<PAGE>
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, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 0-13849
RAMSAY HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0857352
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
COLUMBUS CENTER
ONE ALHAMBRA PLAZA, SUITE 750
CORAL GABLES, FLORIDA 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (305) 569-6993
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 9, 1997 was 10,835,843. The aggregate market value of Common Stock held
by non-affiliates on such date was $35,285,967.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's definitive Proxy Statement to be filed
for the 1997 Annual Meeting of Stockholders are incorporated by reference into
Part III.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Ramsay Health Care, Inc. ("RHCI" or the "Company") is a leading provider and
manager of specialty managed care and behavioral healthcare services in the
country. Through the youth services division of its provider operations, the
Company offers diversified programs for at-risk and troubled youth in
residential and non-residential settings nationwide. In addition, the Company's
managed behavioral care operations provides and manages the delivery of
behavioral healthcare services for employers, insurance companies, health
maintenance organizations and governmental agencies. The Company also operates
psychiatric hospitals and manages behavioral healthcare programs on behalf of
acute care hospitals and community mental health centers under management
contracts.
OVERVIEW
As a provider of behavioral healthcare, the Company offers a comprehensive
range of products and services in its hospital division and its youth services
division. The hospital division provides services at 14 hospitals, in which 703
beds are currently devoted to acute inpatient psychiatric treatment. Patient
care is provided within the hospital division in a variety of treatment
settings: (1) acute inpatient treatment; (2) partial hospitalization programs;
and (3) group and individual outpatient treatment. Outpatient programs are
tailored to provide brief, goal-oriented psychotherapy for specific disorders
such as chemical dependency, eating disorders and mood disorders. The Company
also provides its expertise to community mental health centers and acute care
hospitals under 24 contracts to manage psychiatric programs and partial
hospitalization programs for geriatric patients and for seriously and
persistently mentally ill (SPMI) patients.
The Company's youth services division, created to serve the special needs of
juvenile offenders and adolescents with behavioral disorders, offers care at:
(1) 12 of the Company's 14 hospitals, in which 559 beds are devoted to less-
intensive residential treatment programs and additional beds are utilized for
adolescents requiring acute inpatient treatment; (2) five group homes; and (3)
day programs and other outpatient treatment settings. In both the hospital and
youth services divisions, the choice of treatment and setting depends on the
nature of the patient's disorder and the intensity and duration of treatment
required. Throughout a course of treatment, a patient is often treated in more
than one setting.
As a manager of behavioral healthcare services, the Company offers benefit
design, utilization review, case management, quality assurance and claims
processing services for over 2.1 million covered lives. As of June 30, 1997, the
Company managed care under capitated managed care programs for approximately
500,000 covered lives through fee arrangements in which the Company assumes
responsibility for the cost of providing care in exchange for a fixed per member
per month fee. For approximately 300,000 covered lives under Administrative
Services Only ("ASO") programs, the Company manages care but does not assume
responsibility for the cost of care. For approximately 1,300,000 lives, the
Company provides utilization review services. The Company has established a
network of approximately 2,800 independent physicians, psychologists and
clinicians, 13 Company-owned multi-disciplinary behavioral healthcare outpatient
clinics, as well as hospitals and other behavioral healthcare providers, to
service these lives.
RECENT DEVELOPMENTS
On September 30, 1997, the Company refinanced its outstanding senior and
subordinated secured notes, its variable rate revenue bonds and its demand note
to a corporate affiliate of Paul J. Ramsay, Chairman of the Board of the Company
and a significant shareholder, with proceeds from a credit facility consisting
of term and revolving credit debt of $38.5 million (the "Senior Credit
Facility") and the sale of $2.5 million of Class B Preferred Stock, Series 1997
(the "Series 1997 Preferred Stock") to a
1
<PAGE>
financial institution. In addition, on September 30, 1997, the Company issued an
aggregate of $17.5 million of subordinated bridge notes (the "Bridge Facility"),
of which $15.0 million was purchased by the financial institution and $2.5
million was purchased by Paul Ramsay Holdings Pty. Limited ("Ramsay Holdings"),
a corporate affiliate of Mr. Ramsay. In addition, on September 30, 1997, the
Company entered into an agreement with Ramsay Holdings pursuant to which Ramsay
Holdings purchased $4.0 million of non-convertible, non-voting Class B Preferred
Stock, Series 1997-A (the "Series 1997-A Preferred Stock").
In October 1997, pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") dated as of July 1, 1997 between a wholly-owned subsidiary
of the Company and Summa Healthcare Group, Inc. ("Summa"), the Company acquired
Summa for $300,000 in cash, 250,000 shares of the Company's Common Stock and
fully exercisable warrants to purchase 500,000 shares of the Company's Common
Stock, with an exercise price of $3.25 per share (the fair market value of the
Company's Common Stock on July 1, 1997), and an expiration date of July 2007.
Summa, whose principal stockholder is Luis E. Lamela, the Vice Chairman and a
director of the Company, is engaged in the healthcare consulting, advisory and
development business. Summa's principal assets consist of projects in the
specialty managed care and healthcare services industry, including an
arrangement with a provider of healthcare services to correctional facilities
in Florida. These projects have been undertaken by the Company.
Effective June 10, 1997, the Company completed its previously
announced merger with Ramsay Managed Care, Inc. ("RMCI"). The transaction was
based on a merger agreement entered into by the Company and RMCI on October 1,
1996 and was approved by the shareholders of both companies on April 18, 1997.
STRATEGY
The Company's strategy is to maintain and enhance its position as a
leading high-quality provider and manager of specialty managed care and
behavioral healthcare services, meeting the needs of its patients for
therapeutic care with favorable outcomes in the least restrictive setting and
its payors for cost-effective and accountable treatment programs. The Company's
strategic objectives include:
. Pursue Youth Services Opportunities. The Company's youth services division
actively pursues contracts to provide care that addresses the needs of the
increasing population of at-risk and troubled youth. The division offers
specialized programs for adjudicated and non-adjudicated youth with
developmental disabilities, children and adolescent males and females with
emotional and behavioral disorders, and juvenile offenders. The Company
believes that it has established a strong reputation for effectively meeting the
needs of this growing high-incidence population through proven structured
programs that incorporate therapeutic, educational, vocational, cognitive,
behavioral and social rehabilitative treatment plans. The Company also believes
that its experience in contracting with a variety of public sector agencies to
deliver behavioral healthcare positions it to take advantage of growing
opportunities in youth services.
. Assess Existing Products, Services and Markets. Management believes that an
ongoing evaluation of the Company's existing products, services, markets and
facilities against financial and quality performance standards is integral to
success in the evolving healthcare industry. In targeted geographic markets
where demand warrants, the Company's youth services and managed care products
for which the Company has achieved recognition and expertise will be expanded.
In non-target markets, where economic, competitive, social and/or legislative
factors do not support profitable or strategic delivery of services, products
and facility operations will be phased out or modified to generate acceptable
levels of financial performance.
. Expand Managed Care Business. As Medicaid and other government programs
move toward managed care in a continuing effort to contain healthcare costs, the
Company believes there will be an increasing demand for the management of
behavioral healthcare and the organization of provider networks for patients
served under these programs. The Company will actively pursue the management and
coordination of behavioral healthcare for these populations and will organize
new and expand current systems which provide care for these beneficiaries. The
Company believes that it is well positioned to penetrate this
2
<PAGE>
market because of its experience in coordinating care as program manager for
traditional providers as well as its managed care expertise.
. Pursue Capitated Contracts. Management believes that behavioral healthcare
purchasers will increasingly contract directly with providers on a capitated
basis. Management believes that the Company has a successful record in both
managing and providing care under capitated contracts. This expertise, in
conjunction with its broad service offering, will enhance the Company's ability
to benefit from the expected growth in capitated contracts.
. Identify New Product Development Opportunities. The Company believes that
it has a successful record of providing, coordinating and managing behavioral
healthcare services to achieve favorable clinical outcomes in a cost-effective
manner. The Company intends to identify new market niches and to apply its
expertise to develop products and specialized programs which serve these
markets.
In connection with the "safe-harbor" provisions 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 those set forth
in any forward-looking statements or information made by or on behalf of or
concerning the Company. Some of the most significant factors include (i)
accelerating changes occurring in the healthcare industry, including competition
from consolidating and integrated healthcare provider systems and managers of
healthcare, 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 healthcare
programs, including Medicare and Medicaid, (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 and (iv) the loss of major
managed care customers or the loss of a significant number of members from the
Company's provider network. There can be no assurance that any anticipated
future results will be achieved. As a result of the factors identified above
and other factors, the Company's actual results or financial or other condition
could vary significantly from the performance or financial or other condition
set forth in any forward-looking statements or information.
PROVIDER OPERATIONS
Youth Services Operations
Twelve of the Company's hospitals offer specialized programs for low-
functioning and troubled youths affected by conduct disorders, psychiatric
illness, substance abuse and impulse disorders. These programs provide a full
range of care including (i) acute psychiatric inpatient care, (ii) residential
treatment, consisting of long-term, less intensive inpatient care, (iii) group
homes and (iv) day programs and outpatient services. Within these environments,
clinical and program teams incorporate therapeutic, educational and vocational
programs with cognitive, behavioral and social rehabilitation programs. These
highly structured programs assist troubled youths in learning how to change
ineffective or violent behavior and how to cope with the difficulties and
stresses of life. The primary objective of these programs is behavioral
awareness and self-control, rehabilitation, and reintegration to the home
setting.
Hospital Operations
Acute Inpatient Services. Acute inpatient services are generally provided
to patients needing the most intensive behavioral healthcare treatment. The
most common disorders treated at the Company's hospitals on an acute inpatient
basis are mood and effective disorders (such as depression), psychoses,
situational crises and alcohol and drug dependency. 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, residential
treatment, 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
3
<PAGE>
follows. The treatment regimen utilizes, where appropriate, medication,
individual and group therapy, adjunctive therapy and family therapy.
Each hospital has a multi-disciplinary team of healthcare professionals,
including psychiatrists, psychologists, social workers, nurses, behavioral
healthcare and substance abuse counselors and therapists. Each of the Company's
hospitals has a medical director who acts as liaison between the professional
staff and the hospital administration staff. Each of the Company's hospitals
also 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. All of the Company's hospitals are accredited by the
Joint Commission on Accreditation of Healthcare Organizations ("JCAHO") and are
periodically resurveyed by the JCAHO.
Partial Hospitalization. Partial hospitalization services are provided for
limited periods per day (typically four hours or more) at established intervals,
with the patient returning home at the conclusion of each day's treatment.
Partial hospitalization services are designed to be both an alternative to
inpatient hospitalization services and a key component of care along the
continuum following inpatient hospitalization.
Outpatient/Clinical Services. Outpatient services generally consist of
treatment sessions which can be rendered in a variety of individual or group
settings at various locations, including hospitals and clinics. Once an
individual is assessed for treatment in an outpatient environment, the
individual is provided the appropriate level of care in relation to the
diagnosis.
Contract Management Services. The Company manages inpatient and partial
hospitalization programs under contracts with public and private healthcare
providers. Each management contract is individualized to address the differing
needs of each client and its community. Pursuant to the contracts, the
Company's client typically provides the necessary space (including beds for
inpatient programs) and equipment, clinical and nursing staffs, and support
services (such as billing, dietary and housekeeping). A Company employee
typically acts as the program administrator and, for its partial hospitalization
contracts, as the case manager. The Company also contracts with a psychiatrist
to be the medical director for the managed program.
The Company assists in the development of each managed program as requested
by the client hospital or community mental health center, including licensing,
staffing, and Medicare certification matters. The Company also develops and
implements a local marketing plan for the program to be offered by the client.
Each program is marketed locally with an emphasis on addressing the particular
needs of the client's community. The Company markets the program in the
community on behalf of the client, and the Company's name is not used and its
role is not publicly emphasized in the operation of the program offered by its
client.
Under each contract, the Company typically receives a fixed monthly fee,
together with reimbursement for the Company's direct costs of operating the
program, including the costs of the program administrator, case manager, and
medical director. At June 30, 1997, the Company had 24 contracts to manage
partial hospitalization program services for community mental health centers and
to manage inpatient behavioral healthcare units at medical/surgical hospitals.
Subacute Services. The Company currently operates medical subacute units
in four of its hospitals. Subacute medical healthcare services are provided to
patients who require hospitalization at a level which is less intensive than
that of an acute-care hospital. Generally, subacute patients are medically
stable and may require skilled nursing, ancillary medical, and rehabilitative
therapy services. The Company opened its subacute units in late fiscal 1994 and
early fiscal 1995 to offer medical care (to non-psychiatric patients) in
converted, previously underutilized space. In fiscal 1997, approximately 35
additional beds were converted, bringing to 114 the total number of beds
allocated by the Company for subacute medical care. The units are managed under
contracts with an unaffiliated company experienced in the operation of subacute
care hospitals. The Company has no present plans to expand its subacute
services.
4
<PAGE>
Provider Operations Data
The following table summarizes certain data related to the Company's
provider operations. The table excludes data relating to Three Rivers
Hospital, which was closed on June 30, 1995, Meadowlake Hospital, which was
leased to another healthcare provider on August 1, 1997 and Gulf Coast Treatment
Center, which commenced operations in December 1996.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------------------------------------
1997 1996 1995
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Acute psychiatric admissions.................... 12,710 12,851 11,871
Residential treatment admissions................ 545 440 491
Subacute admissions............................. 960 692 323
------- ------- -------
Total inpatient admissions...................... 14,215 13,983 12,685
Acute psychiatric inpatient days................ 121,611 128,821 133,537
Residential treatment inpatient days............ 101,433 87,633 61,324
Subacute inpatient days......................... 22,999 15,378 6,548
------- ------- -------
Total inpatient days............................ 246,043 231,832 201,409
Average bed days available...................... 460,861 431,514 381,060
Overall inpatient occupancy percentage.......... 53% 54% 53%
</TABLE>
MANAGED CARE OPERATIONS
Effective June 10, 1997, in conjunction with the merger with RMCI, the
Company initiated services as a manager of behavioral healthcare. These services
include benefit design, utilization review, case management, quality assurance
and claims processing services for, as of June 30, 1997, over 2.1 million
covered lives. The Company manages care under capitated managed care programs
for approximately 500,000 covered lives through fee arrangements in which the
Company assumes responsibility for the cost of providing care in exchange for a
fixed per member per month fee. For approximately 300,000 covered lives under
ASO programs, the Company manages care but does not assume responsibility for
the cost of care. For approximately 1,300,000 lives, the Company provides
utilization review services.
The Company manages the delivery of behavioral healthcare and substance
abuse treatment through networks of Company-employed and independent behavioral
healthcare providers on behalf of its managed care customers, primarily self-
insured employers, HMOs, insurance companies and governmental agencies. At
June 30, 1997, the Company provided managed behavioral healthcare services in
eight states through its regional offices located in Phoenix, Arizona, Miami and
Orlando, Florida, Covington, Louisiana, Charlotte, North Carolina, Cleveland,
Ohio, Oklahoma City, Oklahoma, San Antonio, Texas and Morgantown, West Virginia.
The Company's programs utilize a treatment methodology structured to
improve the quality and cost effectiveness of behavioral healthcare by
diagnosing patients as early in the therapeutic process as possible and promptly
providing the most appropriate treatment along the continuum of care in the
least restrictive setting. An integral component of its treatment methodology
is the Company's 24-hour inpatient certification service which, when utilized in
conjunction with the Company's provider network, reduces unnecessary admissions
to inpatient facilities and often results in increased utilization of more cost-
effective outpatient services.
The Company presently provides managed behavioral healthcare and substance
abuse treatment through a network of approximately 50 Company-employed
psychiatrists, psychologists and
5
<PAGE>
clinicians, approximately 2,800 independent psychiatrists, psychologists,
clinicians, social workers and behavioral health counselors, 13 Company-owned
multi-disciplinary behavioral healthcare outpatient clinics, and approximately
150 hospitals and other facilities. The Company's staff of psychiatrists,
psychologists, clinicians and ancillary care providers are generally employed
under both salary and hourly wage arrangements. Independent physicians and other
outside providers generally receive payment on a discounted fee-for-service
basis. The Company also negotiates all-inclusive rates with the network
inpatient, day treatment and residential treatment facilities. The Company
believes that its physician-based provider network has been able to both achieve
cost savings for managed care customers and enhance the quality of behavioral
health and substance abuse treatment for patients.
Each of the Company's clinics has a full range of multi-disciplinary
behavioral healthcare professionals. A typical clinic includes at least one
psychiatrist and three to four psychologists, licensed clinical social workers
or other allied behavioral healthcare professionals. The clinics provide
treatment programs for children, adolescents and adults with a broad range of
behavioral health disorders. Intensive outpatient programs are available for
the treatment of chemical dependence, eating disorders and behavioral disorders
of adolescents. For example, an intensive outpatient treatment for patients
with substance abuse disorders might include individual and family therapy, as
well as a variety of specialty group therapies, including counseling regarding
family, vocational and leisure time issues. These programs were developed by
the Company's professional staff and are designed to achieve a rapid and
effective recovery and to reduce recidivism. Each program is designed to be
time-limited, problem-specific and recovery-oriented.
Treatment protocols within the clinics are tailored to a managed care
environment with an emphasis on high quality, goal-oriented therapy. A typical
treatment plan from initial visit to discharge takes place over approximately
eight to ten sessions. The Company generally uses short intensive therapy
sessions over the course of a treatment plan which the Company has found to be
more effective, both clinically and from a cost perspective, than longer, less
intensive therapy sessions. Psychotherapy as set forth in the treatment plan is
administered by a licensed clinical psychologist, licensed clinical social
worker, or other licensed behavioral healthcare professional. When medication
is necessary, a licensed psychiatrist or registered psychiatric nurse specialist
manages the patient's medication. Follow-up testing and periodic evaluations
are conducted to measure the effectiveness of treatment and to make necessary
changes to therapy.
The Company has developed its own utilization review and case management
criteria which enable it to determine if treatment for a given set of symptoms
is medically necessary and, if so, the appropriate level and type of care for
such symptoms. These criteria are based upon the Company's clinical experiences
and clinical protocols. The Company's utilization review and case management
regimen is not designed to restrict care, but to determine the medical necessity
and appropriateness of all inpatient admissions, lengths of stay and outpatient
treatment programs. The Company believes that the focus of its utilization
review criteria differs from the standard set of diagnosis-specific treatment
plans used by other managed care companies, in that the Company evaluates the
severity of symptoms and the biological components of an illness and also takes
into account a patient's particular personal and social circumstances. The
criteria are designed to ensure, to the degree practicable, that a covered
population, on an individual basis and in the aggregate, neither underutilizes
nor overutilizes available behavioral healthcare services.
COMPETITION
The behavioral healthcare industry is extremely competitive. The
competitive position of the Company has been, and will continue to be, affected
by the increased initiatives undertaken by federal and state governments and
other purchasers of healthcare, including insurance companies and employers, to
revise payment methodologies and monitor healthcare expenditures in order to
contain healthcare costs.
Provider Operations. The Company's 14 inpatient facilities are located in
rural areas and in suburban areas of large metropolitan cities. The Company's
facilities compete with other facilities, including proprietary freestanding
hospitals, not-for-profit hospitals, governmental freestanding hospitals
6
<PAGE>
and psychiatric units of acute-care hospitals. The number of competitors located
within each of the Company's service areas varies significantly. Some of these
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 ability of the Company to compete with other behavioral healthcare
providers depends on the number and quality of psychiatrists, clinical
psychologists and other clinicians practicing at the facility, and the number,
type and quality of other behavioral healthcare facilities in the area. Another
factor affecting competitiveness is the extent to which treatment programs
satisfy individual and 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 other providers of behavioral
healthcare. In addition, the Company actively seeks relationships with managed
care companies, which are increasingly responsible for directing patients to
high quality, cost-effective providers of behavioral healthcare services.
The Company considers the industry servicing the needs of low-functioning
and troubled adolescents and juvenile offenders to be highly fragmented and
highly dependent upon specific referrals by the state agencies responsible for
ensuring these individuals receive the appropriate treatment. The Company's
believes that its demonstrated ability to provide these services and its
treatment outcomes gives it a competitive advantage.
In the provision of contract management services, the Company competes with
several national competitors and many regional and local competitors, many of
which have greater financial resources than the Company. Competition among
contract managers for hospital and community mental health center programs is
generally based upon the reputation, price, and the ability to provide financial
and other benefits to the client, including the management expertise necessary
to enable the client to offer behavioral healthcare programs that provide the
full continuum of behavioral healthcare services in a quality and cost-effective
manner. The pressure to reduce healthcare expenditures has emphasized the need
to manage the appropriateness of behavioral healthcare services provided to
patients. As a result, competitors without management experience covering the
various levels of the continuum of behavioral healthcare services may not be
able to compete successfully. The Company believes that its management
expertise will enable it to compete successfully in this market.
Managed Care Operations. Contracts for the provision of managed behavioral
healthcare services are generally competitively bid and renewed annually. In
the provision of managed behavioral healthcare services, the Company competes
with local and national managed behavioral healthcare companies, insurance
companies, HMOs and not-for-profit health plan corporations, preferred provider
organizations (PPOs) and other provider networks, as well as third-party
administrators. Many of these operations and entities have substantially
greater financial resources than the Company and offer a wider range of services
than the Company.
The ability of the Company to compete with other managed behavioral
healthcare companies depends on its ability to offer management services and
treatment under capitated arrangements which are cost-effective and produce high
quality outcomes. The Company believes that its expertise in the application of
case management, utilization review and quality assurance regimens to the
delivery of behavioral healthcare services, coupled with the provision of high
quality, goal-oriented treatment, permit it to compete effectively in the
managed behavioral healthcare services industry.
INDUSTRY TRENDS
The behavioral healthcare industry has experienced significant changes in
recent years as a result of pressure from purchasers of behavioral healthcare
services to control costs. In response, managed behavioral healthcare
organizations developed to coordinate the delivery of services in the most cost-
efficient manner. These cost containment pressures have caused a reduction in
revenues per patient
7
<PAGE>
day at inpatient facilities, as well as a shift from inpatient to outpatient and
other less costly treatment settings. This shift resulted in declines in both
admissions and average lengths of stay at inpatient facilities.
As the industry continues to evolve, behavioral healthcare companies are
beginning to integrate the provision of healthcare services with managed care
techniques. The Company believes that purchasers of behavioral healthcare will
increasingly contract directly with providers on a capitated basis and that
capitation allows purchasers of behavioral healthcare to place the
responsibility for the cost of providing care directly on the providers who can
most efficiently monitor the utilization, quality and effectiveness of care.
The Company believes that the merger with RMCI has enhanced its ability to
provide capitated services.
SOURCES OF REVENUE
The Company receives payments from third-party reimbursement sources,
including commercial insurance carriers (which provide coverage to insured
patients on both an indemnity basis and through various managed care plans),
Medicare, Medicaid and various governmental agencies (including state judicial
systems). In addition, payments are received directly from patients, including
copayments and deductibles related to services covered by these patients'
benefit plans. The Company's managed care customers are generally self-insured
employers, HMOs, insurance companies and governmental agencies. The Company
also receives payments under management contracts from its client hospitals and
community mental health centers.
The following table sets forth the approximate percentages of the Company's
fiscal year 1997 revenues derived from these various sources.
YEAR ENDED
JUNE 30, 1997
--------------
Medicare............................................................ 36%
Medicaid............................................................ 19%
Other government programs........................................... 11%
Managed care organizations.......................................... 13%
Blue Cross and other commercial insurance........................... 13%
Contract management customers....................................... 4%
Self-pay and other.................................................. 4%
---
100%
===
Medicare. Medicare is the federal health insurance program for the aged
and disabled. Medicare reimburses providers for inpatient, partial
hospitalization and hospital-based outpatient services on a cost-based
reimbursement system. Medicare reimburses for certain other outpatient services
based on an area-wide fee schedule or other blended rates. Medicare
reimbursement is typically less than the Company's established charges for
services provided to Medicare patients. Patients are not responsible for the
difference between the reimbursed amount and the 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 hospitals and units are currently exempt from the DRG reimbursement
system. However, both Congress and the agency responsible for administering the
Medicare program, the Health Care Financing Administration, have been
investigating a revision to the payment system for inpatient psychiatric,
partial hospitalization and hospital-based outpatient services, including of the
type of services provided by the Company, which would eliminate the cost-based
structure of the current system. Under current proposals, reimbursement for
inpatient, partial hospitalization and outpatient psychiatric services would be
transitioned to a prospective payment system in which payment for services may
be unrelated to the provider's costs.
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 currently 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.
8
<PAGE>
Facilities with costs less than their respective target rate per discharge are
currently reimbursed based on allowable Medicare costs, plus an additional
incentive payment. Medicare reimbursement under TEFRA to hospitals exempt from
prospective payment, such as the Company's inpatient facilities, will be
adversely affected by the Balanced Budget Act of 1997, passed by Congress in
July 1997. Under certain provisions of this Act, effective July 1, 1998 for the
Company, target rates per discharge will be capped, the formula by which
incentive payments are calculated will be modified to reduce these payments and
allowable Medicare capital costs will be reduced by 15%. The impact of the
provisions of the Balanced Budget Act is being assessed by the Company at this
time and the Company cannot predict the effect the Act will have on its results
of operations and financial condition.
Medicaid. Medicaid is the federal/state health insurance program for low-
income individuals, including welfare recipients. 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 by the Company.
Other Government Programs. Services provided to low-functioning and
troubled adolescents and juvenile offenders are generally reimbursed on a per-
diem basis by various state agencies, including state judicial systems. The
per-diem rate is generally based on the nature and scope of services provided to
these patients.
Managed Care Organizations and Other Commercial Payors. The Company's
facilities are reimbursed for inpatient and outpatient behavioral healthcare
services by HMOs, commercial insurance companies and self-insured employers
either on a fee-for-service basis or under contractual arrangements which
include per-diem, per-diagnosis or sub-capitated arrangements.
For inpatient and partial hospitalization services, 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 certain states
in which the Company operates, Blue Cross reimbursement is 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.
Most commercial insurance carriers reimburse their policyholders or
reimburse the Company directly for charges at rates and limits specified in
their policies. Patients generally remain responsible for any amounts not
covered under their insurance policies. Generally, reimbursement for
psychiatric inpatient and chemical dependency care by commercial insurance
carriers is to limit inpatient days to a maximum number per year or the
patient's lifetime, or to limit the maximum dollar amount expended for a patient
in a given period.
The Company also contracts with managed care organizations and other
commercial purchasers of behavioral healthcare services under managed care
contracts. The Company typically charges each managed care customer a monthly
capitation fee for each beneficiary enrolled in the customer's health benefit
program managed by the Company. Depending upon both the type of program for
which a customer contracts and the benefits covered under the customer's benefit
program, the capitation fee arrangement is designed so that, with respect to
both inpatient and outpatient care, the Company accepts full risk (all services
capitated), as is generally the case, partial risk (selected services capitated)
or limited risk (full risk up to a maximum amount). Certain contracts, such as
those for the provision of ASO programs, include fee adjustments linked to a
comparison of the customer's historical levels of utilization and cost of
providing healthcare services to current levels of utilization and cost of
providing such services.
In setting its managed care fees, the Company relies upon a number of
factors, including (i) the nature and scope of services to be provided, (ii) the
benefits offered to the managed care customer,
9
<PAGE>
(iii) the prior utilization history and demographic characteristics of the
beneficiary population to be served, (iv) the rates charged by providers and
inpatient facilities in the service area and the mode of provision of such
services and (v) the Company's prior experience with similar programs.
MARKETING
Provider Operations. The Company's hospital 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 behavioral healthcare organizations, 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 accurate information.
Hospital marketing efforts also focus on increasing the number of patients
referred to the Company by primary care physicians, managed care companies and
other behavioral healthcare professionals. Increased referrals are generated by
providing information to physicians on the Company's services, establishing
contacts with managed care companies and by participating in local health
associations. The Company seeks to maintain strong relationships with its
referral sources by providing regular utilization information and updates on
patient progress to purchasers of its healthcare services and primary care
physicians. These activities are performed by full-time marketing
representatives, as well as district and area management.
The Company's marketing programs related to its youth services operations
are aimed at judicial systems, law enforcement agencies and other agencies in
all states where a need for the Company's services is perceived or known. In
some instances, these agencies request a formal proposal in a relatively short
time frame and the Company's marketing personnel work with these agencies to
provide a proposal which is responsive to their needs. In states where
established relationships exist and services are currently provided, marketing
efforts are focused on judges, probationary officers and other individuals
charged with the responsibility of placing adolescents in need of the Company's
services.
In its contract management operations, the Company has developed profiles
of hospitals and community mental health centers in the United States.
Potential clients include medical/surgical hospitals without existing behavioral
healthcare programs, as well as medical/surgical hospitals and community mental
health centers with existing behavioral healthcare programs in need of the
Company's management expertise. Regional salespersons contact prospective
clients and, where appropriate, present a detailed proposal to key decision-
makers. The proposal often contains detailed financial projections of the
proposed behavioral healthcare programs. The Company also works with the
potential client to develop contract terms responsive to the client's and its
community's specific needs.
Managed Care Operations. The Company focuses its managed care sales and
marketing efforts primarily on self-insured employers, HMOs, governmental
agencies and insurance companies. The Company has also targeted employee
benefit consulting firms that represent employers and groups of employers in the
selection and purchase of managed behavioral healthcare benefit programs. The
Company's marketing efforts emphasize its ability to provide a wide array of
cost-effective services to individuals at convenient locations within a
geographic region. The Company believes that its ability to serve a large
number of patients in a region gives it a competitive advantage in marketing to
purchasers of managed care services. The Company's marketing efforts in this
area also emphasize the Company's policy of providing regular feedback on
patient progress to the managed care customer and its ability to collect and
provide accurate utilization, cost and outcome statistics.
REGULATION
As a behavioral healthcare provider and a managed behavioral healthcare
service organization, the Company is currently subject to extensive and
frequently changing government regulations. These regulations are primarily
concerned with licensure, conduct of operations,
10
<PAGE>
reimbursement, financial solvency, standards of medical care, the dispensing of
drugs, patient rights (including the confidentiality of medical records) and the
direct employment of psychiatrists, psychologists, and other licensed
professionals. Regulatory activities affect the Company's business directly by
controlling its operations, restricting licensure of the business entity or by
controlling the reimbursement for services provided, and indirectly by
regulating its customers. In certain cases, more than one regulatory agency may
have authority over the activities of the Company. State licensing laws and
other regulations are subject to amendment and to interpretation by regulatory
agencies with broad discretionary powers. Any new regulations or licensing
requirements, or amendments or interpretations of existing regulations or
requirements, could require the Company to modify its operations materially in
order to comply with applicable regulatory requirements and may have a material
adverse effect on the Company's business, financial condition or results of
operations.
Federal law contains a number of provisions designed to ensure that
services rendered by healthcare 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.
The Social Security Act imposes civil sanctions and criminal penalties upon
persons who make or receive kickbacks, bribes or rebates in connection with
federally-funded healthcare programs. The Social Security Act also provides for
exclusion from the Medicare and Medicaid programs for violations of the anti-
kickback rules. The anti-kickback rules prohibit providers and others from
soliciting, offering, receiving or paying, directly or indirectly, any
remuneration in return for either making a referral for a federally-funded
healthcare service or item or ordering any such covered service or item. In
order to provide guidance with respect to the anti-kickback rules, the Office of
the Inspector General has issued regulations outlining certain "safe harbor"
practices, which although potentially capable of including prohibited referrals,
would not be prohibited if all applicable requirements were met. A relationship
which fails to satisfy a safe harbor is not necessarily illegal, but could be
scrutinized on a case-by-case basis. Since the anti-kickback rules have been
broadly interpreted, they could limit the manner in which the Company conducts
its business. The Company believes that it currently complies with the anti-
kickback rules in planning its activities, and believes that its activities,
even if not within a safe harbor, do not violate the anti-kickback rules.
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, (ii) the statute will ultimately be interpreted by the
courts in a manner consistent with the Company's practices or (iii) the federal
government or other states in which the Company operates will not enact similar
or more restrictive legislation or restrictions that could, under certain
circumstances, impact the Company's operations.
Under another federal provision, known as the "Stark" law or "self-
referral" prohibition, physicians who have an investment or compensation
relationship with an entity furnishing certain designated health services
(including inpatient and outpatient hospital services) may not, subject to
certain exceptions, refer Medicare patients for designated health services to
that entity. Similarly, facilities may not bill Medicare or any other party for
services furnished pursuant to a prohibited referral. Violation of these
provisions may result in disallowance of Medicare claims for the affected
services, as well as the imposition of civil monetary penalties and program
exclusion. In addition, the Stark law prevents states from receiving federal
Medicaid matching payments for designated health services that are provided as a
result of a prohibited referral. Often as a result of this requirement, a
number of states have enacted similar prohibitions to the Stark law covering
referrals of non-Medicare business. The following states in which the Company
conducts business have passed legislation which, under certain circumstances,
either may prohibit the referral of private pay patients to healthcare entities
in which the physician has an ownership or investment interest or with which the
physician has a compensation arrangement or may require the
11
<PAGE>
disclosure of such interest to the patient: Arizona, Florida, Georgia,
Louisiana, Michigan, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South
Carolina, Tennessee, Utah and West Virginia. All of these rules are very
restrictive, prohibit submission of claims for payment related to prohibited
referrals and provide for the imposition of civil monetary penalties and
criminal prosecution. The Company is unable to predict how these laws may be
applied in the future, or whether the federal government or states in which the
Company operates will enact more restrictive legislation or restrictions that
could under certain circumstances impact the Company's operations.
In 1996, Congress enacted the Mental Health Parity Act of 1996 which
generally requires that group health plans which provide benefits for mental
health care must treat mental health benefits on a similar basis as benefits for
any other illness for purposes of imposing annual or lifetime benefit limits.
The law provides that, if the plan imposes limits on medical or surgical
benefits on the basis of different categories of benefits, the plan may do the
same with regard to different categories of mental health benefits, in
accordance with regulations to be issued by the United States Department of
Labor. The impact of this legislation on employee health benefits is unknown
and the Company cannot predict the effect of this legislation on its financial
condition or results of operations.
Some states are beginning to regulate at-risk managed behavioral healthcare
services by finding that such entities are conducting the business of insurance
or acting as an HMO. To the extent that the Company operates or is deemed to
operate in one or more states as a prepaid limited health service organization,
insurance company, HMO, prepaid health plan, or other similar entity, it will be
required to comply with certain statutes and regulations that, among other
things, may require it to maintain minimum levels of deposits, capital, surplus,
reserves or net worth, and also may limit the ability of certain of the
Company's subsidiaries to pay dividends, make certain investments, and repay
certain indebtedness. The imposition of any such requirements will
significantly increase the Company's costs of doing business. Failure by the
Company to obtain or maintain required licenses typically also constitutes an
event of default under the Company's contracts with its managed care customers.
Florida enacted a prepaid limited health service organization statute in
1993. This statute provides for the regulation of limited service prepaid
health plans in a manner similar to the regulation of an HMO. The Company has
obtained a written determination from the staff of the Florida Department of
Insurance that it is not subject to regulation under this statute, but there can
be no assurance than the Florida Department of Insurance will not take a
contrary position in the future or that other provisions of state insurance laws
will not be applied to the Company's activities. Also, the West Virginia
Department of Insurance has issued administrative rules regulating the financial
solvency and operation of entities that contract with HMOs to provide health
services to HMO members on a prepaid basis using a network of independent
providers. The Company's HMO customer in West Virginia has requested that the
West Virginia Department of Insurance grant an exemption for the Company from
the working capital and segregated fund requirements of these rules.
Several of the states in which the Company conducts its business have
enacted legislation requiring organizations engaged in utilization review to
register and to meet certain operating standards. Utilization review
regulations typically impose requirements with respect to qualifications of
personnel, appeal procedures, confidentiality and other matters relating to
utilization review services. The Company is registered in Alabama, Arizona,
Florida, Louisiana, Missouri, Nevada, North Carolina, Oklahoma, South Carolina
and Texas for such services.
Many states in which the Company does business have adopted statutes to
regulate third-party health claims administrators, which may include aspects of
the Company's business. These statutes typically impose requirements with
respect to the financial solvency and operation of the administrator. The
Company has obtained a certificate of authority as an administrator in Ohio and
Texas.
Certain of the Company's services are subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). ERISA
governs certain aspects of the relationship between employer-sponsored health
benefit plans and certain providers of services to such plans through a series
of complex statutes and regulations that are subject to periodic interpretation
by the
12
<PAGE>
Internal Revenue Service and the United States Department of Labor. In general,
these regulations impose, among other things, an obligation on the Company to
act as a fiduciary with respect to some of the health benefit plans it provides
services to. However, there is little direct authority governing the application
of ERISA to many of the activities and arrangements of managed behavioral
healthcare companies.
In certain states, the employment of psychiatrists, psychologists and
certain other behavioral healthcare professionals by business corporations, such
as the Company, is a permissible practice. However, other states have
legislation or regulations or have interpreted existing medical practice
licensing laws to restrict business corporations from providing behavioral
healthcare services or from the direct employment of psychiatrists and, in a few
states, psychologists and other behavioral healthcare professionals. Management
believes that the Company is in compliance with these laws.
State certificate of need or similar statutes generally provide that prior
to the construction or acquisition 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. In most cases, 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.
The Company believes that it is currently in compliance in all material
respects with applicable current statutes and regulations governing its
business. The Company monitors its compliance with applicable statutes and
regulations and works with regulators concerning various compliance issues that
arise from time to time. Notwithstanding the foregoing, the regulatory approach
to the behavioral healthcare services industry is extensive and evolving and
there can be no assurance that a regulatory agency will not take the position,
under existing or future statutes or regulations, or as a result of a change in
the manner in which existing statutes or regulations are or may be interpreted
or applied, that the conduct of all or a portion of the Company's operation
within a given jurisdiction is or will be subject to further licensure and
regulation. Expansion of the Company's businesses to cover additional
geographic areas or to different types of products or customers could also
subject it to additional licensure and regulatory requirements.
ACQUISITIONS, SALES AND LEASE COMMITMENTS
* Meadowlake Hospital. During fiscal year 1997, this 50-bed facility, located
in Enid, Oklahoma, incurred a significant operating loss. Also, due to a lack of
alternative business strategies in a limited market with significant
competition, the Company projected that this facility would not be profitable in
the future. As a result, in August 1997, consistent with the Company's strategy
of assessing its products, services, markets and facilities against financial
and quality performance standards, the Company leased this facility to an
independent healthcare provider for an initial term of three years, with four
three-year renewal options. Lease payments during the initial term total
$360,000 per year and at each renewal option are subject to adjustment based on
the change in the consumer price index during the preceding lease period. In
accordance with the terms of the lease agreement, the tenant is responsible for
all costs of ownership, including taxes, insurance, maintenance and repairs. In
addition, the tenant has the option to purchase the facility at any time during
the initial term for $3 million, less $15,417 for each month of occupancy.
Subsequent to the initial term, the tenant has the option to purchase the
facility at any time for $2.5 million.
* Summa. On July 1, 1997, the Company agreed to acquire Summa for $300,000 in
cash, 250,000 shares of the Company's Common Stock and fully exercisable
warrants to purchase 500,000 shares of the Company's Common Stock, with an
exercise price of $3.25 per share (the fair market value of the Company's Common
Stock on July 1, 1997) and an expiration date of July 2007. Summa's principal
assets consist of projects in the specialty-managed care and healthcare services
industry, including an arrangement with a provider of healthcare services to
correctional facilities in Florida. The acquisition occurred in October 1997.
13
<PAGE>
* Ramsay Managed Care, Inc.(RMCI). In 1993, the Company formed RMCI and entered
the managed behavioral healthcare business with the acquisition of Florida
Psychiatric Management, Inc. ("FPM"). This business expanded through additional
acquisitions and development efforts and, for a number of business reasons
deemed by management to be reasonable at the time, on April 27, 1995, the
Company distributed, on a pro rata basis in the form of a dividend, the common
stock of RMCI held by the Company to the holders of record on April 21, 1995 of
the Company's Common and Preferred Stock. Subsequent to this distribution, RMCI
became a separate, publicly traded company and ceased being a subsidiary of the
Company.
During 1996, it became apparent to the management of the Company and
RMCI that, as a result of recent consolidation trends in the healthcare
industry, the development and growth strategies of both companies were
converging rather than diverging. Accordingly, the Board of Directors of both
companies determined that a merger would be beneficial to the shareholders of
both companies. On October 1, 1996, the Company and RMCI entered into a merger
agreement providing for the acquisition of RMCI by a wholly-owned subsidiary of
the Company. The transaction was approved by the shareholders of both companies
on April 18, 1997 and was closed on June 10, 1997. On the closing date, the
Company issued approximately 2,136,000 shares of Common Stock (valued based on
the closing price of the Company's Common Stock on June 10, 1997 of $3.00 per
share) and 100,000 shares of Class B Preferred Stock, Series 1996 ("the Series
1996 Preferred Stock"), which are convertible into 1,000,000 shares of Common
Stock, in exchange for all of the outstanding shares of RMCI common and
preferred stock. In addition, amounts owed by RMCI to the Company, totalling
approximately $7.0 million on June 10, 1997, and RMCI's deficit in net tangible
assets, totalling approximately $5.6 million on June 10, 1997, were included as
consideration for the acquisition of RMCI.
* Gulf Coast Treatment Center. In December 1996, the Company resumed operations
at this facility in Fort Walton Beach, Florida. This facility had been leased to
another behavioral healthcare provider for the previous four years.
* 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 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, currently require
aggregate annual minimum rentals of $1.62 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.
* Sales 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 these sales approximated $0.75 million.
* Benchmark Behavioral Hospital. Effective April 1995, the Company agreed to
lease this 80-bed facility near Salt Lake City, Utah 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 $0.46 million, 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 Gulf Coast
Treatment Center. 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 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 is material.
14
<PAGE>
In 1985, the Company and Bethany General Hospital in Bethany, Oklahoma
entered into a joint venture whereby the general hospital and the Company hold a
joint certificate of need for a 43-bed psychiatric unit attached to the general
hospital. 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.
In November 1992, the Company formed a limited partnership to operate Three
Rivers Hospital, a 64-bed facility located in Covington, Louisiana and owned by
the Company. 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. Due to a significant decrease in
patient volume and projected negative operating margins, on June 30, 1995, Three
Rivers Hospital was closed. Further, in July 1996, the Three Rivers Hospital
Limited Partnership was dissolved, resulting in no gain or loss to the Company.
INSURANCE
The Company maintains self-insured retentions related to its professional
and general liability insurance program. The Company's operations are insured
for professional liability on a claims-made basis and for general liability on
an occurrence basis. 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.
EMPLOYEES
As of June 30, 1997, the Company employed approximately 1,830 full-time and
1,400 part-time employees, including a corporate headquarters staff of
approximately 30 full-time employees. The Company considers its relationship
with its employees to be good.
15
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information with respect to the executive officers of the Company is set
forth below:
<TABLE>
<CAPTION>
POSITON WITH THE COMPANY AND PRINCIPAL OCCUPATION
NAME OF EXECUTIVE OFFICER AGE DURING THE PAST FIVE YEARS
- ------------------------- --- -----------------------------------------------------------------------------
<S> <C> <C>
Luis E. Lamela................. 47 Vice Chairman of the Board of the Company since January 1996; Chief
Executive Officer of CAC Medical Centers, a division of United HealthCare
of Florida, since May 1994; President and CEO of Ramsay-HMO, Inc. from
prior to 1992 to May 1994.
Bert G. Cibran................. 43 President and Chief Operating Officer of the Company since August 1996;
President, Summa Healthcare Group, Inc. 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 prior to
1992 to February 1994.
Martin Lazoritz, M.D........... 50 Executive Vice President and Chief Medical Officer of the Company since
January 1997; Executive Vice President of RMCI from November 1993 to
January 1997; Chief Executive Officer of FPM, the predecessor of RMCI,
since prior to 1992.
Carol C. Lang ................. 50 Executive Vice President and Chief Financial Officer of the Company since
August 1996; President of HealthLink Enterprises, Inc. (a healthcare
consulting firm) from prior to 1992 to August 1996.
Brent J. Bryson................ 48 Senior Vice President of the Company since January 1997; Vice President of
the Company from October 1994 to January 1997 (including medical leave
from January 1996 through August 1996); Senior Vice President, Southern
Region, with Tenet Healthcare Corporation from prior to 1992 to October
1994.
John A. Quinn.................. 43 Senior Vice President of the Company since January 1997; Vice President of
the Company from prior to 1992 to January 1997.
Wallace E. Smith............... 54 Senior Vice President of the Company since January 1997; Vice President
of the Company from prior to 1992 to January 1997.
I. Paul Mandelkern............. 47 Vice President and General Counsel of the Company since June 1997; Senior
Vice President and General Counsel of FPM since prior to 1992.
William N. Nyman............... 44 Vice President of the Company since August 1993; Regional Controller of
the Company from prior to 1992 to July 1993.
Jorge Rico..................... 32 Vice President of the Company since February 1997; Vice President of
Administration and Information Technology for United HealthCare of
Florida, Inc. from 1994 to January 1997 and for Ramsay-HMO, Inc. from
prior to 1992 to 1994.
Dexter Simanton................ 43 Vice President of the Company since June 1997; Vice President of
Operations of FPM from June 1994 to June 1997; Director of Clinical
Services of Florida Psychiatric Associates from 1992 to June 1994.
Daniel A. Sims................. 37 Vice President and Corporate Controller of the Company since February
1997; Corporate Controller of the Company from December 1993 to January
1997; Chief Financial Officer of a 175-bed medical/surgical hospital from
prior to 1992 to November 1993.
</TABLE>
16
<PAGE>
ITEM 2. PROPERTIES.
The following table provides information concerning the 14 inpatient
facilities currently owned and operated or leased and operated by the Company.
<TABLE>
<CAPTION>
BEDS UTILIZED
DATE OPENED TOTAL FOR RESIDENTIAL
HOSPITAL (7) OR ACQUIRED BEDS TREATMENT
- ------------ ----------- ----- ----------------
<S> <C> <C> <C>
Havenwyck Hospital
Auburn Hills, MI...................... November 1983 166 40
Brynn Marr Hospital
Jacksonville, NC...................... December 1983 76 12
Hill Crest Hospital
Birmingham, AL........................ January 1984 130 50
Heartland Hospital
Nevada, MO............................ April 1984 152 122
Greenbrier Hospital
Covington, LA......................... October 1984 67 14
Coastal Carolina Hospital
Conway, SC............................ November 1984 98 18
Bayou Oaks Hospital
Houma, LA(1).......................... November 1985 98 --
Benchmark Regional Hospital
Woods Cross, UT....................... August 1986 76 76
Desert Vista Hospital
Mesa, AZ(2)........................... February 1987 100 48
Chestnut Ridge Hospital
Morgantown, WV(3)..................... November 1987 70 15
The Haven Hospital
DeSoto, TX............................ April 1990 102 24
Mission Vista Hospital
San Antonio, TX(2).................... November 1991 61 --
Benchmark Behavioral Hospital
Midvale, UT(4)........................ June 1995 80 40
Gulf Coast Treatment Center
Fort Walton Beach, FL(5).............. December 1996 100 100
--- ---
Total (6) 1,376 559
===== ===
</TABLE>
(1) The building in which the Company's facility in Houma, Louisiana is located
is leased for an initial period ending January 31, 2005 (with an option to
renew for 20 years).
(2) 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."
(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) The Company resumed operations at this facility in December 1996. For the
previous four years, this facility was leased to another healthcare
provider.
(6) Excludes Meadowlake Hospital, which was leased to an independent healthcare
provider in August 1997, and Bethany Pavilion, a 43-bed unit managed by the
Company under a joint venture agreement. See "Item 1. Business-Ownership
Arrangements and Operating Agreements."
(7) The Company believes that its facilities are well maintained and are of
adequate size for present needs.
17
<PAGE>
As required by Statement of Financial Accounting Standards (SFAS) No. the
Company periodically reviews its long-lived assets (land, buildings, fixed
equipment, cost in excess of net asset value of purchased businesses and other
intangible assets) 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 $5.5 million and $21.8 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."
The Company leases office space for its corporate headquarters in Coral
Gables, Florida, its former corporate headquarters in New Orleans, Louisiana
(through March 1999) and various regional offices and clinics. These leases have
terms which generally range from three to five years, with renewal options.
ITEM 3. LEGAL PROCEEDINGS.
The Company is party to certain claims, suits and complaints, whether arising
from the acts or omissions of its employees, providers or others, which arise in
the ordinary course of business. As both the number of patients served by the
Company's programs and the number of providers under contract with the Company
increase, the probability of the Company being subject to legal liability
predicated on claims alleging malpractice or related legal theories also
increases. The Company has established reserves 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.
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. However, 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."
In March 1997, a former executive vice president of the Company commenced
arbitration and court proceedings (in the United States District Court for the
Eastern District of Louisiana) against the Company in which he claims his
employment was wrongfully terminated by the Company and seeks damages of
approximately $2.3 million. The Company believes the claims of this individual
are without merit and intends to vigorously defend the proceedings.
Prior to the merger with the Company, RMCI sold its subsidiary which, as a
licensed HMO in Louisiana, Alabama and Mississippi, managed and provided prepaid
healthcare services to its members. On September 29, 1997, RMCI received a
demand for indemnification by the purchaser of this subsidiary in an amount
totalling approximately $5.8 million, an amount in excess of the purchase price
paid by the purchaser for the HMO subsidiary. The demand alleges, among other
things, that certain of the assets of the subsidiary were disallowed as admitted
assets by the Alabama and Louisiana Departments of Insurance and that certain of
the liabilities of the subsidiary were understated as of the date of the sale.
The Company believes this demand is without merit and intends to vigorously
defend any proceedings which may result from this matter. In addition, on
September 30, 1997, the Company demanded indemnification from the purchaser for
various matters in an amount exceeding $2.0 million.
In connection with an earlier terminated transaction involving the possible
sale of RMCI's former HMO subsidiary to a former possible purchaser, RMCI
commenced an action on July 1, 1996 in the Circuit Court of Jefferson County,
Alabama against a former officer of the subsidiary and the former possible
purchaser. The complaint (a) alleges that all defendants tortiously and
fraudulently
18
<PAGE>
interfered with RMCI's proposed sale of the subsidiary, (b) alleges that the
former officer breached his employment contract with RMCI and his fiduciary
duties to all plaintiffs and (c) seeks damages in an amount of no less than $3.0
million, plus punitive damages. On October 4, 1996, the former officer asserted
a counterclaim which alleges that RMCI breached his employment contract by
terminating him without cause and failed to pay him certain compensation
allegedly owed pursuant to the employment contract. As a result, the
counterclaim seeks damages of at least $0.325 million and other remedies. In
addition, on October 21, 1996, the former possible purchaser of the subsidiary
asserted counterclaims against RMCI alleging fraud and breach of contract and
seeking unspecified compensatory and punitive damages. Discovery in this
litigation is ongoing. In addition, RMCI has agreed to indemnify the purchaser
of the subsidiary against any liabilities, costs and expenses sustained by the
purchaser arising out of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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 October 9,
1997, there were 526 holders of record of the Company's Common Stock. No cash
dividends have been declared on the Common Stock since the Company was
organized. Also, the Company's credit facilities in effect as of September 30,
1997 include provisions which prohibit the payment of cash dividends to its
common shareholders.
In connection with a recapitalization of the interests of Mr. Ramsay in June
1993, the Company issued 142,486 shares of Class B Preferred Stock, Series C
(the "Series C Preferred Stock"), which are convertible into 1,424,860 shares of
Common Stock (subject to adjustment). Each share of Series C Preferred Stock is
entitled to (i) cumulative dividends at a rate of 5% per annum (or an aggregate
of $362,200 per year), (ii) a liquidation preference of $50.84 under certain
circumstances and (iii) ten votes on all matters put to a vote of the
shareholders of the Company.
On June 10, 1997, as partial consideration for the acquisition of RMCI, the
Company issued 100,000 shares of Series 1996 Preferred Stock, which are
convertible into 1,000,000 shares of Common Stock (subject to adjustment), to a
corporate affiliate of Mr. Ramsay. Each share of Series 1996 Preferred Stock is
entitled to (i) cumulative dividends at a rate of 5% per annum (or an aggregate
of $150,000 per year), (ii) a liquidation preference of $30.00 under certain
circumstances and (iii) ten votes on all matters put to a vote of the
shareholders of the Company.
On September 30, 1997, in connection with a refinancing of the Company's then
existing indebtedness, the Company entered into an agreement with a corporate
affiliate of Mr. Ramsay pursuant to which the corporate affiliate purchased
4,000 shares of non-convertible, non-voting Series 1997-A Preferred Stock at
$1,000 per share. The shares are entitled to cumulative dividends at a rate of
9% per annum (or an aggregate of $360,000 per year) and to a liquidation
preference of $1,000 per share under certain circumstances. The Series 1997-A
Preferred Stock is mandatorily redeemable at a price of $1,000 per share,
together with all accrued and unpaid dividends, provided (a) the Company's
EBITDA (as defined in the Company's credit documentation) for its fiscal year
ending June 30, 1998 is equal to or greater than $16.5 million, (b) the Company
has availability under its revolving credit facility in excess of $4.0 million
at that time, (c) the financial institution originally providing the revolving
credit facility has syndicated a
19
<PAGE>
portion of the revolving credit facility and (d) the subordinated bridge notes
provided by such financial institution on September 30, 1997 has been refinanced
(collectively, the "Conditions").
The Company's credit documentation prohibits the payment of dividends
in respect of the Series C Preferred Stock, Series 1996 Preferred Stock and
Series 1997-A Preferred Stock unless the Conditions are satisfied.
On September 30, 1997, the Company also sold to a financial
institution, which effected the refinancing, $2.5 million of Series 1997
Preferred Stock. The Series 1997 Preferred Stock is non-voting, is senior to
the Series C Preferred Stock, the Series 1996 Preferred Stock and the Series
1997-A Preferred Stock in liquidation and as to dividends, is initially
convertible (subject to adjustment), at the option of the holder, into 394,945
shares of Common Stock, is optionally redeemable by the Company at a premium
beginning in September 2000, and is manditorily redeemable at the earlier to
occur of a change in control of the Company or September 2007. Dividends on the
Series 1997 Preferred Stock are payable quarterly at 9%, unless the Company is
unable to meet an adjusted minimum fixed charge ratio, at which time dividends
accrue at a rate of 11%, until paid.
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, 1997 and 1996, as reported on the NASDAQ National
Market System:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
Year ended June 30, 1997
<S> <C> <C>
First Quarter.................................................. $3 5/16 $1 7/8
Second Quarter................................................. 3 1/4 1 25/64
Third Quarter.................................................. 4 5/8 2 1/8
Fourth Quarter................................................. 4 1/8 2 5/8
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
</TABLE>
On October 9, 1997, the closing sales price of the Company's Common
Stock was $4 7/8 per share.
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial information
for the periods shown and is qualified by reference to, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" appearing elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------------
1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Statement of Operations Data:
Total revenues............................................ $136,719 $117,423 $136,418 $137,002 $136,354
Salaries, wages and benefits.............................. 67,793 66,259 72,061 64,805 63,810
Other operating expenses.................................. 46,819 42,387 44,741 42,907 40,454
Provision for doubtful accounts........................... 5,688 5,805 5,086 5,846 8,148
Depreciation and amortization............................. 5,473 5,490 7,290 6,836 6,605
Interest and other financing charges...................... 5,942 6,892 8,347 8,906 9,494
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
-------- -------- -------- -------- --------
131,715 136,791 165,771 130,102 137,402
-------- -------- -------- -------- --------
Income (loss) before minority interests, income
taxes, extraordinary item and cumulative
effect of accounting change............................. 5,004 (19,368) (29,353) 6,900 (1,048)
Minority interests........................................ --- --- 887 4,824 1,126
-------- -------- -------- -------- --------
Income (loss) before income taxes,
extraordinary item and cumulative effect
of accounting change.................................... 5,004 (19,368) (30,240) 2,076 (2,174)
Provision (benefit) for income taxes...................... 1,726 (2,887) (13,195) 599 159
-------- -------- -------- -------- --------
Income (loss) before extraordinary item
and cumulative effect of accounting change.............. 3,278 (16,481) (17,045) 1,477 (2,333)
Extraordinary item:
Loss from early extinguishment of debt,
net of income tax benefit............................... --- --- (257) (155) (1,580)
Cumulative effect of change in accounting
for income taxes........................................ --- --- --- --- 2,353
-------- -------- -------- -------- --------
Net income (loss)......................................... $ 3,278 $(16,481) $(17,302) $ 1,322 $ (1,560)
======== ======== ======== ======== ========
Primary earnings per share:
Income (loss) per common and dilutive
common equivalent share before
extraordinary item and cumulative
effect of accounting change............................. $0.33 $(2.12) $(2.25) $0.15 $(0.29)
Net income (loss)......................................... $0.33 $(2.12) $(2.28) $0.14 $(0.20)
Weighted average shares
outstanding(1).......................................... 10,431 7,929 7,743 9,641 7,932
</TABLE>
(1) Includes common and dilutive common equivalent shares outstanding.
<TABLE>
<CAPTION>
JUNE 30
-------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Working capital................................ $ 9,960 $ 11,715 $ 24,098 $ 21,148 $ 23,811
Total assets................................... 141,189 132,758 139,236 183,168 190,370
Long-term debt................................. 47,254 44,664 55,568 67,707 77,429
Stockholders' equity........................... 59,182 46,053 61,779 80,468 79,997
</TABLE>
21
<PAGE>
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 patient 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. 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. 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. For the fiscal year ended June
30, 1997, the Company derived approximately 36% of its revenues from the
Medicare program. Certain legislative changes enacted in July 1997 will impact
the level of Medicare reimbursement received by the Company's facilities
beginning July 1, 1998--see "Item 1. Business-Sources of Revenue."
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 revenues in the period in which the final determination is made.
During the years ended June 30, 1997 and 1995, the Company recorded contractual
adjustment benefits related to intermediary audits of prior year cost reports of
approximately $1.5 million and $1.0 million, 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 $1.9 million. As
a result of this negative experience, the Company recorded additional
contractual adjustment expenses totaling $3.5 million in its June 30, 1996
financial statements related to possible future adjustments of its cost report
estimates by intermediaries. Management believes that its revenues in future
periods will not be negatively impacted by future intermediary audits of cost
report settlements recorded at June 30, 1997 and 1996.
The Company also receives capitated amounts for behavioral healthcare services
provided to patients covered by certain managed care contracts. Capitated
revenues are recognized during the period in which enrolled lives are covered
for capitated payments received. Revenue received from the management of
facilities not owned by the Company and for case management, utilization review
and quality assurance oversight on the delivery of behavioral healthcare
services by independent providers on behalf of clients is recognized at the time
the services are provided.
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 Louisiana and, for
the years ended June 30, 1997 and 1996, disproportionate share payments received
by the Company's Louisiana facilities were not material.
22
<PAGE>
The impact of Louisiana disproportionate share payments on revenues and income
from continuing operations in fiscal year 1995 was approximately $5.6 million
and $3.7 million, respectively. During fiscal year 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 totaling
approximately $5.0 million. The repayment requests related to a) alleged
overpayments made to the Company's former Three Rivers Hospital, which was
closed on June 30, 1995, 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 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.
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, 1997 and
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."
1997 COMPARED TO 1996
For purposes of comparing the Company's statements of operations between 1997
and 1996, same facilities exclude Meadowlake Hospital, which the Company decided
in fiscal 1997 to lease to another healthcare provider (and which lease
commenced in August 1997), and Gulf Coast Treatment Center, which resumed
operations in December 1996.
Total revenues increased from $117.4 million in 1996 to $136.7 million in
1997. The change in revenues between years consisted of (a) increases in
revenues related to contract management and subacute services of $2.3 million
and $7.8 million, respectively, (b) the impact of intermediary audits of prior
year cost reports, which increased revenues in 1997 by $1.5 million but
decreased revenues in 1996 by $5.4 million, (c) a decrease in same facility net
inpatient revenues (excluding the impact of prior year cost report settlements)
of $2.0 million, or 2.4%, (d) a decrease in revenues of Meadowlake Hospital of
$1.7 million, (e) managed behavioral services revenues realized subsequent to
the acquisition of RMCI of $2.0 million and (f) other revenues recorded in 1997
of $4.2 million. Net outpatient revenues remained stable between years and net
patient revenues in 1997 related to Gulf Coast Treatment Center approximated the
revenues realized by the Company from the lease of this facility in 1996.
During the year ended June 30, 1996, the Company recorded contractual
adjustment expenses of approximately $1.9 million related to intermediary audits
during 1996 of its prior year cost reports. The overall negative adjustment to
the Company's estimated cost report settlements was principally due to an audit
of its Havenwyck facility's Blue Cross cost reports for years 1992, 1993, 1994
and 1995. As a result of its negative experience in the fourth quarter of 1996
with respect to estimated cost report settlements, the Company recorded
additional contractual adjustment expenses at June 30, 1996 totalling $3.5
million related to possible future adjustments of its cost report settlements by
intermediaries. During the year ended June 30, 1997, the Company recorded
contractual adjustment benefits of approximately $1.5 million related to
intermediary audits of its prior year cost reports. Management believes that its
revenues in future periods will not be negatively impacted by future
intermediary audits of cost report settlements recorded at June 30, 1997 and
1996.
Same facility net inpatient revenues decreased slightly due to a 6% decline in
acute psychiatric patient days between years, continued pressures from managed
care organizations and other
23
<PAGE>
payors to reduce reimbursement rates for acute psychiatric services, and the
continued shift of the Company's inpatient business from acute psychiatric
patients to less intensive (and consequently lower paying) residential treatment
patients. For the year ended June 30, 1997, approximately 45% of the Company's
behavioral health same facility patient days related to residential treatment
patients, compared to 40% in the prior year.
Contract management revenues increased by $2.3 million in 1997 due to
additional contracts signed and subacute revenues increased by $7.8 million due
to additional patient volume, which was possible because of an expansion of the
subacute units at two facilities. Also, other revenues included $1.28 million
of income recorded on a derivative transaction entered into earlier in fiscal
1997 in connection with a previous refinancing effort and $2.9 million related
to a favorable cash judgement awarded the Company by the courts of the State of
Missouri. In this matter, the courts ruled that the Company's facility in
Nevada, Missouri had received insufficient reimbursement from the Missouri
Department of Social Services for the provision of behavioral healthcare to
Medicaid patients from 1990 to 1996.
Total salaries, wages and benefits increased from $66.3 million in
1996 to $67.8 million in 1997 as a result of (a) a $3.0 million (5.5%) decrease
in same facility salaries, wages and benefits, primarily as a result of the
continued shift in the Company's business to residential treatment services,
which are less intensive and, consequently, require less staffing, (b) an
increase in contract management salaries, wages and benefits, due to additional
contracts, of $1.0 million, (c) an increase of $2.6 million related to increased
volume in the Company's subacute units and (d) a decrease in salaries, wages and
benefits at Meadowlake Hospital of $0.4 million, which was offset by increases
at Gulf Coast Treatment Center and managed behavioral services of $0.6 million
and $0.8 million, respectively.
Other operating expenses in 1997 were $46.8 million, compared to $42.4
million in 1996. This increase is primarily related to (a) a $3.7 million
increase in other operating expenses of the subacute units, (b) a decrease in
same facility other operating expenses of $1.0 million (3.3%), (c) an increase
in other operating expenses associated with Meadowlake Hospital of $0.3 million
and (d) other operating expenses of Gulf Coast Treatment Center and managed
behavioral services of $0.5 million and $0.9 million, respectively.
The provision for doubtful accounts, which consist primarily of
commercial and self-pay accounts receivable deemed uncollectible, remained
stable between years, including the percentage of same facility bad debts to
same facility revenues, which totalled 4.5% in 1997 and 4.4% in 1996. The
provision for bad debts of Meadowlake Hospital did not change significantly from
the prior year and the provision for bad debts of Gulf Coast Treatment Center
was not material in 1997.
Depreciation and amortization did not change significantly between years.
Interest expense decreased from $6.9 million in 1996 to $5.9 million
in 1997. This decrease related to debt reductions made in 1996 and 1997 on the
Company's senior and subordinated secured notes and variable rate demand revenue
bonds outstanding. As stated elsewhere, this debt was refinanced by the Company
on September 30, 1997.
Primarily in the fourth quarter of 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 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.
Pursuant to the principles of measurement contained in SFAS No. 121 and the
Company's expectations, the Company recorded asset impairment charges in its
1996 statement of operations of approximately $5.5 million. This amount includes
an asset impairment charge related to the Company's investment in another
healthcare enterprise of approximately $1.5 million, based on an
24
<PAGE>
assessment of the future cash flows expected to be realized by the Company from
this business. The Company reviewed the value of its long-lived assets
throughout 1997 and determined there were no impairment indicators in 1997.
The Company recorded a $1.7 million provision for income taxes in 1997, which
approximated the statutory tax rate, and a $2.9 million benefit for income taxes
in 1996. 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.
1996 COMPARED TO 1995
For purposes of comparing the Company's statements of operations between 1996
and 1995, same facilities exclude Benchmark South, which was opened in late
fiscal 1995, and Three Rivers Hospital, which was closed on June 30, 1995.
Total 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 (prior to the distribution of RMCI on April 24, 1995) and
because revenues decreased between years due to the impact of intermediary
audits of prior year cost reports, which reduced revenues by $5.4 million in
1996 (see "1997 Compared to 1996" above) and increased revenues in 1995 by $1.0
million. Also, during 1996, the Company replaced approximately $6.4 million in
patient revenues related to Three Rivers Hospital and $5.6 million in
disproportionate share revenues recorded in 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 management revenues. Net outpatient revenues
remained stable between 1996 and 1995, increasing $0.3 million, or 2%.
Same facility net inpatient revenues decreased $0.9 million between years as
same facility net inpatient revenue per patient day decreased 8% 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 1996, same facility residential treatment patient
days comprised 40% of the Company's behavioral health same facility patient
days, compared to 31% in 1995.
Total salaries, wages and benefits in 1996 were $66.3 million, compared to
$72.1 million in 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 1996 were $42.4 million, compared to $44.7 million
in 1995. The material changes in other operating expenses between years 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 1995 related to RMCI of $6.2 million.
The Company's same facility other operating expenses remained stable between
years, increasing $0.3 million, or 1%. Also, during the latter half of 1996, the
Company recorded expenses totalling approximately $0.8 million related to two
individually significant professional liability cases. Based on the facts and
circumstances of each case, the Company increased its reserves related to these
cases up to its self-insured limit. As a result of this negative experience, the
Company reevaluated its reserve for known and unknown professional and general
liability claims and increased this reserve by an additional $0.75 million
during the fourth quarter of 1996. In addition, based on an increase in claims
under the Company's self-insured health plan during the latter half of 1996, the
Company increased its reserve for incurred but not reported health insurance
claims by $0.2 million in the fourth quarter of 1996.
The provision for doubtful accounts increased from $5.1 million in 1995 to
$5.8 million in 1996. This increase primarily related to the same facilities,
which recorded additional provisions on per-
25
<PAGE>
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 1996. The majority of these payors are
state agencies which receive funds from various federal and state sources to pay
the Company for its services. Management initiated steps to limit its exposure
on uncollectible per-diem based residential treatment business in the future,
including by (a) establishing a clear understanding prior to admitting patients
as to the funding sources through which the Company will be paid for its
services, (b) immediate follow-up with these funding sources to ensure initial
claims are billed in accordance with the agency's guidelines and (c) ongoing
monitoring of residential treatment claims, by agency or program, to ensure that
claims will be paid.
Depreciation and amortization in 1996 totalled $5.5 million, compared
to $7.3 million in 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 SFAS No. 121, which reduced depreciation expense in 1996 by an
additional $0.6 million. Finally, depreciation and amortization expense in 1995
related to RMCI totalled $0.9 million.
Interest expense decreased from $8.3 million in 1995 and $6.9 million
in 1996. This decrease related to debt reductions made in 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 1995 related to RMCI totaled $0.2 million.
Primarily in the fourth quarter of 1996, the Company recorded losses
totaling 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 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 1995,
the Company recorded losses totaling 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.
Pursuant to the principles of measurement contained in SFAS No. 121
and the Company's expectations, the Company recorded asset impairment charges in
its 1996 and 1995 statements of operations totaling approximately $5.5 million
and $21.8 million, respectively. These amounts include asset impairment charges
related to the Company's 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.
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.
26
<PAGE>
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, 1997, amounts due from Medicare, Medicaid and Blue
Cross totaled $4.4 million, $0.6 million and $0.7 million, respectively. Also,
at June 30, 1997, amounts due to Medicare, Medicaid and Blue Cross totaled $6.1
million, $0.8 million and $0.2 million, respectively. See "Results of
Operations" above.
At June 30, 1996, net cash advances made by the Company to or on behalf of
RMCI totaled $8.2 million. Of this amount, $6 million primarily related to the
funding of certain RMCI acquisitions and was represented by an unsecured,
interest-bearing (8%), subordinated promissory note due from RMCI and issued on
October 25, 1994. The remaining amount included $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 net amount advanced to RMCI as of the
effective date of the merger, totaling approximately $7.0 million, was included
in the consideration for RMCI.
In connection with the merger of RMCI in June 1997, the Company recorded cost
in excess of net asset value of purchased businesses of approximately $18.8
million and identifiable intangible assets, which included the value of RMCI's
established clinical protocols and existing managed care contracts, of
approximately $4.7 million. The identifiable intangible assets are expected to
be recovered over periods ranging from four to 15 years and cost in excess of
net asset value of purchased businesses is expected to be recovered over a 25-
year period. As partial consideration for the acquisition of RMCI, the Company
assumed RMCI's $2.75 million demand note to a corporate affiliate of Mr. Ramsay
and issued Common Stock, the value of which was $5.6 million (net of issuance
costs totaling $0.8 million) and Series 1996 Preferred Stock, the value of which
was $3.1 million (including accrued dividends of $0.1 million), on June 10,
1997.
The Company has net deferred tax assets totaling approximately $14.8
million, which are reduced by a valuation allowance of $5.4 million, at June 30,
1997. During 1997, the Company's valuation allowance increased primarily as a
result of deferred tax assets acquired in connection with the merger of RMCI
which are not considered realizable. 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, 1997. 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.
The Company's accounts payable and other accrued current liabilities increased
between years from $5.0 million to $7.3 million and $4.4 million to $5.2
million, respectively, primarily due to acquired liabilities in connection with
the merger of RMCI and accrued and unpaid costs in connection with the Company's
refinancing efforts. Hospital and medical claims payable relate to RMCI's
reserve for claims incurred but not yet paid in connection with its capitated
provider contracts.
As mentioned elsewhere, on September 30, 1997, the Company refinanced
its then existing credit facilities. Consequently, the amounts which were
currently due under the Company's former credit facilities, totaling $11.6
million at June 30, 1997, have been excluded from current liabilities since the
refinancing resulted in this amount being outstanding for an uninterrupted
period extending beyond one year from June 30, 1997.
During 1997, amounts owed to minority interests decreased by $0.8 million
primarily based on a final distribution made to minority partners in the Three
Rivers Hospital Limited Partnership,
27
<PAGE>
the operations of which closed on June 30, 1995. Subsequent to this
distribution, the limited partnership was dissolved, resulting in no gain or
loss to the Company.
In August 1996, a corporate affiliate of Mr. Ramsay acquired through a
private placement, 275,546 shares of Common Stock of the Company at a price of
$2.75 per share. These shares were issued for management fees due under a
management agreement with a corporate affiliate of Mr. Ramsay which was in
effect during fiscal 1997. On September 10, 1996, the Company entered into a
letter agreement which terminated this management agreement effective July 1,
1997. In consideration for this termination, the Company issued warrants to
another corporate affiliate of Mr. Ramsay to purchase 250,000 shares of Common
Stock at an exercise price of $2.63 per share. These warrants were fully
exercisable as of September 10, 1996, expire on September 10, 2006 and had a
weighted average fair value on the date of issuance of $0.85 per warrant. As a
result, the Company recorded other operating expenses and additional paid-in
capital of $212,000 related to these warrants.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1997, the Company refinanced its existing senior and
subordinated secured notes, its variable rate revenue bonds and its demand note
to a corporate affiliate of Mr. Ramsay with proceeds from a senior secured
credit facility consisting of term and revolving credit debt of $38.5 million,
the sale of $2.5 million of Series 1997 Preferred Stock to a financial
institution and the sale of $4.0 million of Series 1997-A Preferred Stock to a
corporate affiliate of Mr. Ramsay. In addition, on September 30, 1997, the
Company issued $17.5 million of subordinated bridge notes, of which $15.0
million was purchased by a financial institution and $2.5 million was purchased
by a corporate affiliate of Mr. Ramsay. The bridge notes held by the financial
institution contain a contingent payment obligation which (i) is payable upon
the earlier to occur of certain events (each, an "Event"), including a change of
control involving the Company, a public offering by the Company of Common Stock,
the repayment after March 1998 of the bridge notes and September 30, 2002, (ii)
is payable by the issuance of shares of Common Stock, as required by the
Company's credit documentation, and (iii) is payable in an amount which is to be
determined immediately prior to an Event, depending on the date of the Event,
either (a) by reference to a percentage of the increase in the aggregate market
value for the Company's Common Stock, calculated on a fully-diluted basis, over
a base amount, or (b) by reference to a percentage of the aggregate market value
for the Company's Common Stock, calculated on a fully-diluted basis, on the date
of the Event. It is contemplated that any refinancing of the bridge notes would
also contain a contingent payment obligation based upon the aggregate market
value for the Company's Common Stock.
Under the terms of the Senior Credit Facility, the Company was provided a) a
$12.5 million term loan, payable in 18 quarterly installments ranging from
approximately $0.4 million to $0.9 million, beginning July 1, 1998, b) a $10
million term loan, payable in 20 quarterly installments of $62,500, beginning
January 1, 1998 and eight quarterly installments of approximately $1.0 million,
beginning January 1, 2003 and c) a revolving credit facility (the "Revolver")
for an amount up to the lesser of $16 million or the borrowing base of the
Company's receivables, as defined in the agreement. In addition, a corporate
affiliate of Mr. Ramsay purchased additional preferred shares in the Company
upon closing and, under certain limited circumstances related to an estimated
liability, agreed to purchase Common Stock at a price of $5.17 per share (the
30-day average stock price prior to the closing). As a result, on September 30,
1997, the Company entered into an agreement with a corporate affiliate of Mr.
Ramsay pursuant to which the corporate affiliate purchased 4,000 shares of
Series 1997-A Preferred Stock at $1,000 per share. The purchase price, which
totaled $4.0 million, was paid by (i) offset against approximately $0.6 million
in dividends accrued through September 30, 1997 on the Series C Preferred Stock
and the Series 1996 Preferred Stock, (ii) offset against approximately $0.4
million in unpaid accrued interest and commitment fees on the former demand
note, (iii) $0.25 million in principal due on the former demand note which was
not refinanced with proceeds of the bridge notes and (iv) approximately $2.8
million in cash. Provided certain operating and financing targets are achieved
by September 30, 1998, the Series 1997-A Preferred Stock is mandatorily
redeemable and the Revolver will increase to $20 million. See "Item 5. Market
for the Registrant's Common Equity and Related Stockholder Matters."
28
<PAGE>
Proceeds of the refinancing were used as follows: (a) principal repayments of
$27.5 million of 11.6% senior secured notes and $1.4 million of 15.6%
subordinated secured notes held by a group of insurance companies, (b) repayment
of $3.4 million of bank debt created on September 2, 1997 upon the redemption of
one of the Company's variable rate revenue bonds, (c) repayment of approximately
$0.9 million of accrued interest on the above obligations, (d) creation of a
cash collateral account in an amount totaling approximately $12.9 million which
will be used to redeem the remaining variable rate revenue bonds and to pay
accrued interest thereon on their redemption dates of November 3, 1997 and
December 1, 1997, (e) repayment of $2.5 million of the $2.75 million loan to a
corporate affiliate of Mr. Ramsay, (f) payment of a $2.2 million prepayment
penalty to the group of insurance companies holding the senior and subordinated
secured notes and (g) transaction costs totaling approximately $2.8 million. In
order to satisfy these payments, the amount drawn down on the Revolver totaled
approximately $8.3 million on September 30, 1997. In addition, the Company drew
down an additional $1.7 million on the Revolver on September 30, 1997, leaving
the unused portion of the Revolver at $6 million.
The Company's current primary cash requirements relate to its normal
operating expenses and routine capital improvements at its facilities. 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."
On the basis of its historical cash collection experience, its
projected cash needs and the refinancing of the Company's debt on September 30,
1997, the Company believes that its cash resources and internally generated
funds from future operations will be sufficient to meet its current cash
requirements and future identifiable needs.
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.
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 "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 1997 Annual
Meeting of Stockholders to be held on November 20, 1997 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, 1997.
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.
29
<PAGE>
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.
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:
On June 24, 1997, the Company filed with the Commission a
Current Report on Form 8-K related to the merger with RMCI.
Also, on August 22, 1997, the Company filed a Current Report
on Form 8-K/A to include the financial statements and pro
forma financial information related to the merger with RMCI.
(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 10.64, 10.66,
10.69, 10.71, 10.72, 10.76, 10.77, 10.79, 10.91, 10.97, 10.99,
10.101, 10.102, 10.104 and 10.105.
30
<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: BY
-------------------- ------------------------------------------
BERT G. CIBRAN
PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER
DATED: BY
-------------------- ------------------------------------------
CAROL C. LANG
CHIEF 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: BY
-------------------- ------------------------------------------
PAUL J. RAMSAY
CHAIRMAN OF THE BOARD AND DIRECTOR
DATED: BY
-------------------- ------------------------------------------
LUIS E. LAMELA
EXECUTIVE VICE CHAIRMAN OF THE BOARD
AND DIRECTOR
31
<PAGE>
SIGNATURE/TITLE
---------------
DATED: BY
---------------------- ---------------------------------
AARON BEAM, JR.
DIRECTOR
DATED: BY
---------------------- ---------------------------------
PETER J. EVANS
DIRECTOR
DATED: BY
---------------------- ---------------------------------
THOMAS M. HAYTHE
DIRECTOR
DATED: BY
---------------------- ---------------------------------
STEVEN J. SHULMAN
DIRECTOR
DATED: BY
---------------------- ---------------------------------
MICHAEL S. SIDDLE
DIRECTOR
32
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries are submitted herewith in response to Item 8 and Item 14(a)(1):
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Certified Public Accountants.............. F-2
Consolidated Balance Sheets -- June 30, 1997 and 1996........... F-3
Consolidated Statements of Operations -- For the Years
Ended June 30, 1997, 1996 and 1995......................... F-5
Consolidated Statements of Stockholders' Equity -- For the
Years Ended June 30, 1997, 1996 and 1995................... F-6
Consolidated Statements of Cash Flows --
For the Years Ended June 30, 1997, 1996 and 1995........... F-7
Notes to Consolidated Financial Statements...................... F-8
</TABLE>
All schedules have been omitted because they are inapplicable or the
information is provided in the consolidated financial statements, including the
notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Ramsay Health Care, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Ramsay
Health Care, Inc. and Subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1997. 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 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, 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
Miami, Florida
September 18, 1997,
except for Note 5, the first and fourth paragraphs
of Note 7 and the third paragraph of Note 12,
as to which the date is September 30, 1997
F-2
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $ 1,723,000 $ 7,605,000
Patient accounts receivable, less
allowances for doubtful
accounts of $4,386,000 and
$4,573,000 at June 30,
1997 and 1996, respectively........ 25,802,000 23,410,000
Amounts due from third-party
contractual agencies................ 5,653,000 6,479,000
Current portion of receivable from
affiliated company.................. --- 1,412,000
Other receivables.................... 3,139,000 2,985,000
Deferred income taxes................ --- 1,398,000
Other current assets................. 1,699,000 2,372,000
------------ ------------
Total current assets............. 38,016,000 45,661,000
Other assets
Cash held in trust................... 827,000 745,000
Cost in excess of net asset value of
purchased businesses................ 19,281,000 591,000
Other intangible assets.............. 4,680,000 ---
Unamortized preopening and loan costs 1,837,000 1,040,000
Receivable from affiliated company,
less current portion................ --- 6,795,000
Deferred income taxes................ 9,411,000 10,141,000
Other noncurrent assets.............. 1,155,000 1,392,000
------------ ------------
Total other assets............... 37,191,000 20,704,000
Property and equipment
Land................................. 5,025,000 5,025,000
Buildings and improvements........... 71,190,000 69,200,000
Equipment, furniture and fixtures.... 22,294,000 20,325,000
------------ ------------
98,509,000 94,550,000
Less accumulated depreciation.......... 32,527,000 28,157,000
------------ ------------
65,982,000 66,393,000
------------ ------------
$141,189,000 $132,758,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
1997 1996
------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable...................... $ 7,284,000 $ 4,990,000
Accrued salaries and wages............ 6,282,000 5,169,000
Hospital and medical claims payable... 1,975,000 ---
Other accrued liabilities............. 5,218,000 4,412,000
Amounts due to third-party
contractual agencies................. 7,075,000 8,435,000
Current portion of long-term debt..... 222,000 10,940,000
------------ ------------
Total current liabilities....... 28,056,000 33,946,000
Noncurrent liabilities
Other accrued liabilities............. 6,617,000 7,170,000
Long-term debt, less current portion.. 35,632,000 44,664,000
Short term debt expected to be
refinanced........................... 11,622,000 ---
Minority interests.................... 80,000 925,000
------------ ------------
Total noncurrent liabilities.... 53,951,000 52,759,000
Commitments and contingencies
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 $362,000 at June 30,
1997 and $91,000 at June 30, 1996.... 504,000 233,000
Class B convertible preferred stock,
Series 1996, $1 par value - authorized
100,000 shares; issued 100,000
shares (liquidation value of
$3,000,000), including accrued
dividends of $121,000................ 3,121,000 ---
Common stock $.01 par value--authorized
20,000,000 shares; issued
11,150,640 shares at June 30,
1997 and 8,605,108 shares at
June 30, 1996........................ 112,000 86,000
Additional paid-in capital........... 106,332,000 99,899,000
Retained earnings (deficit).......... (46,988,000) (50,266,000)
Treasury stock--581,550 common
shares at June 30, 1997 and
June 30, 1996, at cost........... (3,899,000) (3,899,000)
------------ ------------
Total stockholders' equity.... 59,182,000 46,053,000
------------ ------------
$141,189,000 $132,758,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------------
1997 1996 1995
------------ -------------- --------------
<S> <C> <C> <C>
Revenues:
Net operating revenues................ $134,669,000 $116,305,000 $135,929,000
Investment income and other........... 2,050,000 1,118,000 489,000
------------ ------------ ------------
TOTAL REVENUES........................... 136,719,000 117,423,000 136,418,000
------------ ------------ ------------
Expenses:
Salaries, wages and benefits.......... 67,793,000 66,259,000 72,061,000
Other operating expenses.............. 46,819,000 42,387,000 44,741,000
Provision for doubtful accounts....... 5,688,000 5,805,000 5,086,000
Depreciation and amortization......... 5,473,000 5,490,000 7,290,000
Interest and other financing charges.. 5,942,000 6,892,000 8,347,000
Losses related to asset sales and
closed businesses.................... --- 4,473,000 6,431,000
Asset impairment charges.............. --- 5,485,000 21,815,000
------------ ------------ ------------
TOTAL EXPENSES........................... 131,715,000 136,791,000 165,771,000
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS,
INCOME TAXES AND EXTRAORDINARY ITEM.... 5,004,000 (19,368,000) (29,353,000)
Minority interests....................... --- --- 887,000
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.................... 5,004,000 (19,368,000) (30,240,000)
Provision (benefit) for income taxes..... 1,726,000 (2,887,000) (13,195,000)
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.. 3,278,000 (16,481,000) (17,045,000)
Extraordinary item:
Loss from early extinguishment of
debt, less applicable
income tax benefit of $206,000...... --- --- (257,000)
------------ ------------ ------------
NET INCOME (LOSS)........................ $ 3,278,000 $(16,481,000) $(17,302,000)
============ ============ ============
Income (loss) per common and dilutive
common equivalent share:
Before extraordinary item............... $0.33 $(2.12) $(2.25)
Extraordinary item:
Loss from early extinguishment
of debt........................... --- --- (0.03)
------------ ------------ ------------
$0.33 $(2.12) $(2.28)
============ ============ ============
Weighted average number of common and
dilutive common equivalent shares
outstanding............................. 10,431,000 7,929,000 7,743,000
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS B CLASS B
CLASS A CONVERTIBLE CONVERTIBLE
CONVERTIBLE PREFERRED PREFERRED ADDITIONAL RETAINED
PREFERRED STOCK STOCK COMMON PAID-IN EARNINGS TREASURY
STOCK SERIES C SERIES 1996 STOCK CAPITAL (DEFICIT) STOCK
----------- ----------- ------------- -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 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)
Shares issued in
connection with employee
stock purchase plan
(15,860 shares)........... --- --- --- --- 40,000 --- ---
Shares issued in
connection with
management and directors'
fees (393,846 shares)..... --- --- --- 4,000 918,000 --- ---
Issuance of common stock
(2,135,826 shares) and
Series 1996 preferred
stock (100,000 shares and
accrued dividends of
$121,000) in connection
with merger, net of costs. --- --- 3,121,000 22,000 5,625,000 --- ---
Issuance of warrants
(250,000 shares).......... --- --- --- --- 212,000 --- ---
Dividends on Class B
convertible preferred
stock, Series C........... --- 271,000 --- --- (362,000) --- ---
Net income................. --- --- --- --- --- 3,278,000 ---
----------- ----------- ---------- -------- ------------ ------------ -------------
BALANCE AT JUNE 30, 1997 $ --- $504,000 $3,121,000 $112,000 $106,332,000 $(46,988,000) $(3,899,000)
=========== =========== ========== ======== ============ ============ =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
---------------------------------------------
1997 1996 1995
------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)....................... $ 3,278,000 $(16,481,000) $(17,302,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization,
including loan costs............ 5,833,000 6,003,000 8,074,000
Asset impairment charges......... --- 5,485,000 21,815,000
Loss on early extinguishment of
debt............................ --- --- 463,000
Write-off of development and
other costs..................... 571,000 381,000 716,000
Loss on disposal of assets....... --- -- 5,096,000
Provision (benefit) for deferred
income taxes.................... 1,222,000 (2,887,000) (13,584,000)
Provision for doubtful accounts.. 5,688,000 5,805,000 5,086,000
Management and director fees
paid in common stock............ 922,000 600,000 ---
Issuance of warrants............. 212,000 --- ---
Minority interests............... --- --- 887,000
Cash flows from (increase)
decrease in operating assets:
Patient accounts receivable. (6,992,000) (7,651,000) (4,410,000)
Other current assets........ 1,287,000 (1,632,000) (522,000)
Other noncurrent assets..... 237,000 225,000 616,000
Cash flows from increase
(decrease) in operating
liabilities:
Accounts payable............ 1,505,000 1,105,000 2,466,000
Accrued salaries, wages and
other liabilities.......... (2,536,000) 9,202,000 (749,000)
Amounts due to third-party
contractual agencies....... (1,360,000) 3,439,000 267,000
------------ ------------ ------------
Total adjustments...... 6,589,000 20,075,000 26,221,000
------------ ------------ ------------
Net cash provided
by operating
activities........ 9,867,000 3,594,000 8,919,000
------------ ------------ ------------
Cash flows from investing activities
Proceeds from sales of assets.... --- --- 970,000
Expenditures for property and
equipment....................... (3,490,000) (1,467,000) (2,726,000)
Development project costs........ --- --- (2,124,000)
Preopening costs................. (386,000) --- (329,000)
Restricted cash used for debt
payments........................ --- --- 5,311,000
Cash held in trust............... 268,000 1,033,000 (974,000)
------------ ------------ ------------
Net cash provided
by (used in)
investing
activities......... (3,608,000) (434,000) 128,000
------------ ------------ ------------
Cash flows from financing activities
Loan costs....................... (1,755,000) (217,000) (290,000)
Payment of costs related to
acquisition..................... (365,000) --- ----
Proceeds from sale/leaseback of
facilities and equipment........ --- --- 12,015,000
Amounts received from affiliate.. 1,124,000 --- ---
Distributions to minority
interests....................... (900,000) (742,000) (2,466,000)
Proceeds from working capital
facility........................ --- --- 2,500,000
Proceeds from private placement
of shares of subsidiary......... --- --- 3,320,000
Increase (decrease) in cash due
to acquisition (distribution)
of subsidiary................... 1,474,000 --- (1,427,000)
Payment of costs related to
distribution of subsidiary...... --- --- (1,696,000)
Net proceeds from exercise of
options and stock purchases..... 40,000 517,000 468,000
Payments on debt................. (10,906,000) (3,795,000) (17,683,000)
Payment of preferred stock
dividends....................... (91,000) (362,000) (364,000)
Payment of costs related to
issuance of stock............... (762,000) --- ---
Cancellation of Class A
preferred stock................. --- --- (123,000)
Purchase of treasury stock...... --- --- (464,000)
------------ ------------ ------------
Net cash used in
financing
activities........ (12,141,000) (4,599,000) (6,210,000)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents............ (5,882,000) (1,439,000) 2,837,000
Cash and cash equivalents at
beginning of year............... 7,605,000 9,044,000 6,207,000
------------ ------------ ------------
Cash and cash equivalents at end
of year......................... $ 1,723,000 $ 7,605,000 $ 9,044,000
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<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 and manager of behavioral healthcare services
in the United States, principally in the Southeast and Southwest. As a provider
of behavioral healthcare, the Company offers a comprehensive range of services
at 14 hospitals (12 of which have units providing less intensive residential
treatment services) and various freestanding outpatient clinics. As a manager of
behavioral healthcare, the Company coordinates and manages the delivery of
services to patients under contracts with self-insured employers, health
maintenance organizations ("HMOs"), government agencies and other purchasers of
healthcare services. The Company also manages behavioral healthcare programs
under contracts with other hospitals and community mental health centers.
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 consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid interest-bearing
investments consisting primarily of commercial paper, money market mutual funds
and deposits and demand revenue bonds. Deposits in banks may exceed the amount
of insurance provided on such deposits. The Company performs reviews of the
credit worthiness of its depository banks. The Company has not experienced any
losses on its deposits of cash in banks.
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-insured retentions for
hospital professional and general liability claims. In addition, at June 30,
1997, cash held in trust includes $350,000 from the April 1, 1997 sale of an HMO
subsidiary by the entity which was acquired by the Company on June 10, 1997 (see
Note 12).
CONCENTRATIONS OF CREDIT RISK
The Company provides services to patients without insurance and accepts
assignments of patients' third party benefits without requiring collateral.
Exposure to losses on receivables due from patients is principally dependent on
each patient's financial condition. The Company monitors its exposure for credit
losses and maintains allowances for anticipated losses.
F-8
<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 primarily relates
to the acquisition of Ramsay Managed Care, Inc. (RMCI), a managed behavioral
healthcare company, on June 10, 1997 (see Note 2). This amount is being
amortized on a straight-line basis over 25 years.
Other intangible assets include the values assigned to established clinical
protocols and managed care contracts acquired in connection with the merger of
RMCI. The value assigned to clinical protocols will be amortized on a straight-
line basis over 15 years, the estimated period these protocols are considered
valid and appropriate. The value assigned to managed care contracts will be
amortized over four years, the estimated weighted average life, including
estimated renewals, of contracts which were in existence as of the date of the
merger.
The Company periodically reviews its intangible assets to assess
recoverability. The carrying value of cost in excess of net asset value of
purchased businesses is reviewed by the Company's 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 carrying
value of these costs is reduced by the estimated shortfall of cash flows.
Preopening costs principally consist of salaries and other costs incurred
prior to opening a new facility, program or business. Effective July 1, 1996,
these costs are deferred and amortized on a straight-line basis over one year.
Prior to July 1, 1996, these costs were 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 cost in excess of net asset value
of purchased businesses, other intangible assets and preopening and loan costs
as of June 30, 1997 and 1996 was $7,671,000 and $6,880,000, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, except for assets considered to
be impaired pursuant to Statement of Financial Accounting Standards (SFAS) No.
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. For
the years ended June 30, 1997, 1996 and 1995, depreciation expense recorded on
the Company's property and equipment totaled $ 4,681,000, $ 4,491,000 and
$5,721,000, respectively.
MEDICARE, MEDICAID AND OTHER CONTRACTED REIMBURSEMENT PROGRAMS
Revenues are recognized at the time services are provided. Net revenues
include estimated reimbursable amounts from Medicare, Medicaid and other
contracted reimbursement programs. Amounts received by the Company for treatment
of patients covered by such programs, which may be based on the cost of services
provided or predetermined rates, are generally less than the established billing
rates of the Company's hospitals. Final determination of amounts earned under
contracted reimbursement programs is
F-9
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 10).
The Company also receives capitated amounts for behavioral healthcare
services provided to patients covered by certain managed care contracts.
Capitated revenues are recognized during the period in which enrolled lives are
covered for capitated payments received. Revenue received from the management
of facilities not owned by the Company and for case management, utilization
review and quality assurance oversight on the delivery of behavioral healthcare
services by independent providers on behalf of clients is recognized at the time
the services are provided.
CONTRACTED PROVIDER SERVICES
The Company contracts with various healthcare providers for the provision
of healthcare services. Contracted providers are primarily hospitals, physicians
and other providers of healthcare services. Hospitals are generally compensated
for their contracted services on a per-diem basis, with physicians and other
healthcare providers generally being compensated on a discounted fee-for-service
basis.
The Company provides a reserve for claims incurred but not yet reported
based on past experience, together with current factors. Estimates are adjusted
as changes in these factors occur, and such adjustments are reported in the year
of determination. Although considerable variability is inherent in such
estimates, management believes that the Company's reserve is adequate.
PROFESSIONAL AND GENERAL LIABILITY INSURANCE
The Company maintains self-insured retentions related to its professional
and general liability insurance program. The Company's operations are insured
for professional liability on a claims-made basis and for general liability on
an occurrence basis. 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 SFAS No. 109. SFAS No.
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. In July 1996,
a final distribution of $900,000 was made to limited partners in
connection with the dissolution of a partnership in which the Company was a
55% general partner. Subsequent to this distribution, this partnership was
dissolved, resulting in no gain or loss to the Company.
F-10
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
EARNINGS PER SHARE
Primary earnings per share are calculated by dividing income before
extraordinary items and net income, as adjusted by reduced interest expense
pursuant to the modified treasury stock method, by the weighted average number
of common and dilutive common equivalent shares outstanding during each period.
The Company's common stock equivalents, which are anti-dilutive in years in
which a loss is incurred and, therefore, excluded from the calculation in those
years, include Class A convertible preferred stock (which was redeemed by the
Company in June 1995), Class B convertible preferred stock, Series C ("Series C
Preferred Stock"), Class B, convertible preferred stock, Series 1996 ("Series
1996 Preferred Stock"), and stock options and warrants to purchase Common Stock.
Fully diluted earnings per share have not been presented separately because the
variance from primary earnings per share is not significant.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact is expected to result in an
increase in primary and fully diluted earnings per share for the year ended June
30, 1997 of $0.02 per share and $0.01 per share, respectively. The Company
expects that the impact of Statement No. 128 on the calculation of primary and
fully diluted earnings per share for the year ended June 30, 1996 will be
immaterial.
STOCK-BASED COMPENSATION
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 on the date of
grant. The Company adopted SFAS No. 123, Accounting for Stock Based
Compensation, during fiscal 1997, and will continue to account for stock option
grants in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and, accordingly, recognizes no
compensation expense for stock options granted.
FINANCIAL INSTRUMENTS
The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable from patient services, and accounts payable
approximate fair value as of June 30, 1997. It is not practicable to estimate
the fair value of the Company's preferred stock because of the lack of a quoted
market price and the inability to estimate fair value without incurring
excessive costs.
2. TRANSACTIONS WITH AFFILIATES
----------------------------
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 and, thereafter, RMCI ceased being a subsidiary of the Company. The
distribution, which was recorded at net book value, 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.
F-11
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On October 1, 1996, the Company and RMCI entered into a merger agreement
providing for the acquisition of RMCI by a wholly owned subsidiary of the
Company. The transaction was approved by the shareholders of both companies on
April 18, 1997 and became effective on June 10, 1997, at which time the results
of operations of RMCI are included in the Company's statement of operations.
The merger was structured as a tax-free exchange recorded using the purchase
method of accounting and, accordingly, the purchase price has been preliminary
allocated to the assets purchased and the liabilities assumed based upon their
fair values at the date of acquisition. The total consideration (including
acquisition costs of approximately $400,000) was approximately $24,000,000.
In exchange for all of the outstanding shares of RMCI common and preferred
stock, the Company issued 2,135,826 shares of Common Stock (valued based on the
closing price of the Company's Common Stock on June 10, 1997 of $3.00 per share)
and 100,000 shares of Series 1996 Preferred Stock, which are convertible into
1,000,000 shares of Common Stock. In addition, amounts owed by RMCI to the
Company, totalling approximately $7,000,000 on June 10, 1997, were included as a
portion of the consideration for the acquisition of RMCI. The Company also
assumed $7,388,000 of liabilities of RMCI.
Included in liabilities assumed was a $2,750,000 obligation owed by RMCI
to a corporate affiliate of Paul J. Ramsay, the Chairman of the Board of the
Company, along with unpaid accrued interest and commitment fees of approximately
$300,000. The loan bears interest at 15% (or approximately $30,000 in June
1997), is due and payable on demand, and was refinanced in September 1997 (see
Note 5). No amounts were paid with respect to this loan facility from June 10,
1997 to the date of the refinancing.
The following unaudited pro forma information as of June 30, 1997 and 1996
has been prepared assuming the merger had been consummated on July 1, 1995 and
accounted for under the purchase method of accounting. This unaudited pro forma
combined summary information may not be indicative of the actual results which
may be realized in the future. Neither expected benefits nor cost reductions
anticipated by the Company have been reflected in the accompanying unaudited pro
forma combined financial data.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Net revenues............................ $158,734,000 $139,025,000
Net loss................................ (1,371,000) (22,413,000)
Net loss from per common and dilutive
common equivalent share................ $ (0.18) $ (2.28)
</TABLE>
Net loss per common and dilutive common equivalent share does not include
common stock equivalents since their effect is anti-dilutive.
At June 30, 1997, three corporate affiliates of Paul J. Ramsay owned an
aggregate voting interest in the Company of approximately 43%, as follows: (a)
Ramsay Holdings HSA Limited owned 15% of the outstanding Common Stock of the
Company and 50% of the outstanding Series C Preferred Stock of the Company, (b)
Paul Ramsay Holdings Pty. Limited ("Pty. Limited") owned approximately 6% of the
outstanding Common Stock of the Company and the remaining 50% of the outstanding
Series C Preferred Stock and (c) Paul Ramsay Hospitals Pty. Limited ("Ramsay
Hospitals") owned approximately 9% of the outstanding Common Stock of the
Company and 100% of the outstanding Series 1996 Preferred Stock of the Company.
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated
as of July 1, 1997, between a wholly-owned subsidiary of the Company and Summa
Healthcare Group, Inc. ("Summa"), the Company agreed to acquire Summa for
$300,000 in cash, 250,000 shares of the Company's Common Stock and fully
exercisable warrants to purchase 500,000 shares of the Company's Common Stock,
with an exercise price of $3.25 per share (the fair market value of the
Company's Common Stock on the date of the Merger Agreement) and an expiration
date of July 2007.
F-12
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Summa, whose principal stockholder is Luis E. Lamela, the Vice Chairman and
a director of the Company, is engaged in the healthcare consulting, advisory and
development business. During 1997, Summa rendered consulting services to the
Company, for which it was paid $237,500. Also, in connection with the merger
with RMCI, the Company assumed approximately $200,000 in fees owed to Summa by
RMCI. Summa's principal assets consist of projects in the specialty managed care
and health services industry, including an arrangement with a provider of
healthcare services to correctional facilities in Florida. These projects will
be undertaken by the Company. The closing of the merger is scheduled to occur
during the Company's second quarter of fiscal 1998 and is subject to customary
closing conditions. Upon closing, the merger will be recorded under the purchase
method of accounting with the related goodwill being allocated and amortized
over an appropriate period commensurate with the value and life of the projects.
In October 1995 and August 1996, Pty. Limited 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.
In October 1996, the Company issued 118,300 shares of Common Stock valued
at $164,000 to its board of directors in lieu of cash payment for fiscal 1997
director fees. The Common Stock was awarded at fair market value on the date of
issuance ($1.39 per share) and the amount was included in other operating
expenses.
On September 10, 1996, the Company entered into a letter agreement with the
Management Fee Affiliate and Pty. Limited which terminated 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, expire on September 10, 2006 and had a
weighted average fair value on the date of issuance of $0.85 per warrant. As a
result, the Company recorded other operating expenses of $212,000 related to
these warrants.
During the years ended June 30, 1997, 1996 and 1995, pursuant to the
management agreement, the Company incurred management fee expenses of $758,000,
$737,000 and $716,000, respectively, which are included in other operating
expenses.
The Company recorded interest income of $440,000, $600,000 and $110,000
during fiscal 1997 (prior to the merger), 1996, and 1995 (subsequent to the
distribution on April 24, 1995), respectively, on interest-bearing amounts owed
by RMCI.
3. IMPAIRMENT OF ASSETS
--------------------
In the fourth quarter of fiscal 1995, the Company elected to early adopt
the provisions of SFAS No. 121. SFAS No. 121 requires that a new cost basis be
established for impaired assets (within the meaning of SFAS No. 121) 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 SFAS No. 121, the Company periodically reviews its long-
lived assets (land, buildings, fixed equipment, cost in excess of net asset
value of purchased businesses and other intangible assets) 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
SFAS No. 121) at June 30, 1996 and 1995. The
F-13
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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), totaled 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 SFAS No. 121, 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 1995, the Company recorded additional asset impairment charges
totaling 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
totaling 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.
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 totaling 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, 1997 and 1996 for the
estimated amount which might be recovered from the Company as a result of this
matter. This amount is classified as a current liability in the Company's
balance sheet at June 30, 1997 and 1996.
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 fiscal 1995 on outpatient operations closed in fiscal 1994,
and closed Three Rivers Hospital on June 30, 1995. Losses recorded in fiscal
1995 as a result of these closures totaled approximately $1,500,000.
F-14
<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:
<TABLE>
<CAPTION>
JUNE 30
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
11.6% senior secured notes.............. $27,544,000 $34,169,000
Variable rate revenue bonds............. 15,700,000 19,400,000
15.6% subordinated secured notes........ 1,385,000 1,846,000
15% demand note to affiliate............ 2,750,000 ---
Other................................... 97,000 189,000
----------- -----------
47,476,000 55,604,000
Less current portion.................... 222,000 10,940,000
----------- -----------
$47,254,000 $44,664,000
=========== ===========
</TABLE>
On September 30, 1997, the Company refinanced its existing senior and
subordinated secured notes, its variable rate revenue bonds and its demand note
to affiliate with proceeds from a credit facility consisting of term and
revolving credit debt of $38,500,000 (the "Senior Credit Facility") and the sale
of $2,500,000 of Class B Preferred Stock, Series 1997 (the "Series 1997
Preferred Stock") to a financial institution. In addition, on September 30,
1997, the financial institution issued a $17,500,000 subordinated bridge
facility, of which $2,500,000 was purchased by Ramsay Hospitals (the "Bridge
Facility"). Consequently, the amounts currently due under the senior and
subordinated secured notes and variable rate bonds of $11,622,000 have been
excluded from current liabilities since the refinancing resulted in this amount
being outstanding for an uninterrupted period extending beyond one year from the
balance sheet date.
Under the terms of the Senior Credit Facility, the Company was provided a)
a $12,500,000 term loan, payable in 18 quarterly installments ranging from
$437,500 to $875,000, beginning July 1, 1998, b) a $10,000,000 term loan,
payable in 20 quarterly installments of $62,500, beginning January 1, 1998, and
eight quarterly installments ranging from $1,062,500 to $1,125,000, beginning
January 1, 2003 and c) a revolving credit facility (the "Revolver") for an
amount up to the lesser of $16,000,000 or the borrowing base of the Company's
receivables (defined as 70% of the Company's patient accounts receivable,
receivables due from managed care customers and receivables due from customers
whose behavioral health operations are managed by the Company). In addition, the
financial institution required that a corporate affiliate of Paul J. Ramsay
purchase additional shares in the Company upon closing and, under certain
limited circumstances related to an estimated liability, purchase Common Stock
at a price of $5.17 per share (the 30-day average stock price prior to the
closing). As a result, on September 30, 1997, the Company entered into an
agreement with a corporate affiliate of Mr. Ramsay pursuant to which the
corporate affiliate purchased 4,000 shares of non-convertible, non-voting Class
B Preferred Stock, Series 1997-A ("Series 1997-A Preferred Stock"), $1.00 par
value, at $1,000 per share. The purchase price, which totaled $4,000,000, was
paid by i) offset against approximately $600,000 in dividends accrued through
September 30, 1997 on the Series C Preferred Stock and the Series 1996 Preferred
Stock, ii) offset against approximately $380,000 in unpaid accrued interest and
commitment fees, iii) $250,000 in principal due to a corporate affiliate of Mr.
Ramsay which was not refinanced with proceeds of the Bridge Facility and iv)
approximately $2,800,000 in cash. The shares are entitled to cumulative
dividends at a rate of 9% per annum ($360,000 per year, $90.00 per preferred
share) and to a liquidation preference of $1,000 per share under certain
circumstances. The Series 1997-A Preferred Stock shall be redeemed at a price of
$1,000 per share and dividends on the Series C Preferred Stock, Series 1996
Preferred Stock and Series 1997-A Preferred Stock shall be paid (see Note 7),
provided a) the Company's EBITDA (as defined in the agreement) for its fiscal
year ending June 30, 1998 is equal to or greater than $16,500,000, b) the
Company has availability under the Revolver in excess of $4,000,000, c) the
financial institution syndicates a portion of the Revolver and d) the Bridge
Facility is refinanced as described below. The Series 1997-A Preferred Stock is
junior to the Series 1997 Preferred Stock in liquidation and as to dividends.
Interest on the term loans and the Revolver varies and, at the option of
the Company, would equal i) a function of the prime lending rate (8.50% at
September 25, 1997) plus a margin ranging from 1.25% to 1.75%, based on the
Company's leverage ratio (as defined in the credit agreement) or ii) the LIBOR
rate (approximately 5.75% at September 25, 1997) plus a margin ranging from
2.75% to 3.25%, based on the Company's leverage ratio. In addition, the Company
is obligated to pay an amount equal to one half of 1% of the unused portion of
the $16,000,000 Revolver.
F-15
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Bridge Facility, which is unsecured and due and payable in September
2005, bears interest at rates ranging from 11% to 12.5% through September 1998,
at which time the interest rate increases to 13%. The Bridge Facility is
expected to be refinanced with the proceeds of a private placement of
$17,500,000 8-year senior subordinated notes by December 31, 1997. The Company
also expects that the senior subordinated notes may include a contingent payment
obligation ("CPO") payable to the noteholders at the earlier to occur of (i) the
fifth anniversary of the placement of the notes; (ii) redemption or repayment of
the notes; (iii) sale of or a change in control involving the Company or (iv) a
public offering of the Company's Common Stock (together, the "Exit"). The
amount of the CPO would equal a certain percentage of the increase in the fully
diluted equity value of the Company during the period from closing to Exit and
would be payable in cash or the Company's Common Stock. The Bridge Facility
provides for a similar CPO in the event the private placement does not occur.
The Senior Credit Facility requires that the Company meet certain
covenants, including (i) the maintenance of certain fixed charge, interest
coverage and leverage ratios, (ii) the maintenance of a minimum level of EBITDA
and tangible net worth (as defined in the credit agreement) and (iii) a
limitation on capital expenditures. The Company is also required to meet an
adjusted minimum fixed charge ratio ("Modified Fixed Charge Coverage Ratio"),
which includes preferred dividends payable in the calculation thereof, in order
to pay dividends on the Series 1997 Preferred Stock. The Company's credit
facilities also prohibit the payments of cash dividends to the common
shareholders of the Company.
In connection with the refinancing of the Company's debt on September 30,
1997, the Company also sold to the financial institution, which effected the
refinancing, $2,500,000 of Series 1997 Preferred Stock. The Series 1997
Preferred Stock is non-voting, is senior to the Series C Preferred Stock, the
Series 1996 Preferred Stock and the Series 1997-A Preferred Stock in liquidation
and as to dividends, is convertible, at the option of the holder, into
approximately 400,000 shares of Common Stock, is optionally redeemable by the
Company at a premium beginning in September 2000, and is manditorily redeemable
at the earlier to occur of a change in control of the Company or September 2007.
Dividends on the Series 1997 Preferred Stock are payable quarterly at 9%, or
$56,250 per quarter, unless the Company is unable to meet its Modified Fixed
Charge Coverage Ratio, at which time the dividend rate increases to 11%, or
$68,750 per quarter.
The aggregate scheduled maturities of the Senior Credit Facility, the
Bridge Facility and certain immaterial capital lease obligations outstanding
during the next five fiscal years are as follows: 1998 -- $222,000; 1999 --
$2,200,000; 2000 -- $2,687,500; 2001 -- $3,237,500; and 2002 -- $3,625,000.
The Company has pledged substantially all of its real property, receivables
and other assets as collateral for the Senior Credit Facility.
The Company believes that the refinancing represents the fair value of the
Company's borrowing.
Proceeds of the Senior Credit Facility, the Bridge Facility, the Series
1997 Preferred Stock and the Series 1997-A Preferred Stock were used as follows:
a) principal repayments of $27,544,000 of 11.6% senior secured notes and
$1,385,000 of 15.6% subordinated secured notes held by a group of insurance
companies, b) repayment of $3,400,000 of bank debt created on September 2, 1997
upon the redemption of one of the Company's variable rate revenue bonds, c)
repayment of approximately $900,000 of accrued interest on the above
obligations, d) creation of a cash collateral account in an amount totaling
approximately $12,900,000 which will be used to redeem the remaining variable
rate revenue bonds and to pay accrued interest thereon on their redemption dates
of November 3, 1997 and December 1, 1997, e) repayment of $2,500,000 of the
$2,750,000 loan to Ramsay Hospitals, f) payment of a $2,200,000 prepayment
penalty to the group of insurance companies holding the senior and subordinated
secured notes and g) transaction costs totaling approximately $2,800,000. In
order to satisfy these payments, the amount drawn down on the Revolver totaled
approximately $8,300,000 on September 30, 1997.
F-16
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In connection with the aforementioned refinancing and planned
extinguishment of debt outstanding at June 30, 1997, the Company expects to
incur a loss on extinguishment of debt of approximately $2,000,000, net of
taxes, which will be recorded in the first quarter of fiscal year 1998.
In fiscal 1997, the Company contemplated a separate refinancing of its
credit facilities and in connection therewith, the Company entered into a
derivative transaction in March 1997 to fix the interest rate on the underlying
debt instrument. As a result of the Company's decision to refinance its credit
facilities as described above, in the fourth quarter of fiscal 1997, the Company
recorded income on the derivative transaction of approximately $1,280,000 and
wrote-off approximately $600,000 of costs directly related to this previous
refinancing effort.
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 $1.62 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
$2,837,000, $3,269,000 and $2,718,000 for the years ended June 30, 1997, 1996
and 1995, respectively.
Future minimum lease payments required under noncancellable operating
leases as of June 30, 1997 are as follows: 1998 -- $4,088,000; 1999 --
$3,409,000; 2000 -- $2,503,000; 2001 -- $2,195,000; 2002 -- $2,080,000; and
thereafter -- $13,220,000.
In August 1997, the Company leased its Meadowlake facility in Oklahoma to
an independent healthcare provider for an initial term of three years, with four
three-year renewal options. Lease payments during the initial term total
$360,000 per year and at each renewal option are subject to adjustment based on
the change in the consumer price index during the preceding lease period. In
accordance with the terms of the lease agreement, the tenant is responsible for
all costs of ownership, including taxes, insurance, maintenance and repairs. In
addition, the tenant has the option to purchase the facility at any time during
the initial term for $3,000,000, less $15,417 for each month of occupancy.
Subsequent to the initial term, the tenant has the option to purchase the
facility at any time for $2,500,000. The book value of the facility was
$2,554,000 on June 30, 1997 which, based on the purchased option included in the
lease, approximates market value.
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, 152,321 shares have
been designated as Series C Preferred Stock, $1.00 par value, 100,000 shares
have been designated as Series 1996 Preferred Stock, $1.00 par value, 100,000
shares have been designated as Series 1997 Preferred Stock, $1.00 par value and
4,000 shares have been designated as Series 1997-A Preferred Stock (see Note 5).
Outstanding capital stock at June 30, 1997 included 11,150,919 shares of
Common Stock, of which 581,550 shares are held in treasury, 142,486 shares of
Series C Preferred Stock and 100,000 shares of Series 1996 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
F-17
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
are entitled to cumulative dividends at a rate of 5% per annum ($362,200 per
year, $2.54 per preferred share) 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 and, as
a result, the Series C Preferred Stock are convertible into 1,424,860 shares of
Common Stock. 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 shares of Series 1996 Preferred Stock were issued to Ramsay Hospitals
in June 1997 in connection with the merger of RMCI. The shares are entitled to
cumulative dividends at a rate of 5% per annum ($150,000 per year, $1.50 per
preferred share) and to a liquidation preference of $30.00 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 $30.00 and multiplying the
quotient obtained by the number of shares of Series 1996 Preferred Stock being
converted. The current conversion price is $3.00 per share and, as a result,
the Series 1996 Preferred Stock are convertible into 1,000,000 shares of Common
Stock. Each share of Series 1996 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.
In connection with the refinancing of the Company's debt on September 30,
1997, dividends on the Series C Preferred Stock and the Series 1996 Preferred
Stock become payable provided a) the Company's EBITDA (as defined in the
agreement) for its fiscal year ending June 30, 1998 is equal to or greater than
$16,500,000, b) the Company has availability under the Revolver in excess of
$4,000,000 at that time, c) the financial institution syndicates a portion of
the Revolver and d) the Bridge Facility is refinanced as described in Note 5.
The Company's 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 totaling $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 (25% or more in the case of certain
persons, including investment companies and investment advisors) 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.
8. OPTIONS AND WARRANTS
- ------------------------
On September 10, 1996, the Company entered into an Exchange Agreement
whereby Mr. Ramsay exchanged 476,070 options with an exercise price of $2.50 per
share (pursuant to the repricing opportunity discussed below), for warrants to
purchase an aggregate of 500,000 shares of Common Stock at $2.75 per share. The
warrants, which expire in June 2003, are not exercisable until the closing price
of 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 Company's 1991 Stock Option Plan.
As part of the Company's senior and subordinated notes (which were
refinanced on September 30, 1997), the Company issued warrants to Aetna Life
Insurance Company and Monumental Life Insurance Company. As of June 30, 1997,
these warrants entitle their holders to purchase an aggregate of 202,165 shares
of the Company's Common Stock at $4.44 per share. These warrants are exercisable
on or before March 31, 2000.
F-18
<PAGE>
RAMSAY HEALTH CARE, INC. SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has additional warrants outstanding to purchase an aggregate of
213,000 shares of the Company's Common Stock (133,000 of which are owned by
corporate affiliates of Paul J. Ramsay). These warrants were issued in exchange
for warrants to purchase common stock of RMCI, and became warrants of the
Company as part of the merger with RMCI.
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 (c) 33% each year beginning on the date of grant and (d) 33% each year
beginning one year from 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. The weighted average remaining
contractual life of all outstanding options at June 30, 1997 is approximately
seven years.
In connection with a repricing opportunity authorized by the Company's
Board of Directors on November 10, 1995, approximately 1,500,000 options (of
which approximately 440,000 are still outstanding at June 30, 1997) were
voluntarily repriced by the optionholders. Under this 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. In addition, the Company granted an additional
690,000 options in fiscal 1997 (including former RMCI options which became
options to purchase an aggregate of 314,000 shares of the Company's Common Stock
on the date of the merger). These options, along with the options repriced on
November 10, 1995, are not exercisable until the closing price of 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. As of
June 30, 1997, none of these options is exercisable.
The Company has frozen its 1990 Stock Option Plan, and authorized
1,516,924, 396,930, 500,000 and 500,000 shares under its 1991, 1993, 1995 and
1996 Stock Option Plans, respectively. At June 30, 1997, 177,669 shares were
available for issuance under these Plans.
In connection with the merger of RMCI, the Company succeeded to RMCI's
Stock Option Plans, which authorize an aggregate of 500,000 shares of Common
Stock. At June 30, 1997, 185,586 shares were available for issuance under the
RMCI Plans.
Summarized information regarding the Company's Stock Option Plans is as
follows:
F-19
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Options exercisable based solely on employees rendering additional service:
<TABLE>
<CAPTION>
Weighted
Number Average
of Option Exercise
Shares Price Price
------------------------------------
<S> <C> <C> <C>
Options outstanding at July 1, 1994 1,675,672 $5.00-$7.88
Granted 65,000 $6.88-$7.88
Exercised (74,166) $5.00-$5.31
Canceled (219,935) $4.01-$7.88
Effect of Distribution of 378,826
Subsidiary ----------
Options outstanding at June 30, 1995 1,825,397
Granted 430,608 $2.50-$4.01
Exercised (3,000) $ 3.38
Modified/Canceled (1,630,959) $2.50-$7.88
----------
Options outstanding at June 30, 1996 622,046 $2.50-$6.31 $3.72
Granted 1,432,500 $2.44-$2.75 $2.72
Exercised ---
Canceled (43,689) $2.50-$4.25 $3.18
----------
Options outstanding at June 30, 1997 2,010,857 $2.44-$6.31 $3.02
==========
Exercisable at June 30, 1997 484,008
==========
Exercisable at June 30, 1996 302,148
==========
Exercisable at June 30, 1995 1,394,688
==========
Weighted average fair value of options $1.07
granted during fiscal 1997 ========
</TABLE>
Options 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:
<TABLE>
<CAPTION>
Weighted
Number Average
of Option Exercise
Shares Price Price
-----------------------------------
<S> <C> <C> <C>
Options outstanding at June 30, 1995 ---
Granted 1,430,582 $ 2.50
Exercised ---
Canceled ---
---------
Options outstanding at June 30, 1996 1,430,582 $ 2.50 $2.50
Granted 375,851 $ 2.75 $2.75
Exchanged in connection with RMCI
merger 314,414 $ 3.00 $3.00
Exercised ---
Canceled (990,940) $ 2.50 $2.50
---------
Options outstanding at June 30, 1997 1,129,907 $2.50-$3.00 $2.72
=========
Exercisable at June 30, 1997 ---
=========
Weighted average fair value of options $1.14
granted during fiscal 1997 =====
</TABLE>
F-20
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Shares of common stock reserved for future issuance at June 30, 1997 are as
follows:
<TABLE>
<S> <C>
Options........................ 3,140,764
Warrants....................... 1,165,498
Conversion of Preferred Stock.. 2,424,860
---------
6,731,122
=========
</TABLE>
Pro forma information regarding net income and earnings per share has been
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS No. 123, Accounting for Stock-Based Compensation.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 6%; dividend yields of 0%; volatility
factors of the expected market price of the Company's Common Stock of .506; and
a weighted-average expected life of the options based on the vesting period of
the options (ranging from one to three years).
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The effect of
compensation expense from stock option awards on pro forma net income reflects
only the vesting of fiscal year ended 1996 awards in 1996 and the vesting of
fiscal year ended 1997 and 1996 awards in 1997, in accordance with SFAS No. 123.
Because compensation expense associated with a stock option award is recognized
over the vesting period, the initial impact of applying SFAS No. 123 may not be
indicative of compensation expense in future years, when the effect of the
amortization of multiple awards will be reflected in pro forma net income. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
---------------------------
1997 1996
----------- --------------
<S> <C> <C>
Pro forma net income (loss) $2,713,000 $(16,798,000)
========== ============
Pro forma net income (loss) per share $ 0.22 $ (2.12)
========== ============
</TABLE>
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:
F-21
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30
-------------
1997 1996 1995
------------ ------------- --------------
<S> <C> <C> <C>
Deferred tax liabilities:
Book basis of fixed assets over tax
basis................................. $ 2,068,000 $ 2,710,000 $ 4,023,000
Change in tax accounting methods....... --- --- 685,000
Economic performance................... 72,000 237,000 316,000
Specifically identifiable intangibles.. 661,000 --- ---
Other.................................. 1,402,000 --- ---
----------- ----------- ------------
Total deferred tax liabilities..... 4,203,000 2,947,000 5,024,000
Deferred tax assets:
Allowance for doubtful accounts........ 1,269,000 1,211,000 609,000
General and professional liability
insurance............................. 778,000 899,000 635,000
Accrued employee benefits.............. 874,000 374,000 417,000
Investment in nonconsolidated
subsidiaries.......................... 1,320,000 1,644,000 1,401,000
Impairment of investment............... 597,000 677,000 568,000
Other accrued liabilities.............. 2,782,000 2,280,000 ---
Other.................................. 43,000 1,307,000 356,000
Net operating loss carryovers.......... 10,187,000 8,962,000 8,146,000
Alternative minimum tax credit
carryovers............................ 1,138,000 1,544,000 1,544,000
----------- ----------- ------------
Total deferred tax assets.......... 18,988,000 18,898,000 13,676,000
Valuation allowance for deferred tax
assets................................. (5,374,000) (4,412,000) ---
----------- ----------- ------------
Deferred tax assets, net of
valuation allowance............... 13,614,000 14,486,000 13,676,000
----------- ----------- ------------
Net deferred tax assets............ $ 9,411,000 $11,539,000 $ 8,652,000
=========== =========== ============
</TABLE>
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
Income taxes currently payable:
Federal........ $ 204,000 $ --- $ ---
State.......... 300,000 --- 183,000
Deferred income taxes:
Federal........ 1,039,000 (2,577,000) (12,154,000)
State.......... 183,000 (310,000) (1,430,000)
----------- ----------- ------------
$ 1,726,000 $(2,887,000) $(13,401,000)
=========== =========== ============
</TABLE>
The provision (benefit) for income taxes is reported in the consolidated
statements of operations as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------------
1997 1996 1995
----------- ------------- --------------
<S> <C> <C> <C>
Provision (benefit) for income taxes.... $1,726,000 $(2,887,000) $(13,195,000)
Income tax benefit from loss on early
extinguishment of debt................. --- --- (206,000)
---------- ----------- ------------
$1,726,000 $(2,887,000) $(13,401,000)
========== =========== ============
</TABLE>
F-22
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The provision (benefit) for income taxes included in the consolidated
statements of operations differs from amounts computed by applying the statutory
rate to income (loss) before income taxes, as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------------
1997 1996 1995
------------ -------------- --------------
<S> <C> <C> <C>
Income (loss) before income taxes,
extraordinary items and cumulative
effect of accounting change............ $5,004,000 $(19,368,000) $(30,240,000)
Federal statutory income tax rate....... 34% 34% 34%
---------- ------------ ------------
1,726,000 (6,585,000) (10,282,000)
Benefit of net operating loss recognized (428,000) --- (2,503,000)
Increase in valuation allowance......... 962,000 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)
State income taxes...................... (183,000) (310,000) (1,247,000)
Other................................... (351,000) (404,000) (119,000)
---------- ------------ ------------
$1,726,000 $ (2,887,000) $(13,401,000)
========== ============ ============
</TABLE>
The Company has net deferred tax assets of $9,411,000 and $11,539,000 at
June 30, 1997 and 1996, respectively. In evaluating the reliability 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 allowance
related to deferred tax assets was increased from $4,412,000 at June 30, 1996,
to $5,374,000 at June 30, 1997 primarily as a result of deferred tax assets
acquired in connection with the merger of RMCI which are not considered
realizable.
At June 30, 1997, net operating loss carryovers of approximately
$26,800,000 (of which approximately $14,300,000 expires from 2001 to 2002,
$5,700,000 expires in 2010 and $6,800,000 expires from 2011 to 2012) and
alternative minimum tax credit carryovers of approximately $1,140,000 are
available to reduce future federal income taxes, subject to certain annual
limitations.
10. 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 adjustments to
net revenues in the period the final determination is made. During fiscal 1995,
the Company recorded contractual reimbursement benefits of approximately
$1,500,000 and $1,000,000, respectively, related to intermediary audits of prior
year cost reports. During fiscal 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 totaling
$3,500,000 related to possible future adjustments of its cost report estimates
by intermediaries.
During the year ended June 30, 1997, the Company received a favorable cash
judgment totaling approximately $2,900,000, net of related costs, by the courts
of the State of Missouri. In this matter, the courts ruled that the Company's
facility in Nevada, Missouri had received insufficient reimbursement from the
Missouri Department of Social Services for the provision of behavioral
healthcare to Medicaid patients from 1990 to 1996.
Management believes that adequate provision has been made for any
adjustments that may result from future intermediary reviews and audits and is
not aware of any claims, disputes or unsettled matters concerning third-party
reimbursement that would have a material adverse effect on the Company's
financial statements.
F-23
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company derived approximately 65%, 70% and 54% of its net revenues from
services provided to patients covered by various federal and state governmental
programs in fiscal 1997, 1996 and 1995, respectively.
11. 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 1997, 1996 or 1995.
12. LITIGATION
----------
The Company is party to certain claims, suits and complaints, whether
arising from the acts or omissions of its employees, providers or others, which
arise in the ordinary course of business. As both the number of patients served
by the Company's programs and the number of providers under contract with the
Company increase, the probability of the Company being subject to legal
liability predicated on claims alleging malpractice or related legal theories
also increases. The Company has established reserves 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.
In March 1997, a former executive vice president of the Company commenced
arbitration and court proceedings against the Company in which he claims his
employment was terminated by the Company and seeks damages of approximately
$2,300,000. The Company believes the claims of this individual are without
merit and intends to vigorously defend the proceedings.
Prior to the merger with the Company, RMCI sold its subsidiary which, as a
licensed HMO in Louisiana, Alabama and Mississippi, managed and provided prepaid
healthcare services to its members. On September 29, 1997, RMCI received a
demand for indemnification by the purchaser of this subsidiary in an amount
totalling approximately $5,800,000. The demand alleges, among other things,
that certain of the assets of the subsidiary were disallowed as admitted assets
by the Alabama and Louisiana Departments of Insurance and that certain of the
liabilities of the subsidiary were understated as of the date of the sale. The
Company believes this demand is without merit and intends to vigorously defend
any proceedings which may result from this matter.
In connection with an earlier terminated transaction involving the possible
sale of RMCI's former HMO subsidiary to a former possible purchaser, RMCI
commenced an action against a former officer of the subsidiary and the former
possible purchaser. The complaint a) alleges that all defendants tortiously and
fraudulently interfered with RMCI's proposed sale of the subsidiary, b) alleges
that the former officer breached his employment contract with RMCI and his
fiduciary duties to all plaintiffs and c) seeks damages in an amount of no less
than $3,000,000, plus punitive damages. The former officer has asserted a
counterclaim which alleges that RMCI breached his employment contract by
terminating him without cause and failed to pay him certain compensation
allegedly owed pursuant to the employment contract. As a result, the
counterclaim seeks damages of at least $325,000 and other remedies. In
addition, the former possible purchaser of the subsidiary has asserted
counterclaims against RMCI alleging fraud and breach of contract and seeking
unspecified compensatory and punitive damages. Discovery in this litigation is
ongoing. Following the merger, RMCI remains as a party to the foregoing
actions. In addition, RMCI has agreed to indemnify the purchaser of the
subsidiary against any liabilities, costs and expenses sustained by the
purchaser arising out of such actions.
F-24
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
Activity in the Company's allowance for doubtful accounts consists of the
following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year........... $ 4,573,000 $ 3,886,000 $ 3,925,000
Provision for doubtful accounts......... 5,688,000 5,805,000 5,086,000
Write-offs of uncollectible patient
accounts receivable.................... (6,323,000) (5,118,000) (5,125,000)
Allowance recorded in connection with
the acquisition of RMCI................ 448,000 --- ---
----------- ----------- -----------
Balance at end of year.................. $ 4,386,000 $ 4,573,000 $ 3,886,000
=========== =========== ===========
</TABLE>
14. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
The Company's non-cash investing and financing activities and cash payments
for interest and income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Distribution of subsidiary to
stockholders........................... $ --- $ --- $ 904,000
Receivable from subsidiary distributed
to stockholders........................ --- --- 7,600,000
Merger with RMCI:
Cost in excess of net asset value of
purchased businesses.................. 18,048,000 --- ---
Other intangible assets................ 4,740,000 --- ---
Issuance of Common Stock............... 6,408,000 --- ---
Issuance of Series 1996 Preferred Stock 3,000,000 --- ---
Noncurrent liabilities................. 750,000 --- ---
Issuance of stock in lieu of cash
payment for management and directors'
fees................................... 922,000 600,000 ---
Cash paid during the year for:
Interest (net of amount capitalized).. $ 4,663,000 $5,260,000 $6,518,000
Income taxes........................... 129,000 249,000 1,231,000
</TABLE>
F-25
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. 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, 1997 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
1997 SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30(2)
---- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues............................ $31,535,000 $35,072,000 $31,801,000 $ 38,311,000
Income before income taxes.............. 148,000 3,064,000 1,083,000 709,000
Net income.............................. 148,000 1,843,000 672,000 615,000
Income per common and dilutive common
- -------------------------------------
equivalent share(1)
- -------------------
Primary:
Income per common share.............. $ 0.01 $ 0.19 $ 0.06 $ 0.06
=========== =========== =========== ============
Fully diluted:
Income per common share.............. $ 0.01 $ 0.19 $ 0.06 $ 0.06
=========== =========== =========== ============
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)
=========== =========== =========== ============
</TABLE>
(1) The quarterly earnings per share amounts may not equal the annual amounts
due to changes in the average common and dilutive common equivalent shares
outstanding during the year.
(2) As further described in Note 5, in the fourth quarter of fiscal 1997, the
Company recorded net revenues related to a derivative transaction of
approximately $1.28 million and wrote-off approximately $0.6 million of
costs related to a contemplated refinancing. As further described in
Note 4, in the fourth quarter of fiscal 1996, 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).
As further described in Notes 4 and 10, 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
writedowns/reserves of approximately $2.9 million ($2.4 million after
estimated income tax benefit) in the fourth quarter of fiscal 1996.
F-26
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Page
Number
--------------
<S> <C> <C>
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..........................
2.5 Agreement and Plan of Merger dated as of July 1, 1997 among Summa Healthcare Group,
Inc., the Company and Ramsay Acquisition Corporation................................ --
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 S-2, 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)............................................. --
</TABLE>
E-1
<PAGE>
<TABLE>
<S> <C> <C>
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)................................................ --
3.8 Certificate of Designation of Preferred Stock of the Company with respect to its
Class B Preferred Stock, Series 1996 filed on March 13, 1997...........................
3.9 Certificate of Designation of Preferred Stock of the Company with respect to its
Class B Preferred Stock, Series 1997 filed on September 30, 1997......................
3.10 Certificate of Designation of Preferred Stock of the Company with respect to its
Class B Preferred Stock, Series 1997-A filed on September 30, 1997....................
3.11 Preferred Stock Purchase Agreement dated as of September 30, 1997 between the
Company and General Electric Capital Corporation......................................
3.12 Preferred Stock Purchase Agreement dated as of September 30, 1997 between the
Company and Paul Ramsay Holdings Pty. Limited.........................................
3.13 Common Stock Purchase Agreement dated as of September 30, 1997 between the Company
and Paul Ramsay Holdings Pty. Limited.................................................
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 (incorporated by
reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1996).................................................................. --
</TABLE>
E-2
<PAGE>
<TABLE>
<S> <C> <C>
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 Corporation, 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 Fifth Supplemental Trust Indenture dated as of June 1, 1997 between the Company,
Bountiful Psychiatric Hospital, Inc., Cumberland Mental Health, Inc., East Carolina
Psychiatric Services Corporation, Havenwyck Hospital, Inc. and Psychiatric
Institute of West Virginia, Inc. and The Bank of New York and Thomas Zakrzewski,
as Trustees...........................................................................
4.7 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)................................. --
4.8 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 4.7).................................. --
4.9 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 4.7)....................................... --
4.10 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 4.7).................................. --
4.11 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 4.7).................................. --
4.12 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 4.7)....................................... --
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 Notes, $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)................. --
</TABLE>
E-3
<PAGE>
<TABLE>
<S> <C> <C>
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 (incorporated by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the year ended June 30, 1996) --
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)................. --
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).............................. --
</TABLE>
E-4
<PAGE>
<TABLE>
<S> <C> <C>
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 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............................................................ --
10.17 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 (incorporated by reference to Exhibit
10.93 to the Company's Annual Report on Form 10-K for the year ended June 30, 1996.. --
10.18 Fourth Amendment to Credit Agreement, First Amendment to Waiver, Consent to Merger
and Extension Agreement dated as of May 15, 1997 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.................................................
10.19 Fifth Amendment to Credit Agreement, Amendment to Fourth Amendment and Amendment to
Waiver dated as of June 4, 1997 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......................................................................
10.20 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).......... --
10.21 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 10.20)................................................................... --
10.22 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 10.20)................................................................... --
</TABLE>
E-5
<PAGE>
<TABLE>
<S> <C> <C>
10.23 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 10.20)........................................................................ --
10.24 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 10.20)..................................................................... --
10.25 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 10.20)..................................................................... --
10.26 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
10.20)................................................................................ --
10.27 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
10.20)................................................................................ --
10.28 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
10.20)................................................................................ --
10.29 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)................................................ --
10.30 Accounts Receivable Security Agreement dated as of 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 10.29)............................................ --
10.31 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 10.29)................................ --
10.32 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 10.29)..................... --
10.33 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 10.29)................................ --
</TABLE>
E-6
<PAGE>
<TABLE>
<S> <C> <C>
10.34 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
are parties to that certain Credit Agreement described in Exhibit
10.15 above (substantially identical to Exhibit 10.29)................................ --
10.35 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 10.29)........................ --
10.36 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 10.29)..................... --
10.37 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).................................................................. --
10.38 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)................................................ --
10.39 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 10.38)................................ --
10.40 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 10.38)................................ --
10.41 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 10.38)............................................ --
10.42 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 10.38)................................ --
10.43 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 10.38)............................................ --
10.44 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 10.38)............................................ --
</TABLE>
E-7
<PAGE>
<TABLE>
<S> <C> <C>
10.45 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
are parties to that certain Credit Agreement described in Exhibit
10.15 above (substantially identical to Exhibit 10.38).............................. --
10.46 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 10.38).............................. --
10.47 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)........................ --
10.48 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 be reference to Exhibit 10.45 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1994).............. --
10.49 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 10.48)............. --
10.50 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 10.48).......................................... --
10.51 Mortgage, Security and Assignment of Leases and Rents dated as of May 15, 1993 by
Greenbrier Hospital, Inc. to Societe Generale individually 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 10.48)................................ --
10.52 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 an 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 10.48).................. --
10.53 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 an 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 10.48)........................................... --
</TABLE>
E-8
<PAGE>
<TABLE>
<S> <C> <C>
10.54 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,
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 10.48)....... --
10.55 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 10.48)... --
10.56 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. 2-98921)......................... --
10.57 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)............... --
10.58 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)......................... --
10.59 Loan Agreement between Louisiana Public Facilities Authority and Houma Psychiatric
Hospital, Inc. dated September 1, 1985, relating to the issuance of bonds for Houma
Psychiatric Hospital, Inc. (incorporated by reference to Exhibit 10.56 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1994)................ --
10.60 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)........................................... --
10.61 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)...................................... --
10.62 Lease among Bethany Psychiatric Hospital, Inc., Bethany General Hospital, the City
of Bethany, Oklahoma and the Bethany General Hospital Trust dated December 9, 1985
(ground lease) (incorporated by reference to Exhibit 10.58 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1996)................................. --
10.63 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, 1994)........................................................................ --
10.64 Ramsay Health Care, Inc. 1990 Stock Option Plan, as amended to date (incorporated
by reference Exhibit 4.3 to the Company's Registration Statement on Form S-8 filed
on March 6, 1991)..................................................................... --
</TABLE>
E-9
<PAGE>
<TABLE>
<S> <C> <C>
10.65 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
by reference to Exhibit 10.78 to the Company's Registration Statement
on Form S-2, Registration No. 33-40762)............................................. --
10.66 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).......................................................... --
10.67 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)..... --
10.68 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)...................... --
10.69 Management Agreement dated as of June 25, 1992 between the Company and Ramsay
Health Care Pty. Limited (incorporated by reference to Exhibit 10.90 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1992).............. --
10.70 Ramsay Health Care, Inc. 1991 Stock Option Plan (incorporated by reference to
Exhibit 10.91 to the Company's Annual Report on Form 10-K for the year ended June
30, 1992)........................................................................... --
10.71 Employment Agreement dated 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)......................................... --
10.72 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).............................................. --
10.73 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) --
10.74 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) --
10.75 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)
.................................................................................... --
10.76 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)................................................................. --
10.77 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)................................................... --
10.78 Fourth Modification, Extension and Amendment of Lease Agreement dated November 15,
1993 between the Company and One Poydas 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)............................................................... --
</TABLE>
E-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.79 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).............................................. --
10.80 Rights Agreement dated as of August 1, 1995 between the Company and First Union
National Bank of North Carolina, as Rights Agent, which includes the form of Right
Certificate as Exhibit A and the Summary 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)............................................ --
10.81 Amendment to Rights Agreement, dated October 3, 1995 between the Company and First
Union National 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)........................................................... --
10.82 Amendment No. 2 to Rights Agreement, dated as of November 1, 1996 between the
Company and First Union National Bank of North Carolina, as Rights Agent
(incorporated by reference to Exhibit 10.101 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996)................................. --
10.83 Letter Agreement dated June 30, 1995 among the Company, 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)...................... --
10.84 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).............. --
10.85 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)........................................................... --
10.86 Facility Lease Agreement dated June 26, 1995 by and between Charter Canyon
Behavioral Health Systems, 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............................................... --
10.87 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)........................ --
10.88 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)....................................................... --
10.89 Employee Benefit Agreement dated as of February 1, 1995 between the Company and
RMCI (incorporated by reference to Exhibit 10.4 to RMCI's Registration Statement
on Form S-1 (Registration No. 33-78034) filed with the Commission on April 24, 1995)
.................................................................................... --
10.90 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)........ --
</TABLE>
E-11
<PAGE>
<TABLE>
<S> <C> <C>
10.91 Corporate Services Agreement dated as of January 2, 1995 between the Company and
(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).... --
10.92 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................ --
10.93 $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)............. --
10.94 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 (incorporated by reference to Exhibit 10.88 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1996)............... --
10.95 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............... --
10.96 Amendment to Rights Agreement, date October 3, 1995 between Ramsay Health Care,
Inc. and First Union National 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).................................. --
10.97 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)................................................. --
10.98 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 (incorporated by reference to
Exhibit 10.94 to the Company's Annual Report on Form 10-K for the year ended
June 30, 1996........................................................................ --
10.99 Amended and Restated Employment Agreement dated as of August 15, 1996 by and
between Reynold Jennings and the Company (incorporated by reference to Exhibit
10.95 to the Company's Annual Report on Form 10-K for the year ended June 30,
1996)................................................................................ --
10.100 Exchange Agreement dated September 10, 1996, by and among the Company, Paul
Ramsay Hospitals Pty. Limited and Paul J. Ramsay, including a relates Warrant
Certificate dated September 10, 1996 issued to Ramsay Hospitals Pty. Limited
(incorporated by reference to Exhibit 10.96 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996)......................................... --
</TABLE>
E-12
<PAGE>
<TABLE>
<S> <C> <C>
10.101 Consulting Agreement dated as of January 1, 1996 between the Company and
Summa Healthcare Group, Inc. (incorporated by reference to Exhibit 10.97
to the Company's Annual Report on Form 10-K for the year ended June 30,
1996)............................................................................. --
10.102 Consulting Agreement dated as of February 1, 1997 between the Company
and Summa Healthcare Group, Inc................................................... --
10.103 Letter Agreement dated as of September 10, 1996 by and among the
Company, Ramsay Health Care Pty. Limited and Paul Ramsay Holdings Pty.
Limited, including a related Warrant Certificate dated September 10,
1996 issued to Paul Ramsay Holdings Pty. Limited (incorporated by
reference to Exhibit 10.98 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1996)................................................. --
10.104 Employment Agreement dated August 12, 1996 by and between the Company
and Remberto Cibran (incorporated by reference to Exhibit 10.99 to the
Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1996.......................................................................... --
10.105 Services Agreement dated August 12, 1996 by and between the Company and
HealthLink Enterprises, Inc. (incorporated by reference to Exhibit
10.100 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996........................................................... --
10.106 Credit Agreement, including all Annexes thereto, dated September 30,
1997 among the Company, The Lenders from Time to Time Party Thereto,
General Electric Capital Corporation, as Administrative Agent, and GECC
Capital Markets Group, as Syndication Agent.......................................
10.107 Subordinated Note Purchase Agreement dated as of September 30, 1997
among the Company, as Issuer, and General Electric Capital Corporation
and Paul Ramsay Holdings Pty. Limited, as Purchasers..............................
10.108 Registration Rights Agreement dated as of September 30, 1997 between the
Company and General Electric Capital Corporation..................................
10.109 Release of Collateral, Termination and Cash Collateral Agreement dated
as of September 30, 1997 among the Company and certain subsidiaries
named therein, Societe Generale, New York Branch, First Union National
Bank of North Carolina and Hiberina National Bank, as lenders, and
Societe Generale, as issuing bank and agent.......................................
11 Computation of Net Income (Loss) Per Share........................................
21 Subsidiaries of the Company.......................................................
23 Consent of Ernst & Young LLP......................................................
27 Financial Data Schedule...........................................................
</TABLE>
Copies of exhibits filed with this Annual Report on Form 10-K or incorporated
herein by reference do not accompany copies hereof for distribution to
stockholders of the Company. The Company will furnish a copy of such exhibits
to any stockholder requesting it.
E-13
<PAGE>
EXHIBIT 2.5
================================================================================
AGREEMENT AND PLAN OF MERGER
among
Summa Healthcare Group, Inc.,
Ramsay Health Care, Inc.
and
Ramsay Acquisition Corp.
July 1, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. THE MERGER............................................ 1
SECTION 1.01 The Merger.................................... 1
SECTION 1.02 Conversion of Shares.......................... 2
SECTION 1.03 Surrender and Payment......................... 2
SECTION 1.04 Fractional Shares............................. 3
ARTICLE II. THE SURVIVING CORPORATION............................ 3
SECTION 2.01 Certificate of Incorporation.................. 3
SECTION 2.02 Bylaws........................................ 4
SECTION 2.03 Directors and Officers........................ 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....... 4
SECTION 3.01 Corporate Existence and Power................. 4
SECTION 3.02 Corporate Authorization....................... 4
SECTION 3.03 Governmental Authorization.................... 4
SECTION 3.04 Non-Contravention............................. 5
SECTION 3.05 Capitalization 5
SECTION 3.06 Subsidiaries.................................. 5
SECTION 3.07 Financial Statements.......................... 5
SECTION 3.08 Absence of Certain Changes.................... 6
SECTION 3.09 No Undisclosed Material Liabilities........... 6
SECTION 3.10 Litigation.................................... 7
SECTION 3.11 Taxes 7
SECTION 3.12 ERISA......................................... 7
SECTION 3.13 Compliance with Laws.......................... 9
SECTION 3.14 Vote Required................................. 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF RAMSAY............. 9
SECTION 4.01 Corporate Existence and Power................. 9
SECTION 4.02 Corporate Authorization....................... 9
SECTION 4.03 Governmental Authorization.................... 10
SECTION 4.04 Non-Contravention............................. 10
SECTION 4.05 Capitalization................................ 10
SECTION 4.06 SEC Filings................................... 11
SECTION 4.07 Financial Statements.......................... 11
SECTION 4.08 No Undisclosed Material Liabilities........... 11
SECTION 4.09 Vote Required................................. 12
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V. COVENANTS OF RAMSAY AND THE COMPANY 12
SECTION 5.01 Best Efforts.................................. 12
SECTION 5.02 Certain Filings............................... 12
SECTION 5.03 Public Announcements.......................... 12
SECTION 5.04 Further Assurances............................ 13
SECTION 5.05 Expenses...................................... 13
SECTION 5.06 Interim Operations............................ 13
ARTICLE VI. CONDITIONS TO THE MERGER............................. 13
SECTION 6.01 Conditions to the Obligations of Each Party... 13
SECTION 6.02 Conditions to the Obligations of Ramsay
and Merger Subsidiary........................ 14
SECTION 6.03 Conditions to the Obligations of the Company.. 14
ARTICLE VII. TERMINATION......................................... 14
SECTION 7.01 Termination................................... 14
SECTION 7.02 Effect of Termination......................... 15
ARTICLE VIII. MISCELLANEOUS...................................... 15
SECTION 8.01 Notices....................................... 15
SECTION 8.02 Amendments; No Waivers........................ 16
SECTION 8.03 Successors and Assigns........................ 16
SECTION 8.04 Governing Law................................. 16
SECTION 8.05 Counterparts; Effectiveness................... 16
SECTION 8.06 Entire Agreement.............................. 16
</TABLE>
EXHIBIT A - FORM OF WARRANT
-ii-
<PAGE>
COMPANY DISCLOSURE SCHEDULE
Section 3.07 Financial Statements. See Attachments.
--------------------
Section 3.08 Absence of Certain Changes.
--------------------------
. The Management Agreement between the Company and Luis Management
Corporation (the "Management Agreement") will be cancelled before the
Effective Time.
. Bonus payments of approximately $350,000 will be paid to Company
employees prior to the Effective Time. Accruals for these bonuses
have not been included in the Financial Statements.
. The Company will make a contribution to its pension plan equal to the
lesser of $30,000 or 30% of each employee's 1997 earnings, prior to
the Effective Time. An accrual for this contribution is not included
in the Financial Statements.
. The Company is expected to pay approximately $90,000 in travel and
entertainment expenses prior to the Effective Time. These expenses
have not been accrued for in the Financial Statements.
. Shareholders distributions of approximately $150,000 will be made
prior to the Effective Time. These distributions have not been accrued
for in the Financial Statements.
. All excess Company cash on the day prior to the Effective Time will be
distributed to Company shareholders.
. Ramsay currently owes the Company $200,000 in management fees and over
$36,000 in expenses incurred in connection with the Management
Agreement. These fees and expenses will be paid to the Company prior
to the Effective Time.
-1-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER dated as of July 1, 1997, among Summa
Healthcare Group, Inc., a Florida corporation (the "Company"), Ramsay Health
Care, Inc., a Delaware corporation ("Ramsay"), and Ramsay Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Ramsay (the "Merger
Subsidiary").
WHEREAS, the Board of Directors of Ramsay and the Board of Directors
and stockholders of each of the Company and the Merger Subsidiary have approved
this Agreement and the Merger (as defined below); and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I. THE MERGER
SECTION 1.01 The Merger. (a) At the Effective Time (as defined in
----------
Section 1.01(b)), the Company shall be merged (the "Merger") with and into the
Merger Subsidiary in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law") and the Florida Business Corporation Act ("Florida
Law"), whereupon the separate existence of the Company shall cease, and the
Merger Subsidiary shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after the satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company and the
Merger Subsidiary will file a certificate of merger with the Secretary of State
of the State of Delaware and articles of merger with the Department of State of
the State of Florida and make all other filings or recordings required by
Delaware Law or Florida Law in connection with the Merger. The closing of the
Merger will take place at the offices of Haythe & Curley, 237 Park Avenue, New
York, New York 10017, or such other place as the parties may agree. The Merger
shall become effective at the later of (i) July 1, 1997, (ii) such time as a
certificate of merger is duly filed with the Secretary of State of the State of
Delaware, (iii) such time as articles of merger are duly filed with the
Department of State of the State of Florida, or (iv) at such later time as is
specified in such certificate of merger and articles of merger (the "Effective
Time").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the assets, rights, privileges, powers and franchises and be subject
to all of the
<PAGE>
2
liabilities, restrictions, disabilities and duties of the Company and the Merger
Subsidiary, all as provided under Delaware Law.
SECTION 1.02 Conversion of Shares. At the Effective Time:
--------------------
(a) each outstanding share of common stock, par value $.01 per share
(the "Shares"), of the Company held by the Company as treasury stock or
owned by Ramsay or any subsidiary of Ramsay immediately prior to the
Effective Time shall be cancelled, and no payment (whether in cash, shares
of Ramsay's common stock, par value $.01 per share (the "Ramsay Common
Stock"), or other consideration) shall be made with respect thereto;
(b) each share of common stock, par value $.01 per share, of the
Merger Subsidiary outstanding immediately prior to the Effective Time shall
continue to be outstanding as one share of common stock, par value $.01 per
share, of the Surviving Corporation with the same rights, powers and
privileges as such share had prior to the Effective Time and such shares
shall constitute the only outstanding shares of capital stock of the
Surviving Corporation;
(c) except as otherwise provided in Section 1.02(a), each Share
outstanding immediately prior to the Effective Time shall be converted into
the right to receive (i) 2,250.23 fully paid and nonassessable shares of
Ramsay Common Stock, (ii) $2,700.27 in cash and (iii) a warrant to purchase
4,500.45 shares of Ramsay Common Stock at an exercise price of $3.25 per
share, such warrant to be in the form of Exhibit A attached hereto
(collectively, the "Warrants") (such Warrant together with such 2,250.23
shares of Ramsay Common Stock and such $2,700.27 in cash are hereinafter
referred to as the "Merger Consideration").
SECTION 1.03 Surrender and Payment. (a) Each holder of Shares that
---------------------
have been converted into a right to receive the Merger Consideration, upon
surrender to Ramsay of a certificate or certificates representing such Shares,
will be entitled to receive in exchange therefor (i) that number of whole shares
of Ramsay Common Stock which such holder has the right to receive pursuant to
Section 1.02, (ii) that amount of cash which such holder has the right to
receive pursuant to Section 1.02, (iii) that number of Warrants which such
holder has the right to receive pursuant to Section 1.02 and (iv) cash in lieu
of fractional shares of Ramsay Common Stock which such holder has the right to
receive pursuant to Section 1.04, and the certificate or certificates for the
Shares so surrendered shall be cancelled. Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes, only
the right to receive upon such surrender the Merger Consideration and cash in
lieu of any fractional shares of Ramsay Common Stock as contemplated by this
Section 1.03 and Section 1.04.
(b) If any shares of Ramsay Common Stock are to be issued to a Person
(as defined below) other than the registered holder of the Shares represented by
the certificate or certificates surrendered in exchange therefor, it shall be a
condition to such issuance that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such issuance shall pay to Ramsay any
<PAGE>
3
transfer or other taxes required as a result of such issuance to a Person other
than the registered holder of such Shares or establish to the satisfaction of
Ramsay that such tax has been paid or is not payable. For purposes of this
Agreement, "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
(c) After the Effective Time, there shall be no further registration
of transfers of Shares. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be cancelled and
exchanged as provided for, and in accordance with the procedures set forth, in
this Article I.
(d) No dividends or other distributions on shares of Ramsay Common
Stock shall be paid to the holder of any unsurrendered certificates representing
Shares until such certificates are surrendered as provided in this Section.
Upon such surrender, there shall be paid, without interest, to the person in
whose name the certificates representing the shares of Ramsay Common Stock into
which such Shares were converted are registered, all dividends and other
distributions paid in respect of such Ramsay Common Stock on a date subsequent
to, and in respect of a record date after, the Effective Time.
SECTION 1.04 Fractional Shares. No fractional shares of Ramsay
-----------------
Common Stock or Warrants to purchase fractional shares of Ramsay Common Stock
shall be issued in the Merger. All fractional shares of Ramsay Common Stock
that a holder of Shares would otherwise be entitled to receive as a result of
the Merger shall be aggregated and if a fractional share of Ramsay Common Stock
results from such aggregation, such holder shall be entitled to receive, in lieu
thereof, an amount in cash determined by multiplying the average of the daily
closing sale price per share of Ramsay Common Stock on the Nasdaq National
Market for the ten trading days immediately preceding the Effective Time by the
fraction of a share of Ramsay Common Stock to which such holder would otherwise
have been entitled. No such cash in lieu of fractional shares of Ramsay Common
Stock shall be paid to any holder of Shares until certificates representing such
Shares are surrendered and exchanged in accordance with Section 1.03. All
Warrants to purchase fractional shares of Ramsay Common Stock that a holder of
Shares would otherwise be entitled to receive as a result of the Merger shall be
aggregated and if a Warrant to purchase a fraction of a share results from such
aggregation (i) if such fraction is greater than or equal to 0.5, such holder
shall be entitled to receive a Warrant to purchase one share of Common Stock in
lieu hereof or (ii) if such fraction is less than 0.5, such holder shall not be
entitled to receive any consideration therefor.
ARTICLE II. THE SURVIVING CORPORATION
SECTION 2.01 Certificate of Incorporation. The certificate of
----------------------------
incorporation of the Merger Subsidiary in effect at the Effective Time shall
continue to be the certificate of incorporation of the Surviving Corporation
until amended in accordance with applicable law.
<PAGE>
4
SECTION 2.02 Bylaws. The bylaws of the Merger Subsidiary in effect
------
at the Effective Time shall continue to be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 2.03 Directors and Officers. From and after the Effective
----------------------
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (i) the directors of the Merger Subsidiary at the Effective
Time shall continue to be the directors of the surviving corporation, and (ii)
the officers of the Merger Subsidiary at the Effective Time shall continue to be
the officers of the Surviving Corporation.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Ramsay that, except as set
forth in the Company Disclosure Schedule delivered by the Company to Ramsay
simultaneously with the execution and delivery hereof (the "Company Disclosure
Schedule"):
SECTION 3.01 Corporate Existence and Power. The Company is a
-----------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Florida, and has all corporate powers and all governmental
licenses, permits, authorizations, consents and approvals required to carry on
its business as now conducted except where the failure to do so would not have
or reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the financial condition, business, assets or results of
operations of the Company (a "Company Material Adverse Effect"). The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not have or
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company has heretofore delivered to Ramsay true
and complete copies of the Company's articles of incorporation and bylaws as
currently in effect.
SECTION 3.02 Corporate Authorization. The execution, delivery and
-----------------------
performance by the Company of this Agreement and the consummation of the Merger
by the Company are within the Company's corporate powers and have been duly
authorized by all necessary corporate action. This Agreement constitutes a
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms. Copies of the resolutions duly adopted by the
Company's Board of Directors and the holders of all of the Shares, adopting,
approving and authorizing this Agreement, have been furnished to Ramsay.
SECTION 3.03 Governmental Authorization. The execution, delivery and
--------------------------
performance by the Company of this Agreement and the consummation of the Merger
by the Company require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than the filing of a
certificate of merger in accordance with Delaware Law and articles of merger in
accordance with Florida Law, except where the failure of any such action to be
taken or filing to be made would not have or reasonably be
<PAGE>
5
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or prevent consummation of the transactions contemplated hereby.
SECTION 3.04 Non-Contravention. The execution, delivery and
-----------------
performance by the Company of this Agreement and the consummation of the Merger
by the Company do not and will not (i) contravene or conflict with the articles
of incorporation or bylaws of the Company, (ii) assuming compliance with the
matters referred to in Section 3.03, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Company, (iii) constitute a default
under or give rise to a right of termination, cancellation or acceleration of
any right or obligation of the Company or to a loss of any benefit to which the
Company is entitled under any material agreement or other instrument binding
upon the Company or any license, franchise, permit or other similar
authorization held by the Company, or (iv) result in the creation or imposition
of any Lien (as defined below) on any asset of the Company, except for any
occurrences or results referred to in clauses (ii), (iii) and (iv) which would
not have or reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect or prevent consummation of the transactions
contemplated hereby. For purposes of this Agreement, "Lien" means, with respect
to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance or adverse claim of any kind in respect of such asset.
SECTION 3.05 Capitalization. The authorized capital stock of the
--------------
Company consists of 1,000 Shares. As of the date hereof, there are outstanding
111.1 Shares. All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable and free
of preemptive rights. Except as set forth in this Section, there are
outstanding as of the date hereof (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
and (iii) no options, warrants or other rights to acquire from the Company, and
no obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
Company Securities.
SECTION 3.06 Subsidiaries. The Company does not have any
------------
Subsidiaries. For purposes of this Agreement, a "Subsidiary" of any Person
means (i) any corporation or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are directly or
indirectly owned by such Person, and (ii) any partnership of which such Person
is a general partner.
SECTION 3.07 Financial Statements. The financial statements of the
--------------------
Company included in the Company Disclosure Schedule fairly present, on a cash
basis applied on a consistent basis (except as may be indicated in the notes
thereto), the financial position of the Company as of the dates thereof and the
results of operations for the periods then ended (subject, in the case of any
interim financial statements, to normal year-end adjustments, none
<PAGE>
6
of which, individually or in the aggregate, would have a Company Material
Adverse Effect) (the date of the latest balance sheet included in such Financial
Statement is referred to herein as the "Balance Sheet Date").
SECTION 3.08 Absence of Certain Changes. Except as contemplated
--------------------------
hereby, since the Balance Sheet Date, the Company has conducted its business in
all material respects in the ordinary course consistent with past practices and
there has not been:
(a) any event, occurrence or development or state of circumstances or
facts, which affects or relates to the Company, which has had or would
reasonably be expected to have a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the Company
of any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company;
(c) any amendment of any material term of any outstanding security of
the Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices;
(e) any creation or assumption by the Company of any Lien on any
material asset other than in the ordinary course of business consistent
with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any change in any method of accounting or accounting practice by
the Company, except for any such change required by reason of a concurrent
change in generally accepted accounting principles; or
(h) except for contractual obligations existing on the date hereof,
other than in the ordinary course of business consistent with past
practices, any (i) grant of any severance or termination pay to any
director, officer or employee of the Company, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, or
(iv) increase in compensation, bonus or other benefits payable to
directors, officers or employees of the Company.
SECTION 3.09 No Undisclosed Material Liabilities. There are no
-----------------------------------
liabilities of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances
<PAGE>
7
which, individually or in the aggregate, have or would reasonably be expected to
have a Company Material Adverse Effect, other than:
(i) liabilities incurred in the ordinary course of business consistent
with past practices since the Balance Sheet Date, which in the aggregate
are not material to the Company; and
(ii) liabilities under this Agreement.
SECTION 3.10 Litigation. There is no action, suit, investigation or
----------
proceeding pending against, or to the knowledge of the Company, threatened
against the Company or any of its properties before any court or arbitrator or
any governmental body, agency or official which would have or reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
SECTION 3.11 Taxes. (i) The Company has timely filed all tax
-----
returns, statements, reports and forms required to be filed with any tax
authority when due in accordance with all applicable laws except where the
failure to do so would not have or reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect; and (ii) no deficiency
in payment of any taxes for any period has been asserted by any taxing authority
which remains unsettled at the date hereof except for deficiencies which would
not have or reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
For purposes of this Agreement, "tax" or "taxes" means all net income,
gross income, gross receipts, sales, use, ad valorem, transfer, accumulated
earnings, personal holding company, excess profits, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign).
SECTION 3.12 ERISA. (a) "Employee Plans" shall mean each "employee
-----
benefit plan", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), which (i) is subject to any provision of ERISA
and (ii) is maintained, administered or contributed to by the Company or any
affiliate (as defined below) and covers any employee or former employee of the
Company or any affiliate or under which the Company or any affiliate has any
liability. Copies of such plans (and, if applicable, related trust agreements)
and all amendments thereto and written interpretations thereof have been
furnished to Ramsay. For purposes of this Section, "affiliate" of any Person
means any other Person which, together with such Person, would be treated as a
single employer under Section 414 of the Code. No Employee Plan individually or
collectively constitutes a "defined benefit plan" as defined in Section 3(35) of
ERISA.
(b) No Employee Plan constitutes a "multi-employer plan", as defined
in Section 3(37) of ERISA, and no Employee Plan is maintained in connection with
any trust described in Section 501(c)(9) of the Code. No Employee Plan is
subject to Title IV of
<PAGE>
8
ERISA. Neither the Company nor any of its affiliates has incurred, nor has
reason to expect to incur, any liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal from, any
plan previously covered by Title IV of ERISA that would have, or reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Employee Plan has or will make the Company
or any officer or director of the Company subject to any liability under Title I
of ERISA or liable for any tax pursuant to Section 4975 of the Code that would
have, or reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code, and each Employee Plan has been
maintained in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, final rules and final regulations, including but
not limited to, ERISA and the Code, which are applicable to such Employee Plan.
(d) Except to the extent it would not have, or reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect,
there is no contract, agreement, plan or arrangement covering any employee or
former employee of the Company that, individually or collectively, could give
rise to the payment of any amount that would not be deductible due to Sections
162(m) or 280G of the Code.
(e) "Benefit Arrangement" of any party shall mean each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for compensation, bonus, profit-sharing,
stock option, or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, health or
medical insurance or other benefits) which (i) is not an Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be, by such party or
any of its affiliates and (iii) covers any employee or former employee of such
party or any of its affiliates. Copies or descriptions of the Benefit
Arrangements of the Company have been furnished to Ramsay. Except to the extent
that it would not have, or reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect, each of the Company's Benefit
Arrangements has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Benefit Arrangement.
(f) Except to the extent that it would not have, or reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, the transactions contemplated hereby will not result in any liability
for severance pay to any employee nor will any employee be entitled to any
payment by reason of such transactions or the termination of such employee
within a specified time period after such transactions.
<PAGE>
9
(g) The Company does not provide, nor has it made any current or past
commitment to provide, post-retirement health or medical benefits for retired
employees of the Company.
SECTION 3.13 Compliance with Laws. The Company is not in violation
--------------------
of, and has not violated, any applicable provisions of any laws, statutes,
ordinances or regulations other than violations which would not, in the
aggregate, reasonably be expected to have a Company Material Adverse Effect. To
the best of the knowledge of the Company, there is no toxic waste condition or
other pollution condition of any nature, including, without limitation, the
presence of asbestos or other carcinogens, existing at any location leased or
owned by the Company which could reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect.
SECTION 3.14 Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated hereby and such approval has been obtained.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF RAMSAY
Ramsay represents and warrants to the Company that, except as
disclosed on the Ramsay Disclosure Schedule delivered by Ramsay to the Company
simultaneously with the execution and delivery hereof:
SECTION 4.01 Corporate Existence and Power. Each of Ramsay and the
-----------------------------
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has all corporate
powers and all governmental licenses, permits, authorizations, consents and
approvals required to carry on its business as now conducted except where the
failure to do so would not have or reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the financial condition,
business, assets or results of operations of Ramsay and its Subsidiaries taken
as a whole (a "Ramsay Material Adverse Effect"). Ramsay is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not have or reasonably be expected to
have, individually or in the aggregate, a Ramsay Material Adverse Effect.
Ramsay has heretofore delivered to the Company true and complete copies of
Ramsay's and the Merger Subsidiary's respective certificates of incorporation
and bylaws as currently in effect. Since the date of its incorporation, the
Merger Subsidiary has not engaged in any activities other than in connection
with or as contemplated by this Agreement.
SECTION 4.02 Corporate Authorization. The execution, delivery and
-----------------------
performance by Ramsay and the Merger Subsidiary of this Agreement and the
consummation of the Merger by the Merger Subsidiary are within the corporate
powers of Ramsay and the Merger Subsidiary and have been duly authorized by all
necessary corporate action. This
<PAGE>
10
Agreement constitutes a valid and binding agreement of Ramsay and the Merger
Subsidiary enforceable against Ramsay and the Merger Subsidiary in accordance
with its terms.
SECTION 4.03 Governmental Authorization. The execution, delivery and
--------------------------
performance by Ramsay and the Merger Subsidiary of this Agreement and the
consummation of the Merger by the Merger Subsidiary require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than (i) the filing of a certificate of merger in accordance with Delaware
Law and articles of merger in accordance with Florida Law; and (ii) compliance
with the applicable requirements of the Nasdaq National Market, except where the
failure of any such action to be taken or filing to be made would not have or
reasonably be expected to have, individually or in the aggregate, a Ramsay
Material Adverse Effect or prevent consummation of the transactions contemplated
hereby.
SECTION 4.04 Non-Contravention. The execution, delivery and
-----------------
performance by Ramsay and the Merger Subsidiary of this Agreement and the
consummation of the Merger by the Merger Subsidiary do not and will not (i)
contravene or conflict with the respective certificates of incorporation or
bylaws of Ramsay or the Merger Subsidiary, (ii) assuming compliance with the
matters referred to in Section 4.03, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Ramsay or any of its Subsidiaries, (iii)
constitute a default under or give rise to a right of termination, cancellation
or acceleration of any right or obligation of Ramsay or any of its Subsidiaries
or to a loss of any benefit to which Ramsay or any of its Subsidiaries is
entitled under any material agreement or other instrument binding upon Ramsay or
any of its Subsidiaries or any license, franchise, permit or other similar
authorization held by Ramsay or any of its Subsidiaries, or (iv) result in the
creation or imposition of any Lien on any asset of Ramsay or any of its
Subsidiaries, except for any occurrences or results referred to in clauses (ii),
(iii) and (iv) which would not have or reasonably be expected to have,
individually or in the aggregate, a Ramsay Material Adverse Effect or prevent
consummation of the transactions contemplated hereby.
SECTION 4.05 Capitalization. The authorized capital stock of Ramsay,
--------------
consisting of shares of Ramsay Common Stock and shares of preferred stock, par
value $1.00 per share, of Ramsay is as shown in the Ramsay SEC Filings (as
hereinafter defined). All outstanding shares of capital stock of Ramsay have
been duly authorized and validly issued and are fully paid and nonassessable and
free of preemptive rights. Except as set forth in this Section, and except for
changes since the date of the latest balance sheet included in the Ramsay SEC
Filings resulting from the grant after such date of employee stock options or
the exercise of employee stock options or other obligations to issue shares of
Ramsay Common Stock referred to above, there are outstanding as of the date
hereof (i) no shares of capital stock or other voting securities of Ramsay, (ii)
no securities of Ramsay convertible into or exchangeable for shares of capital
stock or voting securities of Ramsay, and (iii) no options, warrants or other
rights to acquire from Ramsay, and no obligation of Ramsay to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Ramsay (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "Ramsay Securities"). There are no
outstanding obligations of Ramsay or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Ramsay Securities. The shares of Ramsay Common
Stock issuable in the Merger and the shares of Ramsay
<PAGE>
11
Common Stock issuable upon the exercise of the Warrants have been duly
authorized, and when issued and delivered in accordance with the terms of this
Agreement, will have been validly issued and will be fully paid and
nonassessable and the issuance thereof is not subject to any preemptive or other
similar right.
SECTION 4.06 SEC Filings. (a) Ramsay has delivered to the Company
-----------
(i) Ramsay's annual report on Form 10-K for the fiscal year ended June 30, 1996
(the "Ramsay 10-K"), (ii) its quarterly reports on Form 10-Q for the periods
ended September 30, 1996, December 31, 1996 and March 31, 1997, (iii) its proxy
or information statements and additional soliciting materials required to be
filed with the SEC relating to meetings of, or actions taken without a meeting
by Ramsay' stockholders held (or scheduled to be held) since June 30, 1996, and
(iv) all of its other reports, statements, schedules and registration statements
filed with the Securities and Exchange Commission (the "SEC") since June 30,
1996, and all materials incorporated therein by reference (the filings referred
to in clauses (i) through (v) above and delivered to the Company prior to the
date hereof being hereinafter referred to as the "Ramsay SEC Filings").
(b) As of its filing date, each such report or statement filed
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), complied as to form in all material respects with the requirements of the
Exchange Act and did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(c) Each such registration statement and any amendment thereto filed
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), as of
the date such statement or amendment became effective, complied as to form in
all material respects with the Securities Act and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
SECTION 4.07 Financial Statements. The audited consolidated
--------------------
financial statements of Ramsay and its consolidated Subsidiaries included in the
Ramsay 10-K fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of Ramsay and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended.
SECTION 4.08 No Undisclosed Material Liabilities. Except as
-----------------------------------
described in any Ramsay SEC Filing, there are no liabilities of Ramsay or any of
its consolidated Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which, individually or in
the aggregate, have or would reasonably be expected to have a Ramsay Material
Adverse Effect, other than:
<PAGE>
12
(i) liabilities incurred in the ordinary course of business
consistent with past practices since March 31, 1997, which in the aggregate
are not material to Ramsay and its consolidated Subsidiaries, taken as a
whole; and
(ii) liabilities under this Agreement.
SECTION 4.09 Vote Required. No vote of the holders of any class or
-------------
series of Ramsay' capital stock is necessary to approve this Agreement and the
transactions contemplated hereby. The affirmative vote of the holders of a
majority of the outstanding shares of common stock, par value $0.01 per share,
of the Merger Subsidiary is the only vote of the holders of any class or series
of the Merger Subsidiary's capital stock necessary to approve this Agreement and
the transactions contemplated hereby and such approval has been obtained.
ARTICLE V. COVENANTS OF RAMSAY AND THE COMPANY
The parties hereto agree that:
SECTION 5.01 Best Efforts. Subject to the terms and conditions of
------------
this Agreement, each party will use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement including, without limitation,
obtaining all material consents, waivers and approvals required in connection
with the authorization, execution and delivery of this Agreement by the parties
and the consummation by the parties of the Merger and the other transactions
contemplated by this Agreement.
SECTION 5.02 Certain Filings. The Company and Ramsay shall cooperate
---------------
with one another (a) in determining whether any action by or in respect of, or
filing with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.
SECTION 5.03 Public Announcements. Ramsay and the Company will
--------------------
consult with each other before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange or interdealer quotation system upon the
advice of counsel (in which case only reasonable efforts to consult with the
other party are required), will not issue any such press release or make any
such public statement without the prior consent of the other party, which
consent shall not be unreasonably withheld or delayed.
<PAGE>
13
SECTION 5.04 Further Assurances. At and after the Effective Time,
------------------
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or the Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or the Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 5.05 Expenses. All costs and expenses incurred in connection
--------
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses, whether or not any such transaction is
consummated.
SECTION 5.06 Interim Operations. In order to provide for continuity
------------------
in the business transition between the date hereof and the Effective Time, the
Company shall conduct all business and operations relating to its project to
provide health care services (including medical, dental, behavioral health and
support services) to inmates at correctional facilities in Florida and elsewhere
through Ramsay and/or its subsidiaries and Ramsay shall bear all of the out-of-
pocket expenses incurred in connection therewith. If this Agreement is
terminated, then Ramsay and each of such subsidiaries shall transfer to the
Company all rights, commitments, understandings, know-how, trade secrets,
information, data, studies, work, developments and ideas related thereto, and
all documents, databases and other embodiments of any of the foregoing (whether
on paper, electromagnetic tape or disk, optical disk, film or any other format)
relating to such project acquired by Ramsay or any of its subsidiaries from the
Company between the date hereof and such termination, free and clear of any and
all liens, encumbrances and other security interests of any kind whatsoever.
ARTICLE VI. CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Ramsay and the Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(i) no provision of any applicable law or regulation shall be
enacted, entered, enforced or deemed applicable to the Merger, which makes
the consummation of the Merger illegal, and no judgment, injunction, order
or decree of a court of competent jurisdiction restraining or prohibiting
the consummation of the Merger shall be in effect; and
(ii) the debt of Ramsay and its Subsidiaries with respect to which
consents of the lenders thereunder are required to consummate the Merger
shall have been modified, amended, restructured, refinanced or repaid on
terms reasonably satisfactory to the Board of Directors of Ramsay such that
the Merger and the consummation of the other transactions contemplated
hereby shall be permitted under the terms of such debt.
<PAGE>
14
SECTION 6.02 Conditions to the Obligations of Ramsay and Merger
--------------------------------------------------
Subsidiary. The obligations of Ramsay and the Merger Subsidiary to consummate
- ----------
the Merger are subject to the satisfaction of the following further conditions:
(i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained
in this Agreement shall be true in all respects at and as of the Effective
Time as if made at and as of such time except for (A) changes contemplated
by this Agreement, (B) those representations and warranties that address
matters only as of a particular date, provided that such representations
and warranties are true and correct as of such date, (C) changes in any law
or regulation applicable to the Company or by which any property or asset
of the Company is bound, and (D) changes arising out of general economic
conditions or conditions generally affecting the health care or private
correctional facility markets, and where the failure to be so true and
correct would not have a Company Material Adverse Effect, and Ramsay shall
have received a certificate signed by an executive officer of the Company
to the foregoing effect; and
(ii) the Company shall have been released from any and all current
and future liabilities and obligations relating to the Company car used by
Isabel M. Diaz.
SECTION 6.03 Conditions to the Obligations of the Company. The
--------------------------------------------
obligations of the Company to consummate the Merger are subject to the
satisfaction of the further conditions that Ramsay and the Merger Subsidiary
shall have performed in all material respects all of their respective
obligations hereunder required to be performed by them at or prior to the
Effective Time, the representations and warranties of Ramsay and the Merger
Subsidiary contained in this Agreement shall be true in all respects at and as
of the Effective Time as if made at and as of such time except for (A) changes
contemplated by this Agreement, (B) those representations and warranties that
address matters only as of a particular date, provided that such representations
and warranties are true and correct as of such date, (C) changes in any law or
regulation applicable to Ramsay or any of its Subsidiaries or by which any
property or asset of Ramsay or any of its Subsidiaries is bound, and (D) changes
arising out of general economic conditions or conditions generally affecting the
health care market, and where the failure to be so true and correct would not
have a Ramsay Material Adverse Effect, and the Company shall have received a
certificate signed by an executive officer of each of Ramsay and the Merger
Subsidiary to the foregoing effect.
ARTICLE VII. TERMINATION
SECTION 7.01 Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company or the Merger
Subsidiary):
(i) by mutual written consent of the Company and Ramsay;
<PAGE>
15
(ii) by either the Company or Ramsay, if the Merger has not been
consummated by December 31, 1997 (provided that the right to terminate this
Agreement under this clause shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement has been the
cause of or resulted in the failure to consummate the Merger by such date);
(iii) by either the Company or Ramsay, if there shall be any
applicable domestic law, rule or regulation that makes consummation of the
Merger illegal or otherwise prohibited or if any judgment, injunction,
order or decree of a court of competent jurisdiction shall restrain or
prohibit the consummation of the Merger, and such judgment, injunction,
order or decree shall become final and nonappealable; or
(iv) by either the Company or Ramsay if (x) there has been a breach
by the other party of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have a Ramsay
Material Adverse Effect or Company Material Adverse Effect, as the case may
be, or (y) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the other party,
which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by the terminating party to
the other party.
SECTION 7.02 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 7.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (a) the agreements
contained in Sections 5.05 and 5.06 shall survive the termination hereof, and
(b) nothing herein shall relieve any party hereto from liability for any willful
breaches hereof.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01 Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Ramsay or the Merger Subsidiary, to:
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Telephone: (305) 569-6993
Telecopy: (305) 569-4647
Attention: President
<PAGE>
16
if to the Company to:
P.O. Box 140131
Coral Gables, Florida 33114-0131
Telephone: (305) 567-1010
Telecopy: (305) 567-1169
Attention: President
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered at the address specified
in this Section.
SECTION 8.02 Amendments; No Waivers. (a) Any provision of this Agreement
----------------------
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Ramsay and the Merger Subsidiary or, in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.03 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto and any attempted transfer in
violation of this sentence shall be null and void.
SECTION 8.04 Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the law of the State of Delaware, without regard
to any conflict of laws principles which would apply the laws of any other
jurisdiction except where Florida Law shall apply to the corporate governance of
the Company prior to the Effective Time.
SECTION 8.05 Counterparts; Effectiveness. This Agreement may be signed in
---------------------------
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 8.06 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement,
<PAGE>
17
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder except for the provisions of Article I, which are
intended for the benefit of the Company's stockholders.
* * *
<PAGE>
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
SUMMA HEALTHCARE GROUP, INC.
By:___________________________
President
RAMSAY HEALTH CARE, INC.
By:___________________________
President
RAMSAY ACQUISITION CORP.
By:__________________________
President
The undersigned, Secretary of the Company, hereby certifies that this
Agreement has been adopted by the written consent of the holders of all of the
outstanding stock of the Company entitled to vote thereon.
______________________________
Secretary
The undersigned, Secretary of the Merger Subsidiary, hereby certifies that
this Agreement has been adopted by the written consent of the sole stockholder
of the Merger Subsidiary.
______________________________
Secretary
<PAGE>
EXHIBIT 3.8
CERTIFICATE OF DESIGNATIONS OF
PREFERRED STOCK
OF
RAMSAY HEALTH CARE, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
------------------------------------------------
The undersigned, Bert G. Cibran, President of Ramsay Health Care, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), on behalf of the Corporation and in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by Section 2 of Paragraph (4) of the Amended and Restated
Certificate of Incorporation of the Corporation, and in accordance with the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware, on February 26, 1997, the Board of Directors of the Corporation
authorized and designated 100,000 of the authorized shares of the Class B
Preferred Stock, $0.01 par value, of the Corporation as Class B Preferred Stock,
Series 1996 and adopted the following resolution in connection therewith:
RESOLVED, that the Board of Directors of the Corporation, in accordance with
Section 151(g) of the General Corporation Law of the State of Delaware and
Section 2 of Paragraph (4) of the Corporation's Amended and Restated Certificate
of Incorporation, hereby authorizes and designates 100,000 shares of Class B
Preferred Stock, par value $1.00 per share, as Class B Preferred Stock, Series
1996 (the "Series 1996 Preferred Stock"), which Series 1996 Preferred Stock
shall be described and limited as follows:
(a) Definitions. For purposes of this Designation, the following definitions
-----------
shall apply:
"Additional Shares of Common Stock" shall mean all shares of Common Stock, par
value $0.01 per share (the "Common Stock"), of the Corporation issued subsequent
to the Base Date (or, pursuant to subparagraph (e)(v), deemed to be issued
subsequent to the Base Date) by the Corporation, other than shares of Common
Stock issued or issuable (A)
<PAGE>
2
upon conversion of shares of Class B Preferred Stock, par value $1.00 per share,
Series C (the "Series C Preferred Stock") and shares of Series 1996 Preferred
Stock; (B) pursuant to any Options issued under the 1990, 1991 and 1993 Stock
Option Plans and the 1995 and 1996 Long Term Incentive Plans of the Corporation
as in effect on the Base Date or under any other or additional option, incentive
or similar plan approved by the Board of Directors of the Corporation subsequent
to the Base Date; and (C) upon exercise of Options or Convertible Securities
other than those covered by clause (B) above, in each case which Options or
Convertible Securities were outstanding as of the Base Date.
"Base Date" shall mean the effective date of the merger of Ramsay Managed
Care, Inc. a Delaware corporation, with RHCI Acquisition Corp., a Delaware
corporation, pursuant to the Agreement and Plan of Merger dated October 1, 1996.
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Common Stock Outstanding" shall include all Common Stock issued and
outstanding and issuable upon exercise of all outstanding Options and conversion
of all outstanding Convertible Securities.
"Convertible Securities" shall mean any evidences of indebtedness, shares or
other securities convertible into or exchangeable for shares of Common Stock.
"Effective Price" of Additional Shares of Common Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Common Stock
issued or sold, or deemed to have been issued or sold by the Corporation under
subparagraph (e)(v), into the aggregate consideration received or deemed to have
been received by the Corporation for such issue under subparagraph (e)(v).
"Market Price" shall mean, for any day, the last sale price regular way, or,
in case no sale takes place on any such day, the average of the closing bid and
asked prices regular way, for the Common Stock in either case on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last sale price for the shares of Common Stock
on the Nasdaq National Market or the Nasdaq SmallCap Market, whichever is
applicable, or, if such shares shall not be included in such markets, the
closing bid price in the over-the-counter market, in each such case
<PAGE>
3
averaged over a period of 20 consecutive business days ending immediately prior
to the day as of which the Market Price is being determined. If at any time the
shares of Common Stock are not listed on any national securities exchange,
included in the Nasdaq National Market or the Nasdaq SmallCap Market or quoted
in the over-the-counter market, the Market Price of the shares of Common Stock
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 Corporation by any firm of independent certified
public accountants (which may be the regular auditors of the Corporation) of
recognized national standing selected by the Board of Directors of the
Corporation, as of the last day of the last calendar month ending prior to 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 selected by the Board of
Directors of the Corporation, as of a date which is within 15 days preceding the
date as of which the determination is to be made.
"Options" shall mean rights, options or warrants to subscribe for, purchase or
otherwise acquire shares of Common Stock or Convertible Securities.
(b) Dividend Rights. From and after the issuance of the Series 1996
---------------
Preferred Stock, the holders of outstanding Series 1996 Preferred Stock shall be
entitled to receive, and shall be paid, when and as declared by the Board
of Directors, out of funds legally available therefor, cumulative cash
dividends at an annual rate of $1.50 per share, payable in arrears
quarterly on January 15, April 15, July 15 and October 15, to stockholders
of record on a date not more than 20 days prior to the date on which such
cash dividends are payable, said dividends to commence accrual on the date
of issuance of the applicable shares. Such dividends shall be prior and in
preference to any declaration of payment of any dividend on any class or
series of capital stock of the Corporation, including without limitation,
the Common Stock and the Class A Preferred Stock, par value $1.00 per share
(the "Class A Preferred Stock"), of the Corporation, but shall rank junior
in right of payment with any declaration of payment of dividends on the
Series C Preferred Stock, which payment of dividends shall be senior and
preferred to any payment of dividends in respect of the Series 1996
Preferred Stock. Such dividends in respect of the Series 1996 Preferred
Stock shall be cumulative and shall accrue whether or not declared by the
Board of Directors. No cash dividends shall be paid
<PAGE>
4
with respect to any class or series of capital stock of the Corporation,
including without limitation, the Class A Preferred Stock and the Common Stock,
but other than the Series C Preferred Stock, until all dividends accrued on any
outstanding shares of the Series 1996 Preferred Stock, whether or not declared,
have been set apart and fully paid. No accumulation of dividends on the Series
1996 Preferred Stock shall bear interest.
(c) Liquidation Rights. In the event of liquidation, dissolution or winding
------------------
up of the Corporation, whether voluntary or involuntary, the holders of the
Series 1996 Preferred Stock, by reason of their ownership thereof, shall be
entitled to receive in exchange for and in redemption of each share of
Series 1996 Preferred Stock held, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to
the holders of any class or series of capital stock of the Corporation,
including without limitation, the Class A Preferred Stock and the Common
Stock, but other than any distribution of any of the assets or surplus
funds of the Corporation to the holders of the Series C Preferred Stock,
which distribution shall be senior and preferred to any distribution in
respect of the Series 1996 Preferred Stock, an amount equal to $30.00 per
share held plus all accrued but unpaid dividends, whether or not declared,
on each such share. Subject to the prior preferential amounts to be paid
to the holders of the Series C Preferred Stock, all of the preferential
amounts to be paid to the holders of the Series 1996 Preferred Stock under
this Section (c) shall be paid or set apart for payment before the payment
or setting apart for payment of any amount for, or the distribution of any
assets or surplus funds of the Corporation to, the holders of any other
class or series of capital stock of the Corporation other than the Series C
Preferred Stock, but including without limitation, the Class A Preferred
Stock and the Common Stock of the Corporation, in connection with such
liquidation, dissolution or winding up, whether voluntary or involuntary.
If the assets or surplus funds to be distributed to the holders of the
Series 1996 Preferred Stock are insufficient to permit the payment to such
holders of their full preferential amount, the assets and surplus funds
legally available for distribution shall be distributed ratably among the
holders of the Series 1996 Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive.
After the payment or distribution to the holders of the Series 1996
Preferred Stock of the full preferential amounts aforesaid, the holders of
the Class A Preferred Stock and the Common Stock then outstanding shall be
entitled to receive ratably all the remaining assets of the Corporation.
<PAGE>
5
(d) Voting Rights. Except as required by law, each share of the Series 1996
-------------
Preferred Stock shall entitle the holder thereof to that number of votes
per share equal to the number of whole shares of Common Stock into which
such share of Series 1996 Preferred Stock is then convertible on all
matters put to a vote of the stockholders of the Corporation and shall
otherwise have voting rights and powers equal to the voting rights and
powers of the Common Stock. Such number of votes shall be appropriately
adjusted in the event of any recapitalization, reorganization, stock
dividend, stock split or similar event affecting the capital stock of the
Corporation. In any and all circumstances, the holders of the Series 1996
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of the Corporation and shall vote together with
the holders of the Common Stock as one class upon any matter submitted to a
vote of stockholders, except those matters required by law to be submitted
to a class vote of the holders of Series 1996 Preferred Stock.
(e) Conversion. The holders of the Series 1996 Preferred Stock shall have
conversion rights as follows:
(i) Right to Convert.
(A) Each share of Series 1996 Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
the date of issuance of such share at the office of the Corporation
of or any transfer agent for the Series 1996 Preferred Stock, into
that number of fully paid and nonassessable shares of Common Stock
that results from dividing the Conversion Price per share in effect
at conversion into $30.00 and multiplying the quotient obtained by
the number of shares of Series 1996 Preferred Stock being converted.
The initial Conversion Price is $3.00 per share. The initial
Conversion Price is subject to adjustment from time to time as
provided herein.
(B) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series 1996 Preferred Stock and if any
shares of Series 1996 Preferred Stock surrendered for conversion by
a holder, in the aggregate, for conversion which would otherwise
result in a fractional share of Common Stock, then such fractional
share shall be redeemed by the Corporation at the then effective
Conversion
<PAGE>
6
Price per share, payable as promptly as possible when funds are
legally available therefor.
(ii) Mechanics of Conversion. Before any holder of shares of Series
-----------------------
1996 Preferred Stock shall be entitled to convert the such shares into shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed and accompanied by properly executed stock powers, at
the office of the Corporation or of any transfer agent for the Series 1996
Preferred Stock, shall give written notice to the Corporation at such office of
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued if different from the name shown on the
books and records of the Corporation and shall pay any applicable transfer
taxes. Said conversion notice shall also contain such representations as may
reasonably be required by the Corporation to the effect that the shares of
Common Stock to be received upon conversion are not being acquired and will not
be transferred in any way which might violate the then applicable securities
laws. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series 1996 Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the certificate or certificates for
the shares of Series 1996 Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. All certificates issued upon such
conversion shall contain a legend governing restrictions, if any, upon such
shares imposed by applicable securities laws.
(iii) Adjustment for Subdivisions or Combinations of Common Stock.
-----------------------------------------------------------
In the event that the Corporation at any time or from time to time after the
Base Date effects a subdivision or combination of its outstanding Common Stock
into a greater or lesser number of shares without a proportionate and
corresponding subdivision or combination of its outstanding Series 1996
Preferred Stock, then and in each such event the Conversion Price shall be
decreased or increased proportionately.
(iv) Adjustments for Dividends, Distributions and Convertible
--------------------------------------------------------
Securities. In the event that the Corporation at any time or from time to time
- ----------
after the Base Date shall make or issue, or fix a record date for the
determination of
<PAGE>
7
holders of Common Stock entitled to receive, a dividend or other distribution
payable in Additional Shares of Common Stock, Options or Convertible Securities
without payment of any consideration by such holder of such shares of Common
Stock, without a proportionate and corresponding dividend or other distribution
to holders of shares of Series 1996 Preferred Stock, then and in each such event
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for subsequent adjustment of
such number) of Common Stock issuable in payment of such dividend or
distribution or upon conversion or exercise of such Convertible Securities shall
be deemed, for purposes of this subparagraph (e)(iv), to be issued and
outstanding as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date. In each
such event the then applicable Conversion Price shall be decreased as of the
time of such issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the then
applicable Conversion Price by a fraction,
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding or deemed pursuant to the terms
hereof to be issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, as
applicable; and
(B) the denominator of which shall be (x) the total number of
shares of Common Stock issued and outstanding or deemed pursuant to
the terms hereof to be issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, as
applicable, plus (y) the total number of shares of Common Stock
----
issuable in payment of such dividend or distribution or upon
conversion or exercise of such Options or Convertible Securities;
and provided, however, (i) if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this subparagraph (e)(iv) as of the time of actual
payment of such dividends or distributions; or (ii) if such Convertible
Securities provide, with the passage of time or otherwise, for any decrease or
increase in the number of shares of Common Stock issuable upon conversion or
exercise thereof
<PAGE>
8
(or upon the occurrence of a record date with respect thereto), the Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such decrease or increase becoming effective, be recomputed to
reflect such decrease or increase insofar as it affects the rights of conversion
or exercise of the Convertible Securities then outstanding; or (iii) upon the
expiration of any rights of conversion or exercise under any unexercised
Convertible Securities, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if the only additional shares of Common Stock issued were the shares of such
stock, if any, actually issued upon the conversion or exercise of such
Convertible Securities; or (iv) in the event of issuance of Convertible
Securities which expire by their terms not more than sixty (60) days after the
date of issuance thereof, no adjustments of the Conversion Price shall be made
until the expiration or exercise of all such Convertible Securities, whereupon
such adjustment shall be made in the manner provided in this subparagraph
(e)(iv).
(v) Adjustment of Conversion Price for Diluting Issues.
--------------------------------------------------
(A) If at any time or from time to time after the Base Date, the
Corporation issues or sells, or is deemed by the provisions of this
subparagraph (e)(v) to have issued or sold Additional Shares of Common
Stock, for an Effective Price less than the Conversion Price for the
Series 1996 Preferred Stock in effect on the date of and immediately
prior to such issue, or the Corporation issues or sells, or is deemed
by the provisions of this subparagraph (e)(v) to have issued or sold
Additional Shares of Common Stock, for an Effective Price less than
the Market Price in effect on the date of and immediately prior to
such issue, then and in each such case the then existing Conversion
Price for the Series 1996 Preferred Stock shall be reduced, as of the
opening of business of the date of such issue or sale, to the lower of
the prices determined as follows:
(1) by multiplying the Conversion Price for the Series 1996
Preferred Stock in effect immediately prior to the time of such
issue or sale by a fraction (a) the numerator of
<PAGE>
9
which shall be the sum of (i) the number of shares of Common
Stock Outstanding immediately prior to such issue or sale plus
(ii) the number of shares of Common Stock which the aggregate
consideration received (or by the provisions hereof deemed to
have been received) by the Corporation for the total number of
Additional Shares of Common Stock so issued or sold would
purchase at such Conversion Price for the Series 1996 Preferred
Stock and (b) the denominator of which shall be the number of
shares of Common Stock Outstanding at the close of business on
the date of such issue or sale after giving effect to such issue
or sale of Additional Shares of Common Stock; and
(2) by multiplying the Conversion Price for the Series 1996
Preferred Stock in effect immediately prior to the time of such
issue or sale by a fraction (a) the numerator of which shall be
the sum of (i) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the Market
Price immediately prior to such issue or sale plus (ii) the
aggregate consideration received (or by the provisions hereof
deemed to have been received) by the Corporation for the total
number of Additional Shares of Common Stock so issued or sold,
and (b) the denominator of which shall be the product of (iii)
the number of shares of Common Stock Outstanding at the close of
business on the date of such issue or sale after giving effect to
such issue or sale of Additional Shares of Common Stock,
multiplied by (iv) the Market Price immediately prior to such
issue or sale.
(B) For the purpose of making any adjustment required under this
subparagraph (e)(v), the consideration received by the Corporation for
any issue or sale of securities shall (1) to the extent it consists of
cash, be computed at the net amount of cash received by the
Corporation prior to deduction of any expenses payable by the
Corporation and any underwriting or similar commissions, compensation
or concessions paid or allowed by the Corporation in connection with
such issue or sale, (2) to the extent it consists of property other
than cash, be computed at the fair
<PAGE>
10
value of that property as determined in good faith by the Board of
Directors and (3) if Additional Shares of Common Stock, Convertible
Securities or Options to purchase either Additional Shares of Common
Stock or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Corporation for a
consideration which covers both, be computed (as provided in clauses
(1) and (2) above) as the portion of the consideration so received
that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or Options.
(C) For the purpose of the adjustment required under this
subparagraph (e)(v), if at any time or from time to time after the
Base Date, the Corporation issues or sells any Options or Convertible
Securities (other than Options specified in the definition of
"Additional Shares of Common Stock"), then in each case the
Corporation shall be deemed to have issued at the time of the issuance
of such Options or Convertible Securities the maximum number of
Additional Shares of Common Stock (as set forth in the instruments
relating thereto, giving effect to any provision contained therein for
a subsequent upward adjustment of such number) issuable upon exercise
or conversion thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Corporation for the issuance of
such Options or Convertible Securities plus, in the case of such
Options, the minimum amounts of consideration, if any (as set forth in
the instruments relating thereto, giving effect to any provision
contained therein for a subsequent downward adjustment of such
consideration), payable to the Corporation upon the exercise of such
Options and, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Corporation (other
than by cancellation of liabilities or obligations evidenced by such
Convertible Securities). No further adjustment of the Conversion
Price for the Series 1996 Preferred Stock, adjusted upon the issuance
of such Options or Convertible Securities, shall be made as a result
of the actual issuance of Additional Shares of Common Stock on the
exercise of any such
<PAGE>
11
Options or the conversion of any such Convertible Securities. If any
such Options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised and
fewer than the maximum number of Additional Shares of Common Stock
deemed issued thereunder upon issuance thereof shall have actually
been issued thereunder, or more than the minimum consideration deemed
to have been received by the Corporation upon issuance thereof shall
have been actually received by the Corporation, then the Conversion
Price for the Series 1996 Preferred Stock adjusted upon the issuance
of such Options or Convertible Securities shall be readjusted to the
Conversion Price for the Series 1996 Preferred Stock which would have
been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares
of Common Stock, if any, actually issued or sold on the exercise of
such Options or rights of conversion of such Convertible Securities,
and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Corporation upon
such exercise, plus the consideration, if any, actually received by
the Corporation for the granting of all such Options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted plus the consideration, if
any, actually received by the Corporation (other than by cancellation
of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
(D) Except as expressly provided herein, no adjustment in the
Conversion Price of any share of Series 1996 Preferred Stock shall be
made in respect of the issue of Additional Shares of Common Stock
unless the consideration per share for such Additional Shares of
Common Stock issued or sold or deemed to be issued or sold by the
Corporation is less than the Conversion Price for such share of Series
1996 Preferred Stock or Market Price, in each case, in effect on the
date of, and immediately prior to, such issue or sale.
(vi) Reorganizations, Mergers, Consolidations, or Sales of Assets. If
------------------------------------------------------------
at any time or from time to time there shall be a capital reorganization of the
Common Stock (other
<PAGE>
12
than a subdivision, combination, reclassification, or exchange of shares
provided for elsewhere in this paragraph (e)) or a merger or consolidation of
the Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other person
which is effected so that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the holders of the Series 1996 Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series 1996 Preferred Stock, the number of shares
of stock, securities or assets of the Corporation, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been entitled in
connection such capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this paragraph (e) with respect to the rights of the holders of
the Series 1996 Preferred Stock after the reorganization, merger, consolidation,
or sale to the end that the provisions of this paragraph (e) (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series 1996 Preferred Stock) shall be applied
thereafter with as nearly an equivalent effect as may be practicable.
(vii) No Adjustment. No adjustment to the Conversion Price shall be
-------------
made if such adjustment would result in a change in the Conversion Price of less
than $.01. Any adjustment of less than $.01 which is not made shall be carried
forward and shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an adjustment of $.01 or
more in the Conversion Price.
(viii) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this paragraph
(e), the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to each holder of Series 1996 Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series 1996 Preferred Stock,
furnish or cause to be furnished to such
<PAGE>
13
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Price at that time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at that time
would be received upon the conversion of Series 1996 Preferred Stock.
(ix) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities of the
Corporation other than Series 1996 Preferred Stock for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any Convertible Securities or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Series 1996 Preferred Stock at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
rights, and the amount and character of such dividend, distribution or rights.
(x) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------- ----------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series 1996 Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series 1996 Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of Series 1996 Preferred
Stock, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
(f) Protective Provisions. In addition to any other rights provided by law,
---------------------
so long as any Series 1996 Preferred Stock shall be outstanding, the Corporation
shall not, without first obtaining the affirmative vote or written consent of
the holders of not less than 66-2/3% of such outstanding shares of Series 1996
Preferred Stock, amend or repeal any provision of, or add any provision to, the
Corporation's Certificate of Incorporation or Bylaws, as amended, or file any
certificate of designations, preferences and rights of any series of Preferred
Stock, par value $0.01 per share, of the Corporation, if such action
<PAGE>
14
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, any Series 1996 Preferred Stock.
Nothing herein shall be deemed to restrict the Board of Directors from amending
the terms hereof prior to the issuance of any Series 1996 Preferred Stock.
(g) Notices. Any notice required by the provisions hereof to be given to the
-------
holders of shares of Series 1996 Preferred Stock shall be deemed given if
deposited in the United States Postal Service, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
the Corporation. For so long as Paul J. Ramsay or any entity controlled by
him shall be the beneficial owner of any shares of the Series 1996
Preferred Stock, a copy of any such notices shall also be given to Haythe &
Curley, 237 Park Avenue, New York, New York 10017, Attention: Thomas M.
Haythe, Esq.
The designation was authorized by resolution duly adopted by the Board of
Directors of the Corporation at a meeting thereof duly called and held on
February 26, 1997, at which a quorum was present and acting throughout.
<PAGE>
15
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunder affixed and this Certificate of Designations to be signed by Bert G.
Cibran, its President and Chief Executive Officer, on the 6th day of March,
1997.
____________________________
Bert G. Cibran
President
<PAGE>
EXHIBIT 3.9
Exhibit A to Preferred
Stock Purchase Agreement
------------------------
CERTIFICATE OF DESIGNATIONS
OF
PREFERRED STOCK
OF
RAMSAY HEALTH CARE, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
------------------------------------------------
The undersigned, Remberto G. Cibran, President of Ramsay Health Care, Inc.,
a corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), on behalf of the Corporation and in
-----------
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by Section 2 of Paragraph (4) of the Amended and Restated
Certificate of Incorporation of the Corporation, and in accordance with the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware, on September 29, 1997, the Board of Directors of the Corporation
authorized and designated 100,000 of the authorized shares of the Class B
Preferred Stock, $1.00 par value, of the Corporation as Class B Preferred Stock,
Series 1997 and adopted the following resolution in connection therewith:
RESOLVED, that the Board of Directors of the Corporation, in accordance
with Section 151(g) of the General Corporation Law of the State of Delaware and
Section 2 of Paragraph (4) of the Corporation's Amended and Restated Certificate
of Incorporation, hereby authorizes and designates 100,000 shares of Class B
Preferred Stock, par value $1.00 per share, as Class B Preferred Stock, Series
1997 (the "Series 1997 Preferred Stock"), which Series 1997 Preferred Stock
---------------------------
shall be described and limited as follows:
(a) Definitions. For purposes of this Designation, the following
-----------
definitions shall apply:
"Additional Shares of Common Stock" shall mean all shares of Common Stock,
---------------------------------
par value $0.01 per share (the "Common Stock"), of the Corporation issued
------------
subsequent to the Issue Date (or, pursuant to subparagraph (f)(v), deemed to be
issued subsequent to the Issue Date) by the Corporation, other than shares of
Common Stock issued or issuable (i) upon conversion of shares of the
Corporation's Class B Preferred Stock, Series C (the "Series C Preferred
------------------
Stock"), shares of the Corporation's Class B Preferred Stock, Series 1996 (the
"Series 1996 Preferred Stock") and shares of Series 1997 Preferred Stock; (ii)
- ----------------------------
pursuant to any Options issued under the 1990, 1991 and 1993 Stock Option Plans
and the 1995 and 1996 Long Term Incentive Plans of the Corporation as in effect
<PAGE>
on the Issue Date; (iii) pursuant to warrants and other rights to acquire Common
Stock outstanding on the Issue Date and identified on Schedule 3.05 to the
-------------
Preferred Stock Purchase Agreement dated as of the Issue Date between the
Corporation and General Electric Capital Corporation; and (iv) pursuant to the
provisions of Section 3.04 of the Subordinated Note Purchase Agreement dated as
of the Issue Date among the Corporation, General Electric Capital Corporation
and Paul Ramsay Holdings Pty. Limited or pursuant to the terms and conditions of
any provision of comparable purpose or effect in respect of any issuance of
subordinated indebtedness to a Person other than a Ramsay Affiliate, the
proceeds of which are used to repay in full the indebtedness incurred under such
Subordinated Note Purchase Agreement.
"Applicable Redemption Percentage" shall mean, in the case of a redemption
--------------------------------
of Series 1997 Preferred Stock pursuant to subparagraphs (e)(i) or (iii) hereof
at any time during any Redemption Period set forth below, the Applicable
Redemption Percentage set forth opposite such period:
Applicable Redemption
---------------------
Redemption Period Percentage
----------------- ----------
On or after September 30, 1997 but
before September 30, 2001 105%
On or after September 30, 2001 but
before September 30, 2002 104.286%
On or after September 30, 2002 but
before September 30, 2003 103.571%
On or after September 30, 2003 but
before September 30, 2004 102.857%
On or after September 30, 2004 but
before September 30, 2005 102.143%
On or after September 30, 2005 but
before September 30, 2006 101.429%
On or after September 30, 2006 but
before September 30, 2007 100.714%
"Board of Directors" shall mean the Board of Directors of the Corporation.
------------------
"Change of Control" shall mean any of the following: (a) any person or
-----------------
group of persons (within the meaning of the Exchange Act), other than Ramsay
Affiliates, shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the SEC under the Exchange Act) of issued
2
<PAGE>
and outstanding shares of capital stock of Borrower having the right to cast 30%
or more of the votes for the election of directors of Borrower under ordinary
circumstances; (b) Ramsay Affiliates shall fail to hold beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act)
of that number of the issued and outstanding shares of capital stock of Borrower
having the right to cast at least 4,000,000 votes for the election of directors
of Borrower under ordinary circumstances (such number to be appropriately
adjusted for stock splits, reverse stock splits and similar events involving
such capital stock); or (c) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the board of
directors of Borrower (together with any new directors whose election by the
board of directors of Borrower or whose nomination for election by the
stockholders of Borrower was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose elections or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office.
"Common Stock Outstanding" shall mean, on any date of determination, the
------------------------
number of shares of Common Stock issued and outstanding on such date, plus the
----
number of shares of Common Stock issuable on such date upon exercise of all
outstanding Options and conversion of all outstanding Convertible Securities,
whether or not then exercisable or convertible, minus the number of shares of
-----
Common Stock which the aggregate consideration received by the Corporation for
the total number of shares of Common Stock issuable in respect of such Options
outstanding on such date would purchase at the Conversion Price in effect on
such date.
"Conversion Price" shall mean, initially, $6.33 per share, as such
----------------
Conversion Price may be adjusted from time to time as provided in paragraph (f).
"Convertible Securities" shall mean any evidence of indebtedness, shares or
----------------------
other securities convertible into or exchangeable for shares of Common Stock.
"Effective Price" of Additional Shares of Common Stock shall mean the
---------------
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, or deemed to have been issued or sold by the Corporation
under subparagraph (f)(v), into the aggregate consideration received or deemed
to have been received by the Corporation for such issue under subparagraph
(f)(v).
"Issue Date" shall mean the date of issuance of the shares of Series 1997
----------
Preferred Stock hereby authorized.
"Market Price" shall mean, for any day, the last sale price regular way,
------------
or, in case no sale takes place on any such day, the average of the closing bid
and asked prices regular way, for the Common Stock in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last sale price for the shares
of Common Stock on the Nasdaq National Market or the Nasdaq SmallCap Market,
whichever is applicable, or, if such shares
3
<PAGE>
shall not be included in such markets, the closing bid price in the over-the-
counter market, in each such case averaged over a period of 20 consecutive
business days ending immediately prior to the day as of which the Market Price
is being determined. If at any time the shares of Common Stock are not listed on
any national securities exchange, included in the Nasdaq National Market or the
Nasdaq SmallCap Market or quoted in the over-the-counter market, the Market
Price of the shares of Common Stock shall, subject to the provisions of
subparagraph (f)(viii) below, 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 Corporation by any
firm of independent certified public accountants (which may be the regular
auditors of the Corporation) of recognized national standing selected by the
Board of Directors of the Corporation, as of the last day of the last calendar
month ending prior to 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 of recognized national standing selected by the Board of
Directors of the Corporation, as of a date which is within 15 days preceding the
date as of which the determination is to be made.
"Options" shall mean rights, options or warrants to subscribe for, purchase
-------
or otherwise acquire shares of Common Stock or Convertible Securities.
"Person" shall mean any individual, sole proprietorship, partnership,
------
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).
"Ramsay Affiliates" shall mean Persons, exclusive of the Corporation and
-----------------
its Subsidiaries, who directly, or indirectly through one or more
intermediaries, are controlled by Paul J. Ramsay, an individual with an address
at 154 Pacific Highway, Greenwich, NSW 2065, Australia. As used in this
paragraph, the term "control" (including the term "controlled by") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Persons, whether through stock
ownership, membership, partnership, voting rights, governing boards, committees,
division or other bodies with one or more common members, directors, trustees,
officers or any managers or otherwise.
"Redemption Price" shall mean $25.00 per share (as such number shall be
----------------
appropriately adjusted for stock splits, reverse stock splits or other similar
events involving the Series 1997 Preferred Stock.
"Required Holders" shall mean holders of Series 1997 Preferred Stock
----------------
holding, in the aggregate, more than 50% of the issued and outstanding shares of
Series 1997 Preferred Stock at any time.
"Sale of the Company" shall mean (i) the sale by the shareholders of the
-------------------
Corporation in one or more related transactions of shares of capital stock of
the Corporation then issued and outstanding (including, without limitation,
pursuant to a tender offer for such shares) representing a majority of
4
<PAGE>
the total number of votes eligible to be cast by all holders of the
Corporation's capital stock for the election of directors of the Corporation
under ordinary circumstances; (ii) the merger or consolidation of the
Corporation with or into any other Person (other than a merger in which the
Corporation is the corporation surviving the merger); (iii) the sale by the
Corporation or any of its Subsidiaries of the capital stock of one or more of
its Subsidiaries, the merger of one or more of the Corporation's Subsidiaries
with and into any Person other than a direct or indirect wholly-owned Subsidiary
of the Corporation or the sale by the Corporation or any of its Subsidiaries of
other assets of the Corporation or any of its Subsidiaries, in one or more
transactions, whether or not related, involving capital stock or assets
representing or aggregating 50% or more of the consolidated book value of the
Corporation's assets as of the Issue Date; or (iv) any recapitalization of the
Corporation shall occur pursuant to which Ramsay Affiliates shall have acquired
beneficial ownership of issued and outstanding shares of capital stock of the
Corporation having the right to cast more than 66-2/3% of the total number of
votes in an election of directors of the Corporation under ordinary
circumstances.
(b) Dividend Rights. From and after the issuance of the Series 1997
---------------
Preferred Stock, the holders of outstanding Series 1997 Preferred Stock shall be
entitled to receive, and shall be paid, when and as declared by the Board of
Directors, out of funds legally available therefor, cumulative cash dividends at
an annual rate of $2.25 per share, payable in arrears quarterly on January 15,
April 15, July 15 and October 15, to stockholders of record on a date not more
than 20 days prior to the date on which such cash dividends are payable, said
dividends to commence accrual on the date of issuance of the applicable shares.
In the event that the Corporation fails to declare and pay quarterly dividends
in the full amount provided for herein on any dividend payment date specified
above, then (i) the annual rate at which such dividends shall accrue and be
payable hereunder shall increase to $2.75 per share and (ii) additional
dividends, in an amount equal to the accrued and unpaid dividends on each share
of Series 1997 Preferred Stock multiplied by eleven percent (11%) per annum,
shall accrue from and after such dividend payment and be payable with respect to
each share of Series 1997 Preferred Stock until all accrued and unpaid dividends
shall have been paid. Any reference herein to accrued dividends shall include
the additional dividends payable with respect to the Series 1997 Preferred Stock
pursuant to the preceding sentence. Such dividends shall be prior and in
preference to any declaration of payment of any dividend on any other existing
or future class or series of capital stock of the Corporation, including without
limitation, the Common Stock, the Class A Preferred Stock, par value $1.00 per
share (the "Class A Preferred Stock"), of the Corporation, the Series 1996
-----------------------
Preferred Stock and the Class B Preferred Stock, Series 1997-A of the
Corporation (the "Series 1997-A Preferred Stock") but shall rank pari passu in
----------------------------- ---- -----
right of payment with any declaration of payment of dividends on the Series C
Preferred Stock. Such dividends in respect of the Series 1997 Preferred Stock
shall be cumulative and shall accrue whether or not declared by the Board of
Directors. No cash dividends shall be paid with respect to any other existing
or future class or series of capital stock of the Corporation, including without
limitation, the Class A Preferred Stock, the Series 1996 Preferred Stock, the
Series 1997-A Preferred Stock and the Common Stock, but other than the Series C
Preferred Stock, until all dividends accrued on any outstanding shares of the
Series 1997 Preferred Stock, whether or not declared, have been set apart and
fully paid, and no cash dividends shall be paid with respect to the Series C
Preferred Stock unless, concurrently
5
<PAGE>
therewith, dividends are paid to the same extent on the Series 1997 Preferred
Stock. No accumulation of dividends on the Series 1997 Preferred Stock shall
bear interest.
(c) Liquidation Rights. In the event of liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series 1997 Preferred Stock, by reason of their ownership thereof, shall be
entitled to receive in exchange for and in redemption of each share of Series
1997 Preferred Stock held, prior and in preference to any distribution of any of
the assets or surplus funds of the Corporation to the holders of any other
existing or future class or series of capital stock of the Corporation,
including without limitation, the Common Stock, the Class A Preferred Stock, the
Series C Preferred Stock, the Series 1996 Preferred Stock and the Series 1997-A
Preferred Stock, an amount equal to the Redemption Price, multiplied by the
number of shares held, plus all accrued but unpaid dividends, whether or not
declared, on each such share. All of the preferential amounts to be paid to the
holders of the Series 1997 Preferred Stock under this paragraph (c) shall be
paid or set apart for payment before the payment or setting apart for payment of
any amount for, or the distribution of any assets or surplus funds of the
Corporation to, the holders of any other existing or future class or series of
capital stock of the Corporation, including without limitation, the Common
Stock, the Class A Preferred Stock, the Series C Preferred Stock, the Series
1996 Preferred Stock and the Series 1997-A Preferred Stock, in connection with
such liquidation, dissolution or winding up, whether voluntary or involuntary.
If the assets or surplus funds to be distributed to the holders of the Series
1997 Preferred Stock are insufficient to permit the payment to such holders of
their full preferential amount, the assets and surplus funds legally available
for distribution shall be distributed ratably among the holders of the Series
1997 Preferred Stock in proportion to the full preferential amount each such
holder is otherwise entitled to receive. After the payment or distribution to
the holders of the Series 1997 Preferred Stock of the full preferential amounts
aforesaid, the holders of the Common Stock, Class A Preferred Stock, Series C
Preferred Stock, Series 1996 Preferred Stock and the Series 1997-A Preferred
Stock then outstanding shall be entitled to receive all the remaining assets of
the Corporation, in such order of priority as each shall be entitled pursuant to
the Amended and Restated Certificate of Incorporation of the Corporation or the
Certificate of Designations pursuant to which each was authorized and
designated. Neither the consolidation nor the merger of the Corporation with or
into any other corporation, nor any sale, lease, exchange or conveyance of all
or any part of the property, assets or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding-up of the Corporation within
the meaning of this paragraph (c) unless any such event or occurrence is deemed
to be a liquidation, dissolution or winding-up of the Corporation for the
purposes of the comparable provisions of either of the respective Certificates
of Designations authorizing and designating the Corporation's Series C Preferred
Stock, Series 1996 Preferred Stock and the Series 1997-A Preferred Stock.
(d) Voting Rights. The holders of the Series 1997 Preferred Stock shall
-------------
not be entitled to any voting rights except as hereinafter provided in paragraph
(g) or as otherwise provided by law.
6
<PAGE>
(e) Redemption.
----------
(i) Optional Redemption by the Corporation. All of the issued and
--------------------------------------
outstanding shares of Series 1997 Preferred Stock shall be redeemable by
the Corporation, at the option of the Corporation, in whole or in part, at
any time on or after the third anniversary of the Issue Date, up to but not
including the tenth anniversary of the Issue Date, at a redemption price
equal to the Redemption Price, multiplied by the number of shares held,
multiplied by the Applicable Redemption Percentage, plus all accrued but
unpaid dividends thereon, whether or not declared, through the date of
redemption.
(ii) Mandatory Redemption by the Corporation. All of the issued and
---------------------------------------
outstanding shares of Series 1997 Preferred Stock shall be redeemed by the
Corporation on the tenth anniversary of the Issue Date, if not sooner
redeemed pursuant to any other provision hereof, at a redemption price
equal to the Redemption Price multiplied by the number of shares held, plus
all accrued but unpaid dividends, whether or not declared, through the date
of redemption.
(iii) Mandatory Redemption Upon Change of Control. All of the issued
-------------------------------------------
and outstanding shares of Series 1997 Preferred Stock shall be redeemable
by the Corporation, at the option of the holders thereof, in whole or in
part, at any time on or after a Change of Control or a Sale of the Company,
at a redemption price equal to the Redemption Price multiplied by the
number of shares held, multiplied by the Applicable Redemption Percentage,
plus all accrued and unpaid dividends thereon, whether or not declared,
through the date of redemption.
(iv) Certain Limitations. If the funds of the Corporation legally
-------------------
available for redemption of the Series 1997 Preferred Stock are
insufficient to allow the Corporation to redeem the total number of shares
of Series 1997 Preferred Stock required to be redeemed pursuant to this
paragraph (e), or if applicable law prohibits such redemption, (A) the
Corporation shall use its best efforts to cause such funds to become
available in any manner permitted by Sections 154 and 244 of the Delaware
General Corporation Law, as amended, or any comparable provisions of any
succeeding law, and (B) the holders of shares of Series 1997 Preferred
Stock shall share ratably in all funds not so restricted and legally
available for redemption of such shares. Any shares of Series 1997
Preferred Stock not so redeemed shall remain outstanding and entitled to
all rights and preferences herein, provided that the Corporation shall
immediately redeem any and all such outstanding shares at such time and to
the extent that the Corporation is not restricted from doing so and has
funds legally available therefor.
(v) Notice to Holders. The Corporation shall give notice to each
-----------------
holder of Series 1997 Preferred Stock (A) of any redemption pursuant to
subparagraph (e)(i) at least 30 days prior to the date the Corporation
proposes to redeem all or any part of the outstanding shares of Series 1997
Preferred Stock, specifying the number of shares of Series 1997 Preferred
7
<PAGE>
Stock that the Corporation is calling for redemption and the date fixed for
redemption thereof, and (B) of any Change of Control giving the holders of
shares of Series 1997 Preferred Stock the right to require redemption of
the Series 1997 Preferred Stock pursuant to subparagraph (e)(iii), as soon
as is reasonably practicable before the occurrence thereof, specifying in
reasonable detail the nature thereof and the terms and conditions thereof.
Upon receipt of a notice given pursuant to clause (B) of this subparagraph
(e)(v), each holder of Series 1997 Preferred Stock shall be entitled, at
its option, by giving written notice to the Corporation of such election,
to require the Corporation to redeem all or any part of the outstanding
shares of Series 1997 Preferred Stock held by such holder, on the date such
Change of Control is effected or on any subsequent date as shall be fixed
by such holder in such notice. Each such notice given pursuant to this
subparagraph (e)(v) shall be given by registered mail, return receipt
requested, postage prepaid, shall be effective upon receipt, and shall be
addressed to the Corporation at its principal place of business and to the
holders in accordance with paragraph (h) below.
(vi) Closing. On any date fixed for redemption pursuant to this
--------
paragraph (e), the Corporation shall pay to each holder of Series 1997
Preferred Stock an amount in cash equal to the aggregate redemption price
for such holder's shares, as specified herein, by wire transfer of
immediately available funds to such account as is designated by such
holder, upon surrender of the certificates representing the shares so
redeemed (properly endorsed or assigned for transfer, if required by the
Corporation). If, on or before the date fixed for redemption, the funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, for the exclusive benefit of the
holders of the shares of Series 1997 Preferred Stock so called for
redemption, then, on the date fixed for redemption (unless the Corporation
shall default in the payment of the redemption price specified herein),
notwithstanding that any certificates representing the shares of Series
1997 Preferred Stock so called for redemption shall not have been
surrendered for cancellation: (A) the shares of Series 1997 Preferred Stock
represented thereby shall no longer be deemed outstanding, (B) the right
to receive dividends on them shall cease to accrue, and (C) all other
rights with respect to such shares of Series 1997 Preferred Stock shall
forthwith cease and terminate, except the right of each such holder to
receive the amount payable to such holder on such date upon such
redemption, without interest.
(f) Conversion. The holders of the Series 1997 Preferred Stock shall have
----------
conversion rights as follows:
(i) Right to Convert.
----------------
(A) Each share of Series 1997 Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
the date of issuance of such share at the office of the Corporation of
or any transfer agent for the Series 1997 Preferred Stock, into that
number of fully paid and nonassessable shares of Common Stock that
results from dividing the Conversion Price per share in effect at
conversion into $25.00 and
8
<PAGE>
multiplying the quotient obtained by the number of shares of Series
1997 Preferred Stock being converted.
(B) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series 1997 Preferred Stock and if any shares
of Series 1997 Preferred Stock surrendered for conversion by a holder,
in the aggregate, for conversion would otherwise result in a
fractional share of Common Stock, then such fractional share shall be
redeemed by the Corporation at the then effective Conversion Price per
share, payable as promptly as possible when funds are legally
available therefor.
(ii) Mechanics of Conversion. Before any holder of shares of Series
-----------------------
1997 Preferred Stock shall be entitled to convert such shares into shares
of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed and accompanied by properly executed
stock powers, at the office of the Corporation or of any transfer agent for
the Series 1997 Preferred Stock, and shall give written notice to the
Corporation at such office of the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be issued if
different from the name shown on the books and records of the Corporation.
Said conversion notice shall also contain such representations as may
reasonably be required by the Corporation to the effect that the shares of
Common Stock to be received upon conversion are not being acquired and will
not be transferred in any way which might violate the then applicable
securities laws. The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Series 1997 Preferred
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the certificate or certificates for the shares of Series 1997
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. All certificates issued upon such conversion
shall contain a legend governing restrictions, if any, upon such shares
imposed by applicable securities laws.
(iii) Adjustment for Subdivisions or Combinations of Common Stock.
-----------------------------------------------------------
In the event that the Corporation at any time or from time to time after
the Issue Date effects a subdivision or combination of its outstanding
Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of its
outstanding Series 1997 Preferred Stock, then and in each such event the
Conversion Price shall be decreased or increased proportionately.
(iv) Adjustments for Dividends, Distributions and Convertible
--------------------------------------------------------
Securities. In the event that the Corporation at any time or from time to
----------
time after the Issue Date shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to
9
<PAGE>
receive, a dividend or other distribution payable in Additional Shares of
Common Stock, Options or Convertible Securities without payment of any
consideration by such holder of such shares of Common Stock, without a
proportionate and corresponding dividend or other distribution to holders
of shares of Series 1997 Preferred Stock, then and in each such event the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for subsequent
adjustment of such number) of Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Convertible
Securities shall be deemed, for purposes of this subparagraph (f)(iv), to
be issued and outstanding as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of business on
such record date. In each such event the then applicable Conversion Price
shall be decreased as of the time of such issuance or, in the event such a
record date shall have been fixed, as of the close of business on such
record date, by multiplying the then applicable Conversion Price by a
fraction,
(A) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding or deemed pursuant to the terms
hereof to be issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, as
applicable; and
(B) the denominator of which shall be (x) the total number of
shares of Common Stock issued and outstanding or deemed pursuant to
the terms hereof to be issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, as
applicable, plus (y) the total number of shares of Common Stock
----
issuable in payment of such dividend or distribution or upon
conversion or exercise of such Options or Convertible Securities;
and provided, however, (i) if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this subparagraph (f)(iv) as of the time of actual
payment of such dividends or distributions; or (ii) if such Convertible
Securities provide, with the passage of time or otherwise, for any decrease or
increase in the number of shares of Common Stock issuable upon conversion or
exercise thereof (or upon the occurrence of a record date with respect thereto),
the Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such decrease or increase becoming
effective, be recomputed to reflect such decrease or increase insofar as it
affects the rights of conversion or exercise of the Convertible Securities then
outstanding; or (iii) upon the expiration of any rights of conversion or
exercise under any unexercised Convertible Securities, the Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if the only additional shares of Common
Stock issued were the shares of such stock, if any, actually issued upon the
conversion or exercise of such Convertible Securities; or (iv) in the event of
issuance of Convertible Securities which expire
10
<PAGE>
by their terms not more than sixty (60) days after the date of issuance thereof,
no adjustments of the Conversion Price shall be made until the expiration or
exercise of all such Convertible Securities, whereupon such adjustment shall be
made in the manner provided in this subparagraph (f)(iv).
(v) Adjustment of Conversion Price for Diluting Issues.
--------------------------------------------------
(A) If at any time or from time to time after the Issue Date, the
Corporation issues or sells, or is deemed by the provisions of this
subparagraph (f)(v) to have issued or sold, Additional Shares of
Common Stock for an Effective Price less than the Conversion Price for
the Series 1997 Preferred Stock in effect on the date of and
immediately prior to such issue, or the Corporation issues or sells,
or is deemed by the provisions of this subparagraph (f)(v) to have
issued or sold, Additional Shares of Common Stock for an Effective
Price less than the Market Price in effect on the date of and
immediately prior to such issue, then and in each such case the then
existing Conversion Price for the Series 1997 Preferred Stock shall be
reduced, as of the opening of business on the date of such issue or
sale, to the lower of the prices determined as follows:
(1) by multiplying the Conversion Price for the Series 1997
Preferred Stock in effect immediately prior to the time of such
issue or sale by a fraction (a) the numerator of which shall be
the sum of (i) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale plus (ii) the number of
shares of Common Stock which the aggregate consideration received
(or by the provisions hereof deemed to have been received) by the
Corporation for the total number of Additional Shares of Common
Stock so issued or sold would purchase at such Conversion Price
for the Series 1997 Preferred Stock and (b) the denominator of
which shall be the number of shares of Common Stock Outstanding
at the close of business on the date of such issue or sale after
giving effect to such issue or sale of Additional Shares of
Common Stock; and
(2) by multiplying the Conversion Price for the Series 1997
Preferred Stock in effect immediately prior to the time of such
issue or sale by a fraction (a) the numerator of which shall be
the sum of (i) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the Market
Price immediately prior to such issue or sale plus (ii) the
----
aggregate consideration received (or by the provisions hereof
deemed to have been received) by the Corporation for the total
number of Additional Shares of Common Stock so issued or sold,
and (b) the denominator of which shall be the product of (i) the
number of shares of Common Stock Outstanding at the close of
business on the date of such issue or sale after giving effect to
such issue or sale of Additional Shares of Common Stock,
multiplied by (ii) the Market Price immediately prior to such
---------- --
issue or sale.
11
<PAGE>
(B) For the purpose of making any adjustment required under this
subparagraph (f)(v), the consideration received by the Corporation for
any issue or sale of securities shall (1) to the extent it consists of
cash, be computed at the net amount of cash received by the
Corporation prior to deduction of any expenses payable by the
Corporation and any underwriting or similar commissions, compensation
or concessions paid or allowed by the Corporation in connection with
such issue or sale, (2) to the extent it consists of property other
than cash, be computed at the fair value of that property as
determined by appraisers selected by the Board of Directors of the
Corporation and reasonably acceptable to the Required Holders, and (3)
if Additional Shares of Common Stock, Convertible Securities or
Options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration
which covers both, be computed (as provided in clauses (1) and (2)
above) as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be
allocable to such Additional Shares of Common Stock, Convertible
Securities or Options.
(C) For the purpose of the adjustment required under this
subparagraph (f)(v), if at any time or from time to time after the
Issue Date, the Corporation issues or sells any Options or Convertible
Securities (other than Options or Convertible Securities specified in
the definition of "Additional Shares of Common Stock"), then in each
case the Corporation shall be deemed to have issued at the time of the
issuance of such Options or Convertible Securities the maximum number
of Additional Shares of Common Stock (as set forth in the instruments
relating thereto, giving effect to any provision contained therein for
a subsequent upward adjustment of such number) issuable upon exercise
or conversion thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Corporation for the issuance of
such Options or Convertible Securities plus, in the case of such
Options, the minimum amounts of consideration, if any (as set forth in
the instruments relating thereto, giving effect to any provision
contained therein for a subsequent downward adjustment of such
consideration), payable to the Corporation upon the exercise of such
Options and, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Corporation (other
than by cancellation of liabilities or obligations evidenced by such
Convertible Securities). No further adjustment of the Conversion
Price for the Series 1997 Preferred Stock, adjusted upon the issuance
of such Options or Convertible Securities, shall be made as a result
of the actual issuance of Additional Shares of Common Stock on the
exercise of any such Options or the conversion of any such Convertible
Securities. If any such Options or the conversion privilege
represented by any such Convertible Securities shall expire without
having been exercised and fewer than the maximum number of Additional
Shares of Common Stock deemed issued thereunder upon issuance
12
<PAGE>
thereof shall have actually been issued thereunder, or more than the
minimum consideration deemed to have been received by the Corporation
upon issuance thereof shall have been actually received by the
Corporation, then the Conversion Price for the Series 1997 Preferred
Stock adjusted upon the issuance of such Options or Convertible
Securities shall be readjusted to the Conversion Price for the Series
1997 Preferred Stock which would have been in effect had an adjustment
been made on the basis that the only Additional Shares of Common Stock
so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such Options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common
Stock, if any, were issued or sold for the consideration actually
received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the
granting of all such Options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible
Securities actually converted plus the consideration, if any, actually
received by the Corporation (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the
conversion of such Convertible Securities.
(D) Except as expressly provided herein, no adjustment in the
Conversion Price of any share of Series 1997 Preferred Stock shall be
made in respect of the issue of Additional Shares of Common Stock
unless the consideration per share for such Additional Shares of
Common Stock issued or sold or deemed to be issued or sold by the
Corporation is less than the Conversion Price for such share of Series
1997 Preferred Stock or the Market Price, in each case, in effect on
the date of, and immediately prior to, such issue or sale.
(vi) Reorganizations, Mergers, Consolidations, or Sales of Assets. If
------------------------------------------------------------
at any time or from time to time there shall be a capital reorganization of
the Common Stock (other than a subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this paragraph (f)) or a
merger or consolidation of the Corporation with or into another
corporation, or the sale of all or substantially all of the Corporation's
properties and assets to any other person which is effected so that holders
of Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the holders of the
Series 1997 Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series 1997 Preferred Stock, the number of shares of
stock, securities or assets of the Corporation, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been entitled
in connection with such capital reorganization, merger, consolidation or
sale. In any such case, appropriate adjustment shall be made in the
application of the provisions of this paragraph (f) with respect to the
rights of the holders of the Series 1997 Preferred Stock after the
reorganization, merger, consolidation or sale to the end that the
provisions of this paragraph (f) (including
13
<PAGE>
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series 1997 Preferred Stock) shall be
applied thereafter with as nearly an equivalent effect as may be
practicable.
(vii) No Adjustment. No adjustment to the Conversion Price shall be
-------------
made if such adjustment would result in a change in the Conversion Price of
less than 5%. Any adjustment of less than 5% which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of 5% or more in the Conversion Price.
(viii) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this
paragraph (f), the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and cause
independent public accountants selected by the Corporation to verify such
computation and prepare and furnish to each holder of Series 1997 Preferred
Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based (including, without limitation, any determination of the Market Price
made pursuant to the second sentence of the definition thereof). The
Corporation shall, upon the written request at any time of any holder of
Series 1997 Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and
readjustment, (ii) the Conversion Price at that time in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other
property which at that time would be received upon the conversion of Series
1997 Preferred Stock.
(ix) Objections. The Required Holders shall have the right to object
----------
to any adjustment of the Conversion Price or other matter set forth in a
certificate furnished to the holders pursuant to subparagraph (f)(viii)
hereof (including, without limitation, any determination of the Market
Price made pursuant to the second sentence of the definition thereof) by
giving written notice (an "Objection Notice") to the Corporation specifying
----------------
the nature of their objection within 30 days following receipt of any such
certificate pursuant to subparagraph (f)(viii) hereof and, unless such
objection is resolved by agreement of the Corporation and the Required
Holders within fifteen days thereafter, the Corporation and the Required
Holders shall each have the right to subject the disputed determination to
separate firms of independent public accountants of recognized national
standing (or, in the case of a determination of the Market Price made by an
independent brokerage firm, to separate independent brokerage firms) for a
joint resolution of such objection (neither of which shall be the firm of
independent public accountants regularly retained by the Corporation or
verifying the computation of the Corporation pursuant to subparagraph
(f)(viii) or the independent brokerage firm determining the Market Price
pursuant to the second sentence of the definition thereof). If such firms
cannot jointly resolve such objection, then, unless otherwise directed by
agreement of the Corporation and the Required Holders, such firms shall
choose another firm of independent public accountants of recognized
national standing, which firm shall resolve such objection. In such case,
the (A) Market Price, (B) adjustments
14
<PAGE>
or readjustment required by this paragraph (f), (C) Conversion Price in
effect and (D) number of shares of Common Stock and the amount, if any, of
other property which at that time would be received upon the conversion of
Series 1997 Preferred Stock, as so determined, shall be conclusive and
binding on the Corporation, all of the holders of Series 1997 Preferred
Stock and all persons claiming under or through any of them. In the event
that an Objection Notice is given pursuant to this subparagraph (f)(ix),
the cost of the independent public accountants (or independent brokerage
firm) selected by the Corporation shall be borne solely by the Corporation,
the cost of the independent public accountants (or independent brokerage
firm) selected by the Required Holders shall be borne solely by the
Required Holders, and the cost of any independent public accountants (or
independent brokerage firm) chosen by the Corporation's and the Required
Holders' independent public accountants (or independent brokerage firms) to
resolve any objection shall be borne one-half each by the Required Holders
and the Corporation.
(x) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities of the
Corporation other than Series 1997 Preferred Stock for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any Convertible Securities or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, the
Corporation shall mail to each holder of Series 1997 Preferred Stock at
least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution or rights, and the amount and character of
such dividend, distribution or rights.
(xi) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series 1997 Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series 1997 Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Series 1997 Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(g) Protective Provisions. In addition to any other rights provided by
---------------------
law, so long as any Series 1997 Preferred Stock shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than 66-2/3% of such outstanding shares of
Series 1997 Preferred Stock, (i) amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or Bylaws, as
amended, or file any certificate of designations, preferences and rights of any
series of Preferred Stock, par value $1.00 per share, of the Corporation, if
such action would alter or change the preferences, rights, privileges or powers
15
<PAGE>
of, or the restrictions provided for the benefit of, any Series 1997 Preferred
Stock; or (ii) effect any stock split, reverse stock split or similar event
involving the Series 1997 Preferred Stock.
(h) Notices. Any notice required by the provisions hereof to be given to
-------
the holders of shares of Series 1997 Preferred Stock shall be deemed given if
deposited in the United States Postal Service, registered mail, return receipt
requested, postage prepaid and addressed to each holder of record at his address
appearing on the books of the Corporation. For so long as General Electric
Capital Corporation or any entity controlled by or under common control with it
shall be the beneficial owner of any shares of the Series 1997 Preferred Stock,
a copy of any such notice shall also be given to King & Spalding, 191 Peachtree
Street, Atlanta, Georgia 30303, Attention: John Hays Mershon, Esq.
16
<PAGE>
CONSENT AND AGREEMENT
---------------------
For $10 and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the undersigned, Ramsay Holdings
HSA Limited and Paul Ramsay Holdings Pty. Limited, the holders of all of the
issued and outstanding shares of Class B Preferred Stock, Series C, par value
$1.00 per share ("Series C Stock"), of Ramsay Health Care, Inc., a Delaware
corporation (the "Company"), and Paul Ramsay Hospitals Pty. Limited ("Ramsay
Hospitals"), the holder of all the issued and outstanding shares of Class B
Preferred Stock, Series 1996, par value $1.00 per share ("Series 1996 Stock"),
of the Company (collectively, the "Stockholders"), each hereby consents and
agrees, on its own behalf and on behalf of its successors and assigns, for the
benefit of the holders from time to time of Series 1997 Preferred Stock (as
hereinafter defined), notwithstanding the terms of the Certificate of
Designation of the Series C Stock filed with the Secretary of State of the State
of Delaware (the "Secretary") on June 29, 1993 (the "Series C Certificate"),
including, without limitation, subparagraph (f) of the Series C Certificate and
notwithstanding the terms of the Certificate of Designation of the Series 1996
Stock filed with the Secretary on March 12, 1997 (the "Series 1996
Certificate"), including, without limitation, subparagraph (f) of the Series
1996 Certificate, (i) to the creation by the Company of Class B Preferred Stock,
Series 1997, par value $ 1.00 per share (the "Series 1997 Preferred Stock"),
(ii) to the issuance of 100,000 shares of the Series 1997 Preferred Stock, (iii)
to the execution, delivery, performance and filing of all agreements,
certificates and other documents in connection therewith, including, without
limitation, the filing with the Secretary of the Certificate of Designations for
the Series 1997 Preferred Stock, to which this Consent and Agreement is attached
(the "Series 1997 Certificate of Designations") and (iv) that the Series 1997
Preferred Stock is senior to each of the Series C Stock and the Series 1996
Stock in liquidation and the holders of the Series 1997 Preferred Stock are
entitled to receive dividends prior to the holders of the Series 1996 Stock as
provided in the Series 1997 Certificate of Designations.
This Consent and 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>
2
IN WITNESS WHEREOF, this Consent and Agreement has been duly executed
by the parties hereto as of the 30th day of September, 1997.
RAMSAY HOLDINGS HSA LIMITED
By:_______________________________________________
Name:
Title:
PAUL RAMSAY HOLDINGS PTY. LIMITED
By:_______________________________________________
Name:
Title:
PAUL RAMSAY HOSPITALS PTY. LIMITED
By:_______________________________________________
Name:
Title:
<PAGE>
EXHIBIT 3.10
CERTIFICATE OF DESIGNATIONS OF
PREFERRED STOCK
OF
RAMSAY HEALTH CARE, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
------------------------------------------------
The undersigned, Carol C. Lang, Executive Vice President of Ramsay
Health Care, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), on behalf of the
Corporation and in accordance with the provisions of Section 103 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
of the Corporation by Section 2 of Paragraph (4) of the Amended and Restated
Certificate of Incorporation of the Corporation, and in accordance with the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware, on September 29, 1997, the Board of Directors of the Corporation
authorized and designated 4,000 of the authorized shares of the Class B
Preferred Stock, $1.00 par value, of the Corporation as Class B Preferred Stock,
Series 1997-A and adopted the following resolution in connection therewith:
RESOLVED, that the Board of Directors of the Corporation, in
accordance with Section 151(g) of the General Corporation Law of the State of
Delaware and Section 2 of Paragraph (4) of the Corporation's Amended and
Restated Certificate of Incorporation, hereby authorizes and designates 4,000
shares of Class B Preferred Stock, par value $1.00 per share, as Class B
Preferred Stock, Series 1997-A (the "Series 1997-A Preferred Stock"), which
Series 1997-A Preferred Stock shall be described and limited as follows:
(a) Dividend Rights. From and after the issuance of the Series 1997-A
---------------
Preferred Stock, the holders of outstanding Series 1997-A Preferred Stock shall
be entitled to receive, and shall be paid, when and as declared by the Board of
Directors, out of funds legally available therefor, cumulative cash dividends at
an annual rate of $90.00 per share, payable in arrears quarterly on January 15,
April 15, July 15 and October 15, to stockholders of record on a date not more
than 20 days prior to the date on which such cash dividends are payable, said
dividends to commence accrual on the date of issuance of the applicable shares.
Such dividends shall be prior and in preference to any declaration of payment of
any dividend on any class or series of capital stock of the
<PAGE>
2
Corporation, including without limitation, the Common Stock and the Class A
Preferred Stock, par value $1.00 per share (the "Class A Preferred Stock"), of
the Corporation, but shall be junior in right of payment with any declaration of
payment of dividends on the (i) Class B Preferred Stock, par value $1.00 per
share, Series 1997 (the "Series 1997 Preferred Stock"), (ii) Class B Preferred
Stock, par value $1.00 per share, Series C (the "Series C Preferred Stock") and
(iii) Class B Preferred Stock, par value $1.00 per share, Series 1996 (the
"Series 1996 Preferred Stock"). Such dividends in respect of the Series 1997-A
Preferred Stock shall be cumulative and shall accrue whether or not declared by
the Board of Directors. No cash dividends shall be paid with respect to any
class or series of capital stock of the Corporation, including without
limitation, the Class A Preferred Stock and the Common Stock, but other than the
Series 1997 Preferred Stock, the Series C Preferred Stock and the Series 1996
Preferred Stock, until all dividends accrued on any outstanding shares of the
Series 1997-A Preferred Stock, whether or not declared, have been set apart and
fully paid. No accumulation of dividends on the Series 1997-A Preferred Stock
shall bear interest.
(b) Redemption.
----------
(i) Optional Redemption by the Corporation. The issued and
--------------------------------------
outstanding shares of Series 1997-A Preferred Stock shall be redeemable by the
Corporation, at any time, and from time to time in whole or in part on a pro
rata basis, at the option of the Corporation (upon the notice and otherwise in
the manner set forth in this paragraph (b)) at a redemption price equal to
$1,000 per share (as such number shall be appropriately adjusted for stock
splits, stock dividends or other similar events involving the Corporation and
the Series 1997-A Preferred Stock), plus all accrued but unpaid dividends
thereon (whether or not declared) through the date of redemption.
(ii) Mandatory Redemption by the Corporation. All of the issued and
---------------------------------------
outstanding shares of the Series 1997-A Preferred Stock shall be redeemable by
the Corporation, on the third business day (such date, the "Mandatory Redemption
Date") following the occurrence of the Revolving Credit Commitment Adjustment
Date (as defined in that certain Credit Agreement dated as of September 30, 1997
by and among the Corporation, General Electric Capital Corporation, individually
as a lender and as Administrative Agent, and GECC Capital Markets Group, Inc.,
as Syndication Agent), in whole and not in part, at a redemption price equal to
$1,000 per share (as such number shall be appropriately adjusted for stock
splits, stock dividends or other similar events involving the Corporation and
the Series 1997-A Preferred Stock), plus all accrued and unpaid dividends
thereon (whether or not declared) through the date of redemption.
(iii) Notice to Holders. The Corporation shall give notice to each
-----------------
holder of Series 1997-A Preferred Stock (A) of any redemption pursuant to
subparagraph (b)(i) at least 30 days prior to the date (each, an "Optional
Redemption Date") the Corporation proposes to redeem all or any part of the
outstanding shares of Series 1997-A
<PAGE>
3
Preferred Stock, specifying the number of shares of Series 1997-A Preferred
Stock that the Corporation is calling for redemption and the date fixed for
redemption thereof, and (B) of the occurrence of the Revolving Credit Commitment
Adjustment Date. Each such notice given pursuant to this subparagraph (b)(iii)
shall be given by registered mail, return receipt requested, postage prepaid,
shall be effective upon receipt, and shall be addressed to the holders in
accordance with paragraph (e) below.
(iv) Closing. On each Optional Redemption Date and on the Mandatory
--------
Redemption Date the Corporation shall pay to each holder of Series 1997-A
Preferred Stock an amount in cash equal to the aggregate redemption price for
such holder's shares, as specified herein, by wire transfer of immediately
available funds to such account as is designated by such holder, upon surrender
of the certificates representing the shares so redeemed (properly endorsed or
assigned for transfer, if required by the Corporation). If, on or before the
date fixed for redemption, the funds necessary for such redemption shall have
been set aside by the Corporation, separate and apart from its other funds, for
the exclusive benefit of the holders of the shares of Series 1997-A Preferred
Stock so called for redemption, then, on the date fixed for redemption (unless
the Corporation shall default in the payment of the redemption price specified
herein), notwithstanding that any certificates representing the shares of Series
1997-A Preferred Stock so called for redemption shall not have been surrendered
for cancellation: (A) the shares of Series 1997-A Preferred Stock represented
thereby shall no longer be deemed outstanding, (B) the right to receive
dividends on them shall cease to accrue, and (C) all other rights with respect
to such shares of Series 1997-A Preferred Stock shall forthwith cease and
terminate, except the right of each such holder to receive the amount payable to
such holder on such date upon such redemption, without interest.
(c) Liquidation Rights. In the event of liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series 1997-A Preferred Stock, by reason of their ownership thereof, shall
be entitled to receive in exchange for and in redemption of each share of Series
1997-A Preferred Stock held, prior and in preference to any distribution of any
of the assets or surplus funds of the Corporation to the holders of any class or
series of capital stock of the Corporation, including without limitation, the
Class A Preferred Stock and the Common Stock, but other than any distribution of
any of the assets or surplus funds of the Corporation to the holders of the
Series 1997 Preferred Stock, the Series C Preferred Stock and the Series 1996
Preferred Stock, which distribution shall be senior and preferred to any
distribution in respect of the Series 1997-A Preferred Stock, an amount equal to
$1,000 per share (as such number shall be appropriately adjusted for stock
splits, stock dividends or other similar events involving the Corporation and
the Series 1997-A Preferred Stock) held plus all accrued but unpaid dividends,
whether or not declared, on each such share. Subject to the prior preferential
amounts to be paid to the holders of the Series 1997 Preferred Stock, the Series
C Preferred Stock and the Series 1996 Preferred Stock, all of
<PAGE>
4
the preferential amounts to be paid to the holders of the Series 1997-A
Preferred Stock under this Section (c) shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any assets or surplus funds of the Corporation to, the holders
of any other class or series of capital stock of the Corporation other than the
Series 1997 Preferred Stock, the Series C Preferred Stock and the Series 1996
Preferred Stock, but including without limitation, the Class A Preferred Stock
and the Common Stock of the Corporation, in connection with such liquidation,
dissolution or winding up, whether voluntary or involuntary. If the assets or
surplus funds to be distributed to the holders of the Series 1997-A Preferred
Stock are insufficient to permit the payment to such holders of their full
preferential amount, the assets and surplus funds legally available for
distribution shall be distributed ratably among the holders of the Series 1997-A
Preferred Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive. After the payment or distribution to the
holders of the Series 1997-A Preferred Stock of the full preferential amounts
aforesaid, the holders of the Class A Preferred Stock and the Common Stock then
outstanding shall be entitled to receive ratably all the remaining assets of the
Corporation.
(d) Protective Provisions. In addition to any other rights provided
---------------------
by law, so long as any Series 1997-A Preferred Stock shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than 66-2/3% of such outstanding shares of
Series 1997-A Preferred Stock, amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or Bylaws, as
amended, or file any certificate of designations, preferences and rights of any
series of Preferred Stock, par value $1.00 per share, of the Corporation, if
such action would alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, any Series 1997-A Preferred
Stock. Nothing herein shall be deemed to restrict the Board of Directors from
amending the terms hereof prior to the issuance of any Series 1997-A Preferred
Stock.
(e) Notices. Any notice required by the provisions hereof to be given
-------
to the holders of shares of Series 1997-A Preferred Stock shall be deemed given
if deposited in the United States Postal Service, postage prepaid, and addressed
to each holder of record at his address appearing on the books of the
Corporation. For so long as Paul J. Ramsay or any entity controlled by him
shall be the beneficial owner of any shares of the Series 1997-A Preferred
Stock, a copy of any such notices shall also be given to Haythe & Curley, 237
Park Avenue, New York, New York 10017, Attention: Thomas M. Haythe, Esq.
The designation was authorized by resolution duly adopted by the Board
of Directors of the Corporation by unanimous written consent dated as of
September 29, 1997.
* * *
<PAGE>
5
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunder affixed and this Certificate of Designations to be signed by Carol C.
Lang, its Executive Vice President, on the 29th day of September, 1997.
____________________________
Carol C. Lang
Executive Vice President
<PAGE>
EXHIBIT 3.11
_____________________________________________________________________________
PREFERRED STOCK PURCHASE AGREEMENT
Dated as of September 30, 1997
between
RAMSAY HEALTH CARE, INC.,
as Issuer
and
GENERAL ELECTRIC CAPITAL CORPORATION
as Purchaser
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE 1
AUTHORIZATION OF PREFERRED STOCK;
SALE AND PURCHASE OF PREFERRED STOCK
------------------------------------
<TABLE>
<S> <C> <C>
SECTION 1.01 Authorization of Preferred Stock........................................... 1
--------------------------------
SECTION 1.02 Sale and Purchase of Preferred Stock....................................... 1
------------------------------------
SECTION 1.03 Use of Proceeds............................................................ 2
----------------
SECTION 1.04 Investment Representations................................................. 2
--------------------------
</TABLE>
ARTICLE 2
CONDITIONS TO CLOSING
---------------------
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
------------------------------
<TABLE>
<S> <C> <C>
SECTION 3.01 Corporate Existence; Compliance with Law................................... 3
----------------------------------------
SECTION 3.02 Corporate Power; Authorization; Enforceable Obligations.................... 4
-------------------------------------------------------
SECTION 3.03 Financial Statements....................................................... 4
--------------------
SECTION 3.04 Material Adverse Events.................................................... 4
-----------------------
SECTION 3.05 Authorized and Outstanding Shares of Capital Stock......................... 4
--------------------------------------------------
SECTION 3.06 Authorization and Issuance of Securities................................... 5
----------------------------------------
SECTION 3.07 Securities Laws............................................................ 5
---------------
SECTION 3.08 Senior Credit Agreement.................................................... 5
-----------------------
SECTION 3.09 Full Disclosure............................................................ 5
---------------
SECTION 3.10 Related Transaction Documents.............................................. 6
-----------------------------
</TABLE>
ARTICLE 4
COVENANTS
---------
<TABLE>
<S> <C> <C>
SECTION 4.01 Reports and Notices........................................................ 6
-------------------
SECTION 4.02 Maintenance of Existence and Conduct of Business........................... 6
------------------------------------------------
SECTION 4.03 Compliance with Laws....................................................... 6
--------------------
SECTION 4.04 Application of Proceeds.................................................... 7
-----------------------
SECTION 4.05 Further Assurances......................................................... 7
------------------
SECTION 4.06 Affiliate and Employee Loans and Transactions.............................. 7
---------------------------------------------
SECTION 4.07 Sale of Stock and Assets................................................... 8
------------------------
SECTION 4.08 Restricted Payments........................................................ 8
-------------------
SECTION 4.09 Changes in Existing Options and Convertible Securities..................... 8
------------------------------------------------------
</TABLE>
i
<PAGE>
ARTICLE 5
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
<TABLE>
<S> <C> <C>
SECTION 5.01 Terms Defined in the Senior Credit Agreement............................... 9
---------------------------------------------
SECTION 5.02 Other Defined Terms........................................................ 9
-------------------
SECTION 5.03 Certain Matters of Construction............................................ 10
-------------------------------
</TABLE>
ARTICLE 6
REGISTRATION; TRANSFER; EXCHANGE;
--------------------------------
REPLACEMENT OF CERTIFICATES
---------------------------
<TABLE>
<S> <C> <C>
SECTION 6.01 Register for Series 1997 Preferred Stock................................... 11
----------------------------------------
SECTION 6.02 Transfers.................................................................. 11
---------
SECTION 6.03 Transfer and Exchange of Series 1997 Preferred Stock....................... 12
----------------------------------------------------
SECTION 6.04 Replacement of Certificates................................................ 12
---------------------------
</TABLE>
ARTICLE 7
MISCELLANEOUS
-------------
<TABLE>
<S> <C> <C>
SECTION 7.01 Complete Agreement; Amendments and Waivers................................. 12
------------------------------------------
SECTION 7.02 Tax Characterization....................................................... 13
--------------------
SECTION 7.03 Fees and Expenses; Taxes................................................... 13
------------------------
SECTION 7.04 No Waiver.................................................................. 14
----------
SECTION 7.05 Remedies................................................................... 14
---------
SECTION 7.06 Severability............................................................... 14
------------
SECTION 7.07 Conflict of Terms.......................................................... 14
-----------------
SECTION 7.08 Notices.................................................................... 14
--------
SECTION 7.09 Section Titles............................................................. 16
---------------
SECTION 7.10 Counterparts............................................................... 16
-------------
SECTION 7.11 Time of the Essence........................................................ 16
--------------------
SECTION 7.12 Term....................................................................... 16
----
SECTION 7.13 Publicity.................................................................. 16
---------
SECTION 7.14 Confidentiality............................................................ 16
---------------
SECTION 7.15 GOVERNING LAW.............................................................. 17
--------------
SECTION 7.16 WAIVER OF JURY TRIAL....................................................... 18
--------------------
SECTION 7.17 Indemnification............................................................ 18
---------------
SECTION 7.18 Successors and Assigns..................................................... 19
----------------------
SECTION 7.19 Survival................................................................... 19
--------
</TABLE>
ii
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Annex A - Schedule of Closing Documents
Annex B - Financial Statements, Projections and Notices
Schedule 3.03 - Financial Statements and Projections
Schedule 3.04 - Contingent Liabilities; Restricted Payments
Schedule 3.05 - Certain Options, Etc.
Schedule 4.06 - Transactions with Affiliates and Employees
Exhibit A - Form of Certificate of Designations
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Opinion of the Company's Counsel
</TABLE>
iii
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT ("Agreement") is entered into as
---------
of September 30, 1997, by and between RAMSAY HEALTH CARE, INC., a Delaware
corporation (the "Company"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New
-------
York corporation ("Purchaser"), for the benefit of Purchaser and each other
---------
Person that may hereafter become a holder of shares of Series 1997 Preferred
Stock (as hereinafter defined) in accordance with Article 6 below (Purchaser and
---------
any such holder, individually a "Holder", and collectively, the "Holders").
------ -------
RECITALS
--------
A. The Company desires to issue shares of its Class B Preferred Stock
having an aggregate stated value of $2,500,000, all on the terms and subject to
the conditions contained herein;
B. Purchaser is willing, on the terms and conditions set forth herein,
to purchase such Class B Preferred Stock on the date hereof; and
C. The proceeds of the purchase of such Class B Preferred Stock will be
used in the manner described in Section 1.03 below;
------------
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE 1
AUTHORIZATION OF PREFERRED STOCK;
SALE AND PURCHASE OF PREFERRED STOCK
------------------------------------
SECTION 1.01 Authorization of Preferred Stock. The Company has duly
--------------------------------
authorized and designated 100,000 shares of Class B Preferred Stock of the
Company, $1.00 par value per share, as Class B Preferred Stock, Series 1997 (the
"Series 1997 Preferred Stock") pursuant to a Certificate of Designations in the
---------------------------
form attached as Exhibit A hereto filed with the Secretary of State of Delaware
---------
on September 30, 1997 (the "Certificate of Designations").
---------------------------
SECTION 1.02 Sale and Purchase of Preferred Stock.
------------------------------------
(a) The Company agrees to sell to Purchaser and, on the terms and
subject to the conditions of this Agreement, Purchaser agrees to purchase from
the Company, all of the Series 1997 Preferred Stock, at a purchase price of
$2,500,000.
<PAGE>
(b) The sale and purchase of the Series 1997 Preferred Stock (the
"Closing") will occur at the offices of King & Spalding, 191 Peachtree Street,
- --------
Atlanta, Georgia 30303 at 10:00 A.M., on the Closing Date. At the Closing, the
Company shall deliver to Purchaser one or more certificates evidencing the
100,000 shares of Series 1997 Preferred Stock, as requested by Purchaser,
against delivery by Purchaser to the Company of funds in the amount of
$2,500,000 with such delivery of funds to be in the manner set forth in written
instructions provided by the Company to Purchaser at least one Business Day
prior to the Closing Date.
SECTION 1.03 Use of Proceeds. The proceeds from the sale of the Series
---------------
1997 Preferred Stock shall be used by the Company (i) to effect the Refinancing,
and (ii) for the payment of costs and expenses of the transactions contemplated
by this Agreement and the Related Transaction Documents that are payable by the
Company.
SECTION 1.04 Investment Representations. Purchaser and, by its purchase
--------------------------
of any Series 1997 Preferred Stock hereafter, each Holder represents and
warrants that:
(a) it is an "accredited investor," as that term is defined in
Regulation D under the Securities Act, and has such knowledge, skill,
sophistication and experience in business and financial matters, based on actual
participation, that it is capable of evaluating the merits and risks of the
purchase of Series 1997 Preferred Stock from the Company and the suitability
thereof for Purchaser or such Holder;
(b) it is acquiring Series 1997 Preferred Stock for its own account,
for investment purposes and not with a view to the distribution thereof;
provided, however, that the foregoing representation and warranty shall not be
- -------- -------
construed as imposing any limitation on Purchaser's or any other Holder's right
to transfer any Series 1997 Preferred Stock that is not otherwise expressly set
forth in this Agreement or required under applicable law; and
(c) it will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Series 1997
Preferred Stock (or solicit any offers to buy, purchase or otherwise acquire or
take a pledge of any of the Series 1997 Preferred Stock), except in compliance
with the Securities Act.
ARTICLE 2
CONDITIONS TO CLOSING
---------------------
The obligations of Purchaser to purchase the Series 1997 Preferred Stock
on the Closing Date shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this Article 2:
---------
(a) This Agreement; Preferred Stock Documents. This Agreement or
-----------------------------------------
counterparts hereof shall have been duly executed by, and delivered to, the
Company and Purchaser; and Purchaser shall reasonably have received such
documents, instruments, agreements and legal opinions as Purchaser shall request
in connection with the transactions contemplated by this Agreement and the other
Preferred
2
<PAGE>
Stock Documents, including all those listed in the Schedule of Closing Documents
attached hereto as Annex A, each in form and substance reasonably satisfactory
-------
to Purchaser.
(b) Approvals. Purchaser shall have received (i) satisfactory
---------
evidence that the Company has obtained all required consents and approvals of
all Persons, including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Preferred Stock
Documents and the consummation of the Related Transactions or (ii) an officer's
certificate in form and substance reasonably satisfactory to Purchaser affirming
that no such consents or approvals are required.
(c) Payment of Fees. The Company shall have paid to Purchaser the
---------------
fees required to be paid on the Closing Date in the respective amounts specified
in the GE Capital Fee Letter, and shall have reimbursed Purchaser for all
reasonable legal fees and all other out-of-pocket costs and expenses of closing
presented as of the Closing Date.
(d) Consummation of Related Transactions. Purchaser shall have
------------------------------------
received fully executed copies of the Senior Credit Agreement, the Bridge Note
Purchase Agreement and each of the other Related Transaction Documents, each of
which shall be in form and substance satisfactory to Purchaser and its counsel,
all conditions precedent to the obligations of the Senior Lenders to make
extensions of credit under the Senior Credit Agreement shall have been satisfied
or waived and the Related Transactions shall have been consummated in accordance
with the terms of the Related Transaction Documents.
(e) Representations and Warranties True and Correct. No
-----------------------------------------------
representation or warranty by the Company contained herein or in any of the
other Preferred Stock Documents shall be untrue or incorrect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Purchaser to enter into this Agreement, the Company represents
and warrants to Purchaser and each other Holder of Series 1997 Preferred Stock
that, as of the Closing Date:
SECTION 3.01 Corporate Existence; Compliance with Law. The Company and
----------------------------------------
each of its Subsidiaries: (a) is a corporation duly organized or, in the case of
certain of its Subsidiaries, a partnership or a limited liability company duly
formed; (b) is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation; (c) is duly qualified to do
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification
except where a failure to be so qualified and in good standing is not a Material
Adverse Event; (d) has the requisite corporate, partnership or limited liability
company power and authority, as the case may be, and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its business as now, heretofore
and proposed to be conducted; and (e) is in compliance with its articles or
3
<PAGE>
certificate of incorporation and bylaws, its partnership agreement or limited
liability company operating agreement, as the case may be.
SECTION 3.02 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by the Company of this Agreement and the
other Preferred Stock Documents and the issuance to Purchaser of the Series 1997
Preferred Stock: (a) are within the Company's corporate power; (b) have been
duly authorized by all necessary corporate and shareholder action; (c) are not
in contravention of any provision of the Company's certificate of incorporation
or bylaws or other organizational documents; (d) do not violate any law or
regulation, or any order or decree of any Governmental Authority; (e) do not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any such Subsidiary or
any of their respective property is bound, including, without limitation, the
Related Transaction Documents or the Senior Credit Agreement; (f) do not result
in the creation or imposition of any Lien upon any of the Property of the
Company or any of its Subsidiaries; and (g) do not require the consent or
approval of any Governmental Authority or any other Person, except those
consents and approvals referred to in paragraph (b) of Article 2, all of which
---------
will have been duly obtained, made or complied with prior to the Closing Date
and which are in full force and effect. At or prior to the Closing Date, each
of the Preferred Stock Documents shall have been duly executed and delivered for
the benefit of or on behalf of the Company and each shall then constitute a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except as the enforceability of such
Preferred Stock Document may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditor's rights and
remedies in general.
SECTION 3.03 Financial Statements. The Company has delivered to Purchaser
--------------------
the Financial Statements identified in Schedule 3.03, and each of such Financial
-------------
Statements complies with the description thereof contained in Schedule 3.03.
-------------
SECTION 3.04 Material Adverse Events. Except as set forth in Schedule
----------------------- --------
3.04, the Company and its Subsidiaries have no material obligations, material
- ----
contingent liabilities, or material liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the
Financial Statements identified in Schedule 3.03. Except as otherwise permitted
-------------
hereunder or as set forth in Schedule 3.04, no Restricted Payment has been made
-------------
since the Audit Date, and no shares of Stock of the Company have been, or are
now required to be, redeemed, retired, purchased or otherwise acquired for value
by the Company or any of its Subsidiaries. Since the Audit Date, no Material
Adverse Event has occurred and is continuing.
SECTION 3.05 Authorized and Outstanding Shares of Capital Stock. After
--------------------------------------------------
giving effect to the Closing and the issuance of the Series 1997 Preferred Stock
pursuant to this Agreement, as of the Closing Date the authorized capital stock
of the Company consists of 21,800,000 shares, of which (a) 20,000,000 shares
consist of Common Stock, 10,586,122 of which are issued and outstanding; (b)
800,000 shares consist of Class A Preferred Stock, par value $1.00 per share,
none of which are issued and outstanding; and (c) 1,000,000 shares consist of
Class B Preferred Stock, par value $1.00 per share
4
<PAGE>
("Class B Preferred Stock"), 152,231 shares of which have been authorized and
-----------------------
designated as "Series C," 142,486 of which are issued and outstanding; 100,000
shares of which have been authorized and designated as "Series 1996," all of
which are issued and outstanding; 100,000 shares of which have been authorized
and designated as "Series 1997," all of which are issued and outstanding; and
4,000 shares of which have been authorized and designated as "Series 1997-A,"
all of which are issued and outstanding. Except for warrants issuable under the
Summa Merger Agreement and except as set forth on Schedule 3.05, (i) no Options
-------------
or Convertible Securities are authorized or outstanding, and (ii) there is no
commitment of the Company to issue any such Options or Convertible Securities.
SECTION 3.06 Authorization and Issuance of Securities. The issuance of
----------------------------------------
the Series 1997 Preferred Stock has been duly authorized and, upon delivery to
Purchaser of certificates therefor against payment in accordance with the terms
hereof, the Series 1997 Preferred Stock will have been validly issued and fully
paid and non-assessable, free and clear of all liens and encumbrances created by
or through the Company and all preemptive rights. The issuance of the shares of
Common Stock issuable upon the exercise by Purchaser of the conversion rights
set forth in paragraph (f) of the Certificate of Designations (the "Conversion
----------
Rights") has been duly authorized and, when issued upon exercise of the
- ------
Conversion Rights and surrender of the shares of Series 1997 Preferred Stock so
converted, such shares of Common Stock will have been validly issued and fully
paid and non-assessable, free and clear of all liens and encumbrances created by
or through the Company and all preemptive rights. As of the Closing Date, a
sufficient number of shares of Common Stock have been duly reserved for issuance
upon the exercise of the Conversion Rights.
SECTION 3.07 Securities Laws. In reliance on the investment
---------------
representations contained in Section 1.04, the offer, issuance, sale and
------------
delivery of the Series 1997 Preferred Stock, as provided in this Agreement, and
the offer, issuance, sale and delivery of the Common Stock issuable to Purchaser
upon the exercise by Purchaser of the Conversion Rights, are and will be exempt
from the registration requirements of the Securities Act and all applicable
state securities laws.
SECTION 3.08 Senior Credit Agreement. Each of the representations and
-----------------------
warranties set forth in the Senior Credit Agreement and the Bridge Note Purchase
Agreement is true and correct in all material respects as of the Closing Date.
SECTION 3.09 Full Disclosure. No information contained in this Agreement,
---------------
the other Preferred Stock Documents, the Financial Statements or any written
statement, notice, report or certificate furnished by or on behalf of the
Company or any Affiliate thereof pursuant to the terms of this Agreement or any
other Preferred Stock Document, which has previously been delivered to
Purchasers, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements con tained herein or therein not
misleading in light of the circumstances under which they were made. With
respect to all business plans and other forecasts and projections furnished by
or on behalf of the Company and made available to Purchasers relating to the
financial condition, operations, business, properties or prospects of the
Company and its Subsidiaries, (i) to the knowledge of the Company, no facts
exist concerning the Company or any of its Subsidiaries which would result in
any material change of any of such business plans, forecasts and projections,
(ii) such business plans, forecasts and projections are based upon estimates and
assumptions deemed reasonable by the Company
5
<PAGE>
at the time of preparation thereof, which as a whole are fair in light of
current conditions known to the Company, have been prepared on the basis of the
assumptions stated therein, and reflect a reasonable estimate by the Company of
the results of operations and other information projected therein.
SECTION 3.10 Related Transaction Documents. The Company has delivered to
-----------------------------
the Purchaser a complete and correct copy of each of the Related Transaction
Documents (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith), and neither the Company nor any of its Subsidiaries
and, to the knowledge of the Company, no other Person party thereto is in
default in the performance or compliance with any provisions thereof. Each of
the Related Transaction Documents complies with, and the Related Transactions
have been consummated in accordance with, all applicable laws. Each of the
Related Transaction Documents is in full force and effect, and has not been
terminated, rescinded or withdrawn. All requisite approvals by Governmental
Authorities having jurisdiction over the Company, any of its Subsidiaries and,
to the knowledge of the Company, other Persons referenced therein, with respect
to the Related Transactions, have been obtained, and no such approvals impose
any conditions to the consummation of the Related Transactions or to the conduct
by the Company or any of its Subsidiaries of its business thereafter. Each of
the representations and warranties made by the Company in the Related
Transaction Documents is true and correct in all material respects.
ARTICLE 4
COVENANTS
---------
The Company covenants and agrees (for itself and its Subsidiaries) that,
unless the Required Holders shall otherwise consent in writing, from and after
the date hereof and for so long as this Agreement shall be in effect pursuant to
Section 7.12:
- ------------
SECTION 4.01 Reports and Notices. The Company shall deliver to the
-------------------
Holders the Financial Statements, certificates and notices at the times and in
the manner set forth in Annex B.
-------
SECTION 4.02 Maintenance of Existence and Conduct of Business. The
------------------------------------------------
Company shall (and shall cause each of its Material Subsidiaries to): (a)
except in the case of a Material Subsidiary that merges with and into any other
Person, do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and its rights and franchises; (b)
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; and (c) at all times maintain, preserve and protect all of
its Intellectual Property material to the conduct of its business, and preserve
all the remainder of its Property material to the conduct of its business, and
keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear).
SECTION 4.03 Compliance with Laws. The Company shall (and shall cause each
--------------------
of its Subsidiaries to) comply with all federal, state and local laws, permits
and regulations applicable to it, including those relating to health care;
health care licensing, permits and accreditation; ERISA and labor matters; and
the filing of tax returns and payment of taxes (including, without limitation,
the
6
<PAGE>
withholding, collection, payment and deposit of employees' income, unemployment
and Social Security taxes), except in each case to the extent that a failure to
so comply with any such laws, permits and regulations would not be a Material
Adverse Event.
SECTION 4.04 Application of Proceeds. The Company shall use the proceeds
-----------------------
of the purchase of the Series 1997 Preferred Stock as provided in Section 1.03.
------------
SECTION 4.05 Further Assurances. The Company agrees, at its expense and
------------------
upon the reasonable request of the Required Holders, to duly execute and
deliver, or cause to be duly executed and delivered, to the Holders such further
instruments and do and cause to be done such further acts as may be necessary or
desirable in the reasonable opinion of the Required Holders to carry out more
effectually the provisions and purposes of this Agreement or any other Preferred
Stock Document.
SECTION 4.06 Affiliate and Employee Loans and Transactions. The Company
---------------------------------------------
shall not (nor permit any of its Subsidiaries to) enter into any lending,
borrowing or other commercial transaction with, or make any payments or
transfers of funds or assets (including payment of any management, consulting,
advisory or similar fee) to, or issue any shares of the Company's Stock, or any
warrant, option or other right to acquire shares of the Company's Stock, or any
securities convertible into the Company's Stock, to, any of its Affiliates;
provided, that (a) the Company may borrow money from Ramsay Affiliates, provided
- --------
that the Indebtedness owed to any such Ramsay Affiliate is Subordinated
Indebtedness meeting the requirements of the Senior Credit Agreement, and repay
such Subordinated Indebtedness in accordance with the terms thereof (including
the subordination provisions); (b) the Company and its Subsidiaries may engage
in commercial transactions (including lending or borrowing transactions) between
or among the Company and its Subsidiaries (other than Permitted Joint Ventures
and RMCI); (c) the Company and its Subsidiaries may engage in lending or
borrowing transactions with RMCI provided that, prior to the Revolving Credit
Commitment Adjustment Date, such transactions do not cause the intercompany
accounts due to the Company from RMCI to exceed $14,500,000 at any time; (d) the
Company and its Subsidiaries may engage in lending or borrowing transactions
with TCV to the extent that such transactions do not cause the intercompany
account due to the Company from TCV to exceed $10,100,000 at any time; (e) the
Company and its Subsidiaries may make Investments in Permitted Joint Ventures to
the extent permitted by Section 6.03(e) of the Senior Credit Agreement and,
---------------
additionally, may provide legal, accounting, insurance and other shared services
to the Permitted Joint Ventures of the types provided on the Closing Date and
may lease Real Property to the Permitted Joint Ventures, all on terms that are
no less favorable to the Company and its Subsidiaries than might be obtained in
an arm's-length transaction from a Person that is not an Affiliate of the
Company or such Subsidiary; (f) the Permitted Joint Ventures may engage in
commercial transactions with their Subsidiaries on terms that are no less
favorable to the Permitted Joint Ventures than might be obtained in an arm's-
length transaction from a Person that is not an Affiliate of such Permitted
Joint Venture; (g) the Company and its Subsidiaries may extend loans to their
respective officers, directors and employees in a maximum aggregate principal
amount outstanding at any time for all officers, directors and employees of
$1,000,000, other than loans to officers or directors to whom any other amount
is due by the Company that is not permitted to be paid to such officer or
director by virtue of this Section 4.06, unless such loan is for a business
------------
purpose of the Company or such Subsidiary that is unrelated to the circumstances
of the other amount due to such officer or director; (h) the Company may issue
shares of the Company's Stock, or any warrant, option
7
<PAGE>
or other right to acquire shares of the Company's Stock, or any security
convertible into the Company's Stock, to any Affiliate on terms that are no less
favorable to the Company than might be obtained in an arm's-length transaction
from a Person that is not an Affiliate of the Company; (i) the Company and its
Subsidiaries may make Restricted Payments to the extent permitted under Section
-------
4.08; (j) the Company and its Subsidiaries may pay salary and wages and provide
- ----
stock options and other executive compensation to its executive officers, to the
extent approved by the Company's Board of Directors or the compensation
committee thereof; (k) the Company may pay reasonable and customary directors'
fees to its directors; (l) the Company and its Subsidiaries may pay reasonable
legal fees and reasonable out-of-pocket expenses to Haythe & Curley for services
rendered; (m) RMCI may pay $50,000 of the sums due to Peter J. Evans
referenced in paragraph 12 of Schedule 4.06 at any time and may pay the balance
-------------
of the sums due to Peter J. Evans and the sums due to Luis E. Lamella referenced
in paragraph 12 of Schedule 4.06 after the Revolving Credit Commitment
-------------
Adjustment Date; and (n) the Company and Ramsay Acquisition Corp. may consummate
the transactions contemplated by the Summa Merger Agreement. Set forth in
Schedule 4.06 is a list of all such lending, borrowing or other transactions
- -------------
with Affiliates as of the Closing Date.
SECTION 4.07 Sale of Stock and Assets. The Company shall not (nor permit
------------------------
any of its Subsidiaries to) sell, transfer, convey, assign or otherwise dispose
of any of its properties or other assets, including the capital Stock of any of
their respective Subsidiaries (whether in a public or a private offering or
otherwise) or any of their Accounts, other than the following:
(a) the sale of Meadowlake Hospital on the terms of the purchase
option set forth in the Lease Agreement, dated as of August 1, 1997, by and
between HSA and Baptist Healthcare of Oklahoma, Inc.;
(b) the sale of Three Rivers Hospital or the Stock of Ramsay
Louisiana, Inc.;
(c) the sale of properties or assets (including the capital stock of
any of their respective Subsidiaries) all of the Net Cash Proceeds of which are
utilized, within twelve months after receipt, either (i) as all or a part of the
consideration paid by the Company and its Subsidiaries in respect of
Acquisitions, or (ii) to prepay Indebtedness;
(d) the sale of other properties or assets (including the capital
Stock of any of their respective Subsidiaries) having a book value of not more
than fifteen percent (15%) of the book value of the Company's consolidated
assets as to each such sale or other disposition, determined as of the time of
such disposition, or in excess of twenty-five percent (25%) of the book value of
the Company's consolidated assets, in the aggregate as to all such sales or
other dispositions, determined as of the date of the last such disposition; and
(e) the sale or other disposition of Investments.
SECTION 4.08 Restricted Payments. The Company shall not (nor permit any of
-------------------
its Subsidiaries to) (a) repurchase, retire or redeem any series of preferred
stock of the Company (other than the redemption of the Series 1997-A Preferred
Stock at any time after the Revolving Credit Commitment Adjustment Date) so long
as the Series 1997 Preferred Stock is outstanding, or (b) repurchase, retire or
redeem any Common Stock of the Company at any time while there exists any
arrearage in the payment of dividends on the Series 1997 Preferred Stock, other
than repurchases of
8
<PAGE>
Common Stock from former employees of the Company in amounts not
to exceed $500,000 in the aggregate during the term of this Agreement.
SECTION 4.09 Changes in Existing Options and Convertible Securities. The
------------------------------------------------------
Company shall not change or amend the exercise price, number of shares, vesting
schedule or other financial terms of any Options or Convertible Securities
outstanding as of the Closing Date, unless such change or amendment is effected
by the issuance of new Options or Convertible Securities, replacing the Options
or Convertible Securities so changed or amended and constituting an issuance or
sale of such Options or Convertible Securities for the purposes of paragraph
(f)(v)(C) of the Certificate of Designations.
ARTICLE 5
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
SECTION 5.01 Terms Defined in the Senior Credit Agreement. Except as
--------------------------------------------
otherwise set forth in Section 5.02, capitalized terms used herein and defined
------------
in Annex A of the Senior Credit Agreement shall have the meanings set forth
therein.
SECTION 5.02 Other Defined Terms. In addition to the terms defined in the
-------------------
Senior Credit Agreement, the terms set forth below shall have the following
respective meanings:
"Agreement" shall mean this Preferred Stock Purchase Agreement,
---------
including all Annexes, Schedules, and Exhibits attached or otherwise identified
hereto, all restatements, modifications and supplements hereof or hereto, and
any appendices, attachments, exhibits or schedules to any of the foregoing, and
shall refer to this Agreement as the same may be in effect at the time such
reference be comes operative; provided, that any reference to the Schedules to
--------
this Agreement shall be deemed a reference to the Schedules as in effect as of
the Closing Date, unless otherwise provided in a written amendment thereto.
"Certificate of Designations" shall have the meaning assigned to it
---------------------------
in Section 1.01.
- ---------------
"Claim" shall have the meaning assigned to it in Section 7.17.
----- ------------
"Closing Date" shall mean September 30, 1997, the date of the
------------
purchase and sale of the Series 1997 Preferred Stock pursuant to this Agreement.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
------------
of the Company as constituted on the Closing Date and any capital stock into
which such Common Stock may thereafter be changed.
"Company" shall mean Ramsay Health Care, Inc., a Delaware
-------
corporation.
9
<PAGE>
"Conversion Rights" shall have the meaning assigned to it in Section
----------------- -------
3.06.
- ----
"Convertible Securities" shall have the meaning assigned to it in the
----------------------
Certificate of Designations.
"Holder" shall have the meaning assigned to it in the preamble to
------
this Agreement.
"Indemnified Person" shall have the meaning assigned to it in Section
------------------ -------
7.17.
- ----
"Options" shall have the meaning assigned to it in the Certificate of
-------
Designations.
"Preferred Stock Documents" shall mean, collectively, this Agreement,
-------------------------
the GE Capital Fee Letter, the Certificate of Designations, the Registration
Rights Agreement and each other document, instrument and certificate executed
and delivered by the Company as of the date hereof or at any time thereafter, in
connection with the transactions contemplated by this Agreement, in each case,
as amended, modified or supplemented from time to time.
"Purchaser" shall have the meaning assigned to it in the preamble to
---------
this Agreement.
"Registration Rights Agreement" shall have the meaning set forth in
-----------------------------
Annex A.
- -------
"Related Transactions" shall mean the incurrence of the indebtedness
--------------------
contemplated by the Senior Credit Agreement, the issuance of the Bridge Notes
pursuant to the Bridge Note Purchase Agreement, the issuance of the Series 1997-
A Preferred Stock pursuant to the Ramsay Preferred Stock Purchase Agreement, the
payment of all fees, costs and expenses associated with all of the foregoing and
the execution and delivery of all of the Related Transaction Documents.
"Related Transaction Documents" shall mean the Senior Credit
-----------------------------
Agreement, the Senior Credit Documents, the Bridge Note Purchase Agreement, the
Bridge Notes, the Ramsay Common Stock Subscription Agreement, the Ramsay
Preferred Stock Purchase Agreement, the Ramsay Preferred Stock Designation and
all agreements, instruments, documents and certificates executed by or on behalf
of the Company in connection with the Related Transactions.
"Required Holders" shall mean Holders holding, in the aggregate, more
----------------
than 50% of the issued and outstanding shares of Series 1997 Preferred Stock at
any time.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect from time to time.
"Senior Credit Agreement" shall mean that certain Credit Agreement,
-----------------------
dated as of the date hereof, by and among the Company, the Senior Lenders,
General Electric Capital Corporation, as Administrative Agent, and GECC Capital
Markets Group, Inc., as Syndication Agent, as amended, restated, refinanced,
supplemented or otherwise modified from time to time.
10
<PAGE>
"Senior Lenders" shall mean all of the "Lenders" that are parties to
--------------
the Senior Credit Agreement from time to time.
"Series 1997 Preferred Stock" shall have the meaning assigned to it
---------------------------
in Section 1.01.
------------
SECTION 5.03 Certain Matters of Construction.
-------------------------------
(a) The words "herein," "hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the annexes,
exhibits and schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
(b) For purposes of this Agreement and the other Preferred Stock
Documents, the following additional rules of construction shall apply: (i)
wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter; (ii) the term "including" shall not be limiting or
exclusive, unless specifically indicated to the contrary; (iii) all references
to statutes and related regulations shall include any amendments of same and any
successor statutes and regulations; and (iv) all references to any instruments
or agreements, including references to any of the Preferred Stock Documents,
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
(c) Unless otherwise indicated, all references in this Agreement to
articles, sections, subsections, schedules, annexes, exhibits and attachments
shall refer to the corresponding articles, sections, subsections, schedules,
annexes, exhibits and attachments of or to this Agreement. All schedules,
annexes, exhibits and attachments hereto, or expressly identified to this
Agreement, are incorporated herein by reference and, taken together, shall
constitute but a single agreement. Unless otherwise expressly set forth herein,
or in a written amendment referring to such schedules and annexes, all schedules
and annexes referred to herein shall mean the schedules and annexes as in effect
as of the Clos ing Date.
ARTICLE 6
REGISTRATION; TRANSFER; EXCHANGE;
---------------------------------
REPLACEMENT OF CERTIFICATES
---------------------------
SECTION 6.01 Register for Series 1997 Preferred Stock. The Company shall
----------------------------------------
keep at its principal executive office a register for the registration of
transfers of Series 1997 Preferred Stock. The name and address of each Holder,
each transfer thereof and the name and address of each transferee of one or more
certificates evidencing Series 1997 Preferred Stock shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Series 1997 Preferred Stock shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes hereof, and the
Company shall not be affected by any notice or knowledge to the contrary. The
11
<PAGE>
Company shall give to any Holder, promptly upon request therefor, a complete and
correct copy of the names and addresses of all Holders.
SECTION 6.02 Transfers.
---------
(a) Subject to compliance with applicable securities laws, the Holders
may transfer all or any portion of the Series 1997 Preferred Stock held by them
at any time to any Person, provided, however, that no Holder may transfer shares
------- -------
of Series 1997 Preferred Stock to any Person other than a bank, savings and loan
association or other financial institution, a commercial lender or an insurance
company, investment fund or other institutional investor without the prior
written consent of the Company, such consent not unreasonably to be withheld.
(b) The Company shall cooperate in all reasonable respects with any
Holder in connection with a transfer of shares of Series 1997 Preferred Stock
under this Section 6.02, all as reasonably required to enable the transferring
------------
Holder to effect any such transfer, including the preparation of informational
materials (based upon existing reports and other documents filed with the SEC
under the Exchange Act) for, and the participation of management in meetings
with, potential transferees.
SECTION 6.03 Transfer and Exchange of Series 1997 Preferred Stock. Upon
----------------------------------------------------
surrender of any certificate evidencing Series 1997 Preferred Stock at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered Holder or his attorney duly authorized in writing and accompanied by
(i) the address for notices of each transferee of such certificate, (ii)
evidence of the payment of any applicable transfer taxes, and (iii) an executed
agreement from the transferee in favor of the Company, making the
representations and warranties set forth in Section 1.04 and agreeing to be
------------
bound by the terms and conditions of this Agreement), the Company shall execute
and deliver, at its expense, one or more new certificates (as requested by the
registered Holder thereof) in exchange therefor, in an aggregate number of
shares equal to those evidenced by the surrendered certificate.
SECTION 6.04 Replacement of Certificates. Upon receipt by the Company of
---------------------------
written notice from any Holder of the loss, theft, destruction or mutilation of
any certificate evidencing Series 1997 Preferred Stock held by such Holder and
(a) in the case of loss, theft or destruction, of security reasonably
satisfactory to the Company (or, in the case of Purchaser or any other Holder
that is an institutional investor, an unsecured agreement of indemnity from such
Holder), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company, at its own expense, shall execute and deliver, in lieu
thereof, a new certificate in replacement of such lost, stolen, destroyed or
mutilated certificate.
ARTICLE 7
MISCELLANEOUS
-------------
12
<PAGE>
SECTION 7.01 Complete Agreement; Amendments and Waivers.
------------------------------------------
(a) This Agreement, the other Preferred Stock Documents, the Senior
Credit Agreement, the other Loan Documents, the Bridge Note Purchase Agreement
and the Bridge Notes constitute the complete agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, commitments, understandings or inducements (oral or written, ex
pressed or implied) relating to a financing of substantially similar form,
purpose or effect, including the commitment letter and fee letter, each dated
August 7, 1997 between the Company and Purchaser.
(b) No amendment, modification, termination or waiver of any provision
of this Agreement or any of the Preferred Stock Documents, or any consent to any
departure by the Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Company and the Required Holders or,
in the case of certain matters contemplated by the Certificate of Designations,
as set forth in paragraph (g) thereof.
(c) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 7.01 shall be binding upon each holder
------------
of Series 1997 Preferred Stock at the time outstanding and each future holder of
Series 1997 Preferred Stock.
SECTION 7.02 Tax Characterization. Each of the Company and Purchaser will
--------------------
characterize the Series 1997 Preferred Stock as stock for federal income tax
purposes as of the Closing Date and at all times thereafter.
SECTION 7.03 Fees and Expenses; Taxes.
------------------------
(a) The Company shall reimburse Purchaser for all reasonable out-of-
pocket expenses incurred in connection with the preparation, negotiation,
execution and delivery of the Preferred Stock Documents and the purchase of the
Series 1997 Preferred Stock pursuant thereto (including the reasonable fees and
expenses of Purchaser's special counsel, advisors and consultants retained in
connection with the transactions contemplated by the Preferred Stock Documents
and for advice in connection therewith). The Company shall reimburse Purchaser
for all reasonable fees, costs and expenses, including the reasonable fees,
costs and expenses of counsel or other advisors for advice, assistance, or other
representation in connection with:
(i) any amendment, modification or waiver of, or consent with respect
to, any of the Preferred Stock Documents or any advice in connection with the
administration of the transactions contemplated thereby or the rights of the
Holders thereunder.
(ii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by any Holder, the Company or any other Person) in any way
relating to any of the
13
<PAGE>
Preferred Stock Documents or any other agreement to be executed or
delivered in connection therewith or herewith, whether as party,
witness, or otherwise, including any litigation, contest, dispute, suit,
case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against the Company or any other
Person in connection with the Preferred Stock Documents; provided, that
--------
the Company shall not be liable to reimburse any Holder for any
such fees, costs or expenses incurred by it in the defense of any Claim
as to which such Holder would not be entitled to indemnification by
virtue of the proviso to Section 7.17;
------------
including all reasonable attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings; and all reasonable out-of-pocket expenses, costs,
charges and other fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section 7.03 shall be payable, on demand, by the Company to the
------------
respective Holders, as applicable. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: reasonable fees,
costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
(b) In addition, the Company agrees to pay any present or future
transfer, intangible personal property, stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from the
issuance, sale or delivery of the Series 1997 Preferred Stock by the Company to
Purchaser pursuant to this Agreement or the issuance of Common Stock pursuant to
the exercise of the Conversion Rights, in each case within ten (10) Business
Days after demand by Purchaser therefor (including penalties, interest and
expenses arising therefrom or with respect thereto), whether or not such taxes
were correctly or legally asserted.
SECTION 7.04 No Waiver. No failure on the part of any Holder, at any
---------
time or times, to require strict performance by the Company of any provision of
this Agreement and any of the other Preferred Stock Documents shall waive,
affect or diminish any right of the Holders thereafter to demand strict
compliance and performance therewith. None of the undertakings, agreements,
warranties, covenants and representations of the Company contained in this
Agreement or any of the other Preferred Stock Documents, unless such waiver or
suspension is by an instrument in writing signed by an officer of or other
authorized employee of each of the Required Holders, or as otherwise provided in
the Certificate of Designations, as required by Section 7.02 above, and directed
------------
to the Company specifying such suspension or waiver.
SECTION 7.05 Remedies. The rights and remedies of the Holders under this
--------
Agreement and the other Preferred Stock Documents shall be cumulative and
nonexclusive of any other rights and remedies which the Holders may have under
any other agreement, including the Preferred Stock Documents, by operation of
law or otherwise.
14
<PAGE>
SECTION 7.06 Severability. Wherever possible, each provision of this
------------
Agreement and each of the other Preferred Stock Documents shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement or any of the other Preferred Stock Documents shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or any of the other Preferred Stock Documents.
SECTION 7.07 Conflict of Terms. Except as otherwise provided in this
-----------------
Agreement or any of the other Preferred Stock Documents by specific reference to
the applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision contained in
any of the other Preferred Stock Documents, the provisions contained in this
Agreement shall govern and control.
SECTION 7.08 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another party, or whenever any of the parties desires to give or
serve upon another party any communication with respect to this Agreement or any
of the other Preferred Stock Documents, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be deemed to have been validly served, given or delivered (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the
United States Mail, registered or certified mail, return receipt requested, with
proper postage prepaid, (b) upon transmission, when sent by telecopy or other
similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 7.08), (c) one Business Day after deposit
------------
with a reputable overnight courier with all charges prepaid, or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
below or to such other address (or facsimile number) as may be substituted by
notice given as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than the Company or a
Holder) designated below to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
If to Purchaser, at: General Electric Capital Corporation
3379 Peachtree Road, N.E.
Suite 560
Atlanta, Georgia 30326
Attention: Ms. Cheryl P. Boyd
Telecopy No.: (404) 266-3438
with copies to: General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Region Counsel - Commercial Finance
15
<PAGE>
Telecopy No.: (203) 316-7889
and King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Telecopy No.: (404) 572-5100
If to any other Holder: At its last known address appearing
on the books of the Company maintained
for such purpose in accordance with Section 6.01
------------
If to the Company, at: Ramsay Health Care, Inc.
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Chief Financial Officer
Telecopy No.: (305) 569-4647
with a copy to: Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy No.: (212) 682-0200
SECTION 7.09 Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
SECTION 7.10 Counterparts. This Agreement may be executed in any number
-------------
of separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
SECTION 7.11 Time of the Essence. Time is of the essence of this
-------------------
Agreement and each of the other Preferred Stock Documents.
SECTION 7.12 Term. This Agreement shall remain in full force and effect
----
until all of the Series 1997 Preferred Stock has been (a) redeemed in full, or
(b) converted to Common Stock upon the exercise of the Conversion Rights;
provided, however, that the provisions of Sections 7.03, 7.15, 7.16 and 7.17
- -------- ------- ------------- ---- ---- ----
hereof shall survive any such termination of this Agreement as provided in
Section 7.19 hereof.
- ------------
SECTION 7.13 Publicity.
---------
16
<PAGE>
(a) Except to the extent otherwise required by law, the Company shall
not use the name of or refer to Purchaser, or any of its Affiliates, in any
press release or other disclosure made in connection with the transactions
contemplated by this Agreement without the prior written consent of Purchaser,
and shall provide to Purchaser the proposed text of any such press release or
other disclosure for review not later than two Business Days prior to the
proposed date of release or disclosure thereof.
(b) Subject to a reasonable prior review, the Company consents to
Purchaser's publishing a tombstone or similar advertising material relating to
the financing transaction contemplated by this Agreement.
SECTION 7.14 Confidentiality. The Company has furnished and will furnish
---------------
to Purchaser certain information concerning the Company which the Company has
advised is non-public, proprietary or confidential in nature ("Confidential
------------
Information"). Purchaser confirms to the Company, for itself, that it is
- -----------
Purchaser's policy and practice to maintain in confidence all Confidential
Information which is provided to it under agreements providing for the purchase
of securities and which is identified to it as such, and that it will protect
the confidentiality of Confidential Information submitted to it with respect to
the Company under this Agreement, commensurate with its efforts to maintain the
confidentiality of its own Confidential Information, provided, however, that (a)
-------- -------
nothing contained herein shall prevent Purchaser from disclosing Confidential
Information (i) to its Affiliates and their respective directors, officers and
employees and to any legal counsel, auditors, appraisers, consultants or other
persons retained by it or its Affiliates as professional advisors, on the
condition that such information not be further disclosed except in compliance
with this Section 7.14; (ii) under color of legal authority, including, without
------------
limitation, to any regulatory authority having jurisdiction over it or its
operations or to or under the authority of any court deemed by it to be of
competent jurisdiction; (iii) to any actual or potential transferee of Series
1997 Preferred Stock pursuant to Section 6.02 or any actual or potential
------------
assignee of Purchaser's rights and obligations under this Agreement pursuant to
Section 7.18 hereof, to the extent such actual or potential assignee has agreed
- ------------
to maintain such information in confidence on the basis set forth in this
Section 7.14; and (iv) as necessary in connection with the exercise of its
- ------------
remedies under this Agreement or any of the other Preferred Stock Documents; (b)
the terms of this Section 7.14 shall be inapplicable to any information
------------
furnished to it which is in its possession prior to the delivery to it of such
information by the Company, or otherwise has been obtained by it on a non-
confidential basis, or which was or becomes available to the public or otherwise
part of the public domain (other than as a result of Purchaser's failure to
abide hereby), or which was not non-public, proprietary or confidential when the
Company delivered it to Purchaser; and (c) the determination by Purchaser as to
the application of any of the circumstances described in the foregoing clauses
(a) and (b) will be conclusive if made reasonably and in good faith.
SECTION 7.15 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
-------------
OF THE PREFERRED STOCK DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OTHER PREFERRED
STOCK DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH
17
<PAGE>
STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE COMPANY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK
COUNTY, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER PREFERRED
STOCK DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
ANY OF THE OTHER PREFERRED STOCK DOCUMENTS; PROVIDED, THAT THE PARTIES
--------
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK COUNTY, NEW YORK; AND FURTHER PROVIDED, THAT NOTHING
------- --------
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY COURT OF COMPETENT
JURISDICTION IN ANY OTHER JURISDICTION TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE HOLDERS. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
----- --- ----------
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY ANY SUCH COURT. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 7.08 OF THIS
------------
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
THE COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) BUSINESS DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID.
SECTION 7.16 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
--------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT,
OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT OR ANY OF THE OTHER PREFERRED STOCK DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.17 Indemnification. The Company shall indemnify and hold each
---------------
Holder, their respective Affiliates, and their respective officers, directors,
employees, attorneys and agents (each, an "Indemnified Person"), harmless from
------------------
and against any and all suits, actions, costs, fines, deficiencies,
18
<PAGE>
penalties,proceedings, claims, damages, losses, liabilities and expenses
(includingreasonable attorneys' fees and disbursements and other costs of
investigationsor defense, including those incurred upon any appeal) (each, a
"Claim") which may be instituted or asserted against or incurred by such
-----
Indemnified Person as the result of the consummation of the transactions
contemplated under this Agreement or any other Preferred Stock Document or
otherwise arising in connection with the transactions contemplated hereunder and
thereunder, regardless of whether the Indemnified Person is a party to such
Claim; provided, that the Company shall not be liable for any indemnification to
--------
such Indemnified Person with respect to any portion of any such Claim which
results solely from such Indemnified Person's gross negligence, willful
misconduct or breach of this Agreement as determined by a final judgment of a
court of competent jurisdiction. NO HOLDER OR ANY OTHER INDEMNIFIED PERSON SHALL
BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THE CONSUMMATION OF
THE TRANSACTIONS UNDER THE PREFERRED STOCK DOCUMENTS OR OTHERWISE IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED THEREBY.
19
<PAGE>
Annex A to Preferred
Stock Purchase Agreement
------------------------
SCHEDULE OF CLOSING DOCUMENTS
-----------------------------
In addition to this Agreement, duly executed by the Company and Purchaser,
as required by Article 2, paragraph (a), Purchaser shall have received the
---------- -------------
following, each dated the Closing Date, in form and substance satisfactory to
Purchaser and its counsel, unless otherwise specified below:
1.
PRINCIPAL PREFERRED STOCK DOCUMENTS.
-----------------------------------
(a) Fee Letter. The GE Capital Fee Letter.
----------
(b) Certificate of DESIGNATIONS. A copy of the Certificate of
---------------------------
Designations, certified by the Secretary of State of the State of Delaware.
(c) Stock Certificates. Certificates registered in Purchaser's name
------------------
(or in the name of a nominee of Purchaser) evidencing the Series 1997 Preferred
Stock;
(d) Registration Rights Agreement. A Registration Rights Agreement
-----------------------------
(the "Registration Rights Agreement") with respect to Common Stock issuable upon
-----------------------------
exercise of the Conversion Rights, in substantially the form attached as Exhibit
-------
B to this Agreement, duly executed and delivered by the Company and dated the
- -
Closing Date.
2. DOCUMENTS DELIVERED BY THE COMPANY.
----------------------------------
(a) Board Resolutions and Incumbency Certificates. A certificate of
---------------------------------------------
the Secretary or an Assistant Secretary of the Company certifying:
(i) the resolutions adopted by the Board of Directors of the
Company approving each Preferred Stock Document and the transactions
contemplated thereby, and any other documents evidencing other necessary
corporate action by the Company;
(ii) all documents evidencing any required governmental and
third party approvals with respect to each such Preferred Stock Document
or, in lieu thereof, the officer's certificate contemplated by paragraph
(b)(ii) of Article 2; and
---------
(iii) the names and true signatures of the authorized officers
of the Company.
(b) Certificate of Incorporation. By-Laws and Good Standing
-------------------------------------------------------
Certificates. Each of the following documents:
- ------------
A-1
<PAGE>
(i) the certificate of incorporation of the Company as in effect
on the Closing Date, certified by the Secretary of State of its State of
incorporation no more than 30 days prior to the Closing Date, and the by-
laws of the Company as in effect on the Closing Date, certified by the
Secretary, Assistant Secretary or other appropriate officers or directors
of the Company;
(ii) a "long form" good standing certificate for the Company
from the Secretary of State of its State of incorporation as of a date no
more than 30 days prior to the Closing Date; and
(iii) good standing certificates for the Company from the
Secretary of State of the state in which the Company is required to
qualify as a foreign corporation authorized to transact business, as of a
date no more than 30 days prior to the Closing Date.
(c) Financial Statements. Copies of the Financial Statements described
--------- ----------
in Schedule 3.03 in form and substance satisfactory to Purchaser.
-------------
(d) Proposed Text of Press Release. Not later than two Business Days
-------- ---- -- ----- -------
prior to the Closing Date, the proposed text of any press release or other
disclosure proposed to be issued by the Company with respect to the transactions
contemplated by this Agreement, for Purchaser's review in accordance with
Section 7.13.
- ------------
(e) Officer's Certificate. A certificate of a Responsible Financial
---------------------
Officer of Company affirming that the conditions set forth in Article 2 have
------- -
been satisfied as of the Closing Date.
(f) Other Certificates. Certificates from a Responsible Financial
------------------
Officer of the Company as to each of (i) the Senior Credit Agreement and (ii)
the Bridge Note Purchase Agreement.
(g) Payment Instructions. Payment instructions from the Company
------- ------------
providing for the disbursement of the proceeds of the sale of the Series 1997
Preferred Stock in accordance with Section 1.03.
------------
3. LEGAL OPINION.
----- -------
The opinion of Haythe & Curley, special counsel to the Company in
substantially the form of Exhibit C to this Agreement.
---------
A-2
<PAGE>
Annex B to Preferred
Stock Purchase Agreement
------------------------
FINANCIAL STATEMENTS AND NOTICES
--------- ---------- --- -------
1. Within thirty-five (35) days after the close of each Fiscal Month, (i)
an unaudited consolidated income statement for the Company for such Fiscal Month
and that portion of the current Fiscal Year ending as of the close of such
Fiscal Month, together with comparisons to the corresponding income statement
for the prior year's equivalent period, both on a monthly and year-to-date
basis, and (ii) the Company's consolidated balance sheet as at the end of such
Fiscal Month.
2. Within five (5) days after delivery to the SEC, but in any event
within fifty (50) days after the close of each Fiscal Quarter, the Company's
Form 10-Q for such Fiscal Quarter.
3. Within five days after delivery to the SEC, but in any event within
one hundred five (105) days after the close of each Fiscal Year, the Company's
Form 10-K for such Fiscal Year, including the annual audited financial
statements of the Company, consisting of a consolidated balance sheet and the
related consolidated statements of operations, retained earnings and cash flow,
setting forth in comparative form the figures for the previous Fiscal Year,
which financial statements shall be prepared in accordance with GAAP, certified
without qualification by Ernst & Young LLP or another firm of independent
certified public accountants of recognized national standing selected by the
Company.
4. For so long as Purchaser is the sole Holder, not later than one
hundred fifty (150) days after the close of each Fiscal Year, the annual
management letter from such accountants to the Company in connection with their
audit examination.
5. Promptly upon their becoming available, copies of any registration
statements and the regular, periodic and special reports which the Company shall
have filed with the SEC (or any governmental agency substituted therefor) or any
national securities exchange, including, without limitation, the Company's
annual and quarterly reports on Forms 10-K and 10-Q.
6. Promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed.
<PAGE>
Schedule 3.03 to Preferred
Stock Purchase Agreement
------------------------
FINANCIAL STATEMENTS
--------- ----------
1. Historical Financial Statements. Copies of the consolidated balance
-------------------------------
sheet of the Company and its Subsidiaries as of June 30, 1997 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the Fiscal Year then ended, accompanied by the audit report thereon of Ernst &
Young LLP have been furnished by the Company to each Purchaser prior to the
date of this Agreement. Such consolidated financial statements have been
prepared in conformity with GAAP and present fairly in all material respects the
consolidated financial position of the Company as of the date thereof, and the
consolidated results of operations and cash flows of the Company for the Fiscal
Year then ended.
1
<PAGE>
Schedule 3.04 to Preferred
Stock Purchase Agreement
------------------------
CONTINGENT LIABILITIES; RESTRICTED PAYMENTS
-------------------------------------------
[TO BE PROVIDED BY THE COMPANY]
1
<PAGE>
Schedule 3.05 to Preferred
Stock Purchase Agreement
------------------------
CERTAIN OPTIONS, ETC.
--------------------
[TO BE PROVIDED BY THE COMPANY]
1
<PAGE>
EXHIBIT 3.12
================================================================================
PREFERRED STOCK PURCHASE AGREEMENT
Dated as of September 30, 1997
between
RAMSAY HEALTH CARE, INC.,
as Issuer
and
PAUL RAMSAY HOLDINGS PTY. LIMITED
as Purchaser
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE 1 AUTHORIZATION OF PREFERRED STOCK;
SALE AND PURCHASE OF PREFERRED STOCK 1
SECTION 1.01 Authorization of Preferred Stock........................ 1
SECTION 1.02 Sale and Purchase of Preferred Stock.................... 1
SECTION 1.03 Use of Proceeds......................................... 2
SECTION 1.04 Investment Representations.............................. 2
ARTICLE 2 CONDITIONS TO CLOSING............................................. 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.................................... 3
SECTION 3.01 Corporate Existence; Compliance with Law................ 3
SECTION 3.02 Corporate Power; Authorization; Enforceable Obligations. 3
SECTION 3.03 Financial Statements.................................... 4
SECTION 3.04 Material Adverse Effect................................. 4
SECTION 3.05 Authorized and Outstanding Shares of Capital Stock...... 4
SECTION 3.06 Authorization and Issuance of Securities................ 4
SECTION 3.07 Securities Laws......................................... 4
ARTICLE 4 REGISTRATION; TRANSFER; EXCHANGE;
REPLACEMENT OF CERTIFICATES............................................... 5
SECTION 4.01 Register for Series 1997-A Preferred Stock.............. 5
SECTION 4.02 Transfers............................................... 5
SECTION 4.03 Transfer and Exchange of Series 1997-A Preferred Stock.. 5
SECTION 4.04 Replacement of Certificates............................. 5
ARTICLE 5 MISCELLANEOUS..................................................... 6
SECTION 5.01 Complete Agreement...................................... 6
SECTION 5.02 Amendments and Waivers.................................. 6
SECTION 5.03 Fees and Expenses; Taxes................................ 6
SECTION 5.04 No Waiver............................................... 6
SECTION 5.05 Severability............................................ 6
SECTION 5.06 Notices................................................. 7
SECTION 5.07 Section Titles.......................................... 8
SECTION 5.08 Counterparts............................................ 8
SECTION 5.09 Term.................................................... 8
SECTION 5.10 Indemnification......................................... 8
SECTION 5.11 Successors and Assigns.................................. 8
<PAGE>
THIS PREFERRED STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of
---------
September 30, 1997, by and between RAMSAY HEALTH CARE, INC., a Delaware
corporation (the "Company"), and PAUL RAMSAY HOLDINGS PTY. LIMITED, an
-------
Australian corporation ("Purchaser"), for the benefit of Purchaser and each
---------
other Person (as hereinafter defined) that may hereafter become holder of shares
of Series 1997-A Preferred Stock (as hereinafter defined) in accordance with
Article 4 below (Purchaser and any such holder, individually a "Holder", and
- ---------
collectively the "Holders").
RECITALS
--------
A. The Company desires to issue shares of its Class B Preferred Stock,
$1.00 par value (the "Class B Preferred Stock"), having an aggregate stated
value of $4,000,000, all on the terms and subject to the conditions contained
herein;
B. Purchaser is willing, on the terms and conditions set forth herein, to
purchase such Class B Preferred Stock on the date hereof; and
C. The proceeds of the purchase of such Class B Preferred Stock will be
used in the manner described in Section 1.03 below.
------------
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE 1
AUTHORIZATION OF PREFERRED STOCK;
SALE AND PURCHASE OF PREFERRED STOCK
------------------------------------
SECTION 1.1 Authorization of Preferred Stock. The Company has duly
--------------------------------
authorized and designated 4,000 shares of Class B Preferred Stock of the
Company, $1.00 par value per share, as Class B Preferred Stock, Series 1997-A
(the "Series 1997-A Preferred Stock"), pursuant to a Certificate of Designations
-----------------------------
in the form attached as Exhibit A hereto filed with the Secretary of State of
---------
Delaware on September 30, 1997 (the "Certificate of Designations").
---------------------------
SECTION 1.2 Sale and Purchase of Preferred Stock.
------------------------------------
(1) The Company agrees to sell to Purchaser and, on the terms and
subject to the conditions of this Agreement, Purchaser agrees to purchase from
the Company, all of the Series 1997-A Preferred Stock, at a purchase price of
$4,000,000.
(2) The sale and purchase of the Series 1997-A Preferred Stock (the
"Closing") will occur at the offices of King & Spalding, 191 Peachtree Street,
- --------
Atlanta, Georgia 30303 at 10:00
<PAGE>
A.M., on September 30, 1997 (the "Closing Date"). At the Closing, the Company
shall deliver to Purchaser one or more certificates evidencing the 4,000 shares
of Series 1997-A Preferred Stock, as requested by Purchaser, against delivery by
Purchaser to the Company of funds in the amount of $4,000,000 (including by
offset against amounts owed by the Company to the Purchaser and/or its
affiliates in respect of (i) $250,000 principal amount of indebtedness owed to a
corporate affiliate of the Purchaser by Ramsay Managed Care, Inc., a wholly
owned subsidiary of the Company, (ii) accrued and unpaid interest and net
commitment fees (as of the date hereof) of $354,582 in respect of all such
indebtedness and (iii) accrued and unpaid dividends (as of the date hereof) of
$611,083 in respect of Class B Preferred Stock, Series C of the Company and
Class B Preferred Stock, Series 1996 of the Company held by the Purchaser and a
corporate affiliate thereof).
SECTION 1.3 Use of Proceeds. The proceeds from the sale of the Series
---------------
1997-A Preferred Stock shall be used by the Company for the Company's working
capital and other corporate purposes.
SECTION 1.4 Investment Representations. Purchaser and, by its purchase of
--------------------------
any Series 1997-A Preferred Stock hereafter, each Holder represents and warrants
that:
(1) it is an "accredited investor," as that term is defined in
Regulation D under the Securities Act of 1933 as amended (the "Securities Act"),
and has such knowledge, skill, sophistication and experience in business and
financial matters, based on actual participation, that it is capable of
evaluating the merits and risks of the purchase of Series 1997-A Preferred Stock
from the Company and the suitability thereof for Purchaser;
(2) it is acquiring Series 1997-A Preferred Stock for its own account,
for investment purposes and not with a view to the distribution thereof;
provided, however, that the foregoing representation and warranty shall not be
- -------- -------
construed as imposing any limitation on Purchaser's or any other Holder's right
to transfer any Series 1997-A Preferred Stock that is not otherwise expressly
set forth in this Agreement or required under applicable law; and
(3) it will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Series 1997-A
Preferred Stock (or solicit any offers to buy, purchase or otherwise acquire or
take a pledge of any of the Series 1997-A Preferred Stock), except in compliance
with the Securities Act.
ARTICLE 2
CONDITIONS TO CLOSING
---------------------
The obligations of Purchaser to purchase the Series 1997-A Preferred Stock
on the Closing Date shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this Article 2:
---------
2
<PAGE>
(4) This Agreement; Preferred Stock Agreement. This Agreement or
-----------------------------------------
counterparts hereof shall have been duly executed by, and delivered to, the
Company and Purchaser; and Purchaser shall reasonably have received such
documents, instruments and agreements as Purchaser shall reasonably request in
connection with the transactions contemplated by this Agreement, each in form
and substance reasonably satisfactory to Purchaser.
(5) Approvals. Purchaser shall have received reasonably satisfactory
---------
evidence that the Company has obtained all required consents and approvals of
all Persons, including all requisite governmental authorities, to the execution,
delivery and performance of this Agreement. For purposes of this Agreement,
"Person" shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).
(6) Representations and Warranties True and Correct. No
-----------------------------------------------
representation or warranty by the Company in this Agreement shall be untrue or
incorrect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Purchaser to enter into this Agreement, the Company represents
and warrants to Purchaser that, as of the Closing Date:
SECTION 1.5 Corporate Existence; Compliance with Law. The Company and
----------------------------------------
each of its Subsidiaries: (a) is a corporation duly organized or, in the case of
certain of its Subsidiaries, a partnership or a limited liability company duly
formed; (b) is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation; (c) is duly qualified to do
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification
except where a failure to be so qualified and in good standing would not have a
material adverse effect on the business, financial condition or operations of
the Company, as a whole (a "Material Adverse Effect"); (d) has the requisite
corporate, partnership or limited liability company power and authority, as the
case may be, and the legal right to own, pledge, mortgage or otherwise encumber
and operate its properties, to lease the property it operates under lease, and
to conduct its business as now, heretofore and proposed to be conducted; and (e)
is in compliance with its articles or certificate of incorporation and bylaws,
its partnership agreement or limited liability company operating agreement, as
the case may be.
SECTION 3.1 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by the Company of this Agreement and the
issuance to Purchaser of the Series 1997-A Preferred Stock: (a) are within the
Company's corporate power; (b) have been duly authorized by all necessary
corporate and shareholder action; (c) are not in contravention of any provision
of the Company's certificate of incorporation or bylaws or other organizational
documents;
3
<PAGE>
(d) do not violate any law or regulation, or any order or decree of any
governmental authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary or any of their respective property is
bound; (f) do not result in the creation or imposition of any lien or
encumbrance upon any of the property of the Company or any of its Subsidiaries;
and (g) do not require the consent or approval of any governmental authority or
any other person, except those consents and approvals referred to in paragraph
(b) of Article 2, all of which will have been duly obtained, made or complied
---------
with prior to the Closing Date and which are in full force and effect. At or
prior to the Closing Date, this Agreement shall have been duly executed and
delivered for the benefit of or on behalf of the Company and each shall then
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except as the enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
laws affecting creditor's rights and remedies in general.
SECTION 1.6 Financial Statements. The Company has made available to
--------------------
Purchaser the financial statements identified in Schedule 3.03 (the "Financial
-------------
Statements").
SECTION 1.7 Material Adverse Effect. Since June 30, 1997, no event has
-----------------------
occurred and is continuing that has had a Material Adverse Effect.
SECTION 1.8 Authorized and Outstanding Shares of Capital Stock. After
--------------------------------------------------
giving effect to the Closing and the issuance of the Series 1997-A Preferred
Stock pursuant to this Agreement and the issuing of the Class B Preferred Stock
Series 1997 Preferred Stock, as of the Closing Date the authorized capital stock
of the Company consists of 21,800,000 shares, of which (a) 20,000,000 shares
consist of common stock, $.01 par value per share, of the Company, 10,586,122 of
which are issued and outstanding; (b) 800,000 shares consist of Class A
Preferred Stock, par value $1.00 per share, none of which are issued and
outstanding; and (c) 1,000,000 shares consist of Class B Preferred Stock, par
value $1.00 per share ("Class B Preferred Stock"), 152,231 shares of which have
-----------------------
been authorized and designated as "Series C," 142,486 of which are issued and
outstanding; 100,000 shares of which have been authorized and designated as
"Series 1996," all of which are issued and outstanding; 100,000 shares of which
have been authorized and designated as "Series 1997 Preferred Stock," all of
which are issued and outstanding; and 4,000 shares of which have been authorized
and designated as "Series 1997-A," all of which are issued and outstanding.
SECTION 1.9 Authorization and Issuance of Securities. The issuance of the
----------------------------------------
Series 1997-A Preferred Stock has been duly authorized and, upon delivery to
Purchaser of certificate(s) therefor against payment in accordance with the
terms hereof, the Series 1997-A Preferred Stock will have been validly issued
and fully paid and non-assessable, free and clear of all liens and encumbrances
created by or through the Company and all preemptive rights.
SECTION 1.10 Securities Laws. In reliance on the investment
---------------
representations contained in Section 1.04, the offer, issuance, sale and
------------
delivery of the Series 1997-A Preferred Stock, as
4
<PAGE>
provided in this Agreement and will be exempt from the registration requirements
of the Securities Act and all applicable state securities laws.
ARTICLE 4
REGISTRATION; TRANSFER; EXCHANGE;
---------------------------------
REPLACEMENT OF CERTIFICATES
---------------------------
SECTION 1.11 Register for Series 1997-A Preferred Stock. The Company shall
------------------------------------------
keep at its principal executive office a register for the registration of
transfers of Series 1997-A Preferred Stock. The name and address of each
Holder, each transfer thereof and the name and address of each transferee of one
or more certificates evidencing Series 1997-A Preferred Stock shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Series 1997-A Preferred Stock shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary. The Company shall give to any Holder, promptly upon
request therefor, a complete and correct copy of the names and addresses of all
Holders.
SECTION 1.12 Transfers. Subject to compliance with applicable securities
---------
laws the Holders may transfer all or any portion of the Series 1997-A Preferred
Stock held by them at any time to any Person.
SECTION 1.13 Transfer and Exchange of Series 1997-A Preferred Stock. Upon
------------------------------------------------------
surrender of any certificate evidencing Series 1997-A Preferred Stock at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered Holder or his attorney duly authorized in writing and accompanied by
(i) the address for notices of each transferee of such certificate, (ii)
evidence of the payment of any applicable transfer taxes, and (iii) an executed
agreement from the transferee in favor of the Company, making the
representations and warranties set forth in Section 1.04 and agreeing to be
------------
bound by the terms and conditions of this Agreement), the Company shall execute
and deliver, at its expense, one or more new certificates (as requested by the
registered Holder thereof) in exchange therefor, in an aggregate number of
shares equal to those evidenced by the surrendered certificate.
SECTION 1.14 Replacement of Certificates. Upon receipt by the Company of
---------------------------
written notice from any Holder of the loss, theft, destruction or mutilation of
any certificate evidencing Series 1997-A Preferred Stock held by such Holder and
(a) in the case of loss, theft or destruction, of security reasonably
satisfactory to the Company (or, in the case of Purchaser or any other Holder
that is an institutional investor, an unsecured agreement of indemnity from such
Holder), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company, at its own expense, shall execute and deliver, in lieu
thereof, a new certificate in replacement of such lost, stolen, destroyed or
mutilated certificate.
5
<PAGE>
ARTICLE 5
MISCELLANEOUS
-------------
SECTION 1.15 Complete Agreement. This Agreement constitutes the complete
------------------
agreement among the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements, commitments, understandings or
inducements (oral or written, expressed or implied) relating to a financing of
substantially similar form, purpose or effect.
SECTION 1.16 Amendments and Waivers.
----------------------
(1) No amendment, modification, termination or waiver of any provision
of this Agreement or any consent to any departure by the Company therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Company and at least 66-2/3% of the Holders (the "Required Holders") or,
in the case of certain matters contemplated by the Certificate of Designations,
as set forth therein.
(2) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 5.02 shall be binding upon each holder
------------
of Series 1997-A Preferred Stock at the time outstanding and each future holder
of Series 1997-A Preferred Stock.
SECTION 1.17 Fees and Expenses; Taxes. The Company agrees to pay any
------------------------
present or future transfer, intangible personal property, stamp or documentary
taxes or any other excise or property taxes, charges or similar levies that
arise from the issuance, sale or delivery of the Series 1997-A Preferred Stock
by the Company to Purchaser pursuant to this Agreement (including penalties,
interest and expenses arising therefrom or with respect thereto).
SECTION 1.18 No Waiver. No failure on the part of any Holder, at any time
---------
or times, to require strict performance by the Company of any provision of this
Agreement shall waive, affect or diminish any right of the Holders thereafter to
demand strict compliance and performance therewith. None of the undertakings,
agreements, warranties, covenants and representations of the Company contained
in this Agreement, unless such waiver or suspension is by an instrument in
writing signed by an officer of or other authorized employee of each of the
Required Holders, or as otherwise provided in the Certificate of Designations,
as required by Section 5.02 above, and directed to the Company specifying such
------------
suspension or waiver.
SECTION 1.19 Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
6
<PAGE>
SECTION 1.20 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another party, or whenever any of the parties desires to give or
serve upon another party any communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
business days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
-------
5.06), (c) one (1) business day after deposit with a reputable overnight courier
- ----
with all charges prepaid, or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below or to such other address (or
facsimile number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any person (other than the Company or a Holder) designated below to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
If to Purchaser, at: 154 Pacific Highway
St. Leonard NSW 2065
Australia
Attention: Director
Telecopy No: 011-612-94-333-460
If to any other Holder: At its last known address appearing
on the books of the Company maintained
for such purpose in accordance with Section 4.01
------------
If to the Company, at: Ramsay Health Care, Inc.
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Chief Financial Officer
Telecopy No.: (305) 569-4647
with a copy to: Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy No.: (212) 682-0200
7
<PAGE>
SECTION 1.21 Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
SECTION 1.22 Counterparts. This Agreement may be executed in any number of
-------------
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
SECTION 1.23 Term. This Agreement shall remain in full force and effect
----
until all of the Series 1997-A Preferred Stock has been redeemed in full.
SECTION 1.24 Indemnification. The Company shall indemnify and hold each
---------------
Holder, their respective officers, directors, employees, attorneys, affiliates,
successors and agents (each, an "Indemnified Person"), harmless from and against
------------------
any and all suits, actions, costs, fines, deficiencies, penalties, proceedings,
claims, damages, losses, liabilities and expenses (including reasonable
attorneys' fees and disbursements and other costs of investigations or defense,
including those incurred upon any appeal) (each, a "Claim") which may be
-----
instituted or asserted against or incurred by such Indemnified Person as the
result of the consummation of the transactions contemplated under this Agreement
or otherwise arising in connection with the transactions contemplated hereunder,
regardless of whether the Indemnified Person is a party to such Claim; provided,
--------
that the Company shall not be liable for any indemnification to such Indemnified
Person with respect to any portion of any such Claim which results solely from
such Indemnified Person's gross negligence, willful misconduct or breach of this
Agreement as determined by a final judgment of a court of competent
jurisdiction. NO HOLDER OR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR
LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF THE CONSUMMATION OF THE TRANSACTIONS UNDER
THIS AGREEMENT OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 1.25 Successors and Assigns. This Agreement shall be binding on
----------------------
and shall inure to the benefit of the Company, the Holders and their respective
successors and permitted assigns (including, in the case of the Company, a
debtor-in-possession on behalf of the Company), except as otherwise provided
herein or therein. Except in respect of a collateral assignment in favor of the
Company's lenders, from time to time, the Company may not assign, delegate,
transfer, hypothecate or otherwise convey its rights, benefits, obligations or
duties hereunder or under any this Agreement without the prior express written
consent of the Required Holders. Any such purported assignment, transfer,
hypothecation or other conveyance by the Company without such prior express
written consent shall be void. The terms and provisions of this Agreement are
for the purpose of defining the relative rights and obligations of the Company
and the Holders with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of this
Agreement.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
RAMSAY HEALTH CARE, INC.
By:_________________________________
Carol C. Lang
Executive Vice President
PAUL RAMSAY HOLDINGS PTY.
LIMITED
By:_________________________________
Name: Peter J. Evans
Title: Director
Accepted and agreed to
PAUL RAMSAY HOSPITALS
PTY. LIMITED
By:________________________
Name: Peter J. Evans
Title: Director
9
<PAGE>
EXHIBIT 3.13
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
COMMON STOCK PURCHASE AGREEMENT dated as of September 30, 1997 (this
"Agreement") by and between Paul Ramsay Holdings Pty. Ltd., an Australian
corporation (the "Subscriber"), and Ramsay Health Care, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has entered into that certain Credit Agreement
dated as of September 30, 1997 by and among the Company, General Electric
Capital Corporation, individually as a lender and as Administrative Agent ("GE
Capital"), and GECC Capital Markets Group, Inc., as Syndication Agent (as such
agreement is amended, modified or supplemented from time to time, the "Credit
Agreement");
WHEREAS, it is a condition precedent to the obligations of GE Capital
to consummate the transactions contemplated by the Credit Agreement that the
Subscriber subscribe to purchase certain shares of common stock, $.01 par value
(the "Common Stock"), of the Company, contingent upon the occurrence of a
Louisiana Payment (as defined below); and
WHEREAS, the Subscriber has agreed to purchase shares of Common Stock
following the occurrence of a Louisiana Payment, and the Company has agreed to
issue and sell to the Subscriber such shares following the occurrence of a
Louisiana Payment, subject to the terms and conditions herein contained.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows, intending to be legally bound:
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, effective upon the
occurrence of each Louisiana Payment Condition (as hereinafter defined), the
Subscriber hereby subscribes for and agrees to purchase, acquire and accept from
the Company, and the Company hereby agrees to sell, issue and convey to the
Subscriber, on each Closing Date (as hereinafter defined), the number of whole
shares of Common Stock (the "Applicable Shares" and collectively with all
Applicable Shares purchasable on any other Closing Date, the "Shares") equal to:
(x) the aggregate amount of the Louisiana Payment (as hereinafter defined)
resulting from such Louisiana Payment Condition divided by (y) $5.17 (as such
number shall be appropriately adjusted to take into account stock splits, stock
dividends and similar events affecting the Common Stock).
<PAGE>
B. Purchase Price. The Subscriber hereby agrees, subject to and in
--------------
accordance with the terms and conditions hereof, to pay to the Company on each
Closing Date a purchase price per each Applicable Share equal to $5.17 (as such
number shall be appropriately adjusted to take into account stock splits, stock
dividends and similar events affecting the Common Stock), upon receipt of the
Applicable Certificate (as hereinafter defined), payable in cash by certified or
official bank check or direct bank wire transfer of immediately available funds
to a bank account or accounts designated by the Company. For purposes of this
Agreement, a "Louisiana Payment Condition" shall be deemed to exist in the event
that each of the following events in clauses (x) and (y) has occurred: (x) the
Company or any of its Subsidiaries pay or become liable for the payment of any
amount in excess of $1,300,000 in respect of the Louisiana DHH Claims (as
defined in the Credit Agreement), whether pursuant to a settlement or other
agreement, by offset of current accounts receivable of the Company and its
Subsidiaries from the Department of Health and Hospitals of the State of
Louisiana, by entry of judgment or otherwise and (y) the amount of such excess
actually paid by or offset against the Company and/or its Subsidiaries exceeds
$500,000 during any Fiscal Year of the Company (such excess over $500,000 in any
such Fiscal Year, each a "Louisiana Payment").
C. Delivery of the Shares. Delivery of the Applicable Shares shall
----------------------
be made by the Company to the Subscriber on each Closing Date by delivering a
certificate (each an "Applicable Certificate") representing the Applicable
Shares registered in the name of the Subscriber. All certificates to be
delivered by the Company hereunder shall be accompanied by any requisite
documentary or stock transfer taxes.
D. The Closings. Each closing of the sale by the Company to the
------------
Subscriber of Applicable Shares pursuant to this Agreement shall occur on the
date (each a "Closing Date") mutually agreed to between the Subscriber and the
Company which is no later than ten (10) business days after the date on which a
Louisiana Payment occurs or, if such sale of shares is subject to the condition
set forth in Section IV hereof, within one (1) business day following the
satisfaction of such condition.
E. Legend. Each certificate representing Applicable Shares shall
------
contain upon its face or upon the reverse side thereof legends 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."
2
<PAGE>
F. Notice of Louisiana Payment Conditions. The Company shall
--------------------------------------
deliver to the Subscriber written notice of each Louisiana Payment Condition
promptly after becoming aware that the Louisiana Payment relating thereto will
be required to be paid (and in any event no later than one business day
following each such Louisiana Payment).
SECTION II
INVESTMENT REPRESENTATIONS OF THE SUBSCRIBER
--------------------------------------------
The Subscriber hereby represents and warrants to the Company, as of
the date hereof and as of each Closing Date, that:
(a) The Subscriber understands that the Company proposes to issue
and deliver to the Subscriber 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 Company
will rely upon the representations and warranties of the Subscriber
contained herein; and that such non-compliance with registration is not
permissible unless such representations and warranties are correct.
(b) The Subscriber understands that, under existing rules of the
Securities and Exchange Commission (the "SEC"),the Subscriber 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 the 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 purchase 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").
(c) The Subscriber is not relying on the Company respecting the
financial, tax and other economic considerations of any investment in the
Common Stock, and the Subscriber has relied on the advice of, or has
consulted with, only its own advisors.
(d) The Subscriber is familiar with the provisions of Rule 144
and the limitations upon the availability and applicability of such rule.
(e) The Subscriber 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.
(f) The Subscriber has such knowledge and experience in
financial, tax and business matters so as to enable the Subscriber to
utilize the information made available to the Subscriber in connection with
the issuance of the Shares to the Subscriber and to
3
<PAGE>
evaluate the merits and risks of an investment in the Shares and to make an
informed investment decision with respect thereto.
(g) Subscriber is purchasing the Shares as an investment for its
sole account and without any present view towards the sale or other
distribution thereof.
(h) Subscriber is an Accredited Investor as that term is defined
in Rule 501 of Regulation D promulgated under the Securities Act.
SECTION III
COVENANTS OF THE PARTIES
------------------------
The Company and the Subscriber covenant and agree that they will, if
required to do so under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, or any successor thereto (the "HSR Act"), use their best efforts to file
Notification and Report Forms under the HSR Act with the Federal Trade
Commission ("FTC") and the United States Department of Justice, Antitrust
Division (the "Antitrust Division") in connection with the acquisition of the
Shares and shall use their best efforts to respond as promptly as practicable to
all inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
SECTION IV
CONDITIONS TO THE PARTIES' OBLIGATIONS
--------------------------------------
The obligation of the Company to issue the Applicable Shares on each
Closing Date and the obligation of the Subscriber to purchase the Applicable
Shares on each Closing Date is subject to the satisfaction of the condition
that, in the event that the HSR Act is applicable to the issuance of the
Applicable Shares to be issued hereunder on any Closing Date, all applicable
waiting periods, if any, under the HSR Act shall have expired or terminated with
respect to the purchase of the Applicable Shares.
SECTION V
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 Subscriber:
4
<PAGE>
154 Pacific Highway
St. Leonards NSW 2065
Australia
Telecopy: (011) 612-943-3460
(2) if to the Company:
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Chief Executive Officer
Telecopy: (305) 569-4647
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 contained shall survive the
execution of this Agreement, notwithstanding any investigation at any time made
by or on behalf of any party hereto.
C. Entire Agreement. This Agreement and the documents referred to
----------------
herein contain the entire agreement between the parties hereto with respect to
the transactions contemplated hereby, and no modification hereof shall be
effective unless in writing and signed by the party against which it is sought
to be enforced.
D. Assignment. Except as expressly set forth herein, this Agreement
----------
shall not be assignable by the Company or the Subscriber except pursuant to a
writing executed by each of the parties hereto; provided, however, that the
Company may assign its rights hereunder to any Person which acquires all or
substantially all of its assets or as collateral security pursuant to the Senior
Credit Agreement (as defined in the Credit Agreement) and security documents
relating thereto including, without limitation, a collateral assignment to the
Administrative Agent and/or the Lenders (each as defined in the Credit
Agreement); and provided further that the Subscriber may assign any of its
rights hereunder (but not its obligations, which shall remain in full force and
effect notwithstanding any such assignment) to any of the Ramsay Affiliates (as
defined in the Credit Agreement). Any attempted assignment in violation of this
Section V(D) shall be null and void.
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
5
<PAGE>
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; 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; No Third Party Beneficiaries. This Agreement
--------------------------------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement is intended solely
for the benefit of the parties hereto and may not be relied upon by, and shall
not benefit or create any rights in favor of, any Person other than the parties
hereto and their successors and permitted assigns.
I. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable in the case of
agreements made and to be performed entirely within such State without regard to
its conflicts of laws principles.
J. Submission to Jurisdiction.
--------------------------
(a) Each of the parties hereto hereby irrevocably submits to the
jurisdiction of any New York State or Federal court sitting in New York
City and any appellate court from any thereof and to the courts of its own
corporate domicile with respect to actions brought against it as a
defendant in any action or proceeding arising out of or relating to this
Agreement, and such party hereby irrevocably agrees that all claims in
respect of any such action or proceeding may be heard and determined in
such New York State court or in such Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent it may effectively
do so, any objection it may now or hereafter have as to the venue of any
such action or proceeding brought in any such court or that such court is
an inconvenient forum. Subscriber hereby irrevocably appoints Haythe &
Curley, attention Thomas M. Haythe (the "Process Agent"), with an office on
-------------
the date hereof at 237 Park Avenue, New York, New York 10017, United
States, as its agent to receive on behalf of Subscriber and its property
service of copies of the summons and complaint and any other process which
may be served in any such action or proceeding. Such service may be made
by delivering a copy of such process to Subscriber in care of the Process
Agent at the Process Agent's above address, and Subscriber hereby
irrevocably authorizes and directs the Process Agent to accept such service
on its behalf. As an alternative method of service, Subscriber also
irrevocably consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to Subscriber
at its address specified above. Subscriber agrees that a final judgment in
any such action or proceeding shall be
6
<PAGE>
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Nothing in this paragraph J shall affect the right of the
Company, its successors or assigns to serve legal process in any other
manner permitted by law or affect the right of the Company, its successors
or assigns to bring any action or proceeding against Subscriber or its
property in the courts of other jurisdictions.
(c) To the extent that the Subscriber has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to
itself or its property, the Subscriber hereby irrevocably waives such
immunity in respect of its obligations under this Agreement.
(d) Any judicial proceeding by the Subscriber against the
Company, its successors or assigns involving, directly or indirectly, any
matter in any way arising out of, related to, or connected to this
Agreement shall be brought only in courts in New York, New York.
K. 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.
L. Term. This Agreement shall terminate and be of no further force
----
and effect upon the later to occur of the date on which (i) the Notes (as
defined in the Credit Agreement) have been repaid in full and (ii) the Bridge
Notes (as defined in the Credit Agreement) have been repaid in full.
* * *
7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
PAUL RAMSAY HOLDINGS PTY LTD.
By: __________________________________
Name: Peter J. Evans
Title: Director
RAMSAY HEALTH CARE, INC.
By: __________________________________
Name: Carol C. Lang
Title: Executive Vice President
8
<PAGE>
EXHIBIT 4.6
FIFTH SUPPLEMENTAL TRUST INDENTURE
Dated as of June 1, 1997
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 INSTITUTE OF WEST VIRGINIA, INC.
AND
THE BANK OF NEW YORK
AND
THOMAS ZAKRZEWSKI
AS TRUSTEES
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Definitions............................................... 2
Section 1.1 Definitions Contained in the Original Indenture........... 2
Section 1.2 Amendment of Certain Definitions Contained in the Original
Indenture................................................. 2
Section 1.3 New Definitions........................................... 3
Section 2. Amendments................................................ 4
Section 2.1 Amendment of Section 2.1 to Original Indenture............ 4
Section 2.2 Amendment of Notes........................................ 5
Section 2.3 Amendment of Section 3.17 of the Original Indenture....... 5
Section 2.4 Amendment of Section 3.18(a) of the Original Indenture.... 6
Section 2.5 Amendment of Section 3.20 of the Original Indenture....... 6
Section 2.6 Amendment of Section 3.21(e) of the Original Indenture.... 7
Section 2.7 Amendment of Section 3.25(a) of the Original Indenture.... 7
Section 2.8 Amendment of Section 3.28 of the Original Indenture....... 7
Section 2.9 Amendment of Section 5.2 of the Original Indenture........ 8
Section 2.10 Amendment of Section 5.4 of the Original Indenture........ .10
Section 2.11 Amendment of Section 6.1 of the Original Indenture........ 10
Section 2.12 Amendment of Exhibits to Original Indenture............... 11
Section 3. Miscellaneous............................................. 11
Section 3.1 Applicability of the Original Indenture................... 11
Section 3.2 Counterparts.............................................. 11
Section 3.3 No Legend Required........................................ 12
Section 3.4 No Responsibility of Trustees for Recitals................ 12
Section 3.5 Consent of Lenders to Supplement.......................... 12
Section 3.6 Furnishing of Documents................................... 12
Section 3.7 Execution and Delivery of Mortgage Amendments............. 13
Section 3.8 Payment of Fees and Expenses of Noteholders and Trustees.. 13
Section 3.9 Payment of Administrative Fee............................. 13
Section 3.10 No Conflicts, Etc......................................... 13
i
<PAGE>
FIFTH SUPPLEMENTAL TRUST INDENTURE
FIFTH SUPPLEMENTAL TRUST INDENTURE dated as of June 1, 1997 (herein,
called this "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, 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 Columbus Center,
One Alhambra Plaza, Suite 750, Coral Gables, Florida 33134, and THE BANK OF NEW
YORK, a New York banking corporation (the "TRUSTEE"), whose post office address
is Corporate Trust Division, 101 Barclay Street, Floor 21 West, New York, New
York 10286, Attention Corporate Trust Department and THOMAS ZAKRZEWSKI (the
"INDIVIDUAL TRUSTEE"), whose post office address is c/o The Bank of New York,
Corporate Trust Division, 101 Barclay Street, Floor 21 West, New York, New York
10286, 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"; collectively with the Senior Notes, the "NOTES") UNDER and
secured by the Trust Indenture dated as of March 31, 1990 from the Obligors to
the Trustee (the "FIRST INDENTURE");
WHEREAS, the Obligors and the Trustees entered into a First
Supplemental Trust Indenture dated as of June 15, 1991 (the "FIRST SUPPLEMENTAL
INDENTURE"), entered into a Second Supplemental Trust Indenture dated as of May
15,1993 (the "SECOND SUPPLEMENTAL INDENTURE"), entered into a Third Supplemental
Trust Indenture dated as of April 12, 1995 (the "THIRD SUPPLEMENTAL INDENTURE"),
and entered into a Fourth Supplemental Trust Indenture dated as of September 15,
1995 (the "FOURTH SUPPLEMENTAL INDENTURE"); the First Indenture as amended by
the First Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture and the Fourth Supplemental Indenture (the "ORIGINAL
INDENTURE"), and as hereby amended and as the same may be further amended and
supplemented from time to time being referred to as 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
<PAGE>
the Obligors hereby acknowledge, and in order to strengthen the financial and
operating condition of each and every Obligor, directly and 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 Section 10 of the Indenture, of both
the principal of and interest and premium, if any, upon the Notes at any time
outstanding thereunder according to their tenor and the provisions hereof, and
further subject to Section 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 Section 10 of the Indenture, without any
preference, priority or distinction as follows:
SECTION 1. DEFINITIONS.
SECTION 1.1 DEFINITIONS CONTAINED IN THE 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
therein when used herein, unless the context or use indicates a different
meaning or intent.
SECTION 1.2 AMENDMENT OF CERTAIN DEFINITIONS CONTAINED IN THE
ORIGINAL INDENTURE. Unless the context otherwise requires, the following
definitions contained in Section 1.1 of the Original Indenture are hereby
amended in their entirety as follows:
"BANK DEBT" shall mean (i) indebtedness outstanding under the letter
of credit facility provided under the Credit Agreement in an aggregate amount
not to exceed $16,442,976.60 and referred to therein as the "Letters of Credit"
and (ii) indebtedness outstanding under the term loan facility provided under
the Credit Agreement upon termination of the Letters of Credit referred to in
(i) above in an aggregate principal amount not to exceed $16,442,976.60 and
referred to therein as the "Terms Loans".
"CONSOLIDATED SUBSIDIARY" shall mean each of the Principal
Subsidiaries and any other Subsidiary (i) which is organized under the laws of
the United States or any State thereof; (ii) which conducts all of its business
and has all of its assets within the United States; (iii) of which more than 80%
(by number of votes) of the Voting Stock is owned by the Company and/or one or
more Consolidated Subsidiaries; (iv) which is engaged directly or through a
subsidiary in the health care business in the United States; and (v) which is
consolidated with the Company for financial reporting purposes in accordance
with generally accepted accounting principles; provided, solely for purposes of
--------
calculating Consolidated Cash Flow, Consolidated Current Assets, Consolidated
Current Liabilities, Consolidated Debt Service, Consolidated Net Income,
Consolidated Net Tangible Assets, Consolidated Pre-Tax Net Income, Consolidated
Tangible Net Worth, Fixed Charges and Interest Expense, RMCI and all
subsidiaries of RMCI shall be excluded from the definition of "Consolidated
Subsidiaries".
"CREDIT AGREEMENT" shall mean the Credit Agreement dated as of May 15,
1993, as amended as of April 12, 1995, as of September 15, 1995, as of August
15,1996, as of May 15, 1997 and as of June 4,1997 among the Company and certain
Subsidiaries, as the Borrowers, Great Plains Hospital, Inc., The Haven Hospital,
Inc., H.C. Partnership, HSA Hill Crest Corporation and H.C. Corporation, as
2
<PAGE>
the Guarantors, Societe Generale, New York Branch, First Union National Bank of
North Carolina and Hibernia National Bank, as lenders, and Societe Generale, New
York Branch, as Issuing Bank and Agent.
"OVERDUE RATE" shall mean, at any time with respect to any Note, the
greater of (A) a rate per annum equal to two (2) percent per annum plus the per
----
annum interest rate that would otherwise be in effect at such time under such
Note and (B) the sum of the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time in New York City as its
prime rate plus 1%.
"SUPERIOR INDEBTEDNESS" shall mean (i) all obligations, liabilities
and indebtedness of the Obligors to the holders of the Senior Secured Notes in
an aggregate principal amount not to exceed $56,500,000 arising under the Senior
Secured Notes, the Note Purchase Agreements and this Indenture, (ii) all
obligations, liabilities and indebtedness in an aggregate amount not to exceed
$16,442,976.60 created or arising under certain industrial development bonds of
the Company or its Subsidiaries and associated letters of credit and
reimbursement obligations in connection therewith under the Credit Agreement
(including extensions, renewals and refundings thereof without increase in the
outstanding principal amount under such facility at such time), (iii) all
obligations, liabilities and indebtedness outstanding under the Credit Agreement
arising under the "Term Loans" provided in the Credit Agreement in an aggregate
principal amount not to exceed $16,442,976.60 (including extensions, renewals
and refundings thereof without increase in the outstanding principal amount
under such facility at such time), and (iv) additional indebtedness incurred
after the date of the Original Indenture in an aggregate principal amount not to
exceed $25,000,000, provided that all proceeds of such additional indebtedness
are used exclusively to finance the acquisition, construction or renovation of
facilities owned or acquired by the Company or any Subsidiary. Interest accrued
on the indebtedness described in the foregoing clauses (i), (ii), (iii) and (iv)
shall constitute "Superior Indebtedness" regardless of whether such interest
accrues before or after the commencement of any bankruptcy, insolvency or
receivership proceedings.
SECTION 1.3 NEW DEFINITIONS. Unless the context otherwise requires,
the terms hereinafter set forth when used herein in the Indenture shall have the
following meanings and the following definitions shall be equally applicable to
both the singular and plural forms of any of the terms herein defined:
"ACQUISITION CORP." shall mean RHCI Acquisition Corp., a Delaware
corporation and wholly-owned Subsidiary.
"BONDS" shall have the meaning ascribed to such term in the Credit
Agreement.
"BOND DOCUMENTS" shall have the meaning ascribed to such term in the
Credit Agreement.
"FIFTH SUPPLEMENTAL INDENTURE" shall mean the Fifth Supplemental Trust
Indenture dated as of June 1, 1997 between the Obligors and the Trustees.
3
<PAGE>
"FOURTH AMENDMENT" shall mean the Fourth Amendment to Credit
Agreement, First Amendment to Waiver, Consent to Merger and Extension Agreement
dated as of May 15, 1997 by and among the parties to the Credit Agreement.
"GREENBRIER BONDS" shall have the meaning ascribed to such term in
the Credit Agreement.
"GULF COAST BONDS" shall have the meaning ascribed to such term in
the Credit Agreement.
"GULF COAST TERM NOTE" shall have the meaning ascribed to such term
in the Credit Agreement.
"HOUMA BONDS" shall have the meaning ascribed to such term in the
Credit Agreement.
"LETTERS OF CREDIT" shall have the meaning ascribed to such term in
the Credit Agreement.
"PLAN OF MERGER" shall mean that certain Agreement and Plan of Merger
dated as of October 1, 1996 by and among the Company, Acquisition Corp. and
RMCI.
"RMCI" shall mean Ramsay Managed Care, Inc., a Delaware corporation,
which term shall include the surviving corporation of the merger between RMCI
and Acquisition Corp. pursuant to the Plan of Merger.
SECTION 2. AMENDMENTS.
SECTION 2.1 AMENDMENT OF SECTION 2.1 TO ORIGINAL INDENTURE. Section
2.1 of the Original Indenture is hereby amended and restated in its entirety as
follows:
SECTION 2.1 THE NOTES.
(a) The Notes constitute the joint and several obligation of
the Obligors and shall be issuable as fully registered Notes. The
Notes will be dated the date of authentication and bear interest
payable quarterly on March 31, June 30, September 30, and December
31 in each year (commencing June 30, 1990) and will mature on March
31, 2000. Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.
(b) The Senior Secured Notes shall be designated the
Obligors' 11.6% Senior Secured Notes due March 31, 2000 and shall be
limited to $56,500,000 in aggregate principal amount. The Senior
Secured Notes will bear interest from the date of issue until
maturity at an initial rate of 11.6% per annum, subject to
adjustment as set forth therein, and will bear interest on overdue
principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the Overdue
Rate after
4
<PAGE>
maturity, whether by acceleration or otherwise, until paid, and will
be in substantially the form attached hereto as Exhibit A.
(c) The Subordinated Secured Notes shall be designated the
Obligors' 15.6% Subordinated Secured Notes due March 31, 2000 and
shall be limited to $3,000,000 in aggregate principal amount. The
Subordinated Secured Notes will bear interest from the date of issue
until maturity at an initial rate of 15.6% per annum, subject to
adjustment as set forth therein, and will bear interest on overdue
principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the Overdue
Rate after maturity, whether by acceleration or otherwise, until
paid, and will be in substantially the form attached hereto as
Exhibit B.
(d) The Trustee's certificate of authentication to be borne
by such Notes shall be substantially of the tenor and purport as set
forth in Exhibit A and Exhibit B hereto, and the Notes may have such
letters, numbers or other marks of identification or designation and
such legends or endorsements thereon as the Obligors may deem
appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or any rule
or regulation made pursuant thereto.
SECTION 2.2 AMENDMENT OF NOTES. Each of the Outstanding Senior
Secured Notes (the "EXISTING SENIOR NOTES") is hereby amended and restated to be
in the form set forth in Exhibit A attached hereto (the Existing Senior Notes,
as so amended and restated, are referred to herein, collectively, as the
"AMENDED SENIOR NOTES"), and each of the Outstanding Subordinated Secured Notes
(the "EXISTING SUBORDINATED NOTES") is hereby amended and restated to be in the
form set forth in Exhibit B attached hereto (the Existing Subordinated Notes, as
so amended and restated, are referred to herein, collectively, as the "AMENDED
SUBORDINATED NOTES" and, together with the Amended Senior Notes, collectively
referred to as the "AMENDED NOTES"). Each of the Existing Senior Notes and
Existing Subordinated Notes shall be deemed so amended and restated (without any
action required on the part of the Obligors or any holder of Notes) to be
consistent with the terms and provisions of the Amended Senior Notes and Amended
Subordinated Notes, respectively. If, after the date of this Supplement, the
Obligors shall issue any new Senior Secured Notes or Subordinated Secured Notes,
each of such Notes shall be in the form of the Amended Senior Notes or Amended
Subordinated Notes, as the case may be. Promptly upon request of the holder of
a Note, the Obligors shall issue to such holder an Amended Senior Note or
Amended Subordinated Note, as the case may be, in exchange and substitution for
the Existing Senior Note or Existing Subordinated Note held by such holder, and
otherwise in accordance with the provisions of Sections 2.6, 2.7 and 2.8 of the
Original Indenture. Each reference in the Indenture, any Pledge Agreement or
any Mortgage to a "Note" or the "Notes" shall be deemed to be a reference to,
respectively, an Amended Note and the Amended Notes. The Amended Notes shall be
and are entitled to all of the rights and benefits provided for the Notes in the
Indenture, the Pledge Agreements, the Mortgages and any other document or
agreement securing the Notes.
SECTION 2.3 AMENDMENT OF SECTION 3.17 OF THE ORIGINAL INDENTURE.
Section 3.17 of the Original Indenture is amended and restated to read in its
entirety as follows:
SECTION 3.17 FIXED CHARGE COVERAGE. The Company will, as
of the end of each fiscal quarter, keep and maintain the ratio of
(i) the sum of (A)
5
<PAGE>
Consolidated Cash Flow plus (B) Rentals to (ii) Fixed Charges for
the most recent four fiscal quarters, at not less than (u) 1.5 to 1,
in the case of any determination being made hereunder on or prior to
December 31, 1995, (v) 1.75 to 1, in the case of any determination
being made hereunder as of the end of the fiscal quarter ending
March 31, 1996, (w) 1.4 to 1, in the case of any determination being
made as of the end of any fiscal quarter ending subsequent to April
1, 1996 and on or before September 30, 1998, (x) 1.5 to 1, in the
case of any determination being made as of the end of any fiscal
quarter ending subsequent to October 1, 1998 and on or before June
30, 1999, (y) 1.75 to 1, in the case of any determination being made
as of the end of any fiscal quarter ending subsequent to July 1,
1999 and on or before December 31, 1999, and (z) 2 to 1, in the case
of any determination being made as of the end of any fiscal quarter
ending on or after March 31, 2000.
SECTION 2.4 AMENDMENT OF SECTION 3.18(A) OF THE ORIGINAL INDENTURE.
(a) Subsection (14) of Section 3.18(a) of the Original Indenture is
amended and restated to read in its entirety as follows:
(14) Guaranties of the Company and any Consolidated
Subsidiary (other than the Principal Subsidiaries) entered into
pursuant to the Credit Agreement; provided that any such Guaranties
entered into by Subsidiaries (other than the obligors under the
Credit Agreement) after the date of the Fifth Supplemental Indenture
shall be for the equal and pro rata benefit of the Lenders under the
Credit Agreement and the holders of the Notes.
(b) Subsection (15) of Section 3.18(a) of the Original Indenture is
amended and restated to read in its entirety as follows:
(15) Indebtedness (A) of RMCI owed from time to time to Paul
Ramsay Hospitals Pty. Limited, an Australian corporation, or to an
Affiliate thereof, and (B) owed to an Affiliate of the Company;
provided, no payments of interest or principal shall be required or
--------
permitted in respect of such Indebtedness while any of the Notes are
Outstanding, and copies of all instruments and any other agreements
evidencing or governing the terms of payment of such indebtedness
are provided to the holders of the Notes simultaneously with the
incurring of such Indebtedness;
SECTION 2.5 AMENDMENT OF SECTION 3.20 OF THE ORIGINAL INDENTURE.
Section 3.20 of the Original Indenture is amended by inserting the following
paragraph at the end of such section:
Any provisions in this Section 3.20 or in any other Section of this
Indenture to the contrary notwithstanding, (i) neither the Company nor any
Subsidiary shall, directly or indirectly, make any investments in, or loans,
advances or extensions of credit to, RMCI (other than the investment made in the
creation of Acquisition Corp. to effect the merger between RMCI and Acquisition
Corp. as described in the Plan of Merger), and (ii) RMCI may distribute cash or
other Property to the Company.
6
<PAGE>
SECTION 2.6 AMENDMENT OF SECTION 3.21(E) OF THE ORIGINAL INDENTURE.
Section 3.21(e) of the Original Indenture is amended and restated to read in its
entirety as follows:
(e) The Company will not, and will not permit any Consolidated
Subsidiary to (i) sell, lease or otherwise dispose of any asset mortgaged or
pledged pursuant to the Mortgages or the Pledge Agreements or otherwise
constituting security for the Notes, (ii) sell or otherwise dispose of any
receivables for consideration less than the stated value thereof, or (iii)
consolidate or merge with RMCI (excluding the merger between Acquisition Corp.
and RMCI pursuant to the Plan of Merger).
SECTION 2.7 AMENDMENT OF SECTION 3.25(A) OF THE ORIGINAL INDENTURE.
Section 3.25(a) of the Original Indenture is amended and restated to read in its
entirety as follows:
(a) investments, loans and advances by the Company and its
Consolidated Subsidiaries in and to Consolidated Subsidiaries (other than RMCI),
including any investments in a corporation engaged in the business of operating
psychiatric hospitals in the United States which, after giving effect to such
investment, will become a Consolidated Subsidiary; provided, at the time of such
--------
investment and after giving effect thereto and to the application of the
proceeds thereof, no Default or Event of Default shall have occurred and be
continuing, and provided further, no Principal Subsidiary shall make any
----------------
investment in any entity other than the Company or another Principal Subsidiary;
SECTION 2.8 AMENDMENT OF SECTION 3.28 OF THE ORIGINAL INDENTURE.
Section 3.28 of the Original Indenture is amended and restated to read in its
entirety as follows:
SECTION 3.28 AMENDMENT AND MODIFICATION OF CREDIT AGREEMENT AND
OTHER DOCUMENTS.
(a) The Company will not, and will not permit any Subsidiary to,
directly or indirectly, amend, modify or supplement any term, provision or
condition of (i) the Credit Agreement or any document ancillary or related
thereto, or (ii) any agreement, document, instrument or notes evidencing any
existing or future Subordinated Funded Indebtedness without the prior written
consent of the Required Holders; provided that the provisions of this Section
3.28(a)(ii) shall not prohibit the exchange of the Company's Subordinated
Promissory Note for shares of its Class C Convertible Preferred Stock permitted
by the provisions of Section 3.24(a)(v). Without limiting the foregoing, the
Company will not, and will not permit any Subsidiary to, directly or indirectly,
pledge any additional security for the performance of the obligations and
liabilities of the obligors under the Credit Agreement (exclusive of security
representing proceeds of existing security or Property subject to the effect of
so-called "after-acquired" Lien provisions of the Credit Agreement and related
documents existing as of June 4, 1997), except as required pursuant to Section
3.6(b) of the Fifth Supplemental Indenture or Sections 8(c)(i) or 8(d) of the
Fourth Amendment.
(b) The Company will not, and will not permit any Subsidiary to,
directly or indirectly, (i) agree to any amendment in the terms of the Bond
Documents which has the effect of (A) increasing the rate of interest payable
under the Bonds (excluding changes pursuant to provisions currently
7
<PAGE>
existing in the Bond Documents), (B) changing the schedules of payments under
the Bonds, or (C) requiring the payment of additional fees or other compensation
to any holders of Bonds, or (ii) voluntarily redeem or make any prepayments in
respect of the Bonds (other than regularly scheduled payments), except for (A)
redemption of the Houma Bonds on or after September 1, 1997, and (B) redemption
of the Greenbrier Bonds and the Gulf Coast Bonds on or after August 1, 1998;
provided, any reimbursement obligations of the Company or any Consolidated
- --------
Subsidiary arising from drawings upon Letters of Credit to effect a redemption
referred to in clauses (ii)(A) or (ii)(B) shall not be due and payable prior to
September 30, 1997 or September 30, 1998, respectively.
SECTION 2.9 AMENDMENT OF SECTION 5.2 OF THE ORIGINAL INDENTURE.
Section 5.2 of the Original Indenture shall be amended and restated in its
entirety as follows:
SECTION 5.2 MANDATORY PREPAYMENT.
(a) The Obligors agree that they will prepay the Senior Secured Notes
at 100% of the principal amount of the Senior Secured Notes to be prepaid on
March 31 and September 30 of each of the years and in the principal amount as
follows:
Prepayment Principal Prepayment Principal
Date Amount Date Amount
- ---- ------- ---- ------
March 31, 1993 $2,825,000 March 31, 1997 $3,531,250
September 30, 1993 2,825,000 September 30, 1997 3,531,250
March 31, 1994 2,825,000 March 31, 1998 3,531,250
September 30, 1994 2,825,000 September 30, 1998 3,531,250
March 31, 1995 3,531,250 March 31, 1999 3,937,340
September 30, 1995 3,531,250 September 30, 1999 3,937,340
March 31, 1996 3,531,250
September 30, 1996 3,531,250
(b) Subject to Section 10 hereof, the Obligors agree that they will prepay
the Subordinated Secured Notes at 100% of the principal amount of the
Subordinated Secured Notes to be prepaid on March 31 and September 30 of each of
the years and in the principal amounts as follows:
Prepayment Principal Prepayment Principal
Date Amount Date Amount
- ---- ------ ---- ------
March 31, 1994 $230,769.23 March 31, 1997 $230,769.23
September 30, 1994 230,769.23 September 30, 1997 230,769.23
March 31, 1995 230,769.23 March 31, 1998 230,769.23
September 30, 1995 230,769.23 September 30, 1998 230,769.23
March 31, 1996 230,769.23 March 31, 1999 230,769.23
September 30, 1996 230,769.23 September 30, 1999 230,769.23
8
<PAGE>
(c) The Obligors agree that on September 30,1998 they will make, in addition to
the prepayments required on such date pursuant to Section 5.2(a) and
Section 5.2(b), a prepayment in respect of the principal amount of the
Senior Secured Notes in the aggregate amount of $5,137,980.77, such
prepayment to be shared pro rata by the holders of the Senior Secured
Notes, which prepayment shall be accompanied by a premium on such principal
amount equal to the Yield-Maintenance Premium.
(d) The Company will give prompt written notice (the "TERM NOTE PAYMENT NOTICE")
to the Trustees and all holders of Senior Secured Notes upon any principal
payment made in respect of the Gulf Coast Term Note at a time when the
principal balance of the Gulf Coast Term Note is less than $2,800,000, or
which has the effect of reducing the principal balance of the Gulf Coast
Term Note to less than $2,800,000. The Term Note Payment Notice shall (i)
refer to this Section 5.2(d) and the rights of the holders of the Senior
Secured Notes to require a prepayment in respect of their Senior Secured
Notes on the terms and conditions provided for herein, (ii) contain an
offer by the Obligors to prepay a principal amount in respect of the Senior
Secured Notes in an amount which, together with all previous principal
prepayments, if any, made pursuant to this Section 5.2(d), is equal to
twice the amount by which the principal balance of the Gulf Coast Term Note
is less than $2,800,000, together with accrued interest thereon to the date
of prepayment and a premium equal to the Yield-Maintenance Premium and
(iii) set forth the date, which shall be not less than 15 nor more than 30
days following the date of the Term Note Payment Notice, on which the
Obligors will make such prepayment. Each holder of the Senior Secured
Notes shall have the right to accept such offer and require such prepayment
by written notice to the Company given within 15 days following receipt of
the Term Note Payment Notice. The Obligors shall, on the prepayment date
set forth in the Term Note Payment Notice, make a principal prepayment in
respect of each Senior Secured Note held by a holder who has accepted such
offer of prepayment in an amount equal to a pro rata portion of the amount
prescribed by clause (ii), based on the principal balance of such Note
relative to the aggregate principal balance of all Outstanding Senior
Secured Notes as of the date of such prepayment, together with the
applicable pro rata amount of the Yield-Maintenance Premium.
(e) Upon full and complete satisfaction of all obligations and liabilities of
the Company and other Obligors under the Credit Agreement (as evidenced by
a certificate from the Agent under the Credit Agreement to that effect),
the Obligors shall make a prepayment in respect of the principal amount of
the Notes, subject to Section 10 hereof, within five (5) Business Days
after the sale by the Company or any Subsidiary of any Property which,
together with any other Property sold by the Company or any Subsidiary on
or after the date such obligations and liabilities have been satisfied, has
an aggregate value of more than $500,000. Such prepayment shall be in an
amount equal to the proceeds of such sale, after deducting ordinary and
reasonable costs of sale (including taxes payable in respect of such sale),
unless satisfactory evidence is delivered to the Required Holders that such
proceeds are to be promptly reinvested in replacement Property.
9
<PAGE>
(f) Subject to Section 10 hereof, the Obligors agree that they will pay the
entire unpaid principal amount of the Notes at maturity on March 31, 2000.
Prepayment of less than all of the Notes pursuant to the provisions of
Section 5.3, or Section 5.4 shall not relieve the Obligors of their
obligation pursuant to this Section 5.2.
SECTION 2.10 AMENDMENT OF SECTION 5.4 OF THE ORIGINAL INDENTURE. The
definitions of "Called Principal", "Settlement Date" and "Yield-Maintenance
Premium" appearing in Section 5.4 of the Original Indenture are amended and
restated in their entirety respectively as follows:
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of such
Note that is to be prepaid pursuant to Sections 5.2(c), 5.2(d), 5.2(e),
5.3, 5.4, or 5.5 hereof (any partial prepayment pursuant to Sections
5.2(d), 5.2(e), 5.3, 5.4, or 5.5 hereof being applied in satisfaction of
required payments of principal in inverse order of their scheduled due
dates), or that is declared to be immediately due and payable pursuant to
Section 6.2 hereof, as the context requires.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Sections 5.2(c), 5.2(d), 5.2(e), 5.3, 5.4, or 5.5 hereof or is declared to be
immediately due and payable pursuant to Section 6.2 hereof, as the context
requires.
"YIELD-MAINTENANCE PREMIUM" shall mean, with respect to any Note, a premium
equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield Maintenance Premium
shall in no event be less than zero. Any provisions of this Section 5.4 to
the contrary notwithstanding, the Yield-Maintenance Premium, if any,
payable in connection with a prepayment pursuant to Section 5.2(c) of this
Indenture shall be calculated assuming (i) the Called Principal is
$5,137,980.77, (ii) the Settlement Date is September 30, 1998, (iii) the
Remaining Scheduled Payments consists of a payment on March 31, 1999, of
principal in the amount of $5,137,980.77, and interest in the amount of the
interest accrued on such principal amount from the Settlement Date through
and including March 31, 1999, (iv) the Remaining Average Life is one-half
of one year, and (v) the Discounted Value is calculated using a discount
factor equal to the Reinvestment Yield plus one-half of one percent (1/2%)
----
per annum.
SECTION 2.11 AMENDMENT OF SECTION 6.1 OF THE ORIGINAL INDENTURE.
(a) Section 6.1 of the Original Indenture is amended by amending and restating
Subsection 6.1(g) to read in its entirety as follows:
(g) the existence of an Event of Default under (and as defined in) the
Credit Agreement;
10
<PAGE>
(b) Section 6.1 of the Original Indenture is amended by deleting "or"
appearing at the end of subsection 6.1(o), and amending and restating Subsection
6.1(p) to read in its entirety as follows:
(p) without limiting the provisions of Subsection 6.1(g), if the Company or
any Consolidated Subsidiary defaults in any payment of principal of or
interest on any other obligation for money borrowed (or any obligation under
any Capitalized Lease, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing extensions
of credit) beyond any period of grace provided with respect thereto, or the
Company or any Consolidated Subsidiary fails to perform or observe any other
Agreement, term or condition contained in any agreement under which any such
obligation is created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such failure or
other event is to cause, or to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to cause, such
obligation to become due prior to any stated maturity, provided that the
aggregate amount of all obligations as to which such a payment default shall
occur and be continuing or such a failure or other event causing or
permitting acceleration shall occur and be continuing exceeds $1,000,000;
(c) Section 6.1 of the Original Indenture is amended by inserting the
following as Subsections 6.1(q) and 6.1(r) thereof:
(q) if the maturity of any Bond is accelerated for any reason, unless at the
time of acceleration, prepayment or redemption of such Bond so
accelerated would be permitted by Section 3.28(b) of this Indenture; or
(r) the existence of an Event of Default under, and as defined in, that
certain Guarantee dated as of June 4, 1997 by Paul J. Ramsay and Paul Ramsay
Holdings Pty. Ltd. in favor of the Trustees and the holders of the Notes.
SECTION 2.12 AMENDMENT OF EXHIBITS TO ORIGINAL INDENTURE. Exhibits A and B
to the Original Indenture are amended by substituting therefor Exhibits A and B,
respectively, attached to this Supplement.
SECTION 3. MISCELLANEOUS.
SECTION 3.1 APPLICABILITY OF THE ORIGINAL INDENTURE. The provisions of the
Original Indenture, 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 Section 8.2 of the
Indenture.
SECTION 3.2 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.
11
<PAGE>
SECTION 3.3 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 3.4 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 Trustees assume no responsibility for
the correctness of the same.
SECTION 3.5 CONSENT OF LENDERS TO SUPPLEMENT. The Company represents and
covenants that it has obtained the written consent of the Requisite Lenders
(as defined in the Credit Agreement) to its execution of this Supplement.
SECTION 3.6 FURNISHING OF DOCUMENTS. On or before July 15, 1997 or, in the
case of Liens to be granted to or for the equal and pro rata benefit of the
Lenders under the Credit Agreement and the holders of the Notes, such
earlier date as may be required under the Credit Agreement, the Company
will execute and deliver or furnish, or cause to be executed or delivered
or furnished, as the case may be, to the Trustees, the following:
(a) depositary account agreements with respect to each of the Obligors'
deposit accounts, for the equal and pro rata benefit of the holders of Notes,
duly executed by the depositary banks relating thereto;
(b) for the equal and pro rata benefit of the holders of the Notes and the
Lenders under the Credit Agreement, (i) mortgages and security
agreements granting Liens to the Trustees and the Agent under the
Credit Agreement, in and upon all currently unencumbered Property of
the Company, RMCI and all Subsidiaries of such Persons (excluding (A)
Desert Vista Hospital and the Property located thereat, (B) Property
of the Principal Subsidiaries, (C) Property of the obligors under the
Credit Agreement, and (D) the real Property and improvements thereon
commonly known as Three Rivers Hospital owned by Ramsay Louisiana,
Inc., but including any contract now existing or hereafter entered
into for the sale of the Three Rivers Hospital and the proceeds
thereof); such mortgages and security agreements shall contain
provisions requiring the release of such Liens from the Property
covered thereby upon payment to the Trustees and such Agent of the
proceeds of a sale to a third party of such Property approved by the
Required Holders and Requisite Lenders under the Credit Agreement; and
(ii) joint and several Guaranties of all Subsidiaries of the Company
other than the Obligors, the obligors under the Credit Agreement, HSA
Hill Crest Corporation, H.C. Corporation and H.C. Partnership. The
foregoing Liens and Guaranties shall be governed by the terms of the
Intercreditor Agreement dated as of December 4, 1996 by and among
Societe Generale, as Agent under the Credit Agreement and the
Trustees, as appropriately amended and pursuant to documentation
reasonably satisfactory to the Agent and the Trustees; provided, the
---------
Company shall not be in default of this Section 3.6(b) in the event
that the Agent and the Trustees do not agree on such amendments or
documentation;
12
<PAGE>
(c) title insurance policies insuring the Liens of the mortgages, if any,
described in Section 3.6(b) above as first priority Liens, subject to
no exceptions to title except as approved by the Required Holders;
(d) UCC searches in all appropriate jurisdictions, confirming the perfection
and first priority of the Liens of the security agreements described in
Section 3.6(b) above with respect to all Property covered by such security
agreements in which a security interest may be perfected by the filing of a
UCC statement; provided, the date by which the search in any jurisdiction
--------
shall be required to be delivered to the Trustees shall be extended, as
necessary, to take into account any delay in the filing office in such
jurisdiction in making filing information available and current;
(e) such other documents, instruments or other agreements (including but not
limited to stock certificates evidencing shares of stock in RMCI and
other Subsidiaries) as may be reasonably required by the Required
Holders to perfect the Liens granted by the mortgages and security
agreements described in Section 3.6(b) above; and
(f) such opinions of counsel to the Obligors as the Required Holders may
reasonably request in connection with the execution and delivery of
the documents required pursuant to this Section 3.6, concerning the
authorization, execution, delivery, effectiveness and enforceability
of such documents.
All documents, agreements and other information executed and delivered and/or
furnished pursuant to this Section 3.6 shall be in form and substance
satisfactory to the Required Holders. Within thirty (30) days after receipt of
an appropriate invoice or statement, the Obligors shall pay all reasonable costs
and expenses incurred or associated with the requirements of this Section 3.6,
including but not limited to the reasonable fees and disbursements of counsel to
the Trustees and of counsel to the holders of the Notes.
SECTION 3.7 EXECUTION AND DELIVERY OF MORTGAGE AMENDMENTS. Promptly upon
request of the Required Holders, the Obligors shall promptly execute and
deliver to the Trustees such amendments of any of the Mortgages as the
Required Holders deem reasonably necessary or desirable to reflect the
amendment and restatement of the Existing Senior Notes and the Existing
Subordinated Notes effected hereby.
SECTION 3.8 PAYMENT OF FEES AND EXPENSES OF NOTEHOLDERS AND TRUSTEES. Within
thirty (30) days after receipt of an appropriate invoice or statement, the
Obligors shall pay all reasonable costs and expenses incurred or associated
with the execution and delivery of this Supplement or the enforcement or
administration hereof, including but not limited to recording and filing
fees and charges, search fees, title insurance premiums and the reasonable
fees and disbursements of counsel to the Trustees and of counsel to the
holders of the Notes.
SECTION 3.9 PAYMENT OF ADMINISTRATIVE FEE. The Company has paid to the Trustee
for the ratable benefit of the holders of the Notes an administrative fee in the
aggregate amount of $92,045.
13
<PAGE>
SECTION 3.10 NO CONFLICTS, ETC. The Obligors warrant and represent to the
Trustees, for the benefit of the holders of the Notes, that they have the right
and power and are duly authorized and empowered to enter into, executes, deliver
and perform this Supplement and each of the documents contemplated to be
executed and delivered by them pursuant to Section 3.6 of this Supplement. This
Supplement has been duly authorized and approved by all necessary corporate
action of the Obligors, and is the legal, valid and binding obligations 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. The execution, delivery and performance of this Supplement and the
documents contemplated to be executed and delivered by the Obligors pursuant to
Section 3.6 of this Supplement will not conflict with, nor result in any breach
in any of the provisions of, or constitute a default under, or result in the
creation of any Lien (except Liens permitted by the Indenture) upon any Property
of the Obligors under, the provisions of any agreement, charter instrument,
bylaw, or other instrument to which any Obligor is a party or by which it may be
bound.
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 THE BANK OF NEW YORK. In evidence of its acceptance of
the trusts hereby created, has caused this Indenture to be executed on its
behalf by one of its Corporate Trust Officers and attested by one of its
authorized officers, and Thomas Zakrzewski in token of his acceptance of the
trusts hereby created, has hereunto set his hand, all as of the date first above
written.
RAMSAY HEALTH CARE, INC.
By _________________________
Its President
ATTEST:
_________________________
Secretary
14
<PAGE>
BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.
By_________________________________
Its President
ATTEST:
_________________________
Secretary
CUMBERLAND MENTAL HEALTH, INC.
By_________________________________
Its President
ATTEST:
_________________________
Secretary
EAST CAROLINA PSYCHIATRIC SERVICES
CORPORATION
By_________________________________
Its President
ATTEST:
_________________________
Secretary
15
<PAGE>
HAVENWYCK HOSPITAL, INC.
By_________________________________
Its President
ATTEST:
_________________________
Secretary
MESA PSYCHIATRIC HOSPITAL, INC.
By_________________________________
Its President
ATTEST:
_________________________
Secretary
PSYCHIATRIC INSTITUTE OF WEST
VIRGINIA, INC.
By_________________________________
Its President
ATTEST:
_________________________
Secretary
16
<PAGE>
THE BANK OF NEW YORK
as Corporate Trustee
By_________________________________
Name: REMO J. REALE
Title: ASSISTANT VICE PRESIDENT
ATTEST:
_________________________
Secretary
MARIE E. TRIMBOLI
Assistant Treasurer
___________________________________
Thomas Zakrzewski
As Individual Trustee
<PAGE>
EXHIBIT 10.18
EXECUTION COPY
FOURTH AMENDMENT TO CREDIT AGREEMENT,
FIRST AMENDMENT TO WAIVER, CONSENT TO MERGER
AND EXTENSION AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO WAIVER, CONSENT
TO MERGER AND EXTENSION AGREEMENT dated as of May 15, 1997 (this "Agreement") by
and 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 (collectively, the "Original
Guarantors"), H.C. PARTNERSHIP, a general partnership organized and existing
under the laws of Alabama, HSA HILL CREST CORPORATION, an Alabama corporation
and H.C. CORPORATION, an Alabama corporation, as Guarantors (collectively, the
"Guarantors" and with the Original Guarantors, the Company and the Borrowers,
the "Obligors"), 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 (in such capacity,
the "Agent") as provided in the Credit Agreement (as defined below).
Capitalized terms used and not defined herein have the meaning given to them in
the Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrowers, the Original Guarantors, the Lenders, the Agent, and
the Issuing Bank are parties to a Credit Agreement dated as of May 15, 1993, as
amended by a Consent and Amendment dated as of April 12, 1995, a Second
Amendment dated as of September 15, 1995, and a Third Amendment dated as of
August 15, 1996, (as amended, supplemented and modified from time to time, the
"Credit Agreement");
WHEREAS, the Issuing Bank issued six Letters of Credit pursuant to the terms
of the Credit Agreement to provide for the payment of the principal of and
interest on certain Bonds issued for the benefit of each of the Borrowers;
<PAGE>
WHEREAS, the Obligors (other than the Guarantors) entered into a Waiver to
Credit Agreement dated as of September 30, 1996, as amended by the Letter
Agreement dated November 12, 1996 (the "Waiver") with the Agent, the Issuing
Bank and the Lenders pursuant to which, among other things, the Agent, the
Issuing Bank and the Lenders agreed to waive the Obligors' compliance with
certain covenants in the Credit Agreement during the period June 30, 1996
through June 30, 1997 (the "Waiver Period");
WHEREAS, Letters of Credit which were issued on behalf of Greenbrier, Houma,
Carolina, and Gulf Coast (the "Existing Letters of Credit") remain outstanding,
each with an expiration date of August 15, 1997 (the "Expiration Date");
WHEREAS, the Houma Bonds and Carolina Bonds must be redeemed on June 1, 1997
unless the Letters of Credit supporting such Bonds are extended;
WHEREAS, the Company, RHCI Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of the Company and Ramsay Managed Care, Inc., a Delaware
corporation ("RMCI," which term shall include the surviving corporation of the
merger between RMCI and RHCI Acquisition Corp.) have entered into an Agreement
and Plan of Merger dated as of October 1, 1996 (the "Plan of Merger") pursuant
to which RMCI proposes to merge into RHCI Acquisition Corp. and thereby become a
wholly-owned subsidiary of the Company, upon terms more particularly set forth
in the Plan of Merger (the merger and other transactions contemplated by the
Plan of Merger are hereinafter referred to collectively as the "Merger
Transaction");
WHEREAS, the Obligors have requested the Agent, the Issuing Bank and the
Lenders to (i) extend the stated Expiration Date of the Existing Letters of
Credit from August 15, 1997 to September 30, 1998; (ii) permit them to convert
unpaid reimbursement obligations under the Credit Agreement to a Term Loan under
limited circumstances; (iii) extend the Waiver Period through September 30,
1998; (iv) defer until September 30, 1997 a reduction of the Maximum Credit
Availability required to be made by July 1, 1997; and (v) consent to the Merger
Transaction; and
WHEREAS, the Agent, the Issuing Bank and the Lenders are willing to extend the
Expiration Date of the Existing Letters of Credit, consent to the Merger
Transaction and grant certain of the Obligor's other requests on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the understandings herein
set forth and intending to be legally bound, the Obligors, the Lenders, the
Issuing Bank and the Agent hereby agree as follows:
-2-
<PAGE>
1. Extension of Letters of Credit and Obligors' Right to Convert Loans to
----------------------------------------------------------------------
Term Loans.
- ----------
(a) Subject to the conditions precedent set forth in Section 3, and the
other terms and conditions of this Agreement, (i) the Issuing Bank agrees to
extend the Expiration Date of the Existing Letters of Credit to September 3,
1997 (the "First Extension"), such extension to be effected through the issuance
by the Issuing Bank to the Greenbrier Trustee, the Houma Trustee, the Carolina
Trustee and the Gulf Coast Trustee, respectively, of an Amendment No. 3 to each
of the Existing Letters of Credit; and (ii) the Agent and the Lenders agree that
prior to the effectiveness of the Second Extension (as defined in Section 1(b))
and so long as no Default or Event of Default (other than the absence of the
Life Companies' consent to the execution, delivery and performance of this
Agreement) has occurred and is continuing, the Obligors may, on or before
September 3, 1997, request a conversion of any unpaid reimbursement obligations
under the Credit Agreement to a Term Loan pursuant to Section 2.03 of the Credit
Agreement, subject to the fulfillment of the conditions in Section 2.03 of the
Credit Agreement.
(b) Subject to the conditions precedent set forth in Section 4, and the
other terms and conditions of this Agreement, the Issuing Bank agrees to extend
the Expiration Date of the Existing Letters of Credit to September 30, 1998 (the
"Second Extension"), such extension to be effected through the issuance by the
Issuing Bank to the Greenbrier Trustee, the Houma Trustee, the Carolina Trustee
and the Gulf Coast Trustee, respectively, of an Amendment No. 4 to each of the
Existing Letters of Credit.
2. Extension Fee. On the date of execution and delivery of this Agreement,
-------------
the Obligors shall pay to the Agent in immediately available funds a
nonrefundable extension fee in the amount of $50,00. Such extension fee shall
be shared by the Lenders pro rata on the basis of their respective Percentages.
3. Conditions Precedent to Effectiveness of this Agreement and the First
---------------------------------------------------------------------
Extension. As conditions precedent to the effectiveness of this Agreement and
- ---------
the First Extension, the Agent shall have received the following:
(a) This Agreement duly executed by each of the Obligors and all of the
Lenders.
(b) Payment of the extension fee as provided in Section 2.
(c) Payment of all reasonable costs and expenses of the Agent and the
Issuing Bank incurred prior to the date of this Agreement in connection
with the administration of the Credit Documents, preservation of the rights
of the Agent and the
-3-
<PAGE>
Issuing Bank thereunder and the preparation, execution and delivery of this
Agreement, including, without limitation, the fees and expenses of Luskin, Stern
& Eisler LLP and Zolfo, Cooper LLC.
4. Conditions Precedent to the Second Extension, the Amendments to the Credit
--------------------------------------------------------------------------
Agreement and Waiver and the Lenders' Consent to the Merger Transaction. As
- -----------------------------------------------------------------------
conditions precedent to the Second Extension, the Amendments to the Credit
Agreement and Waiver as set forth in Section 5 and the Lender's Consent to the
Merger Transaction as set forth in Section 6, all of the following conditions
shall have been met on or before June 2, 1997:
(a) All of the conditions precedent set forth in Section 3 shall have
been satisfied to the satisfaction of the Agent.
(b) The representations and warranties of the Obligors contained in
this Agreement shall be true and correct on and as of the date of the Second
Extension.
(c) The Obligors shall deliver to the Agent a corporate chart showing
all of the Obligors and their Subsidiaries and a summary description of the
material assets of each of the Obligors, RMCI and all of their respective
Subsidiaries, which are not subject to a lien or security interest in favor of
the Agent or the Life Companies. Such description shall include the ownership
structure of each of the foregoing entities.
(d) At the time of the Second Extension, no Default or Event of Default
shall have occurred and be continuing.
(e) The Company and the Agent shall have received on or before June 2,
1997 each of the following, duly executed by the parties thereto:
(i) A copy of the consent of the Life Companies to the execution,
delivery and performance by the Obligors of this Agreement;
(ii) A copy of an extension of the Life Company Waiver, dated
September 30, 1996, among the Company, the Noteholder Subsidiaries and the Life
Companies;
(iii) A joint and several unconditional guaranty of Paul J. Ramsay
("Paul Ramsay"), an individual with an address at 156 Pacific Highway,
Greenwich, NSW 2065, Australia, and Paul Ramsay Holdings Pty. Ltd, a New South
Wales (Australia) corporation ("Holdings" and together with Paul Ramsay, the
-4-
<PAGE>
"Ramsay Guarantors") in form and substance reasonably satisfactory to the Agent
pursuant to which the Ramsay Guarantors agree to guarantee payment to the
Issuing Bank, the Agent and the Lenders of a maximum of $5,500,000 of the
obligations of the Obligors under the Credit Agreement and the other Credit
Documents (the "Guaranteed Amount"). The Guaranteed Amount shall be reduced by
the amount of any investments, payments, loans or advances made by either of the
Ramsay Guarantors or any of their affiliates to the Company, any of the other
Obligors or RMCI, in each case, which are used to make principal or other
payments to the Lenders, other than on account of the payments required to be
made to the Lenders during the period September 1, 1997 through December 31,
1997 pursuant to the terms of this Agreement, the Waiver and the Credit
Agreement, which the Obligors are unable to make out of their cash flow (each
such investment, payment, loan or advance is hereinafter referred to as a
"Guarantor Payment"). The Agent and the Lenders consent to any Guarantor
Payment, provided that the repayment of such Guarantor Payment is (A)
--------
subordinated to the payment of the Credit Agreement Obligations (as defined in
Section 8(c)(i)) and (B) not made before the full and indefeasible payment of
the Credit Agreement Obligations; and
(iv) The Agent shall have received on or before June 2, 1997 signed
copies of the most recent, but in no event dated earlier than June 30, 1996, (A)
balance sheet and statement of income or Australian tax return of Paul Ramsay,
each in form and substance reasonably satisfactory to the Agent and (B) balance
sheet, statement of income, and other regularly prepared financial statements
including stockholders' equity and cash flows of Holdings or the equivalent if
regularly prepared, each in form and substance reasonably satisfactory to the
Agent. Each of the foregoing shall be treated by the Lenders as confidential in
accordance with the terms of the confidentiality letters signed by each Lender
dated October 9, 1996.
(f) The Company and each other Obligor shall deliver to the Agent the
originals of all notes payable to the Company or any Obligor, including, without
limitation, any notes from any affiliate or subsidiary of the Company or other
Obligor payable to the Company or such other Obligor.
(g) The Company shall deliver to the Agent an opinion of Haythe &
Curley, counsel to the Obligors, in form and substance satisfactory to the
Agent, to the effect that: (i) the execution and delivery by the Obligors of
this Agreement has been duly authorized by all corporate or partnership action,
as the case may be, (ii) this Agreement 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
-5-
<PAGE>
rights of creditors generally and by the application of general principles of
equity, and (iii) if the Life Companies consent to this Agreement on or before
June 2, 1997, the execution and delivery of this Agreement does not conflict
with or constitute a default under the Life Company Indenture.
5. Amendments to the Credit Agreement and Waiver. Subject to the conditions
---------------------------------------------
in Section 4, the other terms and conditions of this Agreement, and subject to
the Obligors entering into an agreement on or before June 2, 1997, in form and
substance reasonably satisfactory to the Agent, which Agreement shall modify the
financial covenants set forth in Section 7.16 of the Credit Agreement for all
periods subsequent to June 30, 1997, the Credit Agreement and the Waiver are
hereby amended as follows:
(a) The "Waiver Period" shall be extended to September 30, 1998.
(b) Section 3(b) of the Waiver is amended to insert the following
prior to the period at the end of the sentence: "provided, however, the
-------- -------
Obligors may request a conversation of any unpaid reimbursement obligations
under the Credit Agreement to a Term Loan due no earlier than September 30, 1998
with respect to a "Tender Draft" on a Letter of Credit based on a drawing under
a Letter of Credit in respect to the payment of the purchase price of Bonds
tendered for purchase and not successfully remarketed pursuant to the
Indenture."
(c) Section 7.34 of the Credit Agreement, as amended and restated in
the Third Amendment to Credit Agreement dated as of August 15, 1996, is hereby
amended to delete therefrom "and to not more than $15,000,000 by July 1, 1997,".
(d) Section 8.01 of the Credit Agreement is amended to insert the
following new subsection:
"(o) Any of the conditions set forth in Section 4 of the Fourth
Amendment to Credit Agreement, First Amendment to Waiver, Consent to Merger and
Extension Agreement dated as of May 15, 1997 are not satisfied on or before June
2, 1997."
6. Consent to Merger Transaction. Subject to the conditions precedent set
-----------------------------
forth in Section 4, and the other terms and conditions of this Agreement, the
Agent and the Lenders consent to the Merger Transaction, provided, however, that
-------- -------
on or before the effectiveness of the Merger Transaction and pursuant to
documentation in form and substance reasonably satisfactory to the Agent:
-6-
<PAGE>
(a) the Company shall agree that it will maintain RMCI as a separate
subsidiary and shall not combine its assets and liabilities, except for the
consolidated financial reporting purposes of the Company, with the assets and
liabilities of any of the Obligors and shall not make any loans, payments,
advance, equity contributions or investments in RMCI provided that RMCI may
distribute cash, property or other assets to any of the Obligors provided that
such distribution does not constitute a Default or an Event of Default; and
(b) RMCI shall agree to (i) be bound by each of the covenants (other
than the financial covenants) set forth in the Credit Agreement and such other
covenants as the Obligors, the Agent and the Lenders shall mutually agree upon;
(ii) make the representations and warranties contained in each of the Credit
Documents as if RMCI was a party thereto; and (iii) covenant that all existing
commitments to RMCI for equity or debt financing, including, without limitation,
commitments from affiliates, shall not be terminated, amended or otherwise
modified other than an amendment or modification which provides more favorable
terms to RMCI.
7. Representations and Warranties. Each of the Obligors hereby represents and
------------------------------
warrants as of the date hereof that:
(a) The representations and warranties made by the Obligors in the
Credit Agreement and all other Credit Documents, including, without limitation,
the Waiver, are true and correct on and as of the date of execution and delivery
by the Obligors of this Agreement, except to the extent that such
representations and warranties expressly relate to an earlier date. After giving
effect to this Agreement, no Default or Event of Default (other than any default
under the Life Company Indenture arising out of the Company's execution of this
Agreement) has occurred and is continuing on the date of execution and delivery
by the Obligors of this Agreement.
(b) This Agreement 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 and RMCI have obtained all consents and approvals
necessary to their execution and delivery of this Agreement and the Merger
Transaction other than the consent of the Life Companies.
-7-
<PAGE>
(d) The Maximum Credit Availability is $16,443,000. The Obligors have
no setoff, counterclaim, claim or defense against the Agent, the Issuing Bank or
the Lenders with respect to the Obligors' obligations under the Credit Agreement
and the other Credit Documents.
(e) The Obligors are in compliance with all of the terms and conditions
in the Credit Agreement, the Waiver and the other Credit Documents (other than
any terms and conditions requiring compliance with the Life Company Indenture).
(f) Since December 31, 1996, there has been no material adverse change
in the properties, business operations, assets, liabilities, conditions
(financial or otherwise) or prospects of any of the Obligors (or the Obligors
taken as a whole).
(g) All of the assets of the Obligors and each of their subsidiaries
are subject to a valid and enforceable lien or security interest in favor of
either the Lenders or the Life Companies except the assets listed on Schedule A
(the "Unencumbered Assets").
8. Obligors' Agreements. In consideration of the Lenders' consent to the
--------------------
amendments to the Credit Agreement and Waiver, the Lenders' consent to the
Merger Transaction and extension of the Expiration Date of the Existing Letters
of Credit, the Obligors agree as follows:
(a) They shall comply with all of the terms and conditions of this
Agreement, the Waiver and the other Credit Documents (as modified by the
Waiver).
(b) They shall jointly and severally pay within thirty (30) days after
receipt of appropriate invoices therefor (except for payments made under Section
3(c) which are due prior to the effectiveness of this Agreement) all reasonable
costs and expenses of the Agent and the Issuing Bank incurred in connection with
this Agreement, the Waiver, the Credit Agreement or any other Credit Document,
including, without limitation, the reasonable fees and expenses of counsel and
financial consultants for the Agent and the Issuing Bank with respect thereto.
(c) Within sixty (60) days of the date of execution of this Agreement:
(i) To secure all of the obligations of the Obligors under the Credit
Agreement and the other Credit Documents (the "Credit Agreement Obligations")
and the obligations under the Life Company Indenture to the Life Companies the
Obligors shall grant or cause to be granted a first priority security interest
and lien to (x) the Agent for the benefit of the Lenders and (y) the Life
Companies in the unencumbered Assets (other than the land and
-8-
<PAGE>
buildings of Three Rivers Hospital owned by Ramsay Louisiana, Inc. and the
personal property located at Mission Vista Hospital and Desert Vista Hospital
which is subject to lien subordination provisions pursuant to sale/leaseback
documentation), and in any contract of sale of the Three Rivers Hospital and all
proceeds thereof and shall cause each of the Obligors' subsidiaries which is not
currently a guarantor to execute a guarantee of the Credit Agreement Obligations
and a guarantee of the obligations of the Company under the Life Company
Indenture. The security interests, liens and guarantees shall be granted to the
Agent, for the benefit of the Lenders, and to the Life Companies in accordance
with the terms of the Intercreditor Agreement dated as of December 4, 1996 (the
"Intercreditor Agreement") and pursuant to documentation reasonably satisfactory
to the Agent and the Life Companies (provided that the Company shall not be in
default of this Section 8(c) (i) in the event that the Agent and the Life
Companies do not agree on such documentation). To effectuate the purposes of
this Section, the Obligors shall (i) obtain or shall have obtained all necessary
consents and approvals and (ii) duly execute Uniform Commercial Code financing
statements (Form UCC-1), acceptable for filing in all jurisdictions that the
Agent deems necessary or desirable to perfect the security interests granted to
it hereunder.
(ii) Each Obligor shall duly execute and deliver a depository
agreement, in form and substance reasonably satisfactory to the Agent, among
such Obligor, the Agent and such Obligor's existing depository institution or
such other depository institution reasonably satisfactory to the Agent (each, a
"Depository Institution"), pursuant to which such Obligor shall agree, among
other things, to deposit all of its cash flow into accounts maintained at the
Depository Institutions.
(iii) The Obligors shall provide a complete and accurate list of all
patents, registered trademarks, registered service marks and registered
copyrights, and all applications therefor and material licenses thereof, of each
Obligor, showing with regard to the registrations and applications the
jurisdiction in which registered or applied for, the registration or application
number, the date of registration (if any) and any expiration or application
date.
(iv) The Obligors shall provide a complete and accurate list of each
Obligor's liability in excess of $100,000 for any refund, discount or adjustment
claimed by any "third party purchaser" (as such term is used in Section 6.05 of
the Credit Agreement), including, without limitation, claims made pursuant to
Medicare, Medicaid, CHAMPUS and Blue Cross programs.
(d) Within thirty (30 days of the date of the consummation of the
Merger Transaction, to secure all of the Credit Agreement Obligations and the
obligations under the Life
-9-
<PAGE>
Company Indenture to the Life Companies, the Company or RMCI, as appropriate,
shall grant a first priority security interest and lien to (x) the Agent for the
benefit of the Lenders, and (y) the Life Companies in all of the assets of RMCI,
including all of its real and personal property and all of the issued and
outstanding shares of capital stock of RMCI and RMCI and each of RMCI's
subsidiaries which is not currently a guarantor shall execute a guarantee of the
Credit Agreement Obligations and a guarantee of the obligations of the Company
under the Life Company Indenture. The security interests, liens and guarantees
shall be granted to the Agent, for the benefit of the Lenders, and to the Life
Companies in accordance with the Intercreditor Agreement and pursuant to
documentation reasonably satisfactory to the Agent and the Life Companies
(provided that the Company shall not be in default of this Section 8(d) in the
event that the Agent and the Life Companies do not agree on such documentation).
(e) So long as any credit remains available to the respective Trustee
under each Existing Letter of Credit, the Obligors shall pay to the Agent for
the account of the Lenders an amount equal to one percent (1%) per annum on the
Letter of Credit Amount payable one quarter of one percent (.25%) quarterly
commencing November 15, 1997 and thereafter on the quarterly payment dates
specified in Section 2.07(b) of the Credit Agreement (which fees shall be in
addition to and not in substitution for the Commitment Fees required to be paid
pursuant to Section 2.07(b) of the Credit Agreement and Section 3(e) of the
Waiver.
(f) Houma shall, on or before August 1, 1997, deliver or cause to be
delivered to Houma Trustee a notice of optional redemption in accordance with
the terms of the Houma Bonds. The Houma Bonds shall be redeemed, in whole, on
September 1, 1997 and immediately following such redemption with the proceeds of
a Letter of Credit draw the Letter of Credit issued on behalf of Houma shall be
terminated. Notwithstanding the requirements of Section 2.02(b)(4) or 2.03 of
the Credit Agreement, Houma shall execute a term note in form and substance
reasonably satisfactory to the Agent (the "Houma Term Note") on the same
Business Day as the termination of the Letter of Credit, in favor of the Issuing
Bank in the aggregate amount equal to the amount drawn on such Letter of Credit.
Interest shall accrue on the Houma Term Note at a rate no greater than the pre-
tax interest rate of fully taxable debt that would provide the same after tax
yield to the Lenders as the current tax advantaged interest rate on the Houma
Bonds plus all related fees and costs of credit support. The aggregate
outstanding amount of the Houma Term Note together with all interest accrued
thereon shall be payable on or before September 30, 1997.
(g) The Obligors shall cause the Maximum Credit Availability to be
reduced to $6,754,000 by September 30, 1998.
-10-
<PAGE>
9. Reference to and Effect on the Credit Documents.
-----------------------------------------------
(a) The execution, delivery and effectiveness of this Agreement shall
not, except as expressly provided herein, operate as an amendment to or a waiver
of any right, power or remedy of the Agent, the Issuing Bank or the Lenders
under any of the Credit Documents, or constitute an amendment to or a waiver of
any provision of any of the Credit Documents including, without limitation, any
provision of the Credit Agreement or the Waiver. Except as specifically amended
or waived hereby, all of the terms and provisions of the Credit Documents,
including, without limitation, the Credit Agreement and the Waiver, shall remain
in full force and effect and are hereby ratified and confirmed. Upon the
effectiveness of this Agreement, each reference in the Credit Documents to the
Credit Agreement or the Waiver shall mean the Credit Agreement or the Waiver, as
the case may be, as amended or waived hereby.
(b) This Agreement shall be deemed to be a Credit Document for all
purposes.
(c) The failure of any Obligor to perform or comply with any of the
terms and conditions contained in this Agreement shall constitute an Event of
Default under the Credit Agreement.
10. Complete Agreement. This Agreement is a complete memorandum of the
------------------
agreement of the Obligors, the Agent, the Issuing Bank and the Lenders and
supersedes all prior discussions and drafts relating to the subject matter of
this Agreement.
11. Counterparts. This Agreement may be executed in one or more counterparts
------------
each of which shall constitute an original Agreement and all of which together
shall constitute one and the same Agreement. Telecopied counterparts of the
signature pages thereof shall be deemed effective as of the Agent's receipt
thereof.
12. Governing Law. This Agreement 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.
-11-
<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.
RAMSAY HEALTH CARE, INC.
By_________________________________
President
GREENBRIER HOSPITAL, INC.
By_________________________________
President
HOUMA PSYCHIATRIC HOSPITAL, INC.
By_________________________________
President
HSA OF OKLAHOMA, INC.
By_________________________________
President
CAROLINA TREATMENT CENTER, INC.
By_________________________________
President
GULF COAST TREATMENT CENTER, INC.
By_________________________________
President
-12-
<PAGE>
ATLANTIC TREATMENT CENTER, INC.
By_________________________________
President
GREAT PLAINS HOSPITAL, INC.
By_________________________________
President
THE HAVEN HOSPITAL, INC.
By_________________________________
President
H.C. CORPORATION
By_________________________________
President
HSA HILL CREST CORPORATION
By_________________________________
President
H.C. PARTNERSHIP
By_________________________________
HSA Hill Crest Corporation
as general partner of
H.C. Partnership
-13-
<PAGE>
SOCIETE GENERALE, NEW YORK BRANCH,
as Lender, Issuing Bank and Agent
By_________________________________
Title______________________________
FIRST UNION BANK OF NORTH CAROLINA, as Lender
By_________________________________
Title______________________________
HIBERNIA NATIONAL BANK, as Lender
By_________________________________
Title______________________________
-14-
<PAGE>
Schedule A
----------
1. Ramsay's capital stock in each of the following entities:
Flagstaff Psychiatric Hospital, Inc.
Health Group of Las Cruces, Inc.
HSA Lynn Haven, Inc.
HSA Medical Offices of Mesa, Inc.
Integrated Behavioral Services, Inc.
Manhattan Psychiatric Hospital, Inc.
Ramsay Chicago, Inc.
Ramsay Nursing Home Services, Inc.
Ramsay Research and Education Institute, Inc.
RHCI Concord, Inc.
Transitional Care Ventures (Florida), Inc.
Bethany Psychiatric Hospital, Inc.
PsychOptions, Inc.
Ramsay Arizona Health Management Services, Inc.
Ramsay Louisiana, Inc.
Ramsay Management Services of West Virginia, Inc.
Ramsay New Orleans, Inc.
Ramsay Nevada, Inc.
Ramsay Psychiatric Services, Inc.
International Health Care, Inc.
Transitional Care Ventures, Inc.
RHCI San Antonio, Inc.
Transitional Care Ventures (Arizona), Inc.
Transitional Care Ventures (North Texas), Inc.
Transitional Care Ventures, (Texas) Inc.
Transitional Care Ventures, (South Carolina) Inc.
2. All real property or pewrsonal property including accounts, contract rights
and equipment of the entities listed in (1) above.
<PAGE>
EXHIBIT 10.19
FIFTH AMENDMENT TO CREDIT AGREEMENT,
AMENDMENT TO FOURTH AMENDMENT
AND AMENDMENT TO WAIVER
This FIFTH AMENDMENT TO CREDIT AGREEMENT, AMENDMENT TO FOURTH AMENDMENT AND
AMENDMENT TO WAIVER dated as of June 4, 1997 (this "Agreement") by and 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 (collectively, the "Original Guarantors"), H.C. PARTNERSHIP, a
general partnership organized and existing under the laws of Alabama, HSA HILL
CREST CORPORATION, an Alabama corporation and H.C. CORPORATION, an Alabama
corporation, as Guarantors (collectively, the "Guarantors" and with the Original
Guarantors, the Company and the Borrowers, the "Obligors"), RHCI ACQUISITION
CORP., a Delaware corporation ("Acquisition"), 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 Letter of Credit
described in the Credit Agreement (in such capacity, the "Issuing Bank") and as
agent for the Lenders (in such capacity, the "Agent") as provided in the Credit
Agreement (as defined below). Capitalized terms used and not defined herein
have the meaning given to them in the Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrowers, the Original Guarantors, the Lenders, the Agent, and
the Issuing Bank are parties to a Credit Agreement dated as of May 15, 1993, as
amended by a Consent and Amendment dated as of April 12, 1995, a Second
Amendment dated as of September 15, 1995, a Third Amendment dated as of August
15, 1996, and a Fourth Amendment to Credit Agreement, First Amendment to Waiver,
Consent to Merger and Extension Agreement dated as of May 15, 1997 (the "Fourth
Amendment") (as amended, supplemented and modified from time to time, the
"Credit Agreement");
WHEREAS, the Issuing Bank issued six Letters of Credit pursuant to the terms of
the Credit Agreement to provide for the
<PAGE>
payment of the principal of and interest on certain Bonds issued for the benefit
of each of the Borrowers;
WHEREAS, the Obligors (other than the Guarantors) entered into a Waiver to
Credit Agreement dated as of September 30, 1996, as amended by the Letter
Agreement dated November 12, 1996 (the "Waiver") with the Agent, the Issuing
Bank and the Lenders pursuant to which, among other things, the Agent, the
Issuing Bank and the Lenders agreed to waive the Obligors' compliance with
certain covenants in the Credit Agreement during the period June 30, 1996
through June 30, 1997 (the "Waiver Period");
WHEREAS, pursuant to the terms of the Fourth Amendment, the Issuing Bank, the
Agent and the Lenders agreed, among other things, (i) to amend certain
provisions of the Credit Agreement and the Waiver subject to the satisfaction of
certain conditions stated in the Fourth Amendment, including the Obligors
entering into an agreement on or before June 4, 1997 modifying the financial
covenants set forth in Section 7.16 of the Credit Agreement for all periods
subsequent to June 30, 1997 and (ii) to consent to the proposed merger between
Acquisition and Ramsay Managed Care, Inc., a Delaware corporation ("RMCI," which
term shall include RMCI's Subsidiaries and the surviving corporation of the
merger between RMCI and Acquisition and all of such surviving corporation's
Subsidiaries) (the merger and other transactions contemplated by the Plan of
Merger dated as of October 1, 1997 are hereinafter referred to collectively as
the "Merger Transaction"); and
WHEREAS, the Obligors and the Agent, for the benefit of the Lenders, agreed to
extend the June 2, 1997 date for satisfaction of certain conditions stated in
the Fourth Amendment to June 4, 1997 pursuant to a letter agreement dated May
30, 1997.
NOW THEREFORE, in consideration of the premises and the understandings herein
set forth, intending to be legally bound, and in order to fulfill certain of the
conditions to the effectiveness of (i) the amendments to the Credit Agreement
and the Waiver, and (ii) the Lenders', the Issuing Bank's and the Agent's
consent to the Merger Transaction, the Obligors, Acquisition, the Lenders, the
Issuing Bank and the Agent hereby agree as follows:
1. Amendment to Fourth Amendment. Subject to Section 7 below, the Fourth
-----------------------------
Amendment is hereby amended as follows:
(a) Section 5 is deleted in its entirety.
(b) Section 8(d) is amended to delete the language ", including all of its
real and personal property and all of the
-2-
<PAGE>
issued and outstanding shares of capital stock of RMCI" and substituting
therefore ", and all of RMCI's Subsidiaries, including all of their respective
real and personal property and all of their respective issued and outstanding
shares of capital stock owned by RMCI or RMCI's Subsidiaries"; and
(c) Section 8(e) is amended and restated in full as follows:
(e) So long as any credit remains available to the respective Trustee
under each Existing Letter of Credit, the Obligors shall pay to the Agent for
the account of the Lenders an amount equal to .25% per annum of the Letter of
Credit Amount for the quarter ending November 15, 1997; an amount equal to
.50% per annum of the Letter of Credit Amount for the quarter ending February
15, 1998; an amount equal to .75% per annum of the Letter of Credit Amount for
the quarter ending May 15, 1998; and an amount equal to 1.00% per annum of the
Letter of Credit Amount for the quarter ending August 15, 1998 and for every
quarter ending thereafter on the quarterly payment dates specified in Section
2.07(b) of the Credit Agreement (which fees shall be in addition to and not in
substitution for the Commitment Fees required to be paid pursuant to Section
2.07(b) of the Credit Agreement and Section 3(e) of the Waiver) .
2. Amendments to Credit Agreement. Subject to the conditions in Section 7
------------------------------
below, the conditions in Section 4 of the Fourth Amendment and the other terms
and conditions of the Fourth Amendment and this Agreement, the Credit Agreement
is hereby amended as follows:
(a) Section 7.13 of the Credit Agreement is hereby amended to add the
following new subsections (e) and (f):
(e) Debt to Paul Ramsay Hospitals Pty. Limited (or to any Affiliate
thereof) outstanding from time to time from Ramsay Managed Care, Inc., a
Delaware corporation ("RMCI"), as listed on Schedule 1 to the Fifth Amendment
to Credit Agreement, Amendment to Fourth Amendment and Amendment to Waiver
dated as of June 4, 1997 (the "Fifth Amendment"), provided that the repayment
--------
of such Debt is (i) subordinated to the payment of the Obligors'
obligations under this Agreement and any other Credit Document to which an
Obligor is a party and (ii) not made before the full and indefeasible payment
of the obligations under this Agreement and any other Credit Document to which
an Obligor is a party and provided further that copies of all instruments and
--------
any other agreements evidencing or
-3-
<PAGE>
covering the terms of such Debt are provided to the Agent simultaneously with
the incurrence of such Debt;
(f) Debt to any Affiliate of an Obligor to the extent such Affiliate made
a loan to the Company, any of the other Obligors or RMCI or any of its
Subsidiaries, the proceeds of which were used to make a payment o (x)
the Agent, the Issuing Bank or the Lenders or (y) the Life Companies,
provided that the repayment of such Debt is (i) subordinated to the
--------
payment of the Obligors' obligations under this Agreement and any
other Credit Document to which an Obligor is a party and (ii) not made
before the full and indefeasible payment of the obligations under this
Agreement and any other Credit Document to which an Obligor is a
party.
(b) Section 7.16 of the Credit Agreement is hereby amended and restated in
full as follows:
(a) Consolidated Fixed Charge 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 Fixed Charge Coverage Ratio of at
least the following amounts from and after the date indicated:
From and after Fixed Charge Coverage Ratio
-------------- ---------------------------
April 1, 1996 1.40 to 1
July 1, 1999 1.75 to 1
January 1, 2000 2.00 to 1
(b) Consolidated Current 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 at all times a
Current Ratio of at least .90 to 1, without giving effect to each of
the accelerated prepayments due to (i) the Agent, for the benefit of
the Issuing Bank and the Lenders, pursuant to the Section 8(f) of the
Fourth Amendment to Credit Agreement, First Amendment to Waiver,
Consent to Merger and Extension Agreement dated as of May 15, 1997 (as
amended, supplemented or otherwise modified, the "Fourth Amendment")
and Section 6(d) of the Fifth Amendment and (ii) the Life Companies
pursuant to Sections 5.2(c) or 5.2(d) of the Life Company Indenture,
as amended by the Fifth Supplemental Trust Indenture dated as of June 1,
-4-
<PAGE>
1997 (the Fifth Supplemental Trust Indenture")(each such prepayment
as "Accelerated Payment" and collectively, the "Accelerated Payments").
(c) Consolidated Leverage 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 at all times a
Leverage Ratio of not more than 1.50 to 1.
(d) Consolidated Tangible Net Worth. The Obligors will maintain, and the
-------------------------------
Company will cause the other Consolidated Companies to maintain, at
all times a Consolidated Tangible Net Worth of at least $45,000,000.
(e) Short-Term Debt. The Obligors will not permit, and the Company will
---------------
cause the other Consolidated Companies not to permit, Short-Term Debt
of the Consolidated Companies on a consolidated basis, excluding the
Accelerated Payments and the Term Loans to be executed in connection
with Section 8(f) of the Fourth Amendment and Section 6(d) of the
Fifth Amendment, to exceed at any time an amount equal to $2,000,000;
provided, however, solely for purposes of calculating the financial
-------- -------
covenants in this Section 7.16 and Section 7.22, neither Ramsay
Managed Care, Inc. nor any of its Subsidiaries existing from time to
time shall be considered to be a Consolidated Company or part of the
consolidated group.
(c) 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 $12,883,000 by September 30, 1997, and to not more than
$6,754,000 by September 30, 1998, 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.
(d) Section 8.01 of the Credit Agreement is amended to insert the following
new subsections:
(o) Subsequent to the consummation of the Merger Transaction (as defined
in the Fifth Amendment), failure by RMCI to perform or comply with any
of the
-5-
<PAGE>
terms or conditions in the Sections of this Agreement enumerated in Section
8.01(c) or to perform or comply with any of the other terms or conditions
contained in this Agreement and continuance of such failure for 30 days after
the earlier of (i) written notice from the Agent to the Company or (ii) RMCI
has actual knowledge that such failure has occurred (or for such longer period
to which the Agent in its sole discretion may agree in the case of a failure
not curable by the exercise of due diligence within such 30-day period,
provided that RMCI shall have commenced to cure such failure within such 30-
day period and shall complete such cure as quickly as reasonably possible with
the exercise of due diligence); or
(p) Failure by any of the Obligors to perform or comply with any of the
terms or conditions in the Fourth Amendment to Credit Agreement, First
Amendment to Waiver, Consent to Merger and Extension Agreement dated
as of May 15, 1997 or the Fifth Amendment to Credit Agreement,
Amendment to Fourth Amendment and Amendment to Waiver dated as of June
4, 1997; or
(q) The occurrence of an Event of Default, which has not been cured or
waived in writing by the Agent, as defined in the Guarantee of Paul J.
Ramsay and Paul Ramsay Holdings Pty. Ltd, dated as of June 4, 1997; or
(r) Notwithstanding anything herein to the contrary, the acceleration or
prepayment of all or any part of the obligations under the Life
Company Senior Notes or the Life Company Subordinated Notes, other
than an Accelerated Payment or other mandatory prepayment under
Section 5.2(a) and (b) or a payment under Section 5.3 of the Life
Company Indenture as amended by the Fifth Supplemental Trust
Indenture.
3. Amendment to Waiver. Subject to the conditions in Section 7 below,
-------------------
Section 4 of the Fourth Amendment and the other terms and conditions of the
Fourth Amendment and this Agreement, Section 3(b) of the Waiver is amended to
insert the following prior to the period at the of the sentence:
provided, however, the Obligors may request a conversion of any unpaid
-------- -------
reimbursement obligations under the Credit Agreement to a Term Loan
due no earlier than September 30, 1998 with respect to a "Tender
Draft" on a Letter of Credit based on a drawing under a Letter of
Credit in respect of the payment of the purchase price of Bonds
tendered for purchase and not successfully remarketed pursuant to the
Indenture.
-6-
<PAGE>
4. Consent to Merger Transaction. To induce the Issuing Bank, the Agent, and
-----------------------------
the Lenders to consent to the Merger Transaction and in fulfillment of the
conditions precedent to the effectiveness of the consent of the Issuing Bank,
the Agent and the Lenders to the Merger Transaction set forth in Section 6 of
the Fourth Amendment, the Obligors and Acquisition hereby agree as follows:
(a) The Obligors hereby covenant and agree that subsequent to the
consummation of the Merger Transaction, (i) RMCI will be maintained as a
separate subsidiary and its assets and liabilities shall not be combined with
any of the Obligors' assets and liabilities, except for the consolidated
financial reporting purposes of the Company, and (ii) they shall not make any
loans, payments, advances, equity contributions or investments in RMCI provided
that, notwithstanding anything to the contrary in Article 7 of the Credit
Agreement, RMCI may distribute cash, property or other assets to the Company,
provided that such distribution does not constitute a Default or an Event of
Default and provided further that any such cash, property or other assets shall
be subject to security interests and liens in favor of the Agent, for the
ratable benefit of the Lenders, and the Life Companies in accordance with the
Ratio (as such term is defined in the Intercreditor Agreement dated as of
December 4, 1996 among the Trustees the Life Companies, the Agent, the Issuing
Bank and the Lenders (the "Intercreditor Agreement"));
(b) Acquisition hereby covenants and agrees that so long as any amount is
available under any of the Letters of Credit, any of the Letters of Credit has
not been terminated by its terms and surrendered to the Issuing Bank or any
amount is owing to the Agent, the Issuing Bank or any Lender under the Credit
Agreement or any other Credit Document, except to the extent the Agent shall
otherwise consent in writing, (i) it shall perform and comply with each of the
covenants set forth in Article VII of the Credit Agreement as if such covenants
expressly applied to Acquisition; and (ii) all existing commitments to RMCI for
equity or debt financing listed on Schedule 1, shall not be terminated, amended
or otherwise modified other than an amendment or modification which provides
more favorable terms to RMCI; and
(c) Prior to the consummation of the Merger Transaction, the Obligors and
Acquisition shall deliver to the Agent lien searches, through a date
satisfactory to the Agent, showing no Liens affecting the assets of
Acquisition and RMCI.
5. Representations and Warranties. Each of the Obligors and Acquisition
------------------------------
hereby represents and warrants as of the date hereof that:
-7-
<PAGE>
(a) The representations and warranties made by the Obligors in the Credit
Agreement and all other Credit Documents, including, without limitation, the
Waiver, and the Fourth Amendment are true and correct on and as of the date of
execution and delivery by the Obligors and Acquisition of this Agreement, except
to the extent that such representations and warranties expressly relate to an
earlier date. After giving effect to this Agreement, no Default or Event of
Default has occurred and is continuing on the date of execution and delivery by
the Obligors and Acquisition of this Agreement.
(b) This Agreement has been duly authorized by all requisite action on behalf
of the Obligors and Acquisition and constitutes the legal, valid and binding
obligation of the Obligors and Acquisition, 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 and Acquisition have obtained all consents and approvals
necessary to their execution and delivery of this Agreement and the Merger
Transaction.
(d) The Maximum Credit Availability is $16,443,000. The Obligors have no
setoff, counterclaim, claim or defense against the Agent, the Issuing Bank
or the Lenders with respect to the Obligors' obligations under the Credit
Agreement and the other Credit Documents.
(e) The Obligors are in compliance with all of the terms and conditions in
the Credit Agreement, the Waiver and the other Credit Documents.
(f) Since March 31, 1997, there has been no material adverse change in the
properties, business operations, assets, liabilities, conditions (financial
or otherwise) or prospects of any of the Obligors (or the Obligors taken as
a whole).
(g) Acquisition is a Consolidated Subsidiary and after the Merger Transaction
is consummated, RMCI will be a Consolidated Subsidiary.
(h) Acquisition is a corporation dully organized, validly existing and in
good standing under the laws of the state of Delaware.
(i) Acquisition is a direct wholly-owned Subsidiary of the Company.
(j) All existing commitments to RMCI for equity or debt financing including,
without limitation, commitments from RMCI's Affiliates are listed on
Schedule 1.
-8-
<PAGE>
(k) After the Merger Transaction is consummated, RMCI will have the corporate
power and authority and legal right to own and operate its property, to
lease the property it operates under lease, and to carry on its business as
it is now being conducted, and will be duly qualified to transact business
as a foreign corporation in good standing under the laws of each state
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except to the extent that failure to
qualify to transact business would not have a material adverse effect on
the business, operations, assets, condition (financial or otherwise) or
prospects of RMCI or of the Consolidated Companies taken as a whole and
could not materially adversely affect its ability to perform its
obligations under the Credit Documents to which it is a party.
(l) All of the representations and warranties set forth in Sections 6.04,
6.05, 6.07, 6.08, 6.09, and 6.12 through and including 6.27 of the Credit
Agreement shall be applicable to Acquisition, and after the consummation of the
Merger Transaction, to RMCI except that (a) all pending litigation with respect
to RMCI of the type referred to in Section 6.07 of the Credit Agreement is
disclosed on Schedule 2; (b) the capitalization of Acquisition and RMCI is set
forth on Schedule 3; (c) any exceptions with respect to RMCI's environmental
representations set forth in Section 6.15 of the Credit Agreement are set forth
on Schedule 4; (d) a description of all Debt of RMCI immediately after the
consummation of the Merger Transaction having an outstanding principal balance
of $1,000,000 or more is set forth on Schedule 5; (e) a complete list of all
Operating Leases of property to RMCI which are Material Contracts is set forth
on Schedule 6; (f) a complete list of all of RMCI's outstanding Loans and
Investments, as described in Section 6.19 of the Credit Agreement, is set forth
on Schedule 7; (g) RMCI's offices and business locations as described in Section
6.21 of the Credit Agreement are set forth on Schedule 8; and (h) a complete and
accurate list of all of RMCI's employment and investment agreements as described
in Section 6.23 of the Credit Agreement is set forth on Schedule 9.
6. Obligors' Agreement; Release. In consideration of the Issuing Bank's,
----------------------------
Agent's and Lenders' consent to the amendments to the Credit Agreement and
Waiver, the Issuing Bank's, Agent's and Lenders' consent to the Merger
Transaction and extension of the Expiration Date of the Existing Letters of
Credit, the Obligors and Acquisition agree as follows:
(a) They shall comply with all of the terms and conditions of this Agreement,
the Waiver, the Fourth Amendment and the other Credit Documents (as
modified by the Waiver, the Fourth Amendment and this Agreement).
-9-
<PAGE>
(b) In connection with their obligations under Section 8(c)(i) of the Fourth
Amendment, the Obligors shall deliver or cause to be delivered to the Agent
on or before July 15, 1997 the following:
(i) title insurance policies insuring the Liens of the mortgages, if any,
delivered pursuant to such section as first priority Liens, subject to no
exceptions to title except as approved by the Agent;
(ii) lien searches in all appropriate jurisdictions, confirming the
perfection and first priority of the Agent's Lien with respect to all of the
Collateral in which a security interest may be perfected by the filing of a
Uniform Commercial Code financing statement; provided, however, the date by
-------- -------
which such lien searches shall be required to be delivered to the Agent shall be
extended, as necessary, to take into account any delay in the filing office of
any applicable jurisdiction in making information available and current;
(iii) such other documents, instruments or other agreements (including,
without limitation, stock certificates evidencing shares of stock in RMCI and
other Subsidiaries, which certificates shall be duly endorsed in blank or
accompanied by stock powers duly executed in blank) as may be reasonably
required by the Agent to perfect, maintain or enforce the Liens granted to it
for the ratable benefit of the Issuing Bank and the Lenders; and
(iv) such opinions of counsel to the Obligors as the Agent may reasonably
request, each in form and substance satisfactory to the Agent, concerning, among
other things, the authorization, execution, delivery, effectiveness and
enforceability of the documents delivered in connection with Section 8(c)(i) of
the Fourth Amendment.
(c) The fees and expenses covered by Section 8(b) of the Fourth Amendment to
be paid by the Obligors jointly and severally include all fees, costs and
expenses incurred or associated with the execution, delivery, enforcement or
administration of this Agreement, including, without limitation, recording and
filing fees and charges, search fees and title insurance premiums.
(d) Each of Greenbrier and Gulf Coast shall, on or before July 1, 1998,
deliver or cause to be delivered to the Greenbrier Trustee and Gulf Coast
Trustee, as the case may be, a notice of optional redemption. The Greenbrier
Bonds and the Gulf Coast Bonds shall be redeemed, in whole, On August 1, 1998
and immediately following such redemption with the proceeds of draws on the
respective Letters of Credit, the Letters of Credit issue on behalf of
Greenbrier and Gulf Coast shall be terminated.
-10-
<PAGE>
Notwithstanding the requirements of Sections 2.02(a)(4), (e)(4) or 2.03 of the
Credit Agreement, Greenbrier and Gulf Coast shall each execute a term note in
form and substance reasonably satisfactory to the Agent (the "Greenbrier Term
Note" and the "Gulf Coast Note," respectively) on the same Business Day as the
termination of the Greenbrier and Gulf Coast Letters of Credit, in favor of the
Issuing Bank in the aggregate amount equal to the amount drawn on such Letters
of Credit. Interest shall accrue on the Greenbrier Term Note and the Gulf Coast
Term Note at a rate no greater than the pre-tax interest rate of fully taxable
debt that would provide the same after tax yield to the Lenders as the current
tax advantaged interest rate on the Greenbrier and Gulf Coast Bonds plus all
related fees and costs of credit support. The aggregate outstanding amount of
the Greenbrier Term Note, together with interest accrued thereon, shall be
payable on or before September 30, 1998. The aggregate outstanding principal
amount under the Gulf Coast Term Note shall be reduced to $2,800,000 on or
before September 30, 1998 with all remaining amounts under the Gulf Coast Term
Note to be due and payable on a date to be mutually agreed upon by the Obligors
and the Agent.
(e) Each of the Obligors and Acquisition hereby releases, remises, acquits
and forever discharges the Issuing Bank, the Agent and the Lenders and their
respective employees, agents, representatives, consultants, attorneys,
fiduciaries, officers, directors, partners, predecessors, successors and
assigns, subsidiary corporations, parent corporations and related corporate
divisions (all of the foregoing hereinafter called the "Released Parties"), from
any and all actions and causes of action, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and every
character, known or unknown, direct and/or indirect, at law or in equity, of
whatsoever kind or nature, whether heretofore or hereafter arising, for or
because of any matter or things done, omitted or suffered to be done by any of
the Released Parties prior to and including the date of execution hereof, and in
any way directly or indirectly arising out of or in any way connected to this
Agreement, the Credit Agreement or any of the Credit Documents (all of the
foregoing hereinafter called the "Released Matters"). The Obligors and
Acquisition acknowledge that the agreements in this paragraph are intended to be
in full satisfaction of all or any alleged injuries or damages arising in
connection with the Released Matters. The Obligors and Acquisition represent and
warrant to the Released Parties that none of them has purported to transfer,
assign, pledge or otherwise convey any of its right, title or interest in any
Released Matter to any other person or entity and that the foregoing constitutes
a full and complete release of all Released Matters.
7. Conditions Precedent to Effectiveness of this Agreement. As conditions
-------------------------------------------------------
precedent to the effectiveness of this
-11-
<PAGE>
Agreement, the Agent shall be satisfied that all of the conditions precedent set
forth in Section 4 of the Fourth Amendment shall have been fulfilled and the
Agent shall have received the following in form and substance reasonably
satisfactory to the Lenders:
(a) This Agreement duly executed by each of the obligors, Acquisition and all
of the Lenders;
(b) Certified copies of the Articles of Incorporation and Bylaws of
Acquisition and RMCI and the authorizing resolutions with respect to the Fourth
Amendment and this Agreement of each Obligor and Acquisition, and good standing
certificates for Acquisition and RMCI issued by the state of its incorporation
and each other state in which it conducts operations;
(c) A certificate of the Secretary or Assistant Secretary of each Obligor and
Acquisition as to the incumbency and signatures of the Officers of such
Obligor or Acquisition executing this Agreement and the Fourth Amendment;
(d) An opinion, in form and substance satisfactory to the Agent, of Corrs
Chambers Westgarth, counsel to Paul J. Ramsay and Paul Ramsay Holdings Pty.
Ltd; and
(e) Payment of all reasonable costs and expenses of the Agent and the Issuing
Bank incurred prior to the date of this Agreement in connection with the
administration of the Credit Documents, preservation of the rights of the
Agent and the Issuing Bank thereunder and the preparation, execution and
delivery of this Agreement and the Fourth Amendment, including without
limitation, the fees and expenses of Luskin, Stern & Eisler LLP.
8. Reference to and Effect on the Credit Documents.
-----------------------------------------------
(a) The execution, delivery and effectiveness of this Agreement shall not,
except as expressly provided herein, operate as an amendment to or a waiver
of any right, power or remedy of the Agent, the Issuing Bank or the Lenders
under any of the Credit Documents, or constitute an amendment to or a
waiver of any provision of any of the Credit Documents including, without
limitation, any provision of the Credit Agreement, the Fourth Amendment or
the Waiver. Except as specifically amended or waived hereby, all of the
terms and provisions of the Credit Documents, including, without
limitation, the Credit Agreement, the Fourth Amendment and the Waiver,
shall remain in full force and effect and are hereby ratified and
confirmed. Upon the effectiveness of this Agreement, each reference in the
Credit Documents to the Credit Agreement or the Waiver shall mean the
-12-
<PAGE>
Credit Agreement or the Waiver, as the case may be, as amended or waived
hereby.
(b) This Agreement shall be deemed to be a Credit Document for all purposes.
(c) The failure of any Obligor to perform or comply with any of the terms and
conditions contained in this Agreement shall constitute an Event of Default
under the Credit Agreement.
9. Complete Agreement. This agreement is a complete memorandum of the
------------------
agreement of the Obligors, the Agent, the Issuing Bank and the Lenders and
supersedes all prior discussions and drafts relating to the subject matter of
this Agreement.
10. Counterparts. This Agreement may be executed in one or more counterparts
------------
each of which shall constitute an original Agreement and all of which together
shall constitute one and the same Agreement. Telecopied counterparts of the
signature pages hereof shall be deemed effective as of the Agent's receipt
thereof.
11. Governing Law. This Agreement 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.
12. Life Company Waiver. Subject to the conditions in Section 7, the Agent,
-------------------
the Issuing Bank and the Lenders consent to the execution, delivery and
performance by the Company and its Subsidiaries of the Fifth Supplemental Trust
Indenture and by Paul J. Ramsay and Paul Ramsay Holdings Pty. Ltd of the
Guarantee Agreement (the "Life Company Guarantee"), both substantially in the
forms of Exhibits A and B hereto.
-13-
<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.
RAMSAY HEALTH CARE, INC.
By_________________________________
President
GREENBRIER HOSPITAL, INC.
By_________________________________
President
HOUMA PSYCHIATRIC HOSPITAL, INC.
By_________________________________
President
HSA OF OKLAHOMA, INC.
By_________________________________
President
CAROLINA TREATMENT CENTER, INC.
By_________________________________
President
GULF COAST TREATMENT CENTER, INC.
By_________________________________
President
-14-
<PAGE>
ATLANTIC TREATMENT CENTER, INC.
By_________________________________
President
GREAT PLAINS HOSPITAL, INC.
By_________________________________
President
THE HAVEN HOSPITAL, INC.
By_________________________________
President
H.C. CORPORATION
By_________________________________
President
HSA HILL CREST CORPORATION
By_________________________________
President
H.C. PARTNERSHIP
By_________________________________
HSA Hill Crest Corporation
as general partner of
H.C. Partnership
-15-
<PAGE>
RHCI ACQUISITION CORP.
By_________________________________
President
SOCIETE GENERALE, NEW YORK BRANCH,
as Lender, Issuing Bank and Agent
By_________________________________
Title______________________________
FIRST UNION BANK OF NORTH CAROLINA,
as Lender
By_________________________________
Title______________________________
HIBERNIA NATIONAL BANK, as Lender
By_________________________________
Title______________________________
-16-
<PAGE>
EXHIBIT 10.102
CONSULTING AGREEMENT
--------------------
CONSULTING AGREEMENT dated as of February 1, 1997 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 February 1, 1997
----
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 strategic planning, business
development, investor relations, overall evaluation of the Company's services,
assistance in developing and targeting managed care markets, and assisting with
interaction and liaising with business partners.
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.
3.3 The Consultant shall report to the Chairman of the Company.
<PAGE>
2
4. Compensation.
------------
4.1 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 $30,000 per
month, payable in advance on the first day of each month.
4.2 With respect to any significant transactions of the Company as to
which the Consultant shall render substantial consulting or advisory services,
the Consultant shall have a success fee opportunity to be negotiated in good
faith between the Company and the Consultant.
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, 1997,
unless extended in accordance with this Section 6.1. As of December 31, 1997,
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, 1998.
6.3 The Consultant may terminate this Agreement, with or without reason,
by written notice to the Company, given at any time within three (3) months of a
change in control of the Company, with an effective date of thirty (30) days
following the date such notice is given. For purposes of this Agreement, a
change in control of the Company shall be deemed to have occurred if:
<PAGE>
3
(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), other than RHHL (as hereinafter defined) or any affiliate thereof,
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
hereof, a sale or disposition of fifty percent (50%) or more of the assets of
the Company to a party or parties (other than a subsidiary or affiliate of the
Company as above described) shall be deemed a disposition of substantially all
of the business of the Company.
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 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.
6.4 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>
4
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 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
<PAGE>
5
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.
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Chairman
Telefax: (305) 569-4647
if to the Consultant:
Summa Healthcare Group, Inc.
P.O. Box 140131
Coral Gables, Florida 33134-0131
Attention: Chief Executive Officer
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 the subject matter hereof and supersedes the
Consulting Agreement between the parties dated as of January 1, 1996, and no
amendment or modification hereof shall be valid or binding unless made in
<PAGE>
6
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>
7
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_____________________________
<PAGE>
EXHIBIT 10.106
_____________________________________________________________________________
Up to U.S. $42,500,000
CREDIT AGREEMENT
Dated as of September 30, 1997
among
RAMSAY HEALTH CARE, INC.,
as Borrower
THE LENDERS FROM TIME TO TIME PARTY HERETO,
as Lenders
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent
and
GECC CAPITAL MARKETS GROUP, INC.,
as Syndication Agent
____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE 1
AMOUNT AND TERMS OF CREDIT
SECTION 1.01. Revolving Credit Advances...................... 1
-------------------------
SECTION 1.02. Term Loan A.................................... 3
-----------
SECTION 1.03. Term Loan B.................................... 4
-----------
SECTION 1.04. Payments and Prepayments;
-------------------------
Termination of Revolving Credit Commitment..... 5
------------------------------------------
SECTION 1.05. Use of Proceeds................................ 7
---------------
SECTION 1.06. Letters of Credit.............................. 7
-----------------
SECTION 1.07. Interest....................................... 7
--------
SECTION 1.08. Borrowing Base................................. 8
--------------
SECTION 1.09. Fees........................................... 8
----
SECTION 1.10. Receipt of Payments............................ 9
-------------------
SECTION 1.11. Funding, Payments; Non-Funding Lenders......... 9
--------------------------------------
SECTION 1.12. Application and Allocation of Payments......... 10
--------------------------------------
SECTION 1.13. Loan Account and Accounting.................... 11
---------------------------
SECTION 1.14. Indemnity...................................... 12
---------
SECTION 1.15. Access......................................... 12
------
SECTION 1.16. Taxes.......................................... 13
-----
SECTION 1.17. Capital Adequacy; Increased Costs; Illegality.. 14
---------------------------------------------
SECTION 1.18. Single Obligation.............................. 16
-----------------
ARTICLE 2
CONDITIONS PRECEDENT
SECTION 2.01. Conditions to the Initial Loans................ 16
-------------------------------
SECTION 2.02. Further Conditions to Each Loan................ 18
-------------------------------
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Corporate Existence; Compliance with Law....... 19
----------------------------------------
SECTION 3.02. Executive Offices; Collateral Locations;
---------------------------------------
Corporate or Other Names....................... 19
------------------------
SECTION 3.03. Corporate Power; Authorization;
-------------------------------
Enforceable Obligations........................ 19
-----------------------
SECTION 3.04. Financial Statements and Projections........... 20
------------------------------------
SECTION 3.05. Material Adverse Events........................ 20
-----------------------
i
<PAGE>
SECTION 3.06. Ownership of Property; Liens................... 20
----------------------------
SECTION 3.07. Restrictions; No Default; Material Contracts... 20
--------------------------------------------
SECTION 3.08. Labor Matters.................................. 21
-------------
SECTION 3.09. Ventures, Subsidiaries and Affiliates;
--------------------------------------
Outstanding Stock and Indebtedness............. 21
----------------------------------
SECTION 3.10. Government Regulation.......................... 21
---------------------
SECTION 3.11. Margin Regulations............................. 22
------------------
SECTION 3.12. Taxes.......................................... 22
-----
SECTION 3.13. ERISA.......................................... 22
-----
SECTION 3.14. No Litigation.................................. 24
-------------
SECTION 3.15. Brokers........................................ 24
-------
SECTION 3.16. Patents, Trademarks, Copyrights and Licenses... 24
--------------------------------------------
SECTION 3.17. Full Disclosure................................ 24
---------------
SECTION 3.18. Environmental Matters.......................... 25
---------------------
SECTION 3.19. Insurance Policies............................. 26
------------------
SECTION 3.20. Deposit and Disbursement Accounts.............. 26
---------------------------------
SECTION 3.21. Solvency....................................... 26
--------
SECTION 3.22. Subordination of Subordinated Indebtedness..... 27
------------------------------------------
SECTION 3.23. Licenses and Permits........................... 27
--------------------
SECTION 3.24. Compliance with Law............................ 27
-------------------
SECTION 3.25. Health Care Professionals...................... 28
-------------------------
SECTION 3.26. Management Agreements.......................... 28
---------------------
SECTION 3.27. Patient Referrals, Etc......................... 28
----------------------
SECTION 3.28. Pending Revocations, Etc....................... 28
------------------------
SECTION 3.29. Investigations and Audits...................... 29
-------------------------
SECTION 3.30. Payment Adjustments............................ 29
-------------------
SECTION 3.31. Certain Agreements............................. 29
------------------
SECTION 3.32. Related Transaction Documents.................. 29
-----------------------------
ARTICLE 4
FINANCIAL STATEMENTS AND INFORMATION
SECTION 4.01. Reports and Notices............................ 30
-------------------
SECTION 4.02. Communication with Accountants................. 30
------------------------------
ARTICLE 5
AFFIRMATIVE COVENANTS
SECTION 5.01. Maintenance of Existence and Conduct of Business 30
------------------------------------------------
SECTION 5.02. Payment of Charges and Claims.................. 31
-----------------------------
SECTION 5.03. Books and Records.............................. 31
-----------------
SECTION 5.04. Litigation..................................... 31
----------
ii
<PAGE>
SECTION 5.05. Insurance...................................... 31
---------
SECTION 5.06. Compliance with Laws........................... 32
--------------------
SECTION 5.07. Agreements..................................... 33
----------
SECTION 5.08. Environmental Matters.......................... 33
---------------------
SECTION 5.09. Certain Obligations Respecting Subsidiaries.... 34
-------------------------------------------
SECTION 5.10. Application of Proceeds........................ 34
-----------------------
SECTION 5.11. Fiscal Year.................................... 34
-----------
SECTION 5.12. Casualty and Condemnation...................... 34
-------------------------
SECTION 5.13. Application of Certain Proceeds................ 36
-------------------------------
SECTION 5.14. Additional Mortgaged Properties;
--------------------------------
Additional Credit Parties...................... 38
-------------------------
SECTION 5.15. Redemption of Bonds............................ 39
-------------------
SECTION 5.16. Permits, Etc................................... 39
------------
SECTION 5.17. Further Assurances............................. 39
------------------
SECTION 5.18. Ramsay Common Stock Subscription Agreement..... 40
------------------------------------------
ARTICLE 6
NEGATIVE COVENANTS
SECTION 6.01. Acquisitions................................... 40
------------
SECTION 6.02. Mergers, Subsidiaries, Intercompany Transfers,
----------------------------------------------
Etc. .......................................... 43
----
SECTION 6.03. Investments.................................... 44
-----------
SECTION 6.04. Indebtedness................................... 44
------------
SECTION 6.05. Affiliate and Employee Loans and Transactions.. 45
---------------------------------------------
SECTION 6.06. Guaranteed Indebtedness........................ 46
-----------------------
SECTION 6.07. Liens.......................................... 46
-----
SECTION 6.08. Sale of Stock and Assets....................... 46
------------------------
SECTION 6.09. Material Contracts............................. 47
------------------
SECTION 6.10. ERISA.......................................... 48
-----
SECTION 6.11. Financial Covenants............................ 48
-------------------
SECTION 6.12. Hazardous Materials............................ 48
-------------------
SECTION 6.13. Sale-Leasebacks................................ 48
---------------
SECTION 6.14. Cancellation of Indebtedness................... 48
----------------------------
SECTION 6.15. Restricted Payments............................ 48
-------------------
SECTION 6.16. No Speculative Transactions.................... 49
---------------------------
SECTION 6.17. Margin Regulations............................. 49
------------------
SECTION 6.18. Limitation on Negative Pledge Clauses, Etc..... 49
------------------------------------------
SECTION 6.19. Accounting Changes............................. 50
------------------
SECTION 6.20. Changes Relating to Subordinated Debt.......... 50
-------------------------------------
SECTION 6.21. Leases......................................... 50
------
SECTION 6.22. Tax Sharing Agreements......................... 50
----------------------
iii
<PAGE>
ARTICLE 7
TERM
SECTION 7.01. Duration....................................... 50
--------
SECTION 7.02. Survival of Obligations........................ 51
-----------------------
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.01. Events of Default............................. 51
-----------------
SECTION 8.02. Remedies...................................... 53
--------
SECTION 8.03. Waivers by Credit Parties..................... 54
-------------------------
ARTICLE 9
THE ADMINISTRATIVE AGENT
SECTION 9.01. Appointment of the Administrative Agent....... 55
---------------------------------------
SECTION 9.02. The Administrative Agent's Reliance, Etc...... 56
----------------------------------------
SECTION 9.03. GE Capital and Affiliates..................... 56
-------------------------
SECTION 9.04. Lender Credit Decision........................ 57
----------------------
SECTION 9.05. Indemnification............................... 57
---------------
SECTION 9.06. Successor Administrative Agent................ 57
------------------------------
SECTION 9.07. Dissemination of Information.................. 58
----------------------------
SECTION 9.08. Release of Collateral......................... 58
---------------------
ARTICLE 10
SUCCESSORS AND ASSIGNS
SECTION 10.01. Successors and Assigns........................ 59
----------------------
SECTION 10.02. Assignments and Participations................ 59
------------------------------
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Complete Agreement............................ 61
------------------
SECTION 11.02. Amendments and Waivers........................ 61
----------------------
SECTION 11.03. Fees and Expenses; Certain Taxes.............. 63
--------------------------------
SECTION 11.04. No Waiver..................................... 64
---------
SECTION 11.05. Remedies...................................... 64
--------
SECTION 11.06. Severability.................................. 65
------------
iv
<PAGE>
SECTION 11.07. Conflict of Terms............................. 65
-----------------
SECTION 11.08. Setoff and Sharing of Payments................ 65
------------------------------
SECTION 11.09. Authorized Signature.......................... 66
--------------------
SECTION 11.10. Notices....................................... 66
-------
SECTION 11.11. Section Titles................................ 68
--------------
SECTION 11.12. Counterparts.................................. 68
------------
SECTION 11.13. Time of the Essence........................... 68
-------------------
SECTION 11.14. Publicity..................................... 68
---------
SECTION 11.15. Confidentiality............................... 68
---------------
SECTION 11.16. GOVERNING LAW................................. 68A
-------------
SECTION 11.17. WAIVER OF JURY TRIAL.......................... 69
--------------------
v
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Definitions; Rules of Construction
Annex B - Letters of Credit
Annex C - Interest Rates, Etc.
Annex D - Schedule of Closing Documents
Annex E - Insurance Requirements
Annex F - Financial Statements, Projections and Notices
Annex G - Financial Covenants
Schedule 1.01 - Mortgaged Property
Schedule 3.02 - Executive Offices; Other Places of Business
and Collateral Locations; Trade Names
Schedule 3.04 - Financial Statements and Projections
Schedule 3.05 - Contingent Liabilities; Restricted Payments
Schedule 3.06 - Real Property and Leases
Schedule 3.07 - Material Contracts
Schedule 3.08 - Labor Matters
Schedule 3.09 - Subsidiaries, Joint Ventures and Affiliates; Outstanding
Stock; Indebtedness Held by Credit Parties; Inactive
Subsidiaries; Material Subsidiaries
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.18 - Certain Environmental Matters
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 3.31 - Certain Agreements
Schedule 6.03 - Investments
Schedule 6.05 - Transactions with Affiliates and Employees
Schedule 6.07 - Liens
Schedule 11.09 - Authorized Signatures
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Form of Revolving Credit Note
Exhibit C-1 - Form of Term Loan A Note
Exhibit C-2 - Form of Term Loan B Note
Exhibit D - Form of Assignment Agreement
Exhibit E - Form of Mortgage
Exhibit F - Form of Security Agreement
Exhibit G - Form of Stock Pledge Agreement
Exhibit H - Form of Subsidiary Guaranty
Exhibit I - Form of Opinion of Borrower's Counsel
vi
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is entered into as of September 30,
---------
1997, by and among RAMSAY HEALTH CARE, INC., a Delaware corporation
("Borrower"), the lenders from time to time party hereto (the "Lenders"),
-------- -------
GENERAL ELECTRIC CAPITAL CORPORATION, a corporation organized under the banking
laws of the State of New York, as administrative agent (in such capacity, the
"Administrative Agent"), and GECC CAPITAL MARKETS GROUP, INC., a Delaware
- ---------------------
corporation, as syndication agent (the "Syndication Agent").
-----------------
RECITALS
--------
A. Borrower desires to borrow up to $42,500,000 from Lenders and Lenders
are willing to make certain loans and other financial accommodations in favor of
Borrower of up to such amount, upon the terms and conditions set forth herein.
B. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings ascribed to them in Annex A and, for the purposes
-------
of this Agreement and the other Loan Documents, the rules of construction set
forth in Annex A shall govern. All Annexes, Schedules and Exhibits to this
-------
Agreement are incorporated into this Agreement and are a part hereof. These
Recitals shall be construed as part of this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE 1
AMOUNT AND TERMS OF CREDIT
SECTION 1.01. Revolving Credit Advances.
-------------------------
(a) Upon and subject to the terms and conditions hereof, each
Revolving Lender severally agrees to make available to Borrower, from time to
time until the Revolving Credit Commitment Termination Date, its Pro Rata Share
of revolving credit advances (each, a "Revolving Credit Advance") in an
------------------------
aggregate principal amount at any time outstanding up to but not exceeding the
Borrowing Availability. The Pro Rata Share of the Revolving Credit Loan of any
Revolving Lender, as set forth opposite such Revolving Lender's name on the
signature pages hereto, shall not at any time exceed its Pro Rata Share of the
Revolving Credit Commitments, as from time to time in effect pursuant to Section
-------
1.01(g) below. No Revolving Lender shall be responsible for the failure of any
- -------
other Revolving Lender to fund its Pro Rata Share of any Revolving Credit
Advance to be made on any funding date. Each Revolving Credit Advance shall be
in an aggregate amount of $500,000 or an integral multiple of $100,000 in excess
thereof, in the case of an Index Rate Loan,
<PAGE>
and in an aggregate amount of $1,000,000 or an integral multiple of $250,000 in
excess thereof, in the case of a LIBOR Rate Loan. Until the Revolving Credit
Commitment Termination Date, Borrower may from time to time borrow, repay and
reborrow Revolving Credit Advances under this Section 1.01.
------------
(b) Each notice of a borrowing of a Revolving Credit Advance shall be
given in writing (by telecopy, hand delivery, or U.S. mail) by a Responsible
Financial Officer of Borrower to the Administrative Agent in the manner provided
in a written notice requesting such Revolving Credit Advance (a "Notice of
---------
Revolving Credit Advance") given no later than 2:00 P.M. (New York time) on the
- ------------------------
date which is one Business Day prior to the proposed Revolving Credit Advance in
the case of an Index Rate Loan, or 11:00 A.M. (New York time) on the date which
is three (3) Business Days prior to the proposed Revolving Credit Advance in the
case of a LIBOR Rate Loan. Each such Notice of Revolving Credit Advance shall
be substantially in the form of Exhibit A hereto, specifying therein the
---------
requested (i) date of such Revolving Credit Advance, (ii) amount of such
Revolving Credit Advance, (iii) Disbursement Account into which such Revolving
Credit Advance shall be made, (iv) amount of each Index Rate Loan and LIBOR Rate
Loan included in such Revolving Credit Advance, (v) in the case of a Revolving
Credit Advance including one or more LIBOR Rate Loans, the initial LIBOR Period
for each such LIBOR Rate Loan, and (vi) such other information as may reasonably
be requested by the Administrative Agent. The Administrative Agent and each
Revolving Lender shall be entitled to rely upon and shall be fully protected
under this Agreement in relying upon any Notice of Revolving Credit Advance
believed by the Administrative Agent to be genuine and to assume that the
persons executing and delivering the same were duly authorized unless the
responsible individual acting thereon for the Administrative Agent shall have
actual knowledge to the contrary.
(c) The Administrative Agent shall, promptly upon receipt of any
Notice of Revolving Credit Advance, forward a copy of such request to each of
the Revolving Lenders. Each Revolving Lender shall make available to the
Administrative Agent, for the account of such Revolving Lender's Applicable
Lending Office, the amount of such Revolving Lender's Pro Rata Share of each
Revolving Credit Advance by wire transfer to the Payment Account, in same day
funds, not later than 11:00 A.M. (New York time) on the requested funding date.
After receipt of such wire transfers (or, in the Administrative Agent's sole
discretion, before receipt of such wire transfers), subject to the terms hereof,
the Administrative Agent shall make the requested Revolving Credit Advance to
Borrower. All payments by each Revolving Lender shall be made without setoff,
counterclaim or deduction of any kind.
(d) Each Notice of Revolving Credit Advance shall be irrevocable and
binding on Borrower. In the case of any Revolving Credit Advance which the
related Notice of Revolving Credit Advance specifies is to include one or more
LIBOR Rate Loans, Borrower shall indemnify each Revolving Lender against any
loss, cost or expense incurred by such Revolving Lender as a result of any
failure of Borrower to borrow such Revolving Credit Advance on the date
specified in such Notice of Revolving Credit Advance (including, without
limitation, as a result of Borrower's
2
<PAGE>
failure to satisfy the applicable conditions set forth in Article 2), as
provided in paragraph 5 of Annex C.
-------
(e) The Pro Rata Share of the Revolving Credit Advances made by each
Revolving Lender shall be evidenced by a promissory note of Borrower
substantially in the form of Exhibit B hereto, dated the date hereof, payable to
---------
such Revolving Lender in a principal amount equal to the amount of the Revolving
Credit Commitment of such Revolving Lender (based on the maximum amount of the
Revolving Credit Commitments that would be in effect on the Revolving Credit
Commitment Adjustment Date) and otherwise duly completed. The date and amount
of the Pro Rata Share of each Revolving Credit Advance made by each Revolving
Lender and each payment of principal with respect thereto shall be recorded on
the books and records of the Administrative Agent, which books and records shall
constitute prima facie evidence of the accuracy of the information therein
----- -----
recorded.
(f) Borrower shall furnish to the Administrative Agent a Borrowing
Base Certificate substantially in the form of Exhibit A to Annex F hereto, as
-------
and when required by Annex F hereto, completed and signed by a Responsible
-------
Financial Officer of Borrower, which sets forth a calculation of the Borrowing
Base as of the date set forth therein. Promptly after receipt thereof, the
Administrative Agent shall furnish a copy to each Revolving Lender. Borrower
agrees that in making any Revolving Credit Advance hereunder, each Revolving
Lender shall be entitled to rely upon the most recent Borrowing Base Certificate
delivered to it by the Administrative Agent. Borrower further agrees that if
Borrower shall have failed to deliver a Borrowing Base Certificate to the
Administrative Agent within the specified period, the Revolving Lenders shall be
under no obligation to make any further Revolving Credit Advances (or incur any
additional Letter of Credit Obligations) until such time as such Borrowing Base
Certificate is delivered to the Administrative Agent.
(g) On the Closing Date, and at all times thereafter (subject to the
next succeeding sentence), the Revolving Credit Commitments shall be equal to
$16,000,000. Notwithstanding the foregoing, the Revolving Credit Commitments
shall increase to $20,000,000 on the Revolving Credit Commitment Adjustment
Date.
SECTION 1.02. Term Loan A.
-----------
(a) Upon and subject to the terms and conditions hereof, each Term
Loan A Lender severally agrees to make available to Borrower, in a single
funding on the Closing Date, a term loan in the principal amount designated
"Term Loan A" and set forth opposite such Term Loan A Lender's name on the
signature pages hereto (all such term loans, in the aggregate principal amount
of $12,500,000, collectively, "Term Loan A"). Term Loan A shall be evidenced by
-----------
a promissory note of Borrower substantially in the form of Exhibit C-1 attached
-----------
hereto, dated the date hereof, payable to each Term Loan A Lender in the
principal amount of the Pro Rata Share of Term Loan A made by it pursuant to
this Section 1.02, and otherwise duly completed.
------------
3
<PAGE>
(b) Subject to earlier prepayment pursuant to Section 1.04 hereof, the
------------
aggregate principal amount of Term Loan A shall be payable in seventeen (17)
quarterly installments, the first two of which shall be in the amount of
$437,500 each, the third through sixth of which shall be in the amount of
$537,500 each, the seventh through tenth of which shall be in the amount of
$681,250 each, the eleventh through fourteenth of which shall be in the amount
of $812,500 each and the fifteenth through seventeenth of which shall be in the
amount of $875,000 each, on the first day of each January, April, July and
October hereafter, commencing July 1, 1998 and continuing through and including
July 1, 2002, and in an eighteenth and final installment in an aggregate amount
equal to the remaining principal balance thereof on the fifth anniversary of the
Closing Date.
(c) No Term Loan A Lender shall be responsible for the failure of any
other Term Loan A Lender to fund the Pro Rata Share of Term Loan A to be made by
such other Term Loan A Lender on the Closing Date.
SECTION 1.03. Term Loan B.
-----------
(a) Upon and subject to the terms and conditions hereof, each Term
Loan B Lender severally agrees to make available to Borrower, in a single
funding on the Closing Date, a term loan in the principal amount designated
"Term Loan B" and set forth opposite such Term Loan B Lender's name on the
signature pages hereto (all such term loans, in the aggregate principal amount
of $10,000,000, collectively, "Term Loan B"). Term Loan B shall be evidenced by
-----------
a promissory note of Borrower substantially in the form of Exhibit C-2 attached
-----------
hereto, dated the date hereof, payable to each Term Loan B Lender in the
principal amount of the Pro Rata Share of Term Loan B made by it pursuant to
this Section 1.03, and otherwise duly completed.
------------
(b) Subject to earlier prepayment pursuant to Section 1.04 hereof, the
------------
aggregate principal amount of Term Loan B shall be payable in twenty-seven (27)
quarterly installments, the first twenty of which shall be in the amount of
$62,500 each, the twenty-first through twenty-fourth of which shall be in the
amount of $1,062,500 each and the twenty-fifth through twenty-seventh of which
shall be in the amount of $1,125,000 each, on the first day of each January,
April, July and October hereafter, commencing January 1, 1998 and continuing
through and including July 1, 2004 and in a twenty-eighth and final installment
in an aggregate amount equal to the remaining principal balance thereof on the
seventh anniversary of the Closing Date.
(c) No Term Loan B Lender shall be responsible for the failure of any
other Term Loan B Lender to fund the Pro Rata Share of Term Loan B to be made by
such other Term Loan B Lender on the Closing Date.
4
<PAGE>
SECTION 1.04. Payments and Prepayments; Termination of Revolving Credit
---------------------------------------------------------
Commitment.
- ----------
(a) Borrower hereby promises to pay to the Administrative Agent in
immediately available funds, for the ratable benefit of each Lender, the entire
outstanding principal amount of the Revolving Credit Loan, Term Loan A and Term
Loan B, and the Revolving Credit Loan, Term Loan A and Term Loan B shall mature,
on the Revolving Credit Commitment Termination Date.
(b) In the event that the outstanding balance of the Revolving Credit
Loan shall at any time exceed the Borrowing Availability, Borrower shall
immediately repay the Revolving Credit Loan in the amount of such excess. If
any such excess remains after repayment in full of the Revolving Credit Loan,
Borrower shall provide cash collateral for the Letter of Credit Obligations in
the manner specified in Annex B to the extent required to eliminate such excess.
-------
(c) Borrower shall have the right, at any time, upon thirty (30) days'
prior written notice to the Administrative Agent, to terminate or ratably reduce
the Revolving Credit Commitments, in whole or in part, without premium or
penalty; provided, however, that (i) each such reduction of the Revolving Credit
-------- -------
Commitments shall be in integral multiples of $1,000,000, and (ii) the Revolving
Credit Commitments may not be reduced to less than $10,000,000 unless terminated
in full. Upon any such termination of the Revolving Credit Commitments,
Borrower's right to receive Revolving Credit Advances and the benefit of Letter
of Credit Obligations shall simultaneously terminate and Borrower's obligation
to pay the Non-Use Fee shall terminate, and notwithstanding anything to the
contrary contained herein or in the Notes the entire outstanding balance of the
Revolving Credit Loan, Term Loan A and Term Loan B shall be immediately due and
payable. On the date of any such termination, Borrower shall pay to the
Administrative Agent, for the ratable benefit of each Lender, in immediately
available funds, all of the Obligations, together with any accrued and unpaid
interest and any LIBOR funding breakage costs payable in accordance with Annex
-----
C, and make arrangements in accordance with the terms and conditions of Annex B
-------
with respect to any outstanding Letter of Credit Obligations.
(d) Borrower shall have the right, at any time, to prepay voluntarily
all or a ratable portion of Term Loan A and Term Loan B, without premium or
penalty, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (i) each such prepayment shall
-------- -------
be made only upon written notice thereof to the Administrative Agent, received
by the Administrative Agent at least five (5) calendar days prior to such
prepayment, in the case of a partial prepayment, and at least ten (10) Business
Days prior to such prepayment, in the case of a prepayment in full, (ii) each
such prepayment shall be of both, and not either, Term Loan A and Term Loan B,
and (iii) each such partial prepayment of the Term Loans shall be in an
aggregate principal amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof.
(e) If the unpaid principal balance of the Revolving Credit Loan
should at any time exceed the Borrowing Availability, the excess balance shall
nevertheless constitute Obligations
5
<PAGE>
that are secured by the Collateral and entitled to all of the benefits hereof
and of the Loan Documents and shall be evidenced by the Revolving Credit Note.
(f) In addition to the regularly scheduled payments of principal on
the Term Loans and any other prepayments provided for herein, Borrower shall
make the following prepayments of the outstanding principal amount of the Loans
as follows:
(i) Promptly upon receipt by any Credit Party of any cash
proceeds of insurance or condemnation pursuant to Section 5.12 hereof, or
------------
of any asset disposition permitted by paragraphs (a)-(d) of Section 6.08
------------
hereof, and in each case to the extent and within the time periods provided
by Section 5.13 hereof, Borrower shall prepay the Loans in an amount equal
------------
to the Net Cash Proceeds thereof;
(ii) If Borrower issues any Stock for cash (other than Stock
issued (x) upon the exercise of warrants issued and outstanding on the
Closing Date or upon the exercise of warrants issued under the Summa Merger
Agreement, (y) upon the exercise of stock options issued under any employee
stock option plan of Borrower or (z) under Borrower's 1993 Employee Stock
Purchase Plan), no later than the Business Day following the date of
receipt of the proceeds thereof, Borrower shall prepay the Loans in an
amount equal to 50% of the Net Cash Proceeds of the issuance of any such
Stock;
(iii) If Borrower issues any debt securities for cash or
otherwise incurs any Indebtedness (other than (i) the Senior Subordinated
Notes or other Subordinated Indebtedness permitted by Section 6.04(l)
---------------
hereof, to the extent the proceeds thereof are applied to the repayment in
full of the Bridge Notes, (ii) Subordinated Indebtedness permitted by
Section 6.04(m) hereof, to the extent the proceeds thereof are applied to
---------------
the repayment in full of the Subordinated Indebtedness being refinanced
thereby, and (iii) other Indebtedness specifically permitted by Section
-------
6.04 hereof), no later than the Business Day following the date of receipt
----
of the proceeds thereof, Borrower shall prepay the Loans in an amount equal
to 100% of the Net Cash Proceeds of the issuance of any such debt
securities or incurrence of Indebtedness; and
(iv) Until the Termination Date, Borrower shall prepay the Loans
on the earlier of the date which is ten (10) days after (A) the date on
which Borrower's annual audited Financial Statements for the immediately
preceding Fiscal Year are delivered pursuant to Annex F or (B) the date on
-------
which such annual audited Financial Statements were required to be
delivered pursuant to Annex F, in an amount equal to fifty percent (50%) of
-------
Excess Cash Flow for the immediately preceding Fiscal Year. Each such
prepayment shall be accompanied by a Compliance Certificate signed by a
Responsible Financial Officer of Borrower certifying the manner in which
Excess Cash Flow and the resulting prepayment were calculated.
6
<PAGE>
(g) All payments and prepayments made pursuant to this Section 1.04
------------
shall be applied as follows:
(i) All prepayments made pursuant to paragraph (f) of this
Section 1.04 shall be applied first against the Term Loans until paid in
------------ -----
full; second against the outstanding principal amount, if any, of the
------
Revolving Credit Loan, until paid in full; and third, to the Cash
-----
Collateral Account in accordance with the provisions of Annex B until all
-------
Letter of Credit Obligations then outstanding are fully collateralized on
the basis set forth therein. Concurrently with any prepayment pursuant to
items second or third above, the Revolving Credit Commitments shall
------ -----
automatically reduce by an amount equal to the amount of such prepayment
until the Revolving Credit Commitments are reduced to zero.
(ii) All prepayments of Term Loans pursuant to paragraphs (d) or
(f) of this Section 1.04 shall be applied ratably, as between Term Loan A
------------
and Term Loan B, in proportion to the respective outstanding principal
amounts of Term Loan A and Term Loan B as of the date of such prepayment,
and shall be applied to the respective installments of each thereof in the
inverse orders of the respective maturities thereof.
(iii) All payments and prepayments of Loans pursuant to this
Section 1.04 shall be applied, first, to Index Rate Loans or to LIBOR Rate
------------
Loans having a LIBOR Period ending on the date of such payment or
prepayment until all such Index Rate Loans and all such LIBOR Rate Loans
are paid in full and, second, to other LIBOR Rate Loans. In the case of a
prepayment of a LIBOR Rate Loan on any day other than the last day of the
LIBOR Period in respect thereof, Borrower shall be obligated to reimburse
the Lenders in respect of any loss, cost or expense incurred by reason
thereof as provided by paragraph 5 of Annex C.
-------
SECTION 1.05. Use of Proceeds. Borrower shall use the proceeds of the
---------------
Revolving Credit Loan, Term Loan A and Term Loan B (i) to effect the
Refinancing, (ii) for the payment of costs and expenses of the transactions
contemplated by this Agreement and the Related Transactions that are payable by
Borrower, and (iii) for Borrower's working capital and other corporate purposes
not prohibited by the terms of this Agreement and the other Loan Documents.
SECTION 1.06. Letters of Credit. Subject to the terms and conditions of
-----------------
this Agreement, Borrower shall have the right to request the issuance of Letters
of Credit, and the Revolving Lenders agree to incur Letter of Credit
Obligations, in accordance with the terms and conditions set forth in Annex B.
-------
SECTION 1.07. Interest. Borrower shall pay interest on the Revolving
--------
Credit Loan, Term Loan A and Term Loan B to the Administrative Agent for the
ratable benefit of each Lender: (i) in arrears for the preceding Fiscal Quarter,
on each Interest Payment Date hereafter, commencing January 1, 1998; (ii) on the
Revolving Credit Commitment Termination Date; and (iii) if any interest accrues
or remains payable after the Revolving Credit Commitment Termination Date, upon
7
<PAGE>
demand. If any interest or other payment under this Agreement becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension. Interest shall accrue and be payable on the Revolving Credit
Loan, Term Loan A and Term Loan B at the rate or rates, and upon the terms and
conditions, set forth in Annex C. Each determination by the Administrative
-------
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error or bad faith.
SECTION 1.08. Borrowing Base. Based on the most recent Borrowing Base
--------------
Certificate delivered by Borrower to the Administrative Agent and on other
information available to the Administrative Agent, the Administrative Agent
shall in its reasonable credit judgment determine the amount of Reserves, if
any, in addition to those set forth in the Borrowing Base Certificate, for
purposes of determining the amounts, if any, to be advanced to Borrower under
the Revolving Credit Loan.
SECTION 1.09. Fees .
----
(a) Borrower shall pay to GE Capital, individually or in its capacity
as Administrative Agent, the Fees specified in the GE Capital Fee Letter, at the
times specified for payment therein.
(b) Additionally, as compensation for the Revolving Lenders' making
the Revolving Credit Loan and the Letters of Credit available to Borrower,
Borrower agrees to pay to the Administrative Agent, for the ratable benefit of
the Revolving Lenders, in arrears, on each Interest Payment Date, the following
fees:
(i) An unused facility fee (the "Non-Use Fee"), equal to one-half
-----------
of one percent (1/2 of 1%) per annum on the average unused daily balance of
the Revolving Credit Commitments; and
(ii) A letter of credit fee (the "Letter of Credit Fee") at a
--------------------
rate per annum equal to the Applicable Revolver LIBOR Margin (determined on
the basis set forth in paragraph 1 of Annex C including, without
-------
limitation, the provisions thereof with respect to the Default Rate), as
from time to time in effect, on the average outstanding Letter of Credit
Obligations.
(c) All Fees payable pursuant to paragraph (b) above shall be payable
in arrears for the preceding Fiscal Quarter, on each Interest Payment Date
hereafter, commencing January 1, 1998. All computations of Fees calculated on a
per annum basis shall be made by the Administrative Agent on the basis of a
three hundred and sixty (360) day year, in each case for the actual number of
days occurring in the period for which such Fees are payable.
8
<PAGE>
SECTION 1.10. Receipt of Payments. Borrower shall make each payment
-------------------
under this Agreement not later than 12:00 Noon (New York time) on the day when
due in Dollars in immediately available funds to the Payment Account. For
purposes of determining Borrowing Availability and computing interest and Fees
hereunder, all payments shall be deemed received by the Administrative Agent on
the day of receipt of immediately available funds therefor in the Payment
Account prior to 12:00 Noon (New York time). Payments received after 12:00 Noon
(New York time) on any Business Day shall be deemed to have been received on the
following Business Day.
SECTION 1.11. Funding, Payments; Non-Funding Lenders.
--------------------------------------
(a) Availability of each Lender's Pro Rata Share. Term Loan A, Term
--------------------------------------------
Loan B and the initial Revolving Credit Advance made on the Closing Date shall
be funded by the Administrative Agent only upon receipt by the Administrative
Agent of the Pro Rata Share of each such Loan to be funded by each of the
Lenders. Subject to the fulfillment of the conditions set forth in Article 2,
---------
each Lender shall, before 11:00 A.M. (New York time) on the Closing Date, make
available to the Administrative Agent, for the account of such Lender's
Applicable Lending Office, the amount of such Lender's Pro Rata Share of the
initial Revolving Credit Advance, Term Loan A and Term Loan B, as the case may
be, by wire transfer to the Administrative Agent's Payment Account, in same day
funds. The Administrative Agent may assume that each Revolving Lender will make
its Pro Rata Share of each Revolving Credit Advance available to the
Administrative Agent on each funding date subsequent to the Closing Date. If
such Pro Rata Share is not, in fact, paid to the Administrative Agent by such
Revolving Lender when due, the Administrative Agent will be entitled to recover
such amount on demand from such Revolving Lender without set-off, counterclaim
or deduction of any kind. If such Revolving Lender fails to pay the amount of
its Pro Rata Share forthwith upon the Administrative Agent's demand, the
Administrative Agent shall promptly notify Borrower and Borrower shall
immediately repay such amount to the Administrative Agent. Nothing in this
Section 1.11(a) or elsewhere in this Agreement or the other Loan Documents shall
- ---------------
be deemed to require the Administrative Agent to advance funds on behalf of any
Revolving Lender or to relieve any Revolving Lender from its obligation to
fulfill its Revolving Credit Commitment hereunder or to prejudice any rights
that Borrower may have against any Revolving Lender as a result of any default
by such Revolving Lender hereunder. To the extent that the Administrative Agent
advances funds to Borrower on behalf of any Revolving Lender and is not
reimbursed therefor on the same Business Day as such Revolving Credit Advance is
made, the Administrative Agent shall be entitled to retain for its account all
interest accrued on that Revolving Lender's portion of such Revolving Credit
Advance until reimbursed by the applicable Revolving Lender.
(b) Payments. Upon the receipt of any payment from Borrower with
--------
respect to any Obligation, the Administrative Agent will advise each Lender by
telephone or telecopy of the amount of such Lender's Pro Rata Share of
principal, interest and Fees paid for the benefit of Lenders with respect to
each applicable Loan. Provided that such Lender has made all payments required
to be made by it under this Agreement and the other Loan Documents as of such
date, the
9
<PAGE>
Administrative Agent will pay to each Lender such Lender's Pro Rata Share of
principal, interest and Fees paid by Borrower for the benefit of that Lender on
the Loans held by it. Such payments shall be made by wire transfer to such
Lender's account (as specified by such Lender to the Administrative Agent)
promptly following receipt thereof by the Administrative Agent.
(c) Return of Payments. If the Administrative Agent pays an amount to
------------------
a Lender under this Agreement in the belief or expectation that a related
payment has been or will be received by the Administrative Agent from Borrower
and such related payment is not received by the Administrative Agent, then the
Administrative Agent will be entitled to recover such amount from such Lender on
demand, without set-off, counterclaim or deduction of any kind. If the
Administrative Agent determines at any time that any amount received by the
Administrative Agent under this Agreement must be returned to Borrower or paid
to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, the Administrative Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to the
Administrative Agent on demand any portion of such amount that the
Administrative Agent has distributed to such Lender, together with interest at
such rate, if any, as the Administrative Agent is required to pay to Borrower or
such other Person, without set-off, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Revolving Lender (such
-------------------
Lender, a "Non-Funding Lender") to make its Pro Rata Share of any Revolving
------------------
Credit Advance on the date specified therefor shall not relieve any other
Revolving Lender (each such other Revolving Lender, an "Other Lender") of its
------------
obligation to make its Pro Rata Share of such Revolving Credit Advance, but
neither any Other Lender nor the Administrative Agent shall be responsible for
the failure of any Non-Funding Lender to make its Pro Rata Share of any
Revolving Credit Advance to be made on any funding date, and no Non-Funding
Lender shall have any obligation to the Administrative Agent or any Other Lender
for the failure by such Non-Funding Lender. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
"Lender" (or be included in the calculation of "Required Lenders" or "Required
Revolving Lenders" hereunder) for any voting or consent rights under or with
respect to any Loan Document.
SECTION 1.12. Application and Allocation of Payments.
--------------------------------------
(a) So long as no Default or Event of Default shall have occurred and
be continuing, (i) payments matching specific scheduled payments then due shall
be applied to those scheduled payments; (ii) voluntary prepayments shall be
applied as determined by Borrower, subject to the provisions of Section 1.04(d)
---------------
and (g); and (iii) mandatory prepayments shall be applied as set forth in
---
Section 1.04(g). As to each other payment, and as to all payments made when a
- ---------------
Default or Event or Default shall have occurred and be continuing or following
the Revolving Credit Commitment Termination Date, Borrower hereby irrevocably
waives the right to direct the application of any and all payments received from
or on behalf of Borrower (including any proceeds of Collateral), and Borrower
and each Lender hereby irrevocably agree that the Administrative Agent
10
<PAGE>
shall have the continuing exclusive right to apply any and all such payments
against the Obligations in the following order: First, to the payment of any
-----
"Administrative Agent's Fee" or other fees then due and payable to the
Administrative Agent, in its capacity as such, under the GE Capital Fee Letter;
Second, to the payment of all expenses incurred by the Administrative Agent in
- ------
connection with the exercise, protection and enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the Notes, the
Subsidiary Guaranty, or any of the other Loan Documents; Third, to the payment
-----
of interest and Fees owed to each Lender, ratably among all of the Lenders in
accordance with the aggregate amount of interest and Fees then owed to each of
them; Fourth, to the payment of the principal amount of the Notes and the Letter
------
of Credit Obligations then due and payable and for deposit to the Cash
Collateral Account in accordance with Annex B with respect to Letter of Credit
-------
Obligations not then due and payable, ratably among all of the Lenders in
accordance with the aggregate amount of Loans and Letter of Credit Obligations
then outstanding; Fifth, to the payment of all expenses then due and payable to
-----
the Lenders under Section 11.03 hereof (other than expenses payable under item
-------------
Second above), ratably among each of them in accordance with the aggregate
amount of such amounts then owed to each of them; and Sixth, to the payment of
-----
all other Obligations of Borrower or any other Credit Party hereunder, including
any such Obligations of Borrower to any Indemnified Party entitled to
indemnification under Section 1.14 hereof, ratably among all of the Indemnified
------------
Parties in accordance with the aggregate amount then owed to each of them.
(b) The Administrative Agent is authorized to, and at its option may,
charge to the Revolving Credit Loan balance on behalf of Borrower and cause to
be paid all Fees, expenses, Charges, costs (including insurance premiums in
accordance with Section 5.05), principal, interest, or other Obligations then
------------
due and payable by Borrower under this Agreement or any of the Loan Documents,
if and to the extent that Borrower fails promptly to pay any such amounts as and
when due, even if the making of such Revolving Credit Advance causes the
outstanding balance of the Revolving Credit Loan to exceed the Borrowing
Availability, in which case the terms of Sections 1.04(b) and (e) shall apply.
---------------- ---
SECTION 1.13. Loan Account and Accounting. The Administrative Agent
---------------------------
shall maintain a loan account (the "Loan Account") on its books to record: (a)
------------
all Revolving Credit Advances and Letter of Credit Obligations, (b) the Term
Loans, (c) all payments made by Borrower, and (d) all other debits and credits
as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
the Administrative Agent's customary accounting practices as in effect from time
to time. The balance in the Loan Account, as recorded on the Administrative
Agent's most recent printout or other written statement, shall be presumptive
evidence of the amounts due and owing to the Administrative Agent and Lenders by
Borrower; provided that any failure to so record or any error in so recording
--------
shall not limit or otherwise affect Borrower's duty to pay the Obligations. The
Administrative Agent will provide a monthly accounting of transactions under the
Revolving Credit Loan, Term Loan A and Term Loan B to Borrower and each Lender.
Each and every such accounting shall (absent manifest error) be deemed final,
binding and conclusive upon Borrower in all respects as to all matters reflected
therein, unless Borrower, within thirty (30) days after the date any such
accounting is
11
<PAGE>
rendered, shall notify the Administrative Agent in writing of any
objection which Borrower may have to any such accounting, describing the basis
for such objection with reasonable specificity. In that event, only those items
(the "disputed items") expressly objected to in such notice shall be deemed to
--------------
be disputed by Borrower. The Administrative Agent's determination, based upon
the facts available, of any disputed item shall (absent manifest error) be
final, binding and conclusive on Borrower.
SECTION 1.14. Indemnity.
---------
(a) Irrespective of whether any Loan is ever made hereunder or any
Letter of Credit ever issued hereunder, Borrower and each other Credit Party
shall indemnify and hold the Administrative Agent, the Syndication Agent, each
Lender, each Letter of Credit Issuer, their respective Affiliates, and their
respective officers, directors, employees, attorneys and agents (each, an
"Indemnified Person"), harmless from and against any and all suits, actions,
- -------------------
costs, fines, deficiencies, penalties, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees and disbursements
and other costs of investigations or defense, including those incurred upon any
appeal) (each, a "Claim") which may be instituted or asserted against or
-----
incurred by such Indemnified Person as the result of credit having been extended
under this Agreement or any other Loan Document or otherwise arising in
connection with the transactions contemplated hereunder and thereunder,
including any and all Environmental Liabilities and regardless of whether the
Indemnified Person is a party to such Claim; provided, that Borrower shall not
--------
be liable for any indemnification to such Indemnified Person with respect to any
portion of any such Claim which results solely from such Indemnified Person's
gross negligence, willful misconduct or breach of this Agreement as determined
by a final judgment of a court of competent jurisdiction. NEITHER THE
ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, ANY LENDER NOR ANY OTHER
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED THEREBY.
(b) In addition, Borrower and each other Credit Party shall indemnify
each Lender in the manner specified in Annexes B and C.
--------- -
SECTION 1.15. Access. Borrower and each of the other Credit Parties
------
shall, at the expense of the Administrative Agent (unless an Event of Default
shall have occurred and be continuing and as otherwise provided in the GE
Capital Fee Letter), provide access during normal business hours to the
Administrative Agent and any of its officers, employees and agents, as
frequently as the Administrative Agent determines to be reasonably appropriate,
upon at least three Business Days' advance notice (unless a Default or Event of
Default shall have occurred and be continuing, in which event no notice shall be
required and the Administrative Agent shall have
12
<PAGE>
access at any and all times, without notice), to the properties and facilities
of Borrower and each of the other Credit Parties and, while the Administrative
Agent has access to such properties and facilities, (a) permit the
Administrative Agent and any of its officers, employees and agents to inspect
and make extracts from all of Borrower's and the other Credit Parties'
records, files and books of account; and (b) permit the Administrative Agent
to inspect, review, evaluate and make test verifications of the Collateral,
and Borrower and each of the other Credit Parties shall render to the
Administrative Agent, at Borrower's or such Credit Party's reasonable cost and
expense, such clerical and other assistance as may be reasonably requested
with regard thereto. Borrower and each of the other Credit Parties shall make
available to the Administrative Agent and its counsel, as quickly as
practicable under the circumstances, originals or copies of all books, records,
board minutes, contracts, insurance policies, environmental audits, business
plans, files, financial statements (actual and pro forma), filings with
---------
federal, state and local regulatory agencies, and other instruments
and documents which the Administrative Agent may request, but excluding (i) any
confidential patient medical records and (ii) confidential information relating
to a proposed Acquisition and subject to a confidentiality agreement in favor of
the seller. Borrower and each of the other Credit Parties shall deliver any
document or instrument reasonably necessary for the Administrative Agent, as it
may from time to time request, to obtain records from any service bureau or
other Person which maintains records for Borrower or the other Credit Parties.
Borrower shall instruct its independent certified public accountants and its
banking and other financial institutions to make available to the Administrative
Agent such information and records as the Administrative Agent may reasonably
request. Representatives of other Lenders may accompany the Administrative
Agent's representatives, but Borrower shall not be charged for the costs or
expenses of the representatives of such other Lenders.
SECTION 1.16. Taxes.
-----
(a) Any and all payments by or on behalf of Borrower hereunder or
under the Revolving Credit Notes, the Term Notes or any other Loan Document,
shall be made, in accordance with this Section 1.16, free and clear of and
------------
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Revolving Credit Notes, the Term Notes or any other Loan
Document to the Administrative Agent for distribution to any Lender or Letter of
Credit Issuer, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 1.16) each such Lender or Letter of
------------
Credit Issuer receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions, and (iii)
Borrower shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law.
(b) Each Credit Party shall indemnify and, within ten (10) days after
demand therefor, shall pay to the Administrative Agent, for the benefit of such
Lender or Letter of Credit Issuer, the full amount of Taxes (including any Taxes
imposed by any jurisdiction on amounts payable under this Section 1.16) paid by
------------
any Lender or Letter of Credit Issuer and any liability
13
<PAGE>
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.
(c) Within thirty (30) days after the date of any such payment of
Taxes, Borrower shall furnish to the Administrative Agent, at its address
referred to in Section 11.10, the original or a certified copy of a receipt
-------------
evidencing payment thereof.
(d) For the purposes of this Section 1.16, "Taxes" shall mean taxes,
------------ -----
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the net income of
Lenders, the Letter of Credit Issuers or any of their respective assigns
pursuant to Section 10.02, by the United States, the jurisdiction under the laws
-------------
of which any Lender, any Letter of Credit Issuer or any of such assigns is
organized or the jurisdiction in which any Lender's, any Letter of Credit
Issuer's or any of such assigns' Applicable Lending Office is located or, in
each case, any political subdivision thereof.
SECTION 1.17. Capital Adequacy; Increased Costs; Illegality.
---------------------------------------------
(a) If the Administrative Agent, any Lender, or any Letter of Credit
Issuer party to this Agreement shall have determined that the adoption after the
date hereof of any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve requirements
or similar requirements or compliance by any Lender or any such Letter of Credit
Issuer with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law)
from any central bank or other Governmental Authority increases or would have
the effect of increasing the amount of capital, reserves or other funds required
to be maintained by such Lender or Letter of Credit Issuer and thereby reducing
the rate of return on such Lender's or Letter of Credit Issuer's capital as a
consequence of its obligations hereunder, then Borrower shall from time to time
upon demand by such Lender or Letter of Credit Issuer (with a copy of such
demand to the Administrative Agent) pay to the Administrative Agent, for the
account of such Lender or Letter of Credit Issuer, additional amounts sufficient
to compensate such Lender or Letter of Credit Issuer for such reduction. A
certificate as to the amount of that reduction and showing the basis therefor
and the computation thereof submitted by such Lender or Letter of Credit Issuer
to Borrower and to the Administrative Agent shall, absent manifest error, be
final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any law
or regulation (or any change in the interpretation thereof) after the date
hereof or (ii) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law)
after the date hereof, there shall be any increase in the cost to any Lender or
to any Letter of Credit Issuer party hereto of agreeing to make or making,
funding or maintaining any Loan or of agreeing to issue or purchase a
participation interest in or in issuing or purchasing a participation interest
in any Letter of Credit or Letter of Credit Obligation, then Borrower shall from
time to time, upon demand by such Lender or Letter of Credit Issuer (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender or Letter
14
<PAGE>
of Credit Issuer additional amounts sufficient to compensate such Lender or
Letter of Credit Issuer for such increased cost. A certificate as to the amount
of such increased cost, the basis therefor and the computation thereof,
submitted to Borrower and to the Administrative Agent by such Lender or Letter
of Credit Issuer, shall be conclusive and binding on Borrower for all purposes,
absent manifest error. Each Lender and Letter of Credit Issuer party hereto
agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender or Letter of Credit Issuer shall, to the extent not
inconsistent with such Lender's or Letter of Credit Issuer's internal policies
of general application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrower pursuant to this Section
-------
1.17(b).
- -------
(c) If any Lender requests compensation from Borrower under Section
-------
1.17(b), Borrower may at its option, within fifteen (15) days after receipt by
- -------
Borrower of written demand from such Lender (an "Affected Lender") for payment
---------------
of such increased costs, notify the Administrative Agent and such Affected
Lender of its intention to replace the Affected Lender. So long as no Default
or Event of Default shall have occurred and be continuing, Borrower, with the
consent of the Administrative Agent, may obtain, at Borrower's expense, a
replacement Lender ("Replacement Lender") for the Affected Lender, which
------------------
Replacement Lender must be satisfactory to the Administrative Agent. If
Borrower obtains a Replacement Lender within ninety (90) days following notice
of its intention to do so, the Affected Lender must sell and assign its Loans
and any Revolving Credit Commitment to such Replacement Lender for an amount
equal to the principal balance of all Loans held by the Affected Lender and all
accrued interest and Fees with respect thereto through the date of such sale,
provided that Borrower shall have reimbursed such Affected Lender for the
- --------
increased costs that it is entitled to receive under Section 1.17(b) through the
---------------
date of such sale and assignment. Notwithstanding the foregoing, Borrower shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs within fifteen (15) days following its
receipt of Borrower's notice of intention to replace such Affected Lender.
Furthermore, if Borrower gives a notice of intention to replace and does not so
replace such Affected Lender within ninety (90) days thereafter, Borrower's
rights under this Section 1.17(c) shall terminate and Borrower shall promptly
---------------
pay all increased costs demanded by such Affected Lender pursuant to Section
-------
1.17(b).
- -------
(d) Each Lender or Letter of Credit Issuer that desires compensation
under this Section 1.17 shall notify Borrower of any event occurring after the
------------
date hereof entitling such Lender or Letter of Credit Issuer to compensation
under paragraph (a) or (b) of this Section 1.17 as promptly as practicable, but
------------
in any event within 90 days after such Person obtains knowledge thereof;
provided that (i) if any such Lender or Letter of Credit Issuer fails to give
- --------
such notice within 90 days after it obtains knowledge of such an event, such
Person shall, with respect to compensation payable pursuant to this Section 1.17
------------
in respect of any costs resulting from such event, only be entitled to payment
under this Section 1.17 for costs incurred from and after the date 90 days prior
------------
to the date that such Lender or Letter of Credit Issuer does give notice and
(ii) each such Lender and each Letter of Credit Issuer party hereto will
designate a different Applicable Lending Office for any Loans or Letter of
Credit Obligations affected by such event if such designation will avoid the
need for, or
15
<PAGE>
reduce the amount of, such compensation and will not, in the opinion of such
Lender or Letter of Credit Issuer, be disadvantageous in any material respect to
such Lender or Letter of Credit Issuer.
(e) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) after the date hereof shall make it unlawful, or any
central bank or other Governmental Authority shall assert that it is unlawful,
for any Lender to agree to make or to make or to continue to fund or maintain
any LIBOR Rate Loan, then, unless such Lender is able to make or to continue to
fund or to maintain such LIBOR Rate Loan at another branch or office of such
Lender without, in such Lender's opinion, adversely affecting it or its Loans or
the income obtained therefrom, on notice thereof and demand therefor by such
Lender to Borrower through the Administrative Agent, (i) the obligation of such
Lender to agree to make or to continue to fund or maintain LIBOR Rate Loans
shall be suspended until such time, if any, as such Lender may again make and
maintain such LIBOR Rate Loans and (ii) all outstanding LIBOR Rate Loans owing
to such Lender, together with interest accrued thereon, shall automatically
convert into an Index Rate Loan on the last day of the current LIBOR Period or
such earlier date as such Lender may specify to Borrower in such notice.
SECTION 1.18. Single Obligation. All Loans to Borrower and all of the
-----------------
other Obligations of Borrower and any other Credit Party arising under this
Agreement and the other Loan Documents shall constitute one general obligation
of Borrower and the other Credit Parties secured, until the Termination Date, by
all of the Collateral.
ARTICLE 2
CONDITIONS PRECEDENT
SECTION 2.01. Conditions to the Initial Loans. No Lender shall be
-------------------------------
obligated to make any Loan or incur any Letter of Credit Obligations on the
Closing Date, or to take, fulfill, or perform any other action hereunder, until
the following conditions have been satisfied or provided for in a manner
satisfactory to the Administrative Agent, or waived in writing by the
Administrative Agent and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
--------------------------------
hereof shall have been duly executed by, and delivered to, Borrower, each other
Credit Party, the Agents and Lenders; and the Administrative Agent shall have
received such documents, instruments, agreements and legal opinions as the
Administrative Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the Schedule of Closing Documents attached hereto
as Annex D, each in form and substance satisfactory to the Administrative Agent.
-------
(b) Repayment of Outstanding Indebtedness; Cash Collateralization of
----------------------------------------------------------------
Outstanding Letters of Credit. (i) the Administrative Agent shall have received
- -----------------------------
a fully executed original of a payoff letter from the indenture trustee for the
Life Companies, satisfactory to the
16
<PAGE>
Administrative Agent, stipulating the respective amounts of the Life Company
Obligations, confirming that all of the Life Company Obligations will be repaid
in full from the proceeds of the Term Loans, the initial Revolving Credit
Advance and the Related Transactions and agreeing that all Liens upon any of the
property of Borrower or any of its Subsidiaries in favor of the Life Companies
shall be terminated by the indenture trustee for the Life Companies immediately
upon such payment; (ii) the Administrative Agent shall have received a fully
executed original of a payoff letter from SocGen, as Agent under the SocGen
Credit Agreement, satisfactory to the Administrative Agent, stipulating the
amount of the SocGen Obligations and the amount of cash collateral required to
cash collateralize the SocGen Letters of Credit in full and confirming that all
of the SocGen Obligations (other than the SocGen Letters of Credit, but
specifically including the term loan funded on September 2, 1997 in respect of
the Bayou Oaks Bonds) will be repaid in full from the proceeds of the Term
Loans, the initial Revolving Credit Advance and the Related Transactions; and
(iii) the Administrative Agent shall have received a fully executed original of
the SocGen Cash Collateral Agreement.
(c) Approvals. The Administrative Agent shall have received (i)
---------
satisfactory evidence that the Credit Parties have obtained all required
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the Related Transactions or
(ii) an officer's certificate in form and substance reasonably satisfactory to
the Administrative Agent affirming that no such consents or approvals are
required.
(d) Opening Availability. The Borrowing Base supporting the initial
--------------------
Revolving Credit Advance and the initial Letter of Credit Obligations incurred
and the amount of the Reserves to be established on the Closing Date, as
determined by the Administrative Agent, shall provide Borrower with Excess
Borrowing Availability, after giving effect to the initial Revolving Credit
Advance, the incurrence of any initial Letter of Credit Obligations and the
consummation of the Related Transactions (on a pro forma basis, with trade
---------
payables being paid currently, and expenses and liabilities being paid in the
ordinary course of business and without acceleration of sales) of at least
$6,000,000.
(e) Payment of Fees. Borrower shall have paid the Fees required to be
---------------
paid on the Closing Date in the respective amounts specified in Section 1.09
------------
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agents for all reasonable legal fees and all other out-of-pocket
costs and expenses of closing presented as of the Closing Date.
(f) Capital Structure: Other Indebtedness. The capital structure of
-------------------------------------
each Credit Party and the terms and conditions of all Indebtedness of each
Credit Party shall be acceptable to the Administrative Agent in its sole
discretion; and Borrower's Funded Debt (as defined in Annex G) shall not exceed
-------
$55,000,000, giving effect to the Term Loans and any Revolving Credit Advance to
be made on the Closing Date.
17
<PAGE>
(g) Consummation of Related Transactions. The Administrative Agent
------------------------------------
shall have received fully executed copies of the Bridge Note Purchase Agreement,
the Preferred Stock Purchase Agreement and each of the other Related Transaction
Documents, each of which shall be in form and substance satisfactory to the
Administrative Agent and its counsel, and the Related Transactions shall have
been consummated in accordance with the terms of the Related Transaction
Documents.
SECTION 2.02. Further Conditions to Each Loan. Except as otherwise
-------------------------------
expressly provided herein, no Lender shall be obligated to fund any Loan,
convert or continue any Loan into, or as, a LIBOR Rate Loan or incur any Letter
of Credit Obligation, if, as of the date thereof:
(a) Any representation or warranty by any Credit Party contained
herein or in any of the other Loan Documents shall be untrue or incorrect as of
such date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted or
expressly contemplated by this Agreement; or
(b) Any Material Adverse Event shall have occurred and be continuing
since the Audit Date; or
(c) (i) Any Event of Default shall have occurred and be continuing or
would result after giving effect to any Loan (or the incurrence of any Letter of
Credit Obligations), or (ii) a Default shall have occurred and be continuing or
would result after giving effect to any Loan, and the Administrative Agent or
the Required Revolving Lenders shall have determined not to make any Revolving
Credit Advance or incur any Letter of Credit Obligation so long as that Default
is continuing; or
(d) After giving effect to any Revolving Credit Advance (or the
incurrence of any Letter of Credit Obligations), the outstanding principal
amount of the Revolving Credit Loan would exceed the Borrowing Availability.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Rate Loan, as the case may be, shall be deemed
to constitute, as of the date thereof, (i) a representation and warranty by
Borrower that the conditions in this Section 2.02 have been satisfied and (ii)
------------
a reaffirmation by Borrower of the granting and continuance of the
Administrative Agent's Liens, on behalf of itself and Lenders, pursuant to the
Collateral Documents.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce Lenders and the Agents to enter into this Agreement, Borrower and
each Credit Party represents and warrants to each Lender and the Agents that:
18
<PAGE>
SECTION 3.01. Corporate Existence; Compliance with Law. Borrower and
----------------------------------------
each of its Subsidiaries: (a) is a corporation duly organized or, in the case of
certain of its Subsidiaries, a partnership or a limited liability company duly
formed; (b) is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation; (c) is duly qualified to do
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification
except where a failure to be so qualified and in good standing is not a Material
Adverse Event; (d) has the requisite corporate, partnership or limited liability
company power and authority, as the case may be, and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its business as now, heretofore
and proposed to be conducted; and (d) is in compliance with its articles or
certificate of incorporation and bylaws, its partnership agreement or limited
liability company operating agreement, as the case may be.
SECTION 3.02. Executive Offices; Collateral Locations; Corporate or Other
-----------------------------------------------------------
Names. The locations of Borrower's and each of the other Credit Parties'
- -----
respective executive offices, principal places of business, corporate offices,
all premises within which any Collateral is located, and the locations of all of
Borrower's and each of the other Credit Parties' records concerning the
Collateral, in each case as of the Closing Date, are set forth in Schedule 3.02.
-------------
During the prior five years, except as set forth in Schedule 3.02, neither
-------------
Borrower nor any of the other Credit Parties has been known as or used any
corporate, fictitious or trade name.
SECTION 3.03. Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The execution, delivery and performance by Borrower and each of the other Credit
Parties of this Agreement and the other Loan Documents to which it is a party
and the creation of all Liens provided for herein and therein: (a) are within
Borrower's and each such Credit Party's corporate power; (b) have been duly
authorized by all necessary corporate and shareholder action; (c) are not in
contravention of any provision of Borrower's or any such Credit Party's articles
or certificate of incorporation or bylaws or other organizational documents; (d)
do not violate any law or regulation, or any order or decree of any Governmental
Authority; (e) do not conflict with or result in the breach or termination of,
constitute a default under or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Borrower or any such Credit Party is a party or by which Borrower or any
such Credit Party or any of their respective property is bound, including,
without limitation, the Related Transaction Documents or any other agreement,
document or instrument relating to Subordinated Indebtedness; (f) do not result
in the creation or imposition of any Lien upon any of the Property of Borrower
or any such Credit Party other than those in favor of the Administrative Agent
for the ratable benefit of the Lenders, all pursuant to the Collateral
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except those consents and approvals referred to
in Section 2.01(c), all of which will have been duly obtained, made or complied
---------------
with prior to the Closing Date and which are in full force and effect. At or
prior to the Closing Date, each of the Loan Documents shall have been duly
executed and delivered for the benefit of or on behalf of Borrower and each of
the other Credit Parties party thereto and each shall then constitute a legal,
valid and binding obligation of Borrower and each such Credit Party, enforceable
against Borrower and each such Credit Party a party thereto
19
<PAGE>
in accordance with its terms except as the enforceability of such Loan Document
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
laws affecting creditor's rights and remedies in general.
SECTION 3.04. Financial Statements and Projections. Borrower has
------------------------------------
delivered to each of the Agents the Financial Statements and Projections
identified in Schedule 3.04, and each of such Financial Statements and
-------------
Projections complies with the description thereof contained in Schedule 3.04 as
-------------
of the Closing Date.
SECTION 3.05. Material Adverse Events. As of the Closing Date, except as
-----------------------
set forth in Schedule 3.05, Borrower and its Subsidiaries have no material
-------------
obligations, known material contingent liabilities, or material liabilities for
Charges, long-term leases or unusual forward or long-term commitments which are
not reflected in the Financial Statements identified in Schedule 3.04. As of
-------------
the Closing Date, there has been no material deviation in Borrower's or any of
the other Credit Parties' financial position and results of operations from
those reflected in the Projections. As of the Closing Date, except as otherwise
permitted hereunder or as set forth in Schedule 3.05, no Restricted Payment has
-------------
been made since the Audit Date, and no shares of Stock of Borrower have been, or
are now required to be, redeemed, retired, purchased or otherwise acquired for
value by Borrower or any of its Subsidiaries. Since the Audit Date, no Material
Adverse Event has occurred and is continuing.
SECTION 3.06. Ownership of Property; Liens. The real property listed in
----------------------------
Schedule 3.06 constitutes all of the Real Property owned, leased, or used in
- -------------
Borrower's or any of the other Credit Parties' respective businesses as of the
Closing Date. Borrower and each of the other Credit Parties holds (a) good and
insurable fee simple title to all Real Property owned by it and described in
Schedule 3.06, subject only to Permitted Encumbrances of the types described in
- -------------
paragraphs (a), (e) and (i) of the definition thereof, (b) valid and insurable
leasehold interests in all Leases to which it is a party and which are described
in Schedule 3.06, subject only to Permitted Encumbrances of the types described
-------------
in paragraphs (a), (e) and (i) of the definition thereof, and (c) good and valid
title to, or valid leasehold interests in, all of its other properties and
assets, subject only to Permitted Liens. As of the Closing Date, none of the
properties and assets of Borrower or any of the other Credit Parties are subject
to any Liens, except Permitted Encumbrances, Liens set forth in Schedule 6.07
-------------
and the Lien in favor of the Administrative Agent pursuant to the Collateral
Documents.
SECTION 3.07. Restrictions; No Default; Material Contracts. No contract,
--------------------------------------------
lease, agreement or other instrument to which Borrower or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets is bound or affected and no provision of any charter,
corporate restriction, applicable law or governmental regulation would cause a
Material Adverse Event. Neither Borrower nor any of its Subsidiaries is in
default and, to Borrower's knowledge, no third party is in default, under or
with respect to any Material Contract, except in each case to the extent that
such default is not a Material Adverse Event. No Default or Event of Default
has occurred and is continuing. As of the Closing Date, Schedules 3.07 and 3.31
-------------- ----
set forth a complete and accurate list of all Material Contracts.
20
<PAGE>
SECTION 3.08. Labor Matters. Except as set forth in Schedule 3.08, there
------------- -------------
are no strikes or other labor disputes against Borrower or any of its
Subsidiaries that are pending or, to Borrower's knowledge, threatened that would
be a Material Adverse Event. Hours worked by and payment made to employees of
Borrower or its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters, except
where such violations are not Material Adverse Events. All payments due from
Borrower or any of its Subsidiaries on account of employee health and welfare
insurance have been paid or accrued as a liability on the books of Borrower or
such Subsidiary, except in each case to the extent that a failure to pay or
accrue such payment is not a Material Adverse Event. Except as set forth in
Schedule 3.08, as of the Closing Date neither Borrower nor any of its
- -------------
Subsidiaries has any obligation under any collective bargaining agreement or any
agreement providing for management services to be provided to Borrower, and a
correct and complete copy of each agreement listed on Schedule 3.08 has been
-------------
provided to the Administrative Agent. Except as set forth on Schedule 3.08, as
-------------
of the Closing Date there is no organizing activity involving Borrower or any of
its Subsidiaries pending or, to Borrower's knowledge, threatened by any labor
union or group of employees. Except as set forth in Schedule 3.08, as of the
-------------
Closing Date there are no representation proceedings pending or, to Borrower's
knowledge, threatened with the National Labor Relations Board with respect to
Borrower or any of its Subsidiaries, and no labor organization or group of
employees of Borrower or any of its Subsidiaries has made a pending demand for
recognition. Except as set forth on Schedule 3.08, there are no complaints or
-------------
charges against Borrower or any of its Subsidiaries pending or, to the
knowledge of Borrower, threatened to be filed with any federal, state, local or
foreign court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any individual by Borrower or any of its Subsidiaries, which if
adversely determined would be a Material Adverse Event.
SECTION 3.09. Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth in Schedule 3.09, as of the Closing Date
- ------------ -------------
(a) Borrower has no Subsidiaries and is not engaged in any joint venture or
partnership with any other Person, and is not an Affiliate of any other Person;
(b) the Stock of each Subsidiary of Borrower (other than an Inactive Subsidiary)
owned by Borrower or a Subsidiary of Borrower and described in Schedule 3.09
-------------
constitutes all of the issued and outstanding Stock of each such Subsidiary; and
(c) there are no outstanding rights to purchase, options, warrants or similar
rights or agreements pursuant to which Borrower or any of the other Credit
Parties may be required to issue, sell or purchase any Stock or other equity
security of a Credit Party (other than Borrower). Schedule 3.09 lists all
-------------
outstanding Stock of each of the Credit Parties (other than Borrower) as of the
Closing Date and all Indebtedness held by any of the Credit Parties as of the
Closing Date. As of the Closing Date, all of the Subsidiaries of Borrower that
are Inactive Subsidiaries or Material Subsidiaries are identified as such on
Schedule 3.09.
- -------------
SECTION 3.10. Government Regulation. Neither Borrower nor any of the
---------------------
other Credit Parties is: (a) an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940 as amended; or (b)
subject to regulation under the Public Utility Holding Company Act
21
<PAGE>
of 1935, the Federal Power Act, the Interstate Commerce Act or any other federal
or state regulatory statute that requires the approval of any Governmental
Authority in order for Borrower or any such Credit Party to incur Indebtedness,
pledge its assets, or to perform its obligations hereunder, or under any other
Loan Document.
SECTION 3.11. Margin Regulations. Borrower is not engaged in the
------------------
business of extending credit for the purpose of purchasing or carrying Margin
Stock and no proceeds of the Term Loans or any Revolving Credit Advance will be
used to purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock. Borrower will not take any
action, or permit to be taken any action under its control, which might cause
any Loan Document or any document or instrument delivered pursuant hereto or
thereto to violate any regulation of the Federal Reserve Board.
SECTION 3.12. Taxes. As of the Closing Date, Borrower's and each of the
-----
other Credit Parties' federal tax identification numbers are set forth on
Schedule 3.12. All federal, and all material state, local and foreign, tax
- -------------
returns, reports and statements, including information returns, required to be
filed by Borrower and its Subsidiaries, have been filed with the appropriate
Governmental Authority and all material Charges and other impositions shown
thereon to be due and payable have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been paid.
Proper and accurate amounts have been withheld by Borrower and each of its
Subsidiaries from its employees for all periods in compliance in all material
respects with the tax, social security and unemployment withholding provisions
of applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. As of the Closing
Date, (i) Schedule 3.12 sets forth those taxable years for which any of the tax
-------------
returns of Borrower or any of its Subsidiaries are currently being audited by
the IRS or any other applicable Governmental Authority, and any assessments or
threatened assessments in connection with such audit or otherwise currently
outstanding; (ii) except as described in Schedule 3.12, neither Borrower nor any
-------------
of its Subsidiaries has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any Charges; (iii) neither
Borrower nor any of its Subsidiaries has agreed or been requested to make any
adjustment under IRC Section 481(a) by reason of a change in accounting method
or otherwise; and (iv) except as described in Schedule 3.12, Borrower has no
-------------
obligation under any written tax sharing agreement.
SECTION 3.13. ERISA.
-----
(a) As of the Closing Date, Schedule 3.13 lists all Plans maintained
-------------
or contributed to by Borrower and each of its Subsidiaries and all Qualified
Plans maintained or contributed to by any ERISA Affiliate, and separately
identifies the Title IV Plans, Multi-employer Plans, any multiple employer plans
subject to Section 4064 of ERISA, unfunded Pension Plans, Welfare Plans and
Retiree Welfare Plans. IRS determination letters regarding the qualified status
under IRC Section 401 of each such Qualified Plan have been received as of the
dates listed in Schedule 3.13.
-------------
22
<PAGE>
Each of the favorable determination letters considers the requirements of the
Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1986 and the
Omnibus Budget Reconciliation Act of 1987. To the knowledge of Borrower, the
Qualified Plans as amended continue to qualify under Section 401 of the IRC, the
trusts created thereunder continue to be exempt from tax under the provisions of
IRC Section 501(a), and nothing has occurred which would cause the loss of such
qualification or tax-exempt status. Each Qualified Plan so amended has been
submitted to the IRS for a determination letter as to the ongoing qualified
status of the Plan under the IRC within the applicable IRC Section 401(b)
remedial amendment period for the Tax Reform Act of 1986; and each such Plan
shall be amended, including retroactive amendments, as required during such
determination letter process to maintain the qualified status of such Plans. To
the knowledge of Borrower, each Plan is in compliance in all material respects
with the applicable provisions of ERISA and the IRC, including the filing of all
reports required under the IRC or ERISA which are true and correct as of the
date filed, and all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. Neither Borrower, nor any of
its Subsidiaries nor any ERISA Affiliate, with respect to any Qualified Plan,
has failed to make any contribution or pay any amount due as required by IRC
Section 412 or Section 302 of ERISA. With respect to all Retiree Welfare Plans,
the present value of future anticipated expenses pursuant to Borrower's most
recent actuarial projections of liabilities does not exceed $500,000, and copies
of such projections have been provided to Lender. Borrower has no Pension Plans,
other than Qualified Plans and the unfunded Pension Plans listed in Schedule
--------
3.13, and Borrower has not engaged in a prohibited transaction, as defined in
- -----
IRC Section 4975 or Section 406 of ERISA, in connection with any Plan which
would subject Borrower (after giving effect to any exemption) to a material tax
on prohibited transactions imposed by IRC Section 4975 or any other material
liability.
(b) Except as set forth in Schedule 3.13: (i) no Title IV Plan has
-------------
any Unfunded Pension Liability; (ii) no ERISA Event or event described in
Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge of
Borrower, threatened claims, actions or lawsuits (other than claims for benefits
in the normal course), asserted or instituted against (x) any Plan or its
assets, (y) to Borrower's knowledge, any fiduciary with respect to any Plan or
(z) Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to any
Plan; (iv) neither Borrower, nor any of its Subsidiaries nor any ERISA Affiliate
has incurred or reasonably expects to incur any Withdrawal Liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 of ERISA as a result of a
complete or partial withdrawal from a Multi-employer Plan; (v) within the last
five (5) years neither Borrower, nor any of its Subsidiaries nor any ERISA
Affiliate has engaged in a transaction which resulted in a Title IV Plan with
Unfunded Pension Liabilities being transferred outside of the "controlled group"
(within the meaning of Section 4001(a)(14) of ERISA) of any such entity; (vi) no
Plan which is a Retiree Welfare Plan provides for continuing benefits or
coverage for any participant or any beneficiary of a participant after such
participant's termination of employment (except as may be required by IRC
Section 4980B or Part 6 of Title I of ERISA and at the sole expense of the
participant or the beneficiary of the participant); (vii) Borrower, each of its
Subsidiaries and each ERISA Affiliate have complied in all material respects
with the notice and continuation coverage requirements of IRC Section
23
<PAGE>
4980B and the proposed or final regulations thereunder; and (viii) no liability
under any Plan has been funded, nor has such obligation been satisfied with, the
purchase of a contract from an insurance company that is not rated AAA by
Standard & Poor's Rating Group and the equivalent by each other nationally
recognized rating agency.
SECTION 3.14. No Litigation. Except as set forth in Schedule 3.14, no
------------- -------------
action, claim or proceeding is now pending or, to the knowledge of Borrower,
threatened against Borrower or any of its Subsidiaries, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators (a) which challenges Borrower's or
any Credit Party's right, power, or competence to enter into or perform any of
its obligations under the Loan Documents, or the validity or enforceability of
any Loan Document or any action taken thereunder, or (b) which has a reasonable
risk of being determined adversely to Borrower or any of its Subsidiaries and
which, if so determined, would be a Material Adverse Event. To the knowledge of
Borrower, as of the Closing Date there does not exist a state of facts which is
reasonably likely to give rise to such proceedings. Except as set forth in
Schedule 3.14, as of the Closing Date there is no litigation pending or, to the
- -------------
knowledge of Borrower, threatened against Borrower or any of its Subsidiaries
which seeks damages in excess of $500,000 or injunctive relief or alleges
criminal misconduct on the part of Borrower or any of its Subsidiaries, and
neither Borrower nor any of its Subsidiaries is a party to any consent decree.
SECTION 3.15. Brokers. No broker or finder acting on behalf of Borrower
-------
or any other Credit Party brought about the obtaining, making or closing of the
credit extended pursuant to this Agreement or of the Related Transactions and
neither Borrower nor any other Credit Party has any obligation to any Person in
respect of any finder's or brokerage fees in connection therewith.
SECTION 3.16. Patents, Trademarks, Copyrights and Licenses. As of the
--------------------------------------------
Closing Date, Borrower and each of the other Credit Parties own or have valid
licenses for all patents, patent applications, copyrights, service marks,
trademarks, trademark applications and trade names which are necessary to
conduct its business, each of which is listed, together with United States
Patent and Trademark Office or United States Copyright Office application or
registration numbers, where applicable, in Schedule 3.16. Borrower and each of
-------------
its Subsidiaries conduct business without infringement or claim of infringement
of any such license, patent, copyright, service mark, trademark, trade name,
trade secret or other intellectual property right of others, except in each case
to the extent that such infringement or claim of infringement is not a Material
Adverse Event. Except as set forth in Schedule 3.16, to Borrower's knowledge,
-------------
as of the Closing Date, there is no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of Borrower or any
of its Subsidiaries.
SECTION 3.17. Full Disclosure. No information contained in this
---------------
Agreement, the other Loan Documents, the Financial Statements or any written
statement, notice, report or certificate furnished by or on behalf of Borrower
or any Affiliate thereof pursuant to the terms of this Agree-
24
<PAGE>
ment or any other Loan Document, which has previously been delivered to the
Administrative Agent or any Lender, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. With respect to all business plans and other forecasts and
projections (including the Projections) furnished by or on behalf of Borrower
and made available to the Administrative Agent or any Lender relating to the
financial condition, operations, business, properties or prospects of Borrower
and its Subsidiaries, (i) to the knowledge of Borrower, as of the Closing Date
no facts exist concerning Borrower or any of its Subsidiaries which would result
in any material change of any of such business plans, forecasts and projections,
(ii) such business plans, forecasts and projections are based upon estimates and
assumptions deemed reasonable by Borrower at the time of preparation thereof,
which as a whole are fair in light of current conditions known to Borrower, have
been prepared on the basis of the assumptions stated therein, and reflect a
reasonable estimate by Borrower of the results of operations and other
information projected therein.
SECTION 3.18. Environmental Matters.
---------------------
(a) Except as set forth in Schedule 3.18, as of the Closing Date: (i)
-------------
the Real Property is free of contamination from any Hazardous Material except
for such contamination that would not materially adversely impact the value or
marketability of such Real Property; (ii) no Credit Party has caused or suffered
to occur any Release of Hazardous Materials on, at, in, under, above, to, from
or about any of its Real Property that would give rise to any material liability
for corrective or remedial action under any Environmental Laws except in each
case to the extent that the failure to do so would not be a Material Adverse
Event; (iii) Borrower and each of its Subsidiaries are and have been in
compliance with all Environmental Laws, except in each case to the extent that
the failure to do so would not be a Material Adverse Event; (iv) the Credit
Parties have obtained, and are in compliance with, all Environmental Permits
required by Environmental Laws for the operations of their respective
businesses, except in each case to the extent that the failure to do so would
not be a Material Adverse Event, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Credit Party is involved in operations
or knows of any facts, circumstances or conditions, including, without
limitation, any generation, use, treatment, storage, disposal, handling, other
management or Release of Hazardous Materials, that are reasonably likely to
result in any material Environmental Liabilities of such Credit Party, and, to
the knowledge of the Credit Parties, no Credit Party has permitted any current
or former tenant or occupant of the Real Property to engage in any such
operations; (vi) as of the Closing Date, there is no litigation against any
Credit Party arising under or related to any Environmental Laws, Environmental
Permits or Hazardous Material; (vii) no written notice has been received by any
Credit Party identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes in respect of any actual or
potential Environmental Liabilities and, to the knowledge of the Credit Parties,
there are no facts, circumstances or conditions that may result in any Credit
Party being identified as a "potentially responsible party" under CERCLA or
analogous state statutes; (viii) as of the Closing Date, the Credit Parties have
provided to the Administrative Agent copies of all existing environmental
reports, reviews and audits and all written information pertaining to actual or
potential Environmental Liabilities, in each case relating to any
25
<PAGE>
Credit Party; and (ix) to the knowledge of the Credit Parties, the Real Property
owned or leased as of the Closing Date does not contain any underground storage
tanks that have ever leaked; are not registered with appropriate government
officials (to the extent such registration is required) or fail to meet any
applicable legal requirement, including, without limitation to, tightness-
testing requirements.
(b) Borrower has furnished to the Administrative Agent a correct and
complete copy of the Phase I Environmental Assessments for Seven Hospital
Facilities prepared by Robert Bates & Associates, dated March, 1993 and
designated RBA Project No. 93455 (the "Phase I Assessment") and, except with
------------------
respect to Atlantic Shores Hospital, which has previously been sold, and except
as set forth on Schedule 3.18, (i) Borrower is not aware of any change since
-------------
March, 1993 in respect of any of the existing and potential environmental issues
noted in the Phase I Assessment that is reasonably likely to result in any
material Environmental Liability, (ii) since March, 1993 there has been no
material construction to or demolition of any of the hospitals the subject of
the Phase I Assessment and, in any event, no construction or demolition
involving asbestos-containing materials that is reasonably likely to result in
material Environmental Liabilities, and (iii) since March, 1993, there has been
no material change in the processes or physical operations conducted by any of
the hospitals that were the subject of the Phase I Assessment (including,
without limitation, any processes or physical operations involving the
generation, use, storage, treatment, management or other handling of Hazardous
Materials) that is reasonably likely to result in any material Environmental
Liability.
SECTION 3.19. Insurance Policies. The certificate of insurance
------------------
furnished by Borrower to the Administrative Agent pursuant to paragraph 3(a) of
Annex D lists all insurance of any nature maintained for current occurrences by
- -------
Borrower and each of its Subsidiaries as of the Closing Date, as well as a
summary of the terms of such insurance. Such insurance complies with the
standards set forth in Annex E.
-------
SECTION 3.20. Deposit and Disbursement Accounts. Schedule 3.20 lists
--------------------------------- -------------
all banks and other financial institutions at which, as of the Closing Date, any
Credit Party maintains deposit and/or other accounts and/or post office lock
boxes, including the Disbursement Accounts, and such Schedule correctly
identifies the name, address and telephone number of each depository, the name
in which the account is held, a description of the purpose of the account and
the complete account number.
SECTION 3.21. Solvency. Both before and after giving effect to (a) the
--------
entering into by the Credit Parties of this Agreement, the Subsidiary Guaranty
and the other Loan Documents; (b) the Loans and Letter of Credit Obligations to
be made or incurred on the Closing Date or such other date as Loans and Letter
of Credit Obligations requested hereunder are made or incurred; (c) the
disbursement of the proceeds of such Loans pursuant to the instructions of
Borrower; (d) the consummation of the Refinancing and the Related Transactions;
and (e) the payment and accrual of all transaction costs in connection with the
foregoing, each Credit Party is Solvent.
26
<PAGE>
SECTION 3.22. Subordination of Subordinated Indebtedness. This
------------------------------------------
Agreement, and all amendments, modifications, extensions, renewals, refinancings
and refundings hereof, constitute the "Senior Credit Agreement" within the
meaning of the Bridge Note Purchase Agreement; this Agreement, together with
each of the other Loan Documents and all amendments, modifications, extensions,
renewals, refinancings and refundings hereof and thereof, constitute "Senior
Credit Documents" within the meaning of the Bridge Note Purchase Agreement; and
the Term Loans, the Revolving Credit Loan, the Letter of Credit Obligations and
all other Obligations of Borrower to the Lenders and the Agents under this
Agreement, the Term Notes, the Revolving Credit Notes and any of the other Loan
Documents, and all amendments, modifications, extensions, renewals, refundings
or refinancings of any of the foregoing constitute "Senior Indebtedness" of
Borrower within the meaning of the Bridge Note Purchase Agreement, and the
holders thereof from time to time shall be entitled to all of the rights of a
holder of "Senior Indebtedness" pursuant to Article 9 of the Bridge Note
Purchase Agreement.
SECTION 3.23. Licenses and Permits. Borrower and each of its
--------------------
Subsidiaries have all licenses, permits, consents or approvals from or by, and
have made all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for the ownership of its
property and the operation and conduct of its business, including, but not
limited to: (i) licenses, certifications, approvals, and accreditations as a
provider of health care services including those necessary for it to be eligible
to receive payment and compensation and to participate under Medicare, Medicaid,
and any other federal, state, local or commercial health benefit programs
pursuant to which Borrower and each of its Material Subsidiaries currently
receives reimbursement for health care items and services provided; and (ii)
licenses, certifications, approvals, and accreditations necessary to engage in
activities deemed to be the "business of insurance" and to engage in utilization
review activities under applicable State law; except in each case to the extent
that a failure to have such licenses, permits, consents, approvals, certificates
or accreditation from, to have made such filings with, or to have given such
notices to, any such Governmental Authority would not be a Material Adverse
Event with respect to Borrower or any Material Subsidiary.
SECTION 3.24. Compliance with Law. Borrower and each of its
-------------------
Subsidiaries is in compliance with all applicable laws relating to its business,
including, but not limited to: (i) all applicable requirements for participation
in and for the receipt of reimbursement under Medicare, Medicaid, and any other
federal, state, local or commercial health benefit program pursuant to which
Borrower and each of its Subsidiaries currently receives reimbursement for
health care items and services; (ii) all State laws relating to the "business of
insurance" and utilization review activities in any State in which Borrower and
each of its Subsidiaries engages in such business and/or activities; (iii) all
State laws relating to the provision of inpatient psychiatric services and
residential behavioral treatment programs, including, but not limited to, laws
relating to the marketing of psychiatric services, patient referral services,
involuntary admissions, patient rights, and the confidentiality of patient
medical records; except in each case to the extent that a failure to be in
compliance would not be a Material Adverse Event with respect to Borrower or any
Material Subsidiary.
27
<PAGE>
SECTION 3.25. Health Care Professionals. To the knowledge of Borrower,
-------------------------
all health care professionals who are employees or independent contractors of
Borrower or any of its Subsidiaries have obtained all licenses, permits,
certifications, accreditations or approvals necessary to practice the
professions in which such employees or independent contractors are engaged, and
are otherwise in compliance with all State licensing laws relating to the
practice of such professions, and, as applicable, are in compliance with all
requirements for participation in and for the receipt of reimbursement under
Medicare, Medicaid and any federal, state, local or commercial health benefit
program pursuant to which Borrower and each of its Subsidiaries currently
receives reimbursement for health care items and services, except in each case
to the extent that a failure to obtain such licenses, permits, certifications,
accreditations or approvals, or to be in compliance with such laws and
requirements would not be a Material Adverse Event with respect to Borrower or
any Material Subsidiary.
SECTION 3.26. Management Agreements. None of the Management Agreements
---------------------
to which Borrower or any Material Subsidiary is a party, nor any of the
transactions contemplated thereunder, violates any applicable statute, rule or
regulation (i) relating to the eligibility of a Managed Facility to receive
payment and to participate as an accredited and certified provider of health
care services under Medicare, Medicaid or any other federal, state, local or
commercial health benefit program pursuant to which such Managed Facility
currently receives reimbursement for health care items and services, or
applicable to such Managed Facility as a result of its participation in such
programs; (ii) relating to the licenses and permits required in connection
therewith; or (iii) relating to the practice of any health care profession or
the sharing of fees generated in connection therewith; except in each case to
the extent that such violation would not be a Material Adverse Event for
Borrower or such Material Subsidiary.
SECTION 3.27. Patient Referrals, Etc. Borrower and each of its
-----------------------
Subsidiaries, and any business arrangement with physicians, other health care
professionals, and institutional health care providers involving Borrower and
any of its Subsidiaries, are in compliance with all federal and state laws that
prohibit direct or indirect payments for patient referrals, that prohibit
referrals to an entity with which the referring provider has a financial
relationship, and that regulate procedures and practices with respect to
reimbursement, cost reports, claims for reimbursement, and billing for items
and services under Medicare, Medicaid and other federal, state, and local health
benefit programs, as well as with regard to commercial payors, including, but
not limited to, the Ethics in Patient Referrals Act of 1989, 42 U.S.C. (S)
1395nn, as amended, the Medicare and Medicaid Patient and Program Protection Act
of 1987, 42 U.S.C. (S) 1320-7b(b), as amended, and the relevant provisions of
the Health Insurance Portability and Accountability Act of 1996, except in each
case to the extent that a failure to be in compliance with such laws would not
be a Material Adverse Event with respect to Borrower or any Material Subsidiary.
SECTION 3.28. Pending Revocations, Etc. Neither Borrower nor any of its
-------------------------
Subsidiaries has received notification from any Governmental Authority that any
such Governmental Authority has taken or intends to take action to revoke,
terminate, restrict or cancel any license, certificate, certification or permit
of Borrower or any of its Subsidiaries to engage in the practice of any health
28
<PAGE>
care profession, to provide any health care service, to operate a health care
facility, program or service or to participate under Medicare, Medicaid or any
other federal, state, or local health benefit program, except in each case to
the extent that any such revocation, termination, restriction or cancellation,
singly or in the aggregate, would not be a Material Adverse Event with respect
to Borrower or any Material Subsidiary.
SECTION 3.29. Investigations and Audits. Neither Borrower nor any of
-------------------------
its Subsidiaries has received notice of any pending investigation by JCAHO, HCFA
or any other Governmental Authority (which investigation is not otherwise
conducted in the ordinary course of business) or of any pending criminal, civil
or administrative action, audit or investigation by a fiscal intermediary or by
or on behalf of HCFA or any other Governmental Authority (which action, audit or
investigation is of a criminal nature or is otherwise not conducted in the
ordinary course of business) and, to the knowledge of each of the Credit
Parties, no such action, audit or investigation is threatened with respect to
Borrower or any of its Subsidiaries, except in each case to the extent that any
such action, audit or investigation (i) could not reasonably be expected
materially and adversely to affect Borrower's or any Material Subsidiary's right
to receive reimbursement under, or right to participate in, Medicare, Medicaid
or any other federal, state, or local health benefit program to which such
Person would otherwise be entitled, and (ii) would not otherwise be a Material
Adverse Event with respect to Borrower or any Material Subsidiary.
SECTION 3.30. Payment Adjustments. With respect to any audit by
-------------------
Medicare, Medicaid, or any other federal, state, local or commercial third party
payor pending with respect to Borrower or any of its Subsidiaries as of the
Closing Date, neither Borrower nor any of its Subsidiaries has received notice
of any requests or assertions of adjustments or claims for repayment by it of
costs and/or payments previously made to it by any third party payor and, to the
knowledge of each of the Credit Parties, as of the Closing Date none of such
audits provides for any such adjustments or claims; except in each case to the
extent that any such adjustments or claims, individually or in the aggregate,
would not be a Material Adverse Event with respect to Borrower or any Material
Subsidiary.
SECTION 3.31. Certain Agreements. As of the Closing Date, Borrower has
------------------
provided to the Administrative Agent or its counsel, on behalf of the Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject and each of which is listed on Schedule
--------
3.31: (a) licenses and permits held by Borrower or any Material Subsidiary,
except in each case to the extent that the failure to hold such license or
permit would not be a Material Adverse Event with respect to Borrower or such
Material Subsidiary (including agreements, accreditations or certifications as a
provider of health care services eligible to receive payment and compensation
and to participate under Medicare, Medicaid or any other federal, state, local
or commercial health benefit program); and (b) all Management Agreements to
which it or any Material Subsidiary is or is to become a party.
SECTION 3.32. Related Transaction Documents. As of the Closing Date,
-----------------------------
Borrower has delivered to the Administrative Agent a complete and correct copy
of each of the Related
29
<PAGE>
Transaction Documents (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith), and no Credit Party and, to the
knowledge of Borrower, no other Person party thereto is in default in the
performance or compliance with any provisions thereof. Each of the Related
Transaction Documents complies with, and the Related Transactions have been
consummated in accordance with, all applicable laws. Each of the Related
Transaction Documents is in full force and effect as of the Closing Date, and
has not been terminated, rescinded or withdrawn. All requisite approvals by
Governmental Authorities having jurisdiction over Borrower, any other Credit
Party and, to the knowledge of Borrower, other Persons referenced therein, with
respect to the Related Transactions, have been obtained, and no such approvals
impose any conditions to the consummation of the Related Transactions or to the
conduct by Borrower or any other Credit Party of its business thereafter. As of
the Closing Date, each of the representations and warranties made by Borrower in
the Related Transaction Documents is true and correct in all material respects.
ARTICLE 4
FINANCIAL STATEMENTS AND INFORMATION
SECTION 4.01. Reports and Notices. Borrower covenants and agrees that,
-------------------
from and after the Closing Date and until the Termination Date, it shall deliver
to the Administrative Agent the Financial Statements, projections, certificates
and notices at the times and in the manner set forth in Annex F. Promptly after
-------
receipt thereof, the Administrative Agent shall furnish a copy of each to each
Lender.
SECTION 4.02. Communication with Accountants. Borrower (for itself and
------------------------------
on behalf of each of the other Credit Parties) authorizes the Administrative
Agent, after notice to Borrower, to communicate with its and the other Credit
Parties' independent certified public accountants including Ernst & Young LLP
(which communication shall, at the option of Borrower, be conducted in the
presence of a Responsible Financial Officer), and authorizes those accountants
to disclose to the Administrative Agent any and all financial statements and
other supporting financial documents and schedules, including copies of any
management letter, with respect to the business, financial condition and other
affairs of Borrower and the other Credit Parties.
ARTICLE 5
AFFIRMATIVE COVENANTS
Borrower covenants and agrees (for itself and its Subsidiaries) that,
unless the Required Lenders and the Administrative Agent shall otherwise consent
in writing, from and after the date hereof and until the Termination Date:
SECTION 5.01. Maintenance of Existence and Conduct of Business. Borrower
------------------------------------------------
shall (and shall cause each of its Subsidiaries, other than Inactive
Subsidiaries, to): (a) except in the case of
30
<PAGE>
a Subsidiary that is permitted to merge out of existence pursuant to Section
-------
6.02, do or cause to be done all things necessary to preserve and keep in full
- ----
force and effect its corporate existence and its rights and franchises; (b)
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; (c) at all times maintain, preserve and protect all of its
Intellectual Property material to the conduct of its business, and preserve all
the remainder of its Property material to the conduct of its business, and keep
the same in good repair, working order and condition (taking into consideration
ordinary wear and tear), and (d) transact business only under the names set
forth in Schedule 3.02 or such other names as Borrower shall notify
-------------
Administrative Agent in accordance with the terms of Section 6(a) of the
Security Agreement.
SECTION 5.02. Payment of Charges and Claims. Borrower shall (and shall
-----------------------------
cause each of its Subsidiaries to) pay and discharge, or cause to be paid and
discharged in accordance with the terms thereof, (a) all Charges imposed upon it
or any such Subsidiary or its or their income and profits, or any of its
Property (real, personal or mixed), and (b) all lawful claims for labor,
materials, supplies and services or otherwise, which if unpaid by law become a
Lien on its Property; provided, that Borrower or any such Subsidiary shall not
--------
be required to pay any such Charge or claim which is being contested in good
faith by proper legal actions or proceedings, so long as at the time of
commencement of any such action or proceeding and during the pendency thereof
(i) no Default or Event of Default shall have occurred and be continuing, (ii)
adequate reserves with respect thereto are established and are maintained in
accordance with GAAP, (iii) such contest operates to suspend collection of the
contested Charges or claims and is maintained and prosecuted continuously with
diligence, (iv) none of the Collateral having a value in excess of $1,000,000
would be subject to forfeiture or loss by reason of the institution or
prosecution of such contest, and (v) Borrower shall promptly pay or discharge
such contested Charges and all additional charges, interest penalties and
expenses, if any, and shall deliver to Administrative Agent evidence reasonably
acceptable to Administrative Agent of such compliance, payment or discharge, if
such contest is terminated or discontinued adversely to Borrower.
SECTION 5.03. Books and Records. Borrower shall (and shall cause each of
-----------------
its Subsidiaries to) keep adequate records and books of account with respect to
its business activities, in which proper entries, reflecting all of its
consolidated and consolidating financial transactions, are made in accordance
with GAAP and on a basis consistent with the 1997 Audited Financial Statements.
SECTION 5.04. Litigation. Borrower shall notify the Administrative Agent
----------
in writing, promptly upon learning thereof, of any litigation, suit,
administrative proceeding or other action commenced or threatened in writing
against Borrower or any Subsidiary of Borrower, which (a) involves an amount in
excess of $1,000,000, or (b) would be a Material Adverse Event if adversely
determined.
SECTION 5.05. Insurance.
---------
31
<PAGE>
(a) Borrower shall, at its sole cost and expense, maintain or cause to
be maintained for itself and each of its Subsidiaries policies of insurance in
such amounts and as otherwise described in Annex E. In the event Borrower at
-------
any time or times hereafter shall fail to obtain or maintain (or fail to cause
to be obtained or maintained) any of the policies of insurance required above or
to pay any premium in whole or in part relating thereto, the Administrative
Agent, without waiving or releasing any Obligations or any Default or Event of
Default hereunder, may at any time or times thereafter (but shall not be
obligated to) obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which the Administrative
Agent deems advisable. All sums so disbursed, including reasonable attorneys'
fees, court costs and other charges related thereto, shall be payable, on
demand, by Borrower to the Administrative Agent and shall be additional
Obligations hereunder secured by the Collateral, provided, that, if and to the
--------
extent Borrower fails promptly to pay any of such sums upon the Administrative
Agent's demand therefor, the Administrative Agent is authorized to, and at its
option may, make or cause to be made Revolving Credit Advances on behalf of
Borrower for payment thereof.
(b) The Administrative Agent and the Required Lenders reserve the
right at any time, upon review of Borrower's risk profile, to require additional
forms and limits of insurance adequate, in the Administrative Agent's or the
Required Lenders' reasonable opinion, to protect the interests of Lenders,
provided that the same is available on commercially reasonable terms. Borrower
shall, if so requested by the Administrative Agent or the Required Lenders,
deliver to the Administrative Agent and the Lenders, as often as the
Administrative Agent and the Required Lenders may reasonably request, a report
of a reputable insurance broker reasonably satisfactory to the Administrative
Agent or the Required Lenders with respect to the existence and scope of
coverage of its insurance policies.
(c) Borrower shall deliver to the Administrative Agent certificates of
insurance evidencing its compliance with this Section 5.05, together with
------------
endorsements to all of its and its Subsidiaries' (i) "All Risk" insurance
covering the Collateral and business interruption insurance naming the
Administrative Agent as loss payee as its interest appears, for the ratable
benefit of the Lenders, and (ii) general liability and other liability policies
naming the Agents and the Lenders as additional insured.
SECTION 5.06. Compliance with Laws. Borrower shall (and shall cause each
--------------------
of its Subsidiaries to) comply with all federal, state and local laws, permits
and regulations applicable to it, including those relating to health care;
health care licensing, permits and accreditation; ERISA and labor matters; and
the filing of tax returns and payment of taxes (including, without limitation,
the withholding, collection, payment and deposit of employees' income,
unemployment and Social Security taxes), except in each case to the extent that
a failure to so comply with any laws, permits and regulations relating to health
care and to health care licensing, permits and accreditation would not be a
Material Adverse Event with respect to Borrower or any Material Subsidiary, and
to the extent that a failure to so comply with any other laws, permits and
regulations would not be a Material Adverse Event.
32
<PAGE>
SECTION 5.07. Agreements. Borrower shall (and shall cause each of its
----------
Subsidiaries to) perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement, contract, instrument or other document to which it
is a party, except in each case to the extent that any such failure to so
perform or enforce would not be a Material Adverse Event. Borrower shall not
(and shall not permit any of its Subsidiaries to) terminate or modify any
provision of any agreement, contract, instrument or other document to which it
is a party, except in each case to the extent that any such termination or
modification would not be a Material Adverse Event. Borrower shall (and shall
cause each of the other Credit Parties to) perform and comply with all
obligations in respect of Accounts, except in each case to the extent that any
failure so to perform or comply could materially adversely affect the
collectibility of any material portion thereof.
SECTION 5.08. Environmental Matters. Borrower and each other Credit
---------------------
Party shall, and shall cause each other Person leasing, occupying or operating
any of the Real Property (to the extent that any such other Person is within its
control) to: (a) conduct its operations and keep and maintain its Real Property
in compliance with all Environmental Laws and Environmental Permits, except in
each case to the extent that any such noncompliance would not be a Material
Adverse Event; (b) implement any and all investigation, remediation, removal and
response actions which are reasonably appropriate or necessary to maintain the
value and marketability of the Real Property or to comply with Environmental
Laws and Environmental Permits pertaining to the presence, generation,
treatment, storage, use, disposal, transportation or Release of any Hazardous
Material on, at, in, under, above, to, from or about any of its Real Property;
(c) notify the Administrative Agent promptly after Borrower or such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any Real Property which
is reasonably likely to result in Environmental Liabilities in excess of
$1,000,000; and (d) promptly forward to the Administrative Agent a copy of any
order, notice, request for information or any communication or report received
by Borrower or such Credit Party in connection with any such violation or
Release or any other matter relating to any Environmental Laws or Environmental
Permits that could reasonably be expected to result in Environmental Liabilities
in excess of $1,000,000, in each case whether or not the Environmental
Protection Agency or any Governmental Authority has taken or threatened any
action in connection with any such violation, Release or other matter. If the
Administrative Agent at any time has a reasonable basis to believe that there
may be a violation of any Environmental Laws or Environmental Permits by any
Credit Party or any Environmental Liability arising thereunder, or a Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Property, which, in each case, would be a Material Adverse Event, then each
Credit Party shall, upon the Administrative Agent's written request (i) cause
the performance of such environmental audits including subsurface sampling of
soil and groundwater, and preparation of such environmental reports, at
Borrower's expense, as the Administrative Agent may from time to time request,
which shall be conducted by reputable environmental consulting firms acceptable
to the Administrative Agent and shall be in form and substance acceptable to the
Administrative Agent, and (ii) permit the Administrative Agent or its
representatives to have access to all Real Property for the purpose of
conducting such
33
<PAGE>
environmental audits and testing as the Administrative Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrower shall reimburse
the Administrative Agent for the reasonable costs of such audits and tests and
the same will constitute a part of the Obligations secured hereunder.
SECTION 5.09. Certain Obligations Respecting Subsidiaries. Except with
-------------------------------------------
respect to Subsidiaries that are not the surviving corporation in any merger
permitted under Section 6.02 or whose Stock is the subject of a disposition
------------
permitted under Section 6.08, Borrower shall (and shall cause each of its
------------
Subsidiaries to) take such action from time to time as shall be necessary to
ensure that each of the other Credit Parties (excluding Gulf Coast Treatment
Center) is a direct or indirect wholly-owned Subsidiary of Borrower and that at
least ninety-six percent (96%) of the Stock of Gulf Coast Treatment Center
remains owned by Borrower or another Credit Party.
SECTION 5.10. Application of Proceeds. Borrower shall use the proceeds
-----------------------
of Revolving Credit Advances and the Term Loans as provided in Section 1.05.
------------
SECTION 5.11. Fiscal Year. Borrower shall (and shall cause each of its
-----------
Subsidiaries to) maintain as its fiscal year the twelve month accounting period
ending on June 30 of each year.
SECTION 5.12. Casualty and Condemnation.
-------------------------
(a) Borrower shall (and shall cause each of the other Credit Parties
to) promptly notify the Administrative Agent of any material loss, damage or
destruction to any material Collateral, whether or not covered by insurance.
Effective after the occurrence and at all times during the continuation of an
Event of Default, (i) Borrower hereby directs all present and future insurers
under its and each of its Subsidiaries' policies of insurance covering the
Collateral to pay all proceeds payable thereunder directly to the Administrative
Agent as its interest appears, for the ratable benefit of the Lenders; and (ii)
Borrower and each of the other Credit Parties irrevocably makes, constitutes and
appoints the Administrative Agent (and all officers, employees or agents
designated by the Administrative Agent) as its true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
the policies of insurance covering the Collateral, endorsing the name of
Borrower or any of the other Credit Parties on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance covering
the Collateral, and for making all determinations and decisions with respect to
such policies of insurance covering the Collateral. The Administrative Agent
shall have no duty to exercise any rights or powers granted to it pursuant to
the foregoing power-of-attorney. If, notwithstanding the provisions hereof
which require that the Administrative Agent be the sole loss payee, a check or
other instrument from an insurer is made payable to Borrower or any other Credit
Party or to Borrower or any other Credit Party and the Administrative Agent
jointly, the Administrative Agent may endorse Borrower's or such other Credit
Party's name thereon and take such other action as the Administrative Agent may
elect to obtain the proceeds thereof.
34
<PAGE>
(b) Borrower shall (and shall cause each of the other Credit Parties
to), promptly upon learning of the institution of any proceeding for the
condemnation or other taking of any material portion of its or such Credit
Party's Property, notify the Administrative Agent of the pendency of such
proceeding, and Borrower agrees that the Administrative Agent may participate in
any such proceeding and charge the expense thereof to Borrower in accordance
with Section 11.03, and that Borrower from time to time will deliver to the
-------------
Administrative Agent all instruments reasonably requested by the Administrative
Agent to permit such participation. After the occurrence and during the
continuation of an Event of Default, the Administrative Agent is hereby
authorized to prosecute, compromise or settle any such proceeding and to collect
any and all awards, payments or other proceeds of any such condemnation or
taking.
(c) After deducting the expenses, if any, reasonably incurred by the
Administrative Agent in the collection or handling of any insurance or
condemnation proceeds pursuant to paragraphs (a) or (b) above, the
Administrative Agent may, at its option, either (i) apply such proceeds to the
prepayment of the Loans in accordance with Section 1.04(f)(i) and (g) above, or
------------------ ---
(ii) permit or require the applicable Credit Party to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage, destruction or
condemnation; provided, however, that if no Default or Event of Default has
-------- -------
occurred and is continuing and (assuming that the Property is replaced,
restored, repaired or rebuilt with such proceeds) the casualty or condemnation
giving rise to such proceeds is not a Material Adverse Event, the Administrative
Agent shall permit the applicable Credit Party to elect whether to replace,
restore, repair or rebuild the Property and, if such Credit Party elects to do
so, shall permit such Credit Party to retain up to $1,000,000 of such proceeds
for such purpose (in addition to any portion thereof permitted to be retained by
Borrower pursuant to Section 5.13(a) below) and shall establish a Reserve in
---------------
such amount, reducing such Reserve upon receipt from Borrower of evidence
satisfactory to the Administrative Agent that such funds have been expended for
such purpose. In the event that the applicable Credit Party elects not to
replace, restore, repair or rebuild the Property, or elects to do so but has not
completed or entered into binding agreements to complete such replacement,
restoration, repair or rebuilding within 180 days after such casualty or
condemnation, the Administrative Agent may apply such insurance proceeds to the
prepayment of the Loans in accordance with Section 1.04(f)(i) and (g) above.
------------------ ---
All insurance or condemnation proceeds, if any, in excess of the amount
permitted to be retained by such Credit Party and which are otherwise to be made
available to a Credit Party to replace, repair, restore or rebuild the
Collateral shall be applied by the Administrative Agent to reduce the
outstanding principal balance of the Revolving Credit Loan (which application
shall not result in a permanent reduction of the Revolving Credit Commitments)
and, upon such application, the Administrative Agent shall establish a Reserve
against the Borrowing Base in an amount equal to the amount of such proceeds so
applied. Thereafter, such funds shall be made available to the applicable
Credit Party, after the expenditure in full for such purpose of all funds
permitted to be retained by such Credit Party, to provide funds to replace,
repair, restore or rebuild the Collateral as follows: (i) Borrower shall request
a Revolving Credit Advance in the amount requested to be released; (ii) so long
as the conditions set forth in Section 2.02 have been met, the Revolving Lenders
------------
shall make such Revolving Credit Advance; and
35
<PAGE>
(iii) the Reserve established with respect to such proceeds shall be reduced by
the amount of such Revolving Credit Advance. To the extent not used to replace,
repair, restore or rebuild the Collateral, such proceeds shall be applied by the
Administrative Agent to the prepayment of the Loans in accordance with Section
-------
1.04(f)(i) and (g) above.
- ---------- ---
SECTION 5.13. Application of Certain Proceeds. Borrower shall apply all
-------------------------------
Net Cash Proceeds of insurance or condemnation received by it pursuant to
Section 5.12 (to the extent not permitted to be retained by Borrower or another
- ------------
Credit Party for the uses permitted by Section 5.12(c)), and all Net Cash
---------------
Proceeds of any sale or other disposition of assets permitted pursuant to
Section 6.08, as follows (it being understood that, to the extent that the
- ------------
Administrative Agent receives any such Net Cash Proceeds that Borrower or
another Credit Party is permitted to retain pursuant to any provision of this
Agreement, it will make such Net Cash Proceeds available to Borrower or such
other Credit Party for the purposes permitted thereby):
(a) Provided that no Default or Event of Default has occurred and is
continuing, Borrower may retain the first $250,000 in the aggregate of any Net
Cash Proceeds received during any Fiscal Year under Section 5.12(c) or Section
--------------- -------
6.08(b), (c) or (d), and such amounts shall not be subject to the requirements
- ------- --- ---
of Section 1.04(f). Additionally, provided that no Default or Event of Default
---------------
has occurred and is continuing, if any amount otherwise required to be remitted
to the Administrative Agent at any time under paragraphs (b), (c), (d), (e) and
(g) of this Section 5.13 is less than $250,000, then Borrower shall not be
------------
required to remit such funds to the Administrative Agent for application to the
prepayment of the Loans until such time as the cumulative amounts required to be
remitted thereunder equal or exceed $250,000, in which case Borrower shall remit
such cumulative amounts to the Administrative Agent for application to the
Loans, in integral multiples of $250,000, and shall be entitled to retain any
excess until the cumulative amounts required to be remitted hereunder and not
yet remitted once again equal or exceed $250,000.
(b) Subject to the provisions of paragraph (a) above, Borrower shall
remit to the Administrative Agent all of the Net Cash Proceeds of insurance or
condemnation described in Section 5.12(c) above that are received by Borrower or
---------------
any Credit Party, but that Borrower or such Credit Party is not entitled to
retain for the purposes set forth therein, and the Administrative Agent shall
apply all of such proceeds to the prepayment of the Loans in accordance with
Section 5.12(c) hereof.
- ---------------
(c) Borrower shall remit to the Administrative Agent all of the Net
Cash Proceeds received upon the sale of Meadowlake Hospital in accordance with
Section 6.08(a), without regard to the limitations set forth in paragraph (a)
- ---------------
above, and, provided that no Default or Event of Default has occurred and is
continuing, the Administrative Agent shall apply the first $1,000,000 thereof to
the prepayment of the Loans in accordance with Section 1.04(f)(i) and (g)
------------------ ---
hereof, and shall apply any balance thereof against the outstanding principal
amount, if any, of the Revolving Credit Loan, until paid in full (but without
any corresponding reduction in the Revolving Credit Commitments).
36
<PAGE>
(d) Subject to the provisions of paragraph (a) above, Borrower shall
remit to the Administrative Agent all of the Net Cash Proceeds received upon the
sale of Three Rivers Hospital or the Stock of Ramsay Louisiana, Inc. in
accordance with Section 6.08(b), and, provided that no Default or Event of
---------------
Default has occurred and is continuing, the Administrative Agent shall apply
such proceeds as follows: (i) if at the time of such sale Borrower has not
provided to the Administrative Agent all documents required by paragraph 2(h) of
Annex D with respect to Bayou Oaks Hospital, then all of such proceeds shall be
- -------
applied to the prepayment of the Loans in accordance with Section 1.04(f)(i) and
------------------
(g) hereof; and (ii) if at the time of such sale Borrower has provided such
- ---
documents to the Administrative Agent, then all of such proceeds shall be
applied against the outstanding principal amount, if any, of the Revolving
Credit Loan, until paid in full (but without any corresponding reduction in the
Revolving Credit Commitments).
(e) Subject to the provisions of paragraph (a) above, provided that no
Default or Event of Default has occurred and is continuing, Borrower shall remit
to the Administrative Agent the Net Cash Proceeds received upon any sale of
Stock or assets permitted by Section 6.08(c), in such amounts, and at such time
---------------
or times, as follows: (i) on the date of receipt thereof, Borrower shall remit
to the Administrative Agent all or such portion of such Net Cash Proceeds as
Borrower has not, on or before such date, notified the Administrative Agent in
writing that it contemplates utilizing within one hundred eighty (180) days
following the date of receipt thereof in connection with one or more Permitted
Acquisitions, specifying in as much detail as is reasonably practicable the
nature of the contemplated Acquisition or Acquisitions and the amount of such
Net Cash Proceeds to be held for utilization in each, (ii) on or before the
date which is ninety (90) days following the date of receipt thereof, Borrower
shall remit to the Administrative Agent all or such portion of such Net Cash
Proceeds as Borrower has not committed to spend pursuant to one or more letters
of intent or definitive agreements for Permitted Acquisitions entered into on or
before such date, (iii) on or before the date which is one hundred eighty (180)
days following the date of receipt thereof, Borrower shall remit to the
Administrative Agent all or such portion of such Net Cash Proceeds as Borrower
has not spent in the consummation of one or more Permitted Acquisitions on or
before such date, and (iv) if earlier than the dates specified in clauses (ii)
and (iii) above, on the date that Borrower actually enters into a letter of
intent or definitive agreement for or consummates a Permitted Acquisition,
Borrower shall remit to the Administrative Agent that amount, if any, by which
the Net Cash Proceeds actually committed or spent pursuant thereto are less than
the amount held by Borrower in contemplation of such Permitted Acquisition
pursuant to clause (i) hereof; provided, however, that Borrower shall not be
-------- -------
required to remit to the Administrative Agent any proceeds under any clause of
this paragraph (e) that it is otherwise permitted to retain pursuant to this
paragraph (e) in respect of any other Permitted Acquisition. The Administrative
Agent shall apply all Net Cash Proceeds required to be remitted to it pursuant
to this paragraph (e) to the prepayment of the Loans in accordance with Section
-------
1.04(f)(i) and (g) hereof.
- ---------- ---
(f) Subject to the provisions of Section 6.01 hereof, Borrower or any
------------
other Credit Party shall be entitled to utilize any proceeds applied to the
Revolving Credit Loan pursuant to paragraphs (c) and (d) above and any proceeds
not required to be remitted to the Administrative Agent pursuant to paragraph
(e) above for one or more Permitted Acquisitions.
37
<PAGE>
(g) Subject to the provisions of paragraph (a) above, Borrower shall
remit to the Administrative Agent all of the Net Cash Proceeds of each sale of
assets pursuant to Section 6.08(d), for application to the prepayment of the
---------------
Loans in accordance with Section 1.04(f)(i) and (g) hereof.
------------------ ---
(h) Notwithstanding anything to the contrary set forth in this
Agreement, at any time while a Default or Event of Default shall have occurred
and be continuing or following the Revolving Credit Commitment Termination Date,
Borrower shall have no right to retain any proceeds of Collateral and the
Administrative Agent may apply all such proceeds in accordance with Section 1.12
------------
hereof.
SECTION 5.14. Additional Mortgaged Properties; Additional Credit Parties.
----------------------------------------------------------
(a) In the event that, subsequent to the Closing Date, Borrower or any
other Credit Party intends to acquire or lease any Real Property that, when
acquired or leased, would have a book or fair market value in excess of
$1,500,000, Borrower shall, or shall cause such other Credit Party to, notify
the Administrative Agent of such intent as soon as is reasonably practicable
prior to the acquisition or lease of such Real Property. At the request of the
Administrative Agent or the Required Lenders, Borrower shall, or shall cause
such other Credit Party to, execute and deliver a mortgage, leasehold mortgage
or other appropriate instrument with respect to such Real Property,
substantially identical to the Mortgages, and provide all relevant documentation
with respect thereto and take such other actions as would have been provided and
taken pursuant to paragraph 2(h) of Annex D if such Real Property had
-------
constituted Mortgaged Property on the Closing Date. Borrower agrees that,
following the taking of the actions with respect to any Real Property required
by this paragraph (a), the Administrative Agent shall have a valid and
enforceable first priority Lien on such Real Property, free and clear of all
defects and encumbrances except for Permitted Encumbrances of the types
described in paragraphs (a) and (i) of the definition thereof and others
acceptable to the Administrative Agent in its reasonable discretion. All
actions to be taken pursuant to this Section 5.14(a) shall be at the expense of
---------------
Borrower or the applicable Credit Party, shall be taken to the reasonable
satisfaction of the Administrative Agent, and shall be taken within thirty (30)
days after the date of closing a Permitted Acquisition, if such Real Property is
acquired in connection with a Permitted Acquisition, and otherwise shall be
taken within sixty (60) days following receipt of a request from the
Administrative Agent or the Required Lenders.
(b) In the event that, subsequent to the Closing Date, any Person
becomes a Credit Party, whether pursuant to a Permitted Acquisition or
otherwise, Borrower shall cause such Person (i) to become a party to this
Agreement, the Subsidiary Guaranty, the Security Agreement and the Stock Pledge
Agreement, (ii) to provide all relevant documentation with respect thereto and
to take such other actions as such Credit Party would have provided and taken
pursuant to Annex D if such Credit Party had been a Credit Party on the Closing
-------
Date; and (iii) if such Credit Party owns or leases any Real Property having a
book or fair market value in excess of $1,500,000, to comply with paragraph (a)
hereof with respect to such Real Property. Borrower agrees that, following the
delivery of any Collateral Documents required to be executed and delivered by
this Section 5.14(b),
---------------
38
<PAGE>
the Administrative Agent shall have a valid and enforceable first priority Lien
on the respective Collateral covered thereby, free and clear of all Liens other
than Permitted Liens. All actions to be taken pursuant to this Section 5.14(b)
---------------
shall be at the expense of Borrower or the applicable Credit Party, shall be
taken to the reasonable satisfaction of the Administrative Agent, and shall be
taken within thirty (30) days following the date such Person becomes a Credit
Party, whether pursuant to an Acquisition or otherwise.
SECTION 5.15. Redemption of Bonds. Borrower shall:
-------------------
(a) not later than October 1, 1997, call for redemption on November 3,
1997 the Greenbrier Bonds and the Gulf Coast Bonds, and not later than October
31, 1997, call for redemption on December 1, 1997 the Coastal Carolina Bonds, in
each case in accordance with the procedures set forth in the Greenbrier
Indenture, the Gulf Coast Indenture and the Coastal Carolina Indenture,
respectively; and
(b) not later than November 7, 1997, cause to be redeemed the
Greenbrier Bonds and the Gulf Coast Bonds, and not later than December 5, 1997,
cause to be redeemed the Coastal Carolina Bonds, in each case by a drawing on
the appropriate SocGen Letter of Credit and in accordance with the procedures
set forth in the Greenbrier Indenture, the Gulf Coast Indenture and the Coastal
Carolina Indenture, respectively.
SECTION 5.16. Permits, Etc. Borrower shall (and shall cause each of its
-------------
Subsidiaries, other than Inactive Subsidiaries, to) (i) obtain and maintain all
permits, licenses, certifications, accreditations, and other approvals as may be
necessary for the operation of the business of Borrower and each of its Material
Subsidiaries under applicable law, except in each case to the extent that a
failure to obtain or maintain any of such permits, licenses, certifications,
accreditations or other approvals would not be a Material Adverse Event with
respect to Borrower or any Material Subsidiary; and (ii) obtain and maintain its
qualification for participation in and the receipt of reimbursement under
Medicare, Medicaid and any other federal, state or local governmental health
benefit program or commercial health benefit program providing for payment or
reimbursement for services rendered by such Person, as applicable, except in
each case to the extent that the loss or relinquishment of such qualification
does not constitute a Material Adverse Event with respect to Borrower or any
Material Subsidiary. Borrower will promptly furnish or cause to be furnished to
the Administrative Agent copies of all reports and correspondence it or any of
its Material Subsidiaries sends or receives relating to any loss or revocation
(or threatened loss or revocation) of any permit, license, certification,
accreditation, approval or qualification required to be maintained pursuant to
this Section 5.16.
------------
SECTION 5.17. Further Assurances. Borrower and each other Credit Party
------------------
agrees, at such Credit Party's expense and upon the reasonable request of the
Administrative Agent, to duly execute and deliver, or cause to be duly executed
and delivered, to the Administrative Agent such further instruments and do and
cause to be done such further acts as may be necessary or desirable in the
39
<PAGE>
reasonable opinion of the Administrative Agent to carry out more effectually the
provisions and purposes of this Agreement or any other Loan Document.
SECTION 5.18. Ramsay Common Stock Subscription Agreement. Borrower
------------------------------------------
shall perform all of its obligations under the Ramsay Common Stock Subscription
Agreement and shall enforce all of the obligations of Ramsay Holdings under the
Ramsay Common Stock Subscription Agreement in accordance with their terms.
ARTICLE 6
NEGATIVE COVENANTS
Borrower covenants and agrees (for itself and its Subsidiaries) that,
unless the Required Lenders and the Administrative Agent shall otherwise consent
in writing, from and after the date hereof and until the Termination Date:
SECTION 6.01. Acquisitions. Borrower will not, and will not permit any
------------
of its Subsidiaries to, make any Acquisition, except that Borrower and the other
Credit Parties may make Acquisitions of any assets or Person (the "Target") (in
------
each case a "Permitted Acquisition"), subject to the satisfaction of each of the
---------------------
following conditions:
(a) such Permitted Acquisition shall only involve assets (i) located
in the United States or consisting of Stock of a corporation incorporated in the
United States and conducting business in the United States, and (ii) comprising
a health care business, or assets with which to conduct a health care business,
or 100% of the capital Stock of a Person conducting a health care business;
(b) such Permitted Acquisition shall be consensual and shall have been
approved by the Target's board of directors, if a corporation, and otherwise by
such other body or Person as shall have the necessary authority to so approve;
(c) the aggregate of (i) the cash consideration paid by Borrower or
any of the other Credit Parties in respect of such Permitted Acquisition, (ii)
the principal amount of any Indebtedness incurred by Borrower or any other
Credit Party in connection with such Permitted Acquisition (without duplication
as to any Revolving Credit Advance or other Indebtedness incurred to fund any of
the cash consideration included in clause (i) and excluding any "earn out"
obligation permitted pursuant to paragraph (e) below, to the extent that such
obligation is not required to be reflected as a liability on a consolidated
balance sheet of Borrower in accordance with GAAP), (iii) the amount of any
Indebtedness of the Target that, immediately after the consummation of such
Permitted Acquisition, would be reflected on a consolidated balance sheet of
Borrower in accordance with GAAP, and (iv) the amount of the Target's working
capital deficit (i.e., the excess, if any, of the Target's current liabilities
----
(excluding the current portion of long term debt) over its current assets) that,
immediately after the consummation of such Permitted Acquisition, would be
reflected
40
<PAGE>
on a consolidated balance sheet of Borrower in accordance with GAAP,
shall not exceed $2,000,000 with respect to each Permitted Acquisition or
$4,000,000 in the aggregate for all such Permitted Acquisitions during any
Fiscal Year; provided, however, that for so long as Borrower's EBITDA for the
-------- -------
Rolling Four Quarter Period for which Borrower has most recently provided a
Compliance Certificate to the Administrative Agent pursuant to Annex F equals or
-------
exceeds $15,000,000, Borrower may apply the Net Cash Proceeds of asset sales
permitted pursuant to Section 6.08 to such Permitted Acquisition, to the extent
------------
not required by Section 5.13(c), (d) or (e) to be applied to the Loans in
--------------- --- ---
accordance with Sections 1.04(f)(i) and (g) hereof, in addition to any amounts
------------------- ---
otherwise permitted by the foregoing dollar limitations.
(d) the aggregate consideration paid by Borrower or any of the other
Credit Parties in respect of such Permitted Acquisition, including (i) the
consideration described in paragraph (c) above, plus (ii) the value of any Stock
----
issued by Borrower in connection with such Permitted Acquisition, shall not
exceed $5,000,000 with respect to each Permitted Acquisition or $15,000,000 in
the aggregate for all such Permitted Acquisitions during any Fiscal Year;
(e) the consideration payable in respect of such Permitted Acquisition
does not include any "earn out" or other contingent payment obligation, unless
such "earn out" or other contingent payment obligation: (i) is an obligation
solely of Borrower, and is not guaranteed by any Subsidiary of Borrower; is
unsecured; and, when aggregated with any other such obligation then outstanding,
does not cause the maximum amounts payable under all such obligations to exceed
$5,000,000, and (ii) is calculated solely with reference to increases in the
Target's EBITDA over that historically achieved by the Target and does not
exceed the amount of any such increase;
(f) at the time of such Permitted Acquisition, no Default or Event of
Default shall have occurred and be continuing or would result therefrom;
(g) such Permitted Acquisition shall be permitted under the terms of
the Bridge Note Purchase Agreement or the Senior Subordinated Note Agreement,
whichever is then outstanding;
(h) the Target shall not have incurred an operating loss for the
trailing twelve-month period preceding the date of the Permitted Acquisition, as
determined based upon the Target's financial statements for its most recently
completed fiscal year and its most recent interim financial period completed
within sixty (60) days prior to the date of consummation of such Permitted
Acquisition;
(i) the business, assets and Stock acquired in such Permitted
Acquisition shall each be free and clear of all Liens (other than Permitted
Liens);
(j) Borrower shall have performed a review of the financial statements
of the Target and shall have determined that such financial statements present
fairly in all material respects the financial position and results of operations
of the Target as of the dates and for the periods covered by such financial
statements;
41
<PAGE>
(k) Borrower shall have performed a due diligence review of the Target
in a prudent manner and, based on such review, shall have determined that there
is no regulatory or other issue in respect of the Target that could reasonably
be expected materially and adversely to affect the ongoing operations of the
Target;
(l) Borrower shall have delivered to the Administrative Agent not less
than 15 days prior to the consummation of the Permitted Acquisition:
(i) a certificate of a Responsible Financial Officer of Borrower
to the effect set forth in paragraphs (a)-(k) above, together with such
supporting documentation as the Administrative Agent or the Required
Lenders shall reasonably request;
(ii) a five year projection of the balance sheet, income
statement and cash flow statement of the Target;
(iii) a pro forma Compliance Certificate, as of the date and for
---------
the period covered by the most recent Compliance Certificate required to be
delivered to the Administrative Agent pursuant to Annex F, prepared on a
-------
pro forma basis as if (A) the Permitted Acquisition had occurred on the
---------
first day of such period, (B) any sale or other disposition of Stock or
assets occurring after the first day of such period, but on or before the
date on which such Compliance Certificate is delivered, had occurred on the
first day of such period; (C) any Indebtedness to be incurred by Borrower
in connection with the Permitted Acquisition had been incurred as of the
first day of such period, and (D) any Indebtedness to be repaid in
connection with such Permitted Acquisition had been repaid as of the first
day of such period;
(iv) a copy of the definitive agreement for such Acquisition (or
the latest draft thereof), together with all exhibits and schedules
thereto; and
(v) a certificate of a Responsible Financial Officer of Borrower
to the effect that: (1) the Credit Party effecting the proposed Permitted
Acquisition will be Solvent upon the consummation of the Permitted
Acquisition; (2) Borrower's average daily Excess Borrowing Availability for
the most recent month-end for which Borrower is required to deliver a
Borrowing Base Certificate hereunder would have exceeded $4,000,000 on a
pro forma basis (giving effect to such Permitted Acquisition and any
---------
Revolving Credit Advance funded in connection therewith as if made on the
first day of such period, but without including in the Borrowing Base any
Eligible Accounts of the Target unless the Administrative Agent has
reviewed such Eligible Accounts and, in its reasonable judgment, found them
to be of similar quality to the Eligible Accounts of the Credit Parties)
and such Excess Borrowing Availability of $4,000,000 (determined on the
same basis) shall continue through and including the date of consummation
of such Permitted Acquisition; and (3) based on the Compliance Certificate
most recently delivered to the Administrative Agent
42
<PAGE>
pursuant to Annex F and the pro forma Compliance Certificate delivered to
------- ---------
the Administrative Agent pursuant to clause (iii) above, Borrower will be
in compliance with the financial covenants set forth in Annex G after
-------
giving effect to the Permitted Acquisition;
(m) Borrower shall have delivered to the Administrative Agent not less
than three Business Days prior to the consummation of the proposed Acquisition
(if not previously delivered pursuant to paragraph (l)(iv) above), a copy of the
definitive agreement for such Acquisition, together with all exhibits and
schedules thereto;
(n) Neither Borrower nor any other Credit Party shall be subject to a
confidentiality agreement with respect to the proposed Acquisition that shall
prohibit Borrower or such Credit Party from making available to the
Administrative Agent, its counsel and the Lenders any information regarding the
Target or the proposed Acquisition;
(o) within 30 days after the date of such Permitted Acquisition,
Borrower shall comply with the requirements of Section 5.14 hereof; and
------------
(p) on or before the date of such Permitted Acquisition, the
Administrative Agent shall have received, in form and substance reasonably
satisfactory to the Administrative Agent, all opinions, certificates, lien
search results and other documents reasonably requested by the Administrative
Agent;
provided, however, that Borrower may consummate the proposed Acquisition of
- -------- -------
Summa Health Care Group, Inc., substantially on the terms and conditions set
forth in the Summa Merger Agreement, without regard to the foregoing provisions
of this Section 6.01 other than those set forth in paragraphs (f), (g), (i),
------------
(m), (n) and (o) above.
SECTION 6.02. Mergers, Subsidiaries, Intercompany Transfers, Etc.
---------------------------------------------------
Borrower shall not (nor permit any of its Subsidiaries to), directly or
indirectly, by operation of law or otherwise: (a) merge with, consolidate with,
or otherwise combine with, any Person, other than (i) a merger effecting a
Permitted Acquisition, (ii) a merger effecting a disposition of Stock permitted
by Section 6.08, (iii) a merger or consolidation between or among any of
------------
Borrower's Subsidiaries in which a Credit Party is the surviving entity (other
than a merger of RMCI with or into any other Subsidiary) or between or among
Inactive Subsidiaries, or (iv) a merger or consolidation between Borrower and
any of its Subsidiaries (other than RMCI) in which Borrower is the surviving
entity; (b) permit any of its Inactive Subsidiaries to acquire any material
assets or conduct any material business unless such Inactive Subsidiary
concurrently becomes a Credit Party and complies with the requirements of
Section 5.14 hereof; (c) transfer any Mortgaged Real Estate to any of Borrower's
- ------------
Subsidiaries; or (d) transfer any assets to any of Borrower's Subsidiaries,
other than (i) transfers of Stock or assets to a Credit Party not prohibited by
clause (c); (ii) Investments permitted by Section 6.03(c) and (e); and (iii)
--------------- ---
transactions permitted by Section 6.05(c), (d), (e) and (f).
--------------- --- --- ---
43
<PAGE>
SECTION 6.03. Investments. Borrower shall not (nor permit any of its
-----------
Subsidiaries to), directly or indirectly, make or maintain any Investment
except: (a) Cash Equivalents; (b) time deposits maturing no more than 30 days
from the date of creation thereof with a Lender or A-rated banks; (c)
Investments in Credit Parties (limited, in the case of loans to RMCI, to the
extent set forth in Section 6.05(c)); (d) Investments in Subsidiaries that are
---------------
not Credit Parties to the extent outstanding on the Closing Date and, in the
case of TCV, other Investments to the extent set forth in Section 6.05(d); (e)
---------------
Investments in Permitted Joint Ventures (other than TCV) not to exceed
$1,000,000 in the aggregate at any time outstanding; (f) Practice Guarantees
(evidenced by written agreements), provided that the aggregate outstanding
amount of Practice Guarantees and commitments to give Practice Guarantees shall
not at any time exceed $1,000,000; (g) extensions of credit to patients,
evidenced by Eligible Accounts for services rendered, made in the ordinary
course of business and consistent with past practice; (h) other Investments
outstanding on the date hereof and listed in Schedules 3.09 and 6.03; (i) the
-------------- ----
purchase by Borrower or any other Credit Party of Stock of any Subsidiaries that
are not directly or indirectly wholly-owned by Borrower on the Closing Date,
provided that the aggregate amount paid by Borrower and all other Credit Parties
- --------
for such Stock shall not exceed $1,000,000 in the aggregate; and (j) other
Investments not exceeding $1,000,000 in the aggregate made during any Fiscal
Year.
SECTION 6.04. Indebtedness. Borrower shall not (nor permit any of its
------------
Subsidiaries to) create, incur, assume or permit to exist any Indebtedness,
except: (a) the Obligations; (b) Deferred Taxes; (c) Capital Lease Obligations,
Indebtedness secured by purchase money Liens permitted under Section 6.07(d),
---------------
and other Indebtedness incurred during any Fiscal Year, provided that the
aggregate outstanding principal amount of such Capital Lease Obligations and
other Indebtedness permitted under this clause (c) shall not exceed $2,000,000;
(d) unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under applicable
law; (e) Indebtedness consisting of intercompany loans and advances made by (i)
any Credit Party to any other Credit Party, (ii) by any Subsidiary that is not a
Credit Party, to any Credit Party, (iii) to the extent permitted by Section
-------
6.05(e), by any Credit Party to any Permitted Joint Venture, and (iv) by any
- -------
Permitted Joint Venture to its Subsidiaries; (f) Guaranteed Indebtedness
permitted by Section 6.06; (g) until not later than November 7, 1997,
------------
Indebtedness evidenced by the Greenbrier Bonds and the Gulf Coast Bonds and the
reimbursement obligations with respect to the SocGen Letters of Credit related
thereto; (h) until not later than December 5, 1997, Indebtedness evidenced by
the Coastal Carolina Bonds and the reimbursement obligations with respect to the
SocGen Letters of Credit related thereto; (i) any "earn out" or other contingent
payment obligation permitted by Section 6.01(e); (j) the Bridge Notes; (k) the
---------------
obligations evidenced by Article 3 of the Bridge Note Purchase Agreement; (l)
---------
the Senior Subordinated Notes (provided that the Senior Subordinated Notes meet
all of the requirements to qualify as Subordinated Indebtedness set forth in the
definition thereof) or other Subordinated Indebtedness refinancing the Bridge
Notes (including, without limitation, Indebtedness in favor of Ramsay
Affiliates, provided that such Indebtedness meets all of the requirements to
qualify as Subordinated Indebtedness in favor of Ramsay Affiliates set forth in
the definition of Subordinated Indebtedness); and (m) any other Subordinated
Indebtedness refinancing or replacing any Subordinated Indebtedness pursuant to
clause (l) hereof.
44
<PAGE>
SECTION 6.05. Affiliate and Employee Loans and Transactions. Borrower
---------------------------------------------
shall not (nor permit any of its Subsidiaries to) enter into any lending,
borrowing or other commercial transaction with or make any payments or transfers
of funds or assets (including payment of any management, consulting, advisory or
similar fee) to, or issue any shares of Borrower's Stock, or any warrant, option
or other right to acquire Shares of Borrower's Stock, or any securities
convertible into Borrower's Stock to, any of its Affiliates; provided, that (a)
--------
Borrower may borrow money from Ramsay Affiliates, provided that the Indebtedness
owed to any such Ramsay Affiliate is Subordinated Indebtedness, and repay such
Subordinated Indebtedness in accordance with the terms thereof (including the
subordination provisions); (b) the Credit Parties may engage in commercial
transactions (including lending or borrowing transactions) between or among
Credit Parties (other than Permitted Joint Ventures and RMCI); (c) the Credit
Parties may engage in lending or borrowing transactions with RMCI provided that,
prior to the Revolving Credit Commitment Adjustment Date, such transactions do
not cause the intercompany accounts due to Borrower from RMCI to exceed
$14,500,000 at any time; (d) the Credit Parties may engage in lending or
borrowing transactions with TCV to the extent that such transactions do not
cause the intercompany account due to Borrower from TCV to exceed $10,100,000 at
any time; (e) the Credit Parties may make Investments in Permitted Joint
Ventures to the extent permitted by Section 6.03(e) and, additionally, may
provide legal, accounting, insurance and other shared services to the Permitted
Joint Ventures of the types provided on the Closing Date and may lease Real
Property to the Permitted Joint Ventures, all on terms that are no less
favorable to the Credit Parties than might be obtained in an arm's-length
transaction from a Person that is not an Affiliate of such Credit Party; (f) the
Permitted Joint Ventures may engage in commercial transactions with their
Subsidiaries on terms that are no less favorable to the Permitted Joint Ventures
than might be obtained in an arm's-length transaction from a Person that is not
an Affiliate of such Permitted Joint Venture; (g) the Credit Parties may extend
loans to their respective officers, directors and employees in a maximum
aggregate principal amount outstanding at any time for all officers, directors
and employees of $1,000,000, other than loans to officers or directors to whom
any other amount is due by a Credit Party that is not permitted to be paid to
such officer or director by virtue of this Section 6.05, unless such loan is for
------------
a business purpose of such Credit Party that is unrelated to the circumstances
of the other amount due to such officer or director; (h) Borrower may issue
shares of Borrower's Stock, or any warrant, option or other right to acquire
shares of Borrower's Stock, or any security convertible into Borrower's Stock,
to any Affiliate on terms that are no less favorable to Borrower than might be
obtained in an arm's-length transaction from a Person that is not an Affiliate
of Borrower; (i) Borrower and its Subsidiaries may make Restricted Payments to
the extent permitted under Section 6.15; (j) the Credit Parties may pay salary
------------
and wages and provide stock options and other executive compensation to its
executive officers, to the extent approved by Borrower's Board of Directors or
the compensation committee thereof; (k) Borrower may pay reasonable and
customary directors' fees to its directors; (l) the Credit Parties may pay
reasonable legal fees and reasonable out-of-pocket expenses to Haythe & Curley
for services rendered; (m) the Credit Parties may engage in other transactions
between or among Credit Parties that are specifically permitted by Section 6.02;
------------
(n) RMCI may pay $50,000 of the sums due to Peter J. Evans referenced in
paragraph 12 of Schedule 6.05 at any time and may pay the balance of the sums
-------------
due to Peter J. Evans and the sums due to Luis E. Lamella referenced
45
<PAGE>
in paragraph 12 of Schedule 6.05 after the Revolving Credit Commitment
-------------
Adjustment Date; and (o) Borrower and Ramsay Acquisition Corp. may consummate
the transactions contemplated by the Summa Merger Agreement. Set forth in
Schedule 6.05 is a list of all such lending, borrowing or other commercial
- -------------
transactions existing or outstanding as of the Closing Date.
SECTION 6.06. Guaranteed Indebtedness. Borrower shall not (nor permit
-----------------------
any of its Subsidiaries to) incur any Guaranteed Indebtedness except: (a) by
endorsement of instruments or items of payment for deposit to the general
account of Borrower or such Subsidiary; (b) Guaranteed Indebtedness incurred for
the benefit of Borrower or another Credit Party if Borrower or another Credit
Party is permitted by this Agreement to incur the primary obligation (and such
Guaranteed Indebtedness shall be treated as a primary obligation for all
purposes hereof); (c) performance bonds or indemnities entered into in the
ordinary course of business consistent with past practices; and (d) Guaranteed
Indebtedness incurred in connection with Permitted Acquisitions, to the extent
permitted by paragraph (c) of Section 6.01.
------------
SECTION 6.07. Liens. Borrower shall not (nor permit any of its
-----
Subsidiaries to) create or permit to exist any Lien on any of its properties or
assets except for: (a) presently existing or hereafter created Liens in favor of
the Administrative Agent to secure the Obligations; (b) Liens set forth in
Schedule 6.07 existing on the Closing Date; (c) Permitted Encumbrances; (d)
- -------------
purchase money liens or purchase money security interests upon or in Equipment
acquired by Borrower or such Subsidiary (other than Inactive Subsidiaries) in
the ordinary course of business to secure the purchase price of such Equipment
or otherwise to secure Indebtedness or Capital Lease Obligations permitted under
Section 6.04(c) incurred solely for the purpose of financing the acquisition of
- ---------------
such Equipment, so long as such Equipment is not a component, part or accessory
installed on, or an accession, addition or attachment to, any other Equipment of
Borrower or such Subsidiary (except other Equipment on which a security interest
is permitted to exist under this clause (d)); and (e) extensions and renewals of
Liens referred to in paragraphs (b) and (d) above, provided that any such
extension or renewal Lien is limited to the property or assets covered by the
Lien extended or renewed and does not secure Indebtedness in an amount greater
than the amount of the outstanding Indebtedness secured thereby immediately
prior to such extension, renewal or replacement.
SECTION 6.08. Sale of Stock and Assets. Borrower shall not (nor permit
------------------------
any of its Subsidiaries to) sell, transfer, convey, assign or otherwise dispose
of any of its properties or other assets, including the capital Stock of any of
their respective Subsidiaries (whether in a public or a private offering or
otherwise) or any of their Accounts, other than the following:
(a) the sale of Meadowlake Hospital on the terms of the purchase
option set forth in the Lease Agreement, dated as of August 1, 1997, by and
between HSA and Baptist Healthcare of Oklahoma, Inc.;
(b) the sale of Three Rivers Hospital or the Stock of Ramsay
Louisiana, Inc. on such terms as shall be acceptable to Borrower, provided that
at the time of such sale Borrower has provided to the Administrative Agent all
documents required by paragraph 2(h) of Annex D with
-------
46
<PAGE>
respect to Bayou Oaks Hospital, and otherwise on the terms specified in clauses
(i)-(iv) of the proviso to paragraph (c) below with respect to other properties
and assets;
(c) the sale of other properties or assets (including the capital
Stock of any of their respective Subsidiaries) having a fair market value of not
more than $2,500,000 in the aggregate during any Fiscal Year, provided that, as
--------
to any such sale, (i) if any such sale is of Stock of a Subsidiary of Borrower,
the sale is of not less than 100% of such Stock, (ii) the fair market value of
the total consideration received by Borrower or any of its Subsidiaries in
respect of each such sale is not less than the fair market value of the asset
disposed of, (iii) 75% of the aggregate fair market value of the consideration
payable to Borrower or its Subsidiary in respect of each such sale is paid in
cash, and (iv) all shares of Stock, promissory notes and other instruments
evidencing the remainder of such consideration are promptly pledged and
delivered to the Administrative Agent with appropriate endorsements executed in
blank;
(d) the sale, transfer, conveyance or other disposition by a Credit
Party of (i) any of its properties or assets that are obsolete or no longer used
or useful in such Credit Party's business, having a fair market value not
exceeding $1,000,000 in the aggregate in any Fiscal Year and (ii) other
properties and assets, having a fair market value not exceeding $1,000,000 in
the aggregate in any Fiscal Year;
(e) the sale or other disposition of Investments; and
(f) transfers of assets specifically permitted by Section 6.02(d),
---------------
lending or borrowing transactions specifically permitted by Section 6.05(b), (c)
--------------- ---
and (d) and Restricted Payments specifically permitted by Section 6.15;
--- ------------
provided, in each case, that the proceeds of any such sale or other disposition
- --------
are applied in the manner set forth in Section 5.13.
------------
All determinations of fair market value shall be made in good faith by
Borrower's board of directors for the purposes of paragraph (b) and (c) above
and shall be made by a Responsible Financial Officer for the purposes of
paragraph (d) above. With respect to any disposition of assets or other
properties permitted pursuant to this Section 6.08, the Administrative Agent
------------
shall, with reasonable promptness, on reasonable prior written notice and upon
receipt of any proceeds thereof required by Section 5.13 hereof to be remitted
------------
to the Administrative Agent for application to the Obligations, release its Lien
on such assets or other properties in order to permit the applicable Credit
Party to effect such disposition and shall execute and deliver to Borrower, at
Borrower's expense, appropriate UCC-3 termination statements and other releases
as reasonably requested by Borrower.
SECTION 6.09. Material Contracts. Borrower shall not (nor permit any of
------------------
its Subsidiaries to) enter into, cancel or terminate any Material Contract or
amend or otherwise modify any Material Contract, or waive any default or breach
under any Material Contract except that Borrower and its Subsidiaries may (a)
enter into Material Contracts in the ordinary course of business, and (b) enter
47
<PAGE>
into, cancel, terminate, amend or otherwise modify any Material Contract, or
waive any default or breach thereunder, (i) as specifically provided in Section
-------
6.20 with respect to certain Subordinated Indebtedness, or (ii) that would not
- ----
be a Material Adverse Event.
SECTION 6.10. ERISA. Neither Borrower nor any of its Subsidiaries nor
-----
any ERISA Affiliate shall acquire any new ERISA Affiliate that maintains or has
an obligation to contribute to a Pension Plan that has either an "accumulated
funding deficiency," as defined in Section 302 of ERISA, or any "unfunded vested
benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case of any
Pension Plan other than a Multi-employer Plan and in Section 4211 of ERISA in
the case of a Multi-employer Plan if such acquisition would be a Material
Adverse Event. Additionally, neither Borrower nor any of its Subsidiaries nor
any ERISA Affiliate shall, to the extent that any of the following actions would
be a Material Adverse Event: (a) permit or suffer any condition set forth in
Schedule 3.13 to cease to be met and satisfied at any time; (b) terminate any
- -------------
Pension Plan that is subject to Title IV of ERISA where such termination could
reasonably be anticipated to result in liability to Borrower or such Subsidiary;
(c) permit any accumulated funding deficiency, as defined in Section 302(a)(2)
of ERISA, to be incurred with respect to any Pension Plan; fail to make any
contributions or fail to pay any amounts due and owing as required by the terms
of any Plan before such contributions or amounts become delinquent; (d) make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multi-employer Plan; (e) at any time fail to provide the Administrative
Agent with copies of any Plan documents or governmental reports or filings, if
requested by the Administrative Agent.
SECTION 6.11. Financial Covenants. Borrower shall not breach or fail to
-------------------
comply with any of the financial covenants set forth in Annex G, each of which
-------
shall be calculated in accordance with Annex G (and based upon the Financial
-------
Statements delivered hereunder).
SECTION 6.12. Hazardous Materials. Borrower shall not (nor permit any
-------------------
of its Subsidiaries or any other Person within the control of Borrower to): (a)
cause or permit a Release of any Hazardous Materials on, under in or about any
Real Property; (b) use, store, generate, treat or dispose of Hazardous
Materials; or (c) transport any Hazardous Materials to or from any Real
Property; except in each case to the extent that such Release, use, storage,
generation, treatment or disposal would not (i) be a Material Adverse Event, or
(ii) materially adversely impact the value or marketability of any of the
Mortgaged Property.
SECTION 6.13. Sale-Leasebacks. Borrower shall not (nor permit any of
---------------
its Subsidiaries to) enter into any sale-leaseback or similar transaction
involving any of its property or assets.
SECTION 6.14. Cancellation of Indebtedness. Borrower shall not (nor
----------------------------
permit any of its Subsidiaries to) cancel any material claim or material
Indebtedness owing to it, except for reasonable consideration and in the
ordinary course of its business.
SECTION 6.15. Restricted Payments. Borrower shall not (nor permit any
-------------------
of its Subsidiaries to) make any Restricted Payment to any Person, except that
(a) Borrower may pay
48
<PAGE>
dividends on its Series 1997 Preferred Stock and, after the Revolving Credit
Commitment Adjustment Date, on any other class of its preferred stock,
provided that (i) Borrower's Fixed Charge Coverage Ratio would not be
less than 1.25:1.00, determined on a pro forma basis for the most recent Rolling
---------
Four-Quarter Period for which Borrower is required to deliver a Compliance
Certificate to the Administrative Agent pursuant to Annex F hereof, based on
-------
Borrower's actual Fixed Charge Coverage Ratio as set forth therein, but
calculated as if such dividends were included in Fixed Charges for such period
for the purpose of such computation (or, if Borrower has delivered to the
Administrative Agent a pro forma Compliance Certificate for such period pursuant
---------
to Section 6.01(l)(iii), based on Borrower's pro forma Fixed Charge Coverage
-------------------- ---------
Ratio as set forth therein, but calculated as if such dividends were included in
pro forma Fixed Charges for such period for the purpose of such computation),
- ---------
(ii) no Default or Event of Default exists or would be caused by such payment,
and (iii) such payment is otherwise permitted by law; (b) Borrower may redeem
its Series 1997-A Preferred Stock at any time after the Revolving Credit
Commitment Adjustment Date, provided that (i) no Default or Event of Default
exists or would be caused by such redemption, and (ii) such redemption is
otherwise permitted by law; (c) Borrower may make payments of interest, fees and
expenses under the Bridge Notes, the Senior Subordinated Notes and other
Subordinated Indebtedness permitted by this Agreement in accordance with their
terms (including, without limitation, their respective subordination provisions)
and may repay the principal amount of the Bridge Notes or any other Subordinated
Indebtedness permitted under Section 6.04 utilizing the proceeds of other
------------
Subordinated Indebtedness permitted by Section 6.04; (d) Borrower may pay its
------------
obligations under Article 3 of the Bridge Note Purchase Agreement solely by the
delivery of Stock of Borrower on the basis contemplated by Section 3.04 thereof;
------------
(e) any Subsidiary of Borrower may pay cash dividends (or, in the case of a
Subsidiary that is a partnership or limited liability company, cash
distributions) (i) to Borrower or to another Credit Party and (ii) to any other
Person holding such Subsidiary's Stock, provided that any such dividends or
distributions are paid on a basis which is pro rata as to all Persons holding
--------
such Stock (including Borrower or another Credit Party, as applicable); and (f)
Borrower may repurchase Stock of Borrower from former employees of Borrower or
its Subsidiaries for amounts not to exceed $500,000 in the aggregate during the
term of this Agreement.
SECTION 6.16. No Speculative Transactions. Borrower shall not (nor
---------------------------
permit any of its Subsidiaries to) engage in any transaction involving commodity
options or futures contracts or other, similar, speculative matters (other than
in the ordinary course of business consistent with past practice and interest
rate swap, cap or collar agreements relating to the Term Loans or the Revolving
Credit Loan).
SECTION 6.17. Margin Regulations. Borrower shall not use the proceeds
------------------
of the Term Loans or any Revolving Credit Advance to purchase or carry any
Margin Stock or any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
SECTION 6.18. Limitation on Negative Pledge Clauses, Etc. Borrower
-------------------------------------------
shall not (nor permit any of its Subsidiaries to), directly or indirectly, enter
into any agreement with any Person which directly or indirectly (a) prohibits or
limits the ability of Borrower or any other Credit Party
49
<PAGE>
to create, incur, assume or suffer to exist any Lien upon any of its Property,
assets or revenues in favor of the Administrative Agent for the benefit of
Lenders, whether now owned or hereafter acquired; or (b) restricts, prohibits or
requires the consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by a Subsidiary
of Borrower to Borrower.
SECTION 6.19. Accounting Changes. Borrower shall not make any
------------------
significant change in accounting treatment and reporting practices except for
changes concurred in by Borrower's independent public accountants.
SECTION 6.20. Changes Relating to Subordinated Debt. Neither Borrower
-------------------------------------
nor any other Credit Party shall change or amend the terms of the Bridge Notes,
the Senior Subordinated Notes, the Bridge Note Purchase Agreement, the Senior
Subordinated Note Agreement or any other Subordinated Indebtedness (or any
indenture or agreement in connection therewith) if the effect of such amendment
is to: (a) increase the interest rate on such Subordinated Indebtedness; (b)
change the dates upon which payments of principal or interest are due on such
Subordinated Indebtedness other than to extend such dates; (c) change any
default or event of default other than to delete or make less restrictive any
default provision therein; (d) change or add any covenant with respect to such
Subordinated Indebtedness other than to make less restrictive any such covenant;
(d) change the redemption or prepayment provisions of such Subordinated
Indebtedness other than to extend the dates therefor or to reduce the premiums
payable in connection therewith; (e) grant any security or collateral to secure
payment of such Subordinated Indebtedness; or (f) change or amend any other term
if such change or amendment would materially increase the obligations of the
obligor or confer additional material rights to the holder of such Subordinated
Indebtedness in a manner adverse to any Credit Party, the Administrative Agent
or any Lender.
SECTION 6.21. Leases. Neither Borrower nor any other Credit Party shall
------
lease any of the Mortgaged Property to any third party, other than (a) leases in
existence on the Closing Date and reflected in the title insurance policy in
respect thereof furnished to the Administrative Agent pursuant to Annex D, and
-------
(b) other leases entered into after the Closing Date, provided that the space
leased under all such leases with respect to any Mortgaged Property does not
exceed 10% of the total square footage of the building to which such lease
applies.
SECTION 6.22. Tax Sharing Agreements. Neither Borrower nor any other
----------------------
Credit Party shall enter into any tax sharing agreement with any Person not
included in Borrower's Financial Statements.
ARTICLE 7
TERM
SECTION 7.01. Duration. The financing arrangements contemplated hereby
--------
shall be in effect until the Revolving Credit Commitment Termination Date. On
the Revolving Credit
50
<PAGE>
Commitment Termination Date, the Revolving Credit Commitments shall terminate
and the Revolving Credit Loan, the Term Loans, and all other Obligations shall
immediately become due and payable in full, in cash.
SECTION 7.02. Survival of Obligations. Except as otherwise expressly
-----------------------
provided for in the Loan Documents, no termination or cancellation (regardless
of cause or procedure) of any financing arrangement under this Agreement shall
in any way affect or impair the Obligations, duties, indemnities and liabilities
of Borrower or any other Credit Party, or the rights of the Agents or Lenders
relating to any Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such termination, or
any transaction or event, the performance of which is not required until after
the Revolving Credit Commitment Termination Date. Except as otherwise expressly
provided herein or in any other Loan Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon Borrower or any
other Credit Party, and all rights of the Agents and Lenders, all as contained
in the Loan Documents, shall not terminate or expire, but rather shall survive
such termination or cancellation and shall continue in full force and effect
until such time as all of the Obligations have been indefeasibly paid in full in
accordance with the terms of the agreements creating such Obligations.
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.01. Events of Default. The occurrence of any one or more of
-----------------
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
- -----------------
(a) Borrower (i) fails to make any payment or prepayment of principal
of the Loans or any of the other Obligations when due and payable, (ii) fails to
make any payment of interest on, or Fees owing in respect of, the Loans or any
of the other Obligations when due and payable and such failure shall remain
unremedied for more than three (3) Business Days, or (iii) fails to pay or
reimburse the Administrative Agent, the Syndication Agent or Lenders for any
expense reimbursable hereunder or under any other Loan Document within ten (10)
Business Days following the Administrative Agent's demand for such reimbursement
or payment of expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or observe
any of the provisions of Sections 1.05, 1.15, 5.05, 5.10, 5.11, 5.13, 5.14 or
------------- ---- ---- ---- ---- ---- ----
5.15, of Article 6, or of any of the provisions set forth in Annex G.
- ---- --------- -------
(c) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Article 4 or any provisions set forth in Annex F and the same
--------- -------
shall remain unremedied for three (3) Business Days or more after receipt of
written notice thereof from the Administrative Agent or any Lender.
51
<PAGE>
(d) Any Credit Party shall fail or neglect to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.01) and the same shall remain unremedied for thirty (30) days or more
- ------------
after the earlier of (i) receipt of written notice thereof from the
Administrative Agent or any Lender and (ii) any Credit Party knows such failure
or neglect.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party which is not cured
within any applicable grace period, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other than
the Obligations) of any Credit Party in excess of $1,000,000 in the aggregate,
or (ii) causes, or permits any holder of such Indebtedness or a trustee to
cause, Indebtedness or a portion thereof in excess of $1,000,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, regardless of whether such default is waived, or
such right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any material respect as of the date made, or any
representation or warranty herein or in any Loan Document or in any written
statement, report, financial statement or certificate (other than a Borrowing
Base Certificate) made or delivered to the Administrative Agent or any Lender by
any Credit Party is untrue or incorrect in any material respect as of the date
when made or deemed made.
(g) Assets of any Credit Party with a fair market value of $1,000,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced against any Credit
Party seeking a decree or order in respect of any Credit Party (i) under Title
11 of the United States Code, as now constituted or hereafter amended or any
other applicable federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) for any Credit Party or of any substantial part of any
such Credit Party's assets, or (iii) ordering the winding-up or liquidation of
the affairs of any Credit Party, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court shall enter a
decree or order granting the relief sought in such case or proceeding.
(i) Any Credit Party (i) shall file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) shall fail to contest in a timely and appropriate manner or shall consent
to the institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any
Credit Party or of any substantial part of any such Credit Party's assets, (iii)
shall make an assignment for the benefit of creditors, or (iv) shall
52
<PAGE>
take any corporate action in furtherance of any of the foregoing, or (v) shall
admit in writing its inability to, or shall be generally unable to, pay its
debts as such debts become due.
(j) A final judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate at any time outstanding shall be rendered against
any Credit Party unless such judgment or judgments shall, within thirty (30)
days after the entry thereof, have been discharged or execution thereof stayed
or bonded pending appeal, or shall have been discharged prior to the expiration
of any such stay.
(k) Any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any security interest created under any Loan Document shall cease to be a
valid and perfected first priority security interest or Lien (except as
otherwise permitted herein or therein) in any material amount of the Collateral
purported to be covered thereby.
(l) Any Change of Control shall occur; or, except as the result of any
disposition specifically permitted or consented to hereunder, Borrower or any
other Credit Party shall fail at any time to be the record and beneficial owner
of 100% of the issued and outstanding capital Stock of any of its Subsidiaries
(other than Gulf Coast Treatment Center) that are Credit Parties as of the
Closing Date or that become Credit Parties subsequent to the Closing Date, or
shall fail at any time to be the record and beneficial owner of not less than
96% of the issued and outstanding capital Stock of Gulf Coast Treatment Center,
in each case free and clear of any Lien other than inchoate tax Liens and Liens
in favor of the Administrative Agent for the benefit of the Lenders.
(m) Any Material Adverse Event occurs and is continuing.
(n) Borrower or any of the Ramsay Affiliates shall fail to perform
their respective obligations under the Ramsay Common Stock Subscription
Agreement, as and when such performance is due.
SECTION 8.2. Remedies.
--------
(a) If any Event of Default shall have occurred and be continuing, the
provisions of Section 1.09 (b)(ii) and paragraph 1(e) of Annex C with respect to
-------------------- -------
the Default Rate shall apply.
(b) If any Event of Default shall have occurred and be continuing, or
if a Default shall have occurred and be continuing and the Administrative Agent
or the Required Revolving Lenders shall have determined not to make any
Revolving Credit Advances or incur any Letter of Credit Obligations so long as
that specific Default is continuing, the Administrative Agent may, or at the
written direction of the Required Revolving Lenders shall, without notice,
suspend the
53
<PAGE>
Revolving Credit Commitments with respect to further Revolving Credit Advances
and/or the incurrence of further Letter of Credit Obligations whereupon any
further Revolving Credit Advances or Letter of Credit Obligations shall be made
or incurred in the Administrative Agent's sole discretion (or in the sole
discretion of the Required Revolving Lenders, if such suspension occurred at
their direction) so long as such Event of Default is continuing.
(c) If any Event of Default shall have occurred and be continuing, the
Administrative Agent may (and at the direction of the Required Lenders shall),
without notice, take any one or more of the following actions: (i) terminate the
Revolving Credit Commitments, whereupon the Revolving Lenders' obligation to
make further Revolving Credit Advances or to incur further Letter of Credit
Obligations shall terminate; (ii) declare all or any portion of the Obligations
to be forthwith due and payable, including the Revolving Credit Loan, the Term
Loans and any contingent liabilities with respect to Letter of Credit
Obligations, whereupon such Obligations shall become and be due and payable;
(iii) require that all Letter of Credit Obligations be fully cash collateralized
in accordance with the terms of Annex B; or (iv) exercise any rights and
-------
remedies provided to the Administrative Agent or any Lender under the Loan
Documents and/or at law or equity, including all remedies provided under the
Code; provided, however, that upon the occurrence of an Event of Default
-------- -------
specified in Section 8.01(g), (h) or (i), the Revolving Credit Commitments shall
--------------- --- ---
immediately terminate and the Obligations shall become immediately due and
payable, in each case, without declaration, notice or demand by or to any
Person.
(d) Anything in this Agreement to the contrary notwithstanding, each
Lender hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement, the Notes or the
other Loan Documents (including exercising any rights of set-off) without first
obtaining the prior written consent of the Administrative Agent and the Required
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of the Administrative Agent and the
Required Lenders.
SECTION 8.03. Waivers by Credit Parties. Except as otherwise provided
-------------------------
for in this Agreement and the other Loan Documents, to the full extent permitted
by applicable law, Borrower and each other Credit Party waives (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all Loan
Documents, notes, commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by the Administrative
Agent on which Borrower or any other Credit Party may in any way be liable, and
Borrower and each other Credit Party hereby ratifies and confirms whatever the
Administrative Agent may do in this regard, (b) all rights to notice and a
hearing prior to the Administrative Agent's taking possession or control of, or
to the Administrative Agent's replevy, attachment or levy upon, the Collateral
or any bond or security which might be required by any court prior to allowing
the Administrative Agent to exercise any of their remedies, and (c) the benefit
of any right of redemption and all valuation, appraisal and exemption laws.
Borrower and each other Credit Party acknowledges that it has been advised by
counsel of its choice with respect to this
54
<PAGE>
Agreement, the other Loan Documents and the transactions contemplated by this
Agreement and the other Loan Documents.
ARTICLE 9
THE ADMINISTRATIVE AGENT
SECTION 9.1. Appointment of the Administrative Agent.
---------------------------------------
(a) GE Capital is hereby appointed to act on behalf of all Lenders as
the Administrative Agent under this Agreement and the other Loan Documents. The
provisions of this Article 9 are solely for the benefit of the Administrative
---------
Agent and Lenders, and neither Borrower, the Credit Parties nor any other Person
shall have any rights directly or as a third party beneficiary of any of the
provisions hereof, except (i) Borrower's right to approve any successor
Administrative Agent in accordance with Section 9.06 and (ii) Borrower's right
------------
to have Collateral released in accordance with Section 9.08. In performing its
------------
functions and duties under this Agreement and the other Loan Documents, the
Administrative Agent shall act solely as an agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower, any other Credit Party or any other
Person. The Administrative Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the other Loan
Documents. The duties of the Administrative Agent shall be mechanical and
administrative in nature and the Administrative Agent shall not have, or be
deemed to have, by reason of this Agreement, any other Loan Document or
otherwise, a fiduciary relationship in respect of any Lender. Neither the
Administrative Agent nor any of its Affiliates nor any of their respective
officers, directors, employees, agents or representatives shall be liable to any
Lender for any action taken or omitted to be taken by it hereunder or under any
other Loan Document, or in connection herewith or therewith, except for damages
solely caused by its or their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
(b) If the Administrative Agent shall request instructions from the
Required Lenders, the Required Revolving Lenders or all affected Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Lenders,
the Required Revolving Lenders or all affected Lenders, as the case may be, and
the Administrative Agent shall not incur liability to any Person by reason of so
refraining. The Administrative Agent shall be fully justified in failing or
refusing to take any action hereunder or under any other Loan Document (i) if
such action would, in the opinion of the Administrative Agent, be contrary to
law or the terms of this Agreement or any other Loan Document, (ii) if such
action would, in the opinion of the Administrative Agent, expose the
Administrative Agent to Environmental Liabilities or (iii) if the Administrative
Agent shall not first be indemnified to its satisfaction against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the
55
<PAGE>
Administrative Agent as a result of the Administrative Agent's acting or
refraining from acting hereunder or under any other Loan Documents in accordance
with the instructions of the Required Lenders, the Required Revolving Lenders or
all affected Lenders, as applicable.
SECTION 9.02. The Administrative Agent's Reliance, Etc. Neither the
-----------------------------------------
Administrative Agent nor any of its Affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for damages solely caused by its or their own
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction. Without limitation of the generality of the foregoing,
the Administrative Agent: (a) may treat the payee of any Note as the holder
thereof until the Administrative Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form satisfactory to the
Administrative Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Credit Party or to inspect the Collateral (including the books and records) of
any Credit Party; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; and (f) shall incur no liability
under or in respect of this Agreement or the other Loan Documents by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 9.03. GE Capital and Affiliates. With respect to its Revolving
-------------------------
Credit Commitment and Loans hereunder, GE Capital shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender and
may exercise the same as though it were not the Administrative Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include
GE Capital in its individual capacity. GE Capital and its Affiliates may lend
money to, invest in, and generally engage in any kind of business with, any
Credit Party, any of their Affiliates and any Person who may do business with or
own securities of any Credit Party or any such Affiliate, all as if GE Capital
were not the Administrative Agent and without any duty to account therefor to
Lenders. GE Capital and its Affiliates may accept fees and other consideration
from any Credit Party for services in connection with this Agreement or
otherwise without having to account for the same to Lenders. Each Lender
acknowledges the potential conflict of interest between GE Capital as a Lender
holding disproportionate interests in the Loans and GE Capital as the
Administrative Agent.
SECTION 9.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon the Administrative Agent or any
other Lender and based
56
<PAGE>
on the Financial Statements and such other documents and information as it has
deemed appropriate, made its own credit and financial analysis of the Credit
Parties and its own decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
SECTION 9.5. Indemnification. Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not reimbursed by Borrower and without
limiting the obligations of Borrower hereunder), ratably according to their
respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by the Administrative Agent in connection therewith;
provided, however, that no Lender shall be liable for any portion of such
- -------- -------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct as finally determined by a court
of competent jurisdiction. Without limiting the foregoing, each Lender agrees
to reimburse the Administrative Agent promptly upon demand for its Pro Rata
Share of any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that the Administrative Agent is not reimbursed for such expenses
by Borrower or any other Credit Party.
SECTION 9.06. Successor Administrative Agent. The Administrative Agent
------------------------------
may resign at any time by giving not less than thirty (30) days' prior written
notice thereof to Lenders and Borrower. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
resigning Administrative Agent's giving notice of resignation, then the
resigning Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, which shall be a Lender, if a Lender is willing to accept
such appointment, or otherwise shall be a commercial bank or financial
institution or a subsidiary of a commercial bank or financial institution if
such commercial bank or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $300,000,000. If no successor Administrative Agent has been
appointed pursuant to the foregoing, by the 30th day after the date such notice
of resignation was given by the resigning Administrative Agent, such resignation
shall become effective and the Required Lenders shall thereafter perform all the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor Administrative Agent as provided above.
Any successor Administrative Agent appointed
57
<PAGE>
by the Required Lenders hereunder shall be subject to the approval of Borrower,
such approval not to be unreasonably withheld or delayed; provided that such
--------
approval shall not be required if a Default or an Event of Default shall have
occurred and be continuing. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Administrative Agent.
Upon the earlier of the acceptance of any appointment as the Administrative
Agent hereunder by a successor Administrative Agent or the effective date of the
resigning Administrative Agent's resignation, the resigning Administrative Agent
shall be discharged from its duties and obligations under this Agreement and the
other Loan Documents, except that any indemnity rights or other rights in favor
of such resigning Administrative Agent shall continue. After any resigning
Administrative Agent's resignation hereunder, the provisions of this Article 9
---------
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under this Agreement and the other Loan
Documents. The Administrative Agent may be removed at the written direction of
the Required Lenders; provided that in so doing, such Required Lenders shall be
deemed to have waived and released any and all claims they may have against the
Administrative Agent.
SECTION 9.07. Dissemination of Information. The Administrative Agent
----------------------------
will use reasonable efforts to provide Lenders with any notice of Default or
Event of Default received by the Administrative Agent from, or delivered by the
Administrative Agent to, Borrower or any other Credit Party, with notice of any
Event of Default of which the Administrative Agent has actually become aware and
with notice of any action taken by the Administrative Agent following any Event
of Default; provided, however, that the Administrative Agent shall not be liable
-------- -------
to any Lender for any failure to do so, except to the extent that such failure
is attributable solely to the Administrative Agent's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. Lenders
acknowledge that Borrower is required to provide financial statements to Lenders
in accordance with Section 4.01 hereof and agree that the Administrative Agent
------------
shall have no duty to provide the same to Lenders.
SECTION 9.08. Release of Collateral. Upon indefeasible payment in full
---------------------
in cash and performance of all of the outstanding Obligations (other than
indemnification Obligations under Section 1.14), termination of the Revolving
------------
Credit Commitments of all Revolving Lenders and a release of all claims against
the Administrative Agent and Lenders, and so long as no suits, actions,
proceedings, or claims are pending or threatened against any Indemnified Person
asserting any damages, losses or liabilities that are indemnified Claims, the
Administrative Agent shall deliver to Borrower termination statements, mortgage
releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.
58
<PAGE>
ARTICLE 10
SUCCESSORS AND ASSIGNS
SECTION 10.01. Successors and Assigns. This Agreement and the other Loan
----------------------
Documents shall be binding on and shall inure to the benefit of Borrower,
Lenders, the Agents and their respective successors and assigns (including, in
the case of Borrower or any other Credit Party, a debtor-in-possession on behalf
of Borrower or such Credit Party), except as otherwise provided herein or
therein. Borrower may not assign, delegate, transfer, hypothecate or otherwise
convey its rights, benefits, obligations or duties hereunder or under any of the
Loan Documents without the prior express written consent of the Administrative
Agent and the Required Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by Borrower without such prior express written
consent shall be void. The terms and provisions of this Agreement and the other
Loan Documents are for the purpose of defining the relative rights and
obligations of Borrower, Lenders and Agents with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any of
the terms and provisions of this Agreement or any of the other Loan Documents.
SECTION 10.02. Assignments and Participations.
------------------------------
(a) Subject to the terms and conditions of this Section 10.02, each
-------------
Lender shall have the right to assign or sell participations in, at any time or
times, the Loan Documents, Loans, Letter of Credit Obligations and any Revolving
Credit Commitment or of any portion thereof or interest therein, including any
Lender's rights, title, interests, remedies, powers or duties thereunder,
whether evidenced by a writing or not. Each such assignment by a Lender shall
(i) require the consent of Borrower (which shall not be unreasonably withheld or
delayed) unless a Default or Event of Default shall have occurred and be
continuing, (ii) require the consent of the Administrative Agent (which shall
not be unreasonably withheld or delayed), (iii) require the execution of an
assignment and assumption agreement (an "Assignment Agreement") substantially in
--------------------
the form attached hereto as Exhibit D and otherwise in form and substance
---------
satisfactory to, and acknowledged by, the Administrative Agent; (iv) in the case
of an assigning Lender holding a Revolving Credit Commitment and a ratable
portion of Term Loan A, be a pro rata assignment of its Revolving Credit
--------
Commitment and its ratable portion of the Revolving Credit Loan and Term Loan A,
(v) be conditioned on such assignee Lender's representing to the assigning
Lender and the Administrative Agent that it is purchasing the applicable Loans
to be assigned to it for its own account, for investment purposes and not with a
view to the distribution thereto; (vi) if a partial assignment, be in an amount
at least equal to $5,000,000 or, if less, the assigning Lender's entire
remaining interest and, after giving effect to any such partial assignment,
other than an assignment of its entire remaining interest, the assigning Lender
shall have retained Loans and /or a Revolving Credit Commitment in an amount at
least equal to $5,000,000; and (vii) include a payment to the Administrative
Agent of an assignment fee of $3,500. In the case of an assignment by a Lender
under this Section 10.02, the assignee shall have, to the extent of such
-------------
assignment, the same rights, benefits and obligations as it would if it were a
Lender hereunder. Each assigning Revolving Lender shall be relieved of its
obligations hereunder with respect to its Revolving Credit Commitment or
59
<PAGE>
assigned portion thereof from and after the date of such assignment. Borrower
hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender". In all instances, each Lender's liability to make Loans
hereunder shall be several and not joint and shall be limited to such Lender's
Pro Rata Share of the applicable Loan. In the event any Lender assigns or
otherwise transfers all or any part of a Note, Borrower shall, upon the request
of the Administrative Agent or such Lender, execute new Notes in exchange for
the Notes being assigned. Notwithstanding the foregoing provisions of this
Section 10.02(a), any Lender may at any time pledge or assign all or any portion
- ----------------
of such Lender's rights under this Agreement and the other Loan Documents to a
Federal Reserve Bank; provided, however, that no such pledge or assignment shall
-------- -------
release such Lender from such Lender's obligations hereunder or under any other
Loan Document.
(b) Any participation by a Lender of all or any part of its Loans
and/or Revolving Credit Commitment shall be in an amount at least equal to
$5,000,000, and with the understanding that all amounts payable by Borrower
hereunder shall be determined as if that Lender had not sold such participation,
and that the holder of any such participation shall not be entitled to require
such Lender to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of , or interest rate or
Fees payable with respect to, any Loan in which such holder participates, (ii)
any extension of the scheduled amortization of the principal amount of any Loan
in which such holder participates or the final maturity date thereof, and (iii)
any release of all or substantially all of the Collateral (other than in
accordance with the terms of this Agreement, the Collateral Documents or the
other Loan Documents). Solely for purposes of Sections 1.16, 1.17 and 11.08,
------------- ---- -----
Borrower acknowledges and agrees that a participation shall give rise to a
direct obligation of Borrower to the participant and the participant shall be
considered to be a "Lender." Except as set forth in the preceding sentence
neither Borrower nor any other Credit Party shall have any obligation or duty to
any participant. Neither the Administrative Agent nor any Lender (other than
the Lender selling a participation) shall have any duty to any participant and
may continue to deal solely with the Lender selling a participation as if no
such sale had occurred.
(c) Except as expressly provided in this Section 10.02, no Lender
-------------
shall, as between Borrower and that Lender, or the Administrative Agent and that
Lender, be relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Borrower and each of its Subsidiaries shall assist any Lender
permitted to sell assignments or participations under this Section 10.02 as
-------------
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall reasonably be
requested and the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Borrower and each of the other Credit Parties shall certify the
correctness, completeness and accuracy of all descriptions of such Credit Party
and their affairs contained in any selling materials provided by it and all
other information provided by it and included in such materials, except that any
Projections delivered by Borrower shall only be
60
<PAGE>
certified by Borrower as having been prepared by Borrower in compliance with the
representations contained in Schedule 3.04.
-------------
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Complete Agreement. This Agreement, the other Loan
------------------
Documents and the Related Transaction Documents constitute the complete
agreement among the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements, commitments, understandings or
inducements (oral or written, expressed or implied) relating to a financing of
substantially similar form, purpose or effect, including the commitment letter
and fee letter, each dated August 7, 1997 between Borrower and GE Capital.
SECTION 11.02. Amendments and Waivers.
----------------------
(a) Except for actions expressly permitted to be taken by the
Administrative Agent, no amendment, modification, termination or waiver of any
provision of this Agreement or any of the Notes, or any consent to any departure
by any Credit Party therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Administrative Agent and Borrower, and by
the Required Lenders, Required Revolving Lenders or all affected Lenders, as
applicable. Except as set forth in paragraphs (b) and (c) below, all such
amendments, modifications, terminations or waivers requiring the consent of any
Lenders shall require the written consent of the Required Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement which increases the percentage
advance rate set forth in the definition of "Borrowing Base" shall be effective
unless the same shall be in writing and signed by the Administrative Agent, the
Required Lenders, the Required Revolving Lenders and Borrower. No amendment,
modification, termination or waiver of or consent with respect to any provision
of this Agreement which waives compliance with the conditions precedent set
forth in Section 2.02 to the making of any Revolving Credit Advance or the
------------
incurrence of any Letter of Credit Obligations shall be effective unless the
same shall be in writing and signed by the Administrative Agent, the Required
Revolving Lenders and Borrower. Notwithstanding anything contained in this
Agreement to the contrary, no waiver or consent with respect to any Default (if
in connection therewith the Administrative Agent or the Required Revolving
Lenders, as the case may be, have exercised its or their right to suspend the
making or incurrence of further Revolving Credit Advances or Letter of Credit
Obligations pursuant to Section 8.02(a)) or any Event of Default shall be
---------------
effective for purposes of the conditions precedent to the making of Revolving
Credit Advances or the incurrence of Letter of Credit Obligations set forth in
Section 2.02 unless the same shall be in writing and signed by the
- ------------
Administrative Agent, the Required Revolving Lenders and Borrower.
61
<PAGE>
(c) No amendment, modification, termination or waiver shall, unless in
writing and signed by the Administrative Agent and each Lender, do any of the
following: (i) increase the principal amount of any Revolving Credit Commitment
(except for the increase in the Revolving Credit Commitments contemplated by
Section 1.01(g)) or the original principal amount of Term Loan A or Term Loan B;
- ---------------
(ii) except as otherwise permitted under Section 6.08, release any Credit Party
------------
from liability under the Subsidiary Guaranty or release all or substantially all
of the Collateral; or (iii) amend or waive this Section 11.02 or the definition
-------------
of the term "Required Lenders."
(d) No amendment, modification, termination or waiver shall, unless in
writing and signed by the Administrative Agent, the Required Lenders and all of
the Lenders holding Loans directly affected thereby, extend any scheduled
payment date or final maturity date of the principal amount of any Loan.
(e) No amendment, modification, termination or waiver shall, unless in
writing and signed by the Administrative Agent and all of the Lenders holding
Revolving Credit Commitments, Loans or Letter of Credit Obligations directly
affected thereby, (i) reduce the principal of, rate of interest on or Fees
payable with respect to any Revolving Credit Commitment, Loan or Letter of
Credit Obligations, or (ii) waive, forgive, defer, extend or postpone any
payment of interest or Fees.
(f) No amendment, modification, termination or waiver shall, unless in
writing and signed by all of the Revolving Lenders, amend or waive (i) any
provision of this Agreement requiring consent or action on the part of the
Required Revolving Lenders or (ii) the definition of "Required Revolving
Lenders."
(g) No amendment, modification, termination or waiver affecting the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document shall be effective unless in writing and signed by the
Administrative Agent, in addition to the Lenders required hereinabove to take
such action.
(h) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for the Administrative Agent to take additional Collateral pursuant to
any Loan Document. No amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of the
holder of that Note. No notice to or demand on any Credit Party in any case
shall entitle such Credit Party or any other Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 11.02 shall be binding upon each holder of the Notes at the time
- -------------
outstanding and each future holder of the Notes.
62
<PAGE>
SECTION 11.03. Fees and Expenses; Certain Taxes.
--------------------------------
(a) Borrower shall reimburse the Agents for all reasonable out-of-
pocket expenses incurred in connection with the preparation, negotiation,
execution, delivery and syndication of the Loan Documents (including the
reasonable fees and expenses of the Agents' special counsel, advisors,
consultants and auditors retained in connection with the Loan Documents and
advice in connection therewith). Borrower shall reimburse the Administrative
Agent (and, with respect to clauses (iii), (iv) and (v) below, all Lenders) for
all reasonable fees, costs and expenses, including the reasonable fees, costs
and expenses of counsel or other advisors (including environmental and
management consultants and appraisers) for advice, assistance, or other
representation in connection with:
(i) wire transfer fees and other costs of the forwarding to
Borrower or any other Person on behalf of Borrower by the Administrative
Agent of the proceeds of the Loans;
(ii) any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the Loans made pursuant hereto or its rights hereunder or
thereunder;
(iii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by the Administrative Agent, the Syndication
Agent, any Lender, Borrower, any other Credit Party or any other Person) in
any way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against Borrower, any
other Credit Party or any other Person that may be obligated to Lenders or
the Agents by virtue of the Loan Documents, including any such litigation,
contest, dispute, suit, proceeding or action arising in connection with any
work-out or restructuring of the Loans during the pendency of one or more
Events of Default; provided, that Borrower shall not be liable to reimburse
--------
the Administrative Agent, the Syndication Agent or any Lender for any such
fees, costs or expenses incurred by it in the defense of any Claim as to
which such Person would not be entitled to indemnification by virtue of the
proviso to Section 1.14(a).
---------------
(iv) any attempt to enforce any remedies of the Administrative
Agent or any Lender against any or all of the Credit Parties or any other
Person that may be obligated to the Administrative Agent or any Lender by
virtue of any of the Loan Documents;
(v) any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; or
63
<PAGE>
(vi) any efforts to verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral
after the occurrence and during the continuance of an Event of Default;
including all reasonable attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings; and all reasonable out-of-pocket expenses, costs,
charges and other fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section 11.03 shall be payable, on demand, by Borrower to the Agents or
-------------
Lenders, as applicable. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: reasonable fees, costs and
expenses of accountants, environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services.
(b) In addition, Borrower agrees to pay any present or future
intangible personal property, stamp or documentary taxes or any other excise or
property taxes, charges or similar levies that arise from any payment made
hereunder or under the Notes or from the execution, delivery, recording or
registration of, or otherwise with respect to, this Agreement, any of the
Mortgages or any of the other Collateral Documents or Loan Documents or any
other matter contemplated by this Agreement, within ten (10) Business Days after
demand by the Administrative Agent or any Lender therefor (including penalties,
interest and expenses arising therefrom or with respect thereto), whether or not
such taxes were correctly or legally asserted.
SECTION 11.04. No Waiver. No failure on the part of the Administrative
---------
Agent or any Lender, at any time or times, to require strict performance by
Borrower or any other Credit Party with any provision of this Agreement and any
of the other Loan Documents shall waive, affect or diminish any right of the
Administrative Agent or Lenders thereafter to demand strict compliance and
performance therewith. Any suspension or waiver of a Default or Event of
Default shall not suspend, waive or affect any other Default or Event of Default
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower or any other Credit Party contained in this
Agreement or any of the other Loan Documents and no Default or Event of Default
by Borrower shall be deemed to have been suspended or waived by the
Administrative Agent or Lenders, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
the Administrative Agent, the Required Lenders or the Required Revolving
Lenders, as applicable, and directed to Borrower specifying such suspension or
waiver.
SECTION 11.05. Remedies. The rights and remedies of Lenders and the
--------
Agents under this Agreement and the other Loan Documents shall be cumulative and
nonexclusive of any other rights and remedies which Lenders and the Agents may
have under any other agreement, including
64
<PAGE>
the Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
SECTION 11.06. Severability. Wherever possible, each provision of this
------------
Agreement and each of the other Loan Documents shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement or any of the other Loan Documents shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement or any of the other Loan
Documents.
SECTION 11.07. Conflict of Terms. Except as otherwise provided in this
-----------------
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision contained in
any of the other Loan Documents, the provisions contained in this Agreement
shall govern and control.
SECTION 11.08. Setoff and Sharing of Payments.
------------------------------
(a) In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default, each Lender and
each holder of any Note is hereby authorized to the extent permitted by
applicable law at any time or from time to time, without notice to Borrower or
any of the other Credit Parties or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
balances held by it at any of its offices for the account of Borrower or any
other Credit Party (regardless of whether such balances are then due to Borrower
or such Credit Party) and any other properties or assets any time held or owing
by that Lender or that holder to or for the credit or for the account of
Borrower or any other Credit Party against and on account of any of the
Obligations which are not paid when due.
(b) Any Lender or holder of any Note exercising a right to set off or
otherwise receiving any payment on account of the Obligations in excess of its
Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders
shall sell) such participations in each such other Lender's or holder's Pro Rata
Share of the Obligations as would be necessary to cause such Lender to share the
amount so set off or otherwise received with each other Lender or holder in
accordance with their respective Pro Rata Shares. Borrower and each of the
other Credit Parties agree, to the fullest extent permitted by law, that (a) any
Lender or holder may exercise its right to set off with respect to amounts in
excess of its Pro Rata Share of the Obligations and may sell participations in
such amount so set off to other Lenders and holders and (b) any Lender or
holders so purchasing a participation in the Loans made or other Obligations
held by other Lenders or holders may exercise all rights of set-off, bankers'
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the set-off amount or payment otherwise received is
thereafter recovered from the Lender that has exercised
65
<PAGE>
the right of set-off, the purchase of participations by that Lender shall be
rescinded and the purchase price restored without interest.
SECTION 11.09. Authorized Signature. Until the Administrative Agent
--------------------
shall be notified by Borrower to the contrary, the signature upon any document
or instrument delivered pursuant hereto and believed by the Administrative Agent
or any of the Administrative Agent's officers, agents, or employees to be that
of an officer or duly authorized representative of Borrower or any other Credit
Party listed in Schedule 11.09 shall bind Borrower and all other Credit Parties
--------------
and be deemed to be the act of Borrower or such other Credit Party affixed
pursuant to and in accordance with resolutions duly adopted by Borrower's or
such other Credit Party's Board of Directors, and the Administrative Agent shall
be entitled to assume the authority of each signature and authority of the
Person whose signature it is or appears to be unless the Person acting in
reliance on such signature shall have actual knowledge of the fact that such
signature is false or the Person whose signature or purported signature is
presented is without authority.
SECTION 11.10. Notices. Except as otherwise provided herein, whenever
-------
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another party, or whenever any of the parties desires to give
or serve upon another party any communication with respect to this Agreement or
any of the other Loan Documents, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
deemed to have been validly served, given or delivered (a) upon the earlier of
actual receipt and three (3) Business Days after deposit in the United States
Mail, registered or certified mail, return receipt requested, with proper
postage prepaid, (b) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 11.10), (c) one Business Day after deposit with a
-------------
reputable overnight courier with all charges prepaid, or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated below or to such
other address (or facsimile number) as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to any Person (other than the Administrative Agent,
Borrower or a Lender) designated below to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
(a) If to the Administrative Agent, at:
66
<PAGE>
General Electric Capital Corporation
3379 Peachtree Road, N.E.
Suite 560
Atlanta, Georgia 30326
Attention: Ms. Cheryl P. Boyd
Telecopy No.: (404) 266-3438
with copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Region Counsel - Commercial Finance
Telecopy No.: (203) 316-7889
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Telecopy No.: (404) 572-5100
(b) if to Borrower, at:
Ramsay Health Care, Inc.
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Chief Financial Officer
Telecopy No.: (305) 569-4647
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy No.: (212) 682-0200
(c) if to any Lender, at its address for notices set forth below its
signature hereto.
67
<PAGE>
SECTION 11.11. Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
SECTION 11.12. Counterparts. This Agreement may be executed in any
------------
number of separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
SECTION 11.13. Time of the Essence. Time is of the essence of this
-------------------
Agreement and each of the other Loan Documents.
SECTION 11.14. Publicity.
---------
(a) Except to the extent otherwise required by law, Borrower shall not
use the name of or refer to GE Capital, or any of its Affiliates, in any press
release or other public disclosure made in connection with the transactions
contemplated by this Agreement or the Related Transactions without the prior
written consent of GE Capital, and shall provide to GE Capital the proposed text
of any such press release or other public disclosure for review not later than
two Business Days prior to the proposed date of release or disclosure thereof.
(b) Subject to a reasonable prior review, Borrower consents to the
Agents' publishing a tombstone or similar advertising material relating to the
financing transaction contemplated by this Agreement.
SECTION 11.15. Confidentiality. Borrower has furnished and will furnish
---------------
to Lenders certain information concerning Borrower, its Subsidiaries, Affiliates
and their respective businesses which Borrower has advised is non-public,
proprietary or confidential in nature ("Confidential Information"). Each of the
------------------------
Agents and Lenders confirms to Borrower, for itself, that it is such Agent's or
Lender's policy and practice to maintain in confidence all Confidential
Information which is provided to it under agreements providing for the extension
of credit and which is identified to it as such, and that it will protect the
confidentiality of Confidential Information submitted to it with respect to
Borrower under this Agreement, commensurate with its efforts to maintain the
confidentiality of its own Confidential Information, provided, however, that (a)
-------- -------
nothing contained herein shall prevent any Agent or Lender from disclosing
Confidential Information (i) to its Affiliates and their respective directors,
officers and employees and to any legal counsel, auditors, appraisers,
consultants or other persons retained by it or its Affiliates as professional
advisors, on the condition that such information not be further disclosed except
in compliance with this Section 11.15; (ii) under color of legal authority,
-------------
including, without limitation, to any regulatory authority having jurisdiction
over it or its operations or to or under the authority of any court deemed by it
to be of competent jurisdiction; (iii) to any actual or potential assignee of or
participant in Lender's rights and obligations under this Agreement pursuant to
Section 10.02 hereof, to the extent such actual or potential assignee or lender
- -------------
has agreed to maintain such information in confidence on the basis set forth in
this Section 11.15; and (iv) as necessary in connection with the exercise of its
-------------
remedies under this Agreement or any of the other Loan Documents; (b) the terms
of this Section 11.15 shall be inapplicable to any information furnished to it
-------------
which is in its possession prior to the delivery to it
68
<PAGE>
of such information by Borrower, or otherwise has been obtained by it on a non-
confidential basis, or which was or becomes available to the public or otherwise
part of the public domain (other than as a result of such Agent's or Lender's
failure to abide hereby), or which was not non-public, proprietary or
confidential when Borrower delivered it to such Agent or Lender; and (c) the
determination by such Agent or Lender as to the application of any of the
circumstances described in the foregoing clauses (a) and (b) will be conclusive
if made reasonably and in good faith.
SECTION 11.16. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
-------------
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. BORROWER AND EACH OTHER CREDIT PARTY HEREBY CONSENTS AND AGREES THAT
THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT THE PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
- --------
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, NEW YORK; AND
FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
- ------- --------
PRECLUDE LENDERS OR THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY COURT OF COMPETENT JURISDICTION IN ANY OTHER JURISDICTION TO
COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LENDERS OR THE ADMINISTRATIVE AGENT. BORROWER AND EACH OTHER CREDIT PARTY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER AND EACH OTHER CREDIT PARTY
HEREBY WAIVES ANY OBJECTION WHICH BORROWER OR SUCH CREDIT PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
--------------------
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY ANY SUCH COURT. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO BORROWER OR SUCH CREDIT PARTY AT THE ADDRESS FOR BORROWER SET
FORTH IN SECTION 11.10 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
-------------
DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE
(3) BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
69
<PAGE>
_____________________________________________________________________________
ANNEXES, SCHEDULES AND EXHIBITS
TO
CREDIT AGREEMENT
Dated as of September 30, 1997
among
RAMSAY HEALTH CARE, INC.,
as Borrower
THE LENDERS FROM TIME TO TIME PARTY THERETO,
as Lenders
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent
and
GECC CAPITAL MARKETS GROUP, INC.,
as Syndication Agent
___________________________________________________________________________
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
----------------------------------------
Annex A - Definitions; Rules of Construction
Annex B - Letters of Credit
Annex C - Interest Rates, Etc.
Annex D - Schedule of Closing Documents
Annex E - Insurance Requirements
Annex F - Financial Statements, Projections and Notices
Annex G - Financial Covenants
Schedule 1.01 - Mortgaged Property
Schedule 3.02 - Executive Offices; Other Places of Business
and Collateral Locations; Trade Names
Schedule 3.04 - Financial Statements and Projections
Schedule 3.05 - Contingent Liabilities; Restricted Payments
Schedule 3.06 - Real Property and Leases
Schedule 3.07 - Material Contracts
Schedule 3.08 - Labor Matters
Schedule 3.09 - Subsidiaries, Joint Ventures and Affiliates; Outstanding
Stock; Indebtedness Held by Credit Parties; Inactive
Subsidiaries; Material Subsidiaries
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.18 - Certain Environmental Matters
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 3.31 - Certain Agreements
Schedule 6.03 - Investments
Schedule 6.05 - Transactions with Affiliates and Employees
Schedule 6.07 - Liens
Schedule 11.09 - Authorized Signatures
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Form of Revolving Credit Note
Exhibit C-1 - Form of Term Loan A Note
Exhibit C-2 - Form of Term Loan B Note
Exhibit D - Form of Assignment Agreement
Exhibit E - Form of Mortgage
Exhibit F - Form of Security Agreement
Exhibit G - Form of Stock Pledge Agreement
Exhibit H - Form of Subsidiary Guaranty
Exhibit I - Form of Opinion of Borrower's Counsel
i
<PAGE>
Annex A to
Credit Agreement
----------------
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
1. Definitions. Capitalized terms used in this Agreement and the
-----------
other Loan Documents shall have (unless otherwise provided elsewhere in this
Agreement and the other Loan Documents) the following respective meanings:
"Accounts" shall mean all "accounts," as such term is defined in the
--------
Code, now owned or hereafter acquired by any Credit Party and, in any event,
including: (a) all accounts receivable, other receivables, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code); (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services;
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods);
(d) all monies due or to become due to any Credit Party under all purchase
orders and contracts for the sale or lease of goods or the performance of
services or both by such Credit Party or in connection with any other
transaction (whether or not yet earned by performance on the part of such Credit
Party) now or hereafter in existence, including, without limitation, the right
to receive the proceeds of said purchase orders and contracts; and (e) all
collateral security and guarantees of any kind, now or hereafter in existence,
given by any Person with respect to any of the foregoing.
"Acquisition" shall mean any transaction, or any series of related
-----------
transactions, by which Borrower or any of its Subsidiaries directly or
indirectly (i) acquires any property with which an ongoing business is conducted
or is to be conducted; (ii) acquires all or substantially all of the assets of
any firm, partnership, joint venture, limited liability company, corporation or
division thereof, whether through a purchase of assets, merger or otherwise,
(iii) acquires (in one transaction or as the most recent transaction in a series
of transactions) control of at least a majority in ordinary voting power of the
Stock of a corporation which have ordinary voting power for the election of
directors, other than the acquisition of Stock of a wholly-owned Subsidiary
solely in connection with the creation, formation and capitalization of that
Subsidiary by Borrower or another Credit Party, or (iv) acquires control of more
than 50% ownership interest in any partnership, joint venture or limited
liability company.
"Administrative Agent" shall mean GE Capital or its successor
--------------------
appointed pursuant to Section 9.06, in its capacity as administrative agent for
------------
the Lenders hereunder.
A-1
<PAGE>
"Affiliate" shall mean, with respect to any Person: (a) each Person
---------
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by or is under common control with such
Person, and (c) each of such Person's executive officers and directors. For the
purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
"Agents" shall mean, collectively, the Administrative Agent and the
------
Syndication Agent.
"Agreement" shall mean the Credit Agreement to which this Annex A is
--------- -------
attached and of which it forms a part, including all Annexes, Schedules, and
Exhibits attached or otherwise identified hereto, all restatements,
modifications and supplements hereof or hereto, and any appendices, attachments,
exhibits or schedules to any of the foregoing, and shall refer to this Agreement
as the same may be in effect at the time such reference becomes operative;
provided, that any reference to the Schedules to this Agreement shall be deemed
- --------
a reference to the Schedules as in effect as of the Closing Date, unless
otherwise provided in a written amendment thereto.
"Applicable Lending Office" shall mean, with respect to each Lender,
-------------------------
such Lender's Domestic Lending Office in the case of an Index Rate Loan and such
Lender's Eurodollar Lending Office in the case of a LIBOR Rate Loan.
"Assignment Agreement" shall have the meaning assigned to it in
--------------------
Section 10.02(a).
- ----------------
"Audit Date" shall mean June 30, 1997, the date of Borrower's balance
----------
sheet included in the 1997 Audited Financial Statements.
"Bankruptcy Code" shall mean Title 11 of the United States Code,
---------------
(S)(S) 101 et seq., as the same may, from time to time, be in effect.
------
"Bayou Oaks Bonds" shall have the meaning attributed to such term in
----------------
the SocGen Credit Agreement.
"Bayou Oaks Hospital" shall mean the hospital facility located at 934
-------------------
Main Street, Houma, Louisiana 70360, and leased by Houma Psychiatric Hospital,
Inc.
"Borrower" shall mean Ramsay Health Care, Inc., a Delaware
--------
corporation.
"Borrowing Availability" shall mean, at any time: (a) the lesser at
----------------------
such time of (i) the amount of the Revolving Credit Commitments, as from time to
time in effect, and (ii) the Borrowing Base, minus (b) the Letter of Credit
-----
Obligations.
A-2
<PAGE>
"Borrowing Base" shall mean, at any time, an amount determined by the
--------------
Administrative Agent to be equal to the sum at such time of: (a) seventy percent
(70%) of Net Eligible Accounts, minus (b) Reserves.
-----
"Borrowing Base Certificate" shall mean a borrowing base certificate
--------------------------
in substantially the form attached as Exhibit A to Annex F.
-------
"Bridge Note Purchase Agreement" shall mean the Subordinated Note
------------------------------
Purchase Agreement of even date herewith among Borrower, as issuer, and GE
Capital and Paul Ramsay Holdings Pty. Ltd., as purchasers, as in effect on the
Closing Date and as the same may be amended, modified or supplemented with the
consent of the Administrative Agent and the Required Lenders.
"Bridge Notes" shall mean the $17,500,000 in aggregate principal
------------
amount of Borrower's Increasing Rate Senior Subordinated Bridge Notes due
September 30, 2005, to be issued and purchased pursuant to the Bridge Note
Purchase Agreement.
"Business Day" shall mean any day that is not (a) a Saturday, a Sunday
------------
or a day on which banks generally are required or permitted to be closed in the
State of New York, or (b) a day on which the Administrative Agent is not open
for business.
"Capital Lease Obligation" shall have the meaning assigned to it in
------------------------
Annex G.
- -------
"Cash Collateral Account" shall have the meaning assigned to it in
-----------------------
Annex B.
- -------
"Cash Equivalents" shall mean: (a) securities with maturities of one
----------------
year or less from the date of acquisition, issued or fully guaranteed or insured
by the government of the United States or any agency thereof and backed by the
full faith and credit of the United States; (b) United States government
securities purchased subject to an agreement with the seller for repurchase by
such seller at a date not more than 60 days from the date of purchase, under
which such seller agrees to pay interest in lieu of the right to receive the
interest payable by the United States government on the securities purchased,
provided that title to the securities so purchased shall vest in the purchaser,
that the purchaser shall have actual or constructive possession of such
securities, and that the current market value of such securities (or of cash or
additional United States government securities pledged with the purchaser as
collateral for the purpose) is at all times at least equal to the principal of
and interest thereafter to become payable by the seller under said agreement;
(c) certificates of deposit, Eurodollar time deposits, overnight bank deposits
and bankers' acceptances of any domestic commercial bank having capital and
surplus in excess of $500,000,000, having maturities of one year or less from
the date of acquisition; and (d) commercial paper of an issuer rated at least A-
1 by Standard & Poor's Rating Group, a division of the McGraw-Hill Companies,
Inc., or at least P-1 by Moody's Investors Services, Inc., or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments.
"CERCLA" is defined in the definition of "Environmental Laws."
------
A-3
<PAGE>
"Change of Control" shall mean any of the following: (a) any person
-----------------
or group of persons (within the meaning of the Exchange Act), other than Ramsay
Affiliates, shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the SEC under the Exchange Act) of the issued and
outstanding shares of capital stock of Borrower having the right to cast 30% or
more of the votes for the election of directors of Borrower under ordinary
circumstances; (b) Ramsay Affiliates shall fail to hold beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act)
of that number of the issued and outstanding shares of capital stock of Borrower
having the right to cast at least 4,000,000 votes for the election of directors
of Borrower under ordinary circumstances (such number to be appropriately
adjusted for stock splits, reverse stock splits and similar events involving
such capital stock); or (c) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the board of
directors of Borrower (together with any new directors whose election by the
board of directors of Borrower or whose nomination for election by the
stockholders of Borrower was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose elections or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office.
"Charges" shall mean all federal, state, county, city, municipal,
-------
local, foreign or other governmental taxes (including taxes owed to PBGC at the
time due and payable), levies, assessments, charges or Liens upon or relating
to: (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income
or gross receipts of any Credit Party, (d) the ownership or use by any Credit
Party of any of its assets, or (e) any other aspect of any Credit Party's
business.
"Chattel Paper" shall mean all "chattel paper," as such term is
-------------
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Claim" shall have the meaning assigned to it in Section 1.14.
----- ------------
"Closing Date" shall mean the Business Day on which the conditions
------------
precedent set forth in Article 2 have been satisfied, in the Administrative
---------
Agent's sole discretion, or waived in writing by the Administrative Agent with
the consent of the Required Lenders, and the Term Loans and the initial
Revolving Credit Advance have been made.
"Coastal Carolina Bonds" shall have the meaning attributed to such
----------------------
term in the SocGen Credit Agreement.
"Coastal Carolina Indenture" shall have the meaning attributed to such
--------------------------
term in the SocGen Credit Agreement.
"Code" shall mean the Uniform Commercial Code as the same may, from
----
time to time, be in effect in the State of New York; provided, that in the event
--------
that by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or the remedies with respect to, the Administrative
Agent's security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term "Code"
A-4
<PAGE>
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection,
priority or remedies and for purposes of definitions related to such provisions.
"Collateral" shall mean the property covered by the Collateral
----------
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to a
Lien in favor of the Administrative Agent to secure the Obligations.
"Collateral Documents" shall mean the Security Agreement, the
--------------------
Mortgages, the Subsidiary Guaranty, the Stock Pledge Agreement, and all other
instruments and agreements now or hereafter securing the whole or any part of
the Obligations.
"Compliance Certificate" shall mean a compliance certificate in
----------------------
substantially the form attached as Exhibit B to Annex F.
-------
"Contracts" shall mean all contracts, undertakings, or agreements
---------
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which any Credit Party may now or hereafter have any right, title or
interest, including any agreement relating to the terms of payment or the terms
of performance of any Account.
"Copyrights" shall mean any United States copyright to which any
----------
Credit Party now or hereafter has title, as well as any application for a United
States copyright hereafter made by Borrower.
"Credit Parties" shall mean Borrower, each of Borrower's direct or
--------------
indirect, existing and future wholly-owned Subsidiaries (other than Inactive
Subsidiaries) and Gulf Coast Treatment Center.
"Default Rate" shall mean a rate per annum equal to two percent (2%)
------------
over the Applicable Margins otherwise in effect under Annex C from time to time.
-------
"Default" shall mean any event which, with the passage of time or
-------
notice or both, would, unless cured or waived, become an Event of Default.
"Deferred Taxes" shall mean, with respect to any Person at any date,
--------------
the amount of deferred taxes of such Person as shown on the consolidated balance
sheet of such Person as of such date prepared in accordance with GAAP.
"Disbursement Account" shall mean that certain account of Borrower,
--------------------
account number 812105744 in the name of Borrower at Hibernia National Bank, New
Orleans, Louisiana, ABA number 065000090, or such other deposit account as may
be designated in writing by Borrower to the Administrative Agent, into which the
Administrative Agent shall, from time to time, deposit proceeds of Loans made to
Borrower pursuant to this Agreement.
A-5
<PAGE>
"Documents" shall mean all "documents," as such term is defined in the
---------
Code, now owned or hereafter acquired by any Credit Party, wherever located, and
in any event any bills of lading, dock warrants, dock receipts, warehouse
receipts, or other documents of title.
"Dollars" and "$" shall mean lawful money of the United States.
------- -
"DOL" shall mean the United States Department of Labor or any
---
successor thereto.
"Domestic Lending Office" shall mean, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" below its name
on the signature pages hereto or in the Assignment and Acceptance pursuant to
which it became a Lender or such other office of such Lender as such Lender may
from time to time specify to Borrower and the Administrative Agent.
"EBITDA" shall mean, with respect to any Person other than Borrower,
------
EBITDA as defined in Annex G, but determined for such Person instead of Borrower
-------
on the basis set forth therein.
"Eligible Accounts" means Borrower's and its Subsidiaries' (i)
-----------------
"patient accounts receivable," (ii) "other receivables" consisting of managed
care accounts receivable and contract accounts receivable and (iii) other
accounts receivable of a type first created after the Closing Date that the
Administrative Agent has reviewed and, in its reasonable judgment, found to be
of similar quality to the foregoing, in each case net of allowances for doubtful
accounts and contractual and administrative allowances, all determined on a
consolidated basis consistent with that utilized in the preparation of
Borrower's 1997 Audited Financial Statements.
"Environmental Laws" shall mean all applicable federal, state, local
------------------
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable judicial or administrative interpretation
thereof relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include, but are not limited to,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. (S)(S) 9601 et seq.) ("CERCLA"); the Hazardous
-- --- ------
Material Transportation Act, as amended (49 U.S.C. (S)(S) 1801 et seq.); the
-- ---
Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S)(S)
136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C.
-- ---
(S)(S) 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended (15
-- --- ----
U.S.C. (S)(S) 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. (S)(S) 740
-- ---
et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. (S)(S)
- -- ---
1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C.
-- ---
(S)(S) 651 et seq.); and the Safe Drinking Water Act, as amended (42 U.S.C.
-- ---
(S)(S) 300(f) et seq.), and any and all regulations promulgated thereunder, and
-- ---
all analogous state and local counterparts or equivalents and any transfer of
ownership notification or approval statutes.
A-6
<PAGE>
"Environmental Liabilities" shall mean all liabilities, obligations,
-------------------------
responsibilities, remedial actions, removal costs, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including any thereof arising under any Environmental Law, permit,
order or agreement with any Governmental Authority) and which relate to any
health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Release, threatened Release,
or the presence of a Hazardous Material.
"Environmental Permits" shall mean all permits, licenses,
---------------------
authorizations, certificates, approvals, registrations or other written
documents required by any Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is defined in the
---------
Code, and, in any event, including all machinery, equipment, furnishings,
Fixtures and vehicles and any and all additions, accessions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
-----
(or any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
---------------
incorporated) under common control with Borrower and which, together with
Borrower, is treated as a single employer within the meaning of Section 414(b),
(c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to Borrower, any of its
-----------
Subsidiaries or any ERISA Affiliate: (a) a Reportable Event with respect to a
Title IV Plan or a Multi-employer Plan; (b) the withdrawal of Borrower, any of
its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section
4063 of ERISA during a plan year in which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal
of Borrower, any of its Subsidiaries or any ERISA Affiliate from any Multi-
employer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan
or the treatment of a plan amendment as a termination under Section 4041 of
ERISA; (e) the institution of a proceeding to terminate a Title IV Plan or
Multi-employer Plan by the PBGC; (vi) the failure to make required contributions
to a Qualified Plan; or (f) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multi-employer Plan or the imposition of any liability under
Title IV of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA.
A-7
<PAGE>
"Eurodollar Lending Office" shall mean, with respect to any Lender,
-------------------------
the office of such Lender specified as its "Eurodollar Lending Office" below its
name on the signature pages hereto or in the Assignment and Acceptance pursuant
to which it became a Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may from
time to time specify to Borrower and the Administrative Agent.
"Event of Default" shall have the meaning assigned to it in Section
---------------- -------
8.01.
- ----
"Excess Borrowing Availability" shall mean, at any time of
-----------------------------
measurement, the amount by which Borrowing Availability exceeds the aggregate
principal amount of the Revolving Credit Loan.
"Excess Cash Flow" shall mean, for any Fiscal Year: (a) EBITDA for
----------------
such Fiscal Year, minus (b) the sum of (i) Interest Expense for such Fiscal
-----
Year, plus (ii) all principal payments made on Funded Debt (other than the
----
Revolving Credit Loan) during such Fiscal Year, plus (iii) that portion of
----
Capital Expenditures (including Capital Lease Obligations) paid in cash during
such Fiscal Year, plus (iv) that portion of Tax Expense paid in cash during such
----
Fiscal Year, plus (c) any decrease in Working Capital during such Fiscal Year,
----
minus (d) any increase in Working Capital during such Fiscal Year, plus (e) the
- ----- ----
cash portion of any extraordinary gains during such Fiscal Year. For the
purposes of this definition, "Capital Expenditures," "EBITDA," Funded Debt,"
-------------------- ------ -----------
"Interest Expense" and "Tax Expense" shall have the meanings assigned to them in
- ----------------- -----------
Annex G; "Working Capital" shall mean the excess of Borrower's Current Assets
- ------- ---------------
over its Current Liabilities; "Current Assets" shall mean all assets of Borrower
--------------
that are or should be classified as current on a consolidated balance sheet of
Borrower prepared in accordance with GAAP; and "Current Liabilities" shall mean
-------------------
all liabilities of Borrower that are or should be classified as current on a
consolidated balance sheet of Borrower prepared in accordance with GAAP, but
excluding the Revolving Credit Loan and the current portion of other Funded
Debt.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Federal Reserve Board" shall mean the Board of Governors of the
---------------------
Federal Reserve System and any successor thereto.
"Fees" shall mean the fees due the Administrative Agent, the
----
Syndication Agent and Revolving Lenders as set forth in Section 1.09, and any
------------
other fees due to the Administrative Agent or Lenders pursuant to the Loan
Documents.
"Financial Statements" shall mean the financial statements referred to
--------------------
in paragraph 1(a) of Schedule 3.04 and the financial statements required to be
-------------
delivered pursuant to Annex F.
-------
"Fiscal Month" shall mean each of the one month accounting periods of
------------
Borrower ending on the last day of each calendar month.
A-8
<PAGE>
"Fiscal Quarter" shall mean each of the three month accounting periods
--------------
of Borrower ending on March 31, June 30, September 30 and December 31 of each
Fiscal Year.
"Fiscal Year" shall mean the twelve month accounting period of
-----------
Borrower ending on June 30 of each year. Subsequent changes of the fiscal year
of Borrower shall not change the term "Fiscal Year," unless the Administrative
Agent and the Required Lenders shall consent in writing to such change.
"Fixtures" shall mean all "fixtures," as such term is defined in the
--------
Code, now or hereafter owned or acquired by Borrower, wherever located, and, in
any event, including all of the fixtures, systems, machinery, apparatus,
equipment and fittings of every kind and nature whatsoever and all appurtenances
and additions thereto and substitutions therefor or replacements thereof, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, Real Property wherever located.
"FPM Ohio" shall mean FPM Behavioral Health of Ohio, Ltd., an Ohio
--------
limited liability company, 51% of the issued and outstanding Stock of which is
owned, directly or indirectly, by Borrower as of the date of this Agreement.
"GAAP" shall mean generally accepted accounting principles in the
----
United States as in effect from time to time, consistently applied, subject to
the rules of construction set forth in Section 4 of Annex G.
-------
"GE Capital" shall mean General Electric Capital Corporation, a
----------
corporation organized under the banking laws of the State of New York.
"GE Capital Fee Letter" shall mean the letter agreement of even date
---------------------
herewith between Borrower and GE Capital with respect to certain Fees to be paid
from time to time by Borrower to GE Capital, individually or in its capacity as
Administrative Agent.
"General Intangibles" shall mean all "general intangibles," as such
-------------------
term is defined in the Code, now owned or hereafter acquired by any Credit Party
and, in any event, including all right, title and interest which any Credit
Party may now or hereafter have in or under any Contract, all customer lists,
Intellectual Property, interests in partnerships, limited liability companies,
joint ventures and other business associations, permits, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill (including the goodwill associated with any
Intellectual Property), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss, and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man, and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, and bank accounts
(including the Disbursement Account), rights to receive tax refunds and other
payments and rights of indemnification.
A-9
<PAGE>
"Goods" shall mean all "goods" as such term is defined in the Code,
-----
now owned or hereafter acquired by any Credit Party, wherever located, including
movables, Fixtures, Equipment, Inventory, or other tangible personal property.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof and any entity exercising
executive, judicial, legislative, regulatory or administrative functions of or
pertaining to government.
"Greenbrier Bonds" shall have the meaning attributed to such term in
----------------
the SocGen Credit Agreement.
"Greenbrier Indenture" shall have the meaning attributed to such term
--------------------
in the SocGen Credit Agreement.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
-----------------------
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligation") of any other Person (the "primary obligor") in
------------------ ---------------
any manner including any obligation or arrangement of such Person: (a) to
purchase or repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
"Gulf Coast Bonds" shall have the meaning attributed to such term in
----------------
the SocGen Credit Agreement.
"Gulf Coast Indenture" shall have the meaning attributed to such term
--------------------
in the SocGen Credit Agreement.
"Gulf Coast Treatment Center" shall mean Gulf Coast Treatment Center,
---------------------------
Inc., a Florida corporation, 96% of the issued and outstanding Stock of which is
owned, directly or indirectly, by Borrower as of the date of this Agreement.
"Hazardous Material" shall mean a Hazardous Substance and/or a
------------------
Hazardous Waste.
"Hazardous Substance" shall mean any element, material, compound,
-------------------
mixture, solution, chemical, substance, or pollutant within the definition of
"hazardous substance" under Section 101(14) of CERCLA; petroleum or any
fraction, by-product or distillation product thereof; asbestos, polychlorinated
biphenyls, or any radioactive substances; and any material regulated as a
hazardous substance by any jurisdiction in which Borrower owns or operates or
has owned or operated a facility.
A-10
<PAGE>
"Hazardous Waste" shall mean any element, pollutant, contaminate or
---------------
discarded material (including any radioactive material) within the definition of
Section 103(6) of RCRA; any medical waste, biowaste, biohazardous waste and any
other hospital-related waste material; and any other material regulated as a
hazardous waste by any jurisdiction in which Borrower or any of its Subsidiaries
owns or operates or has owned or operated a facility, or to which Borrower or
any of its Subsidiaries sends material for treatment, storage or disposal as
waste.
"HCFA" shall mean the Health Care Financing Administration, an agency
----
of the United States Department of Health and Human Services.
"HSA" shall mean HSA of Oklahoma, Inc. an Oklahoma corporation.
---
"Inactive Subsidiaries" shall mean Subsidiaries of Borrower that have
---------------------
no material assets and conduct no business.
"Indebtedness" of any Person shall mean: (a) all indebtedness of such
------------
Person for borrowed money or for the deferred purchase price of property or
services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured, but not including obligations to trade creditors incurred in the
ordinary course of business, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all Capital Lease Obligations, (e) all Guaranteed
Indebtedness, (f) all "earn out" or other contingent payment obligations
incurred in connection with an Acquisition, to the extent required to be
reflected on a consolidated balance sheet of Borrower in accordance with GAAP,
(g) all Indebtedness referred to in clause (a), (b), (c), (d) or (e) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(h) the Obligations, and (i) all liabilities under Title IV of ERISA.
"Indemnified Person" shall have the meaning assigned to it in Section
------------------ -------
1.14.
- ----
"Index Rate Loan" shall have the meaning assigned to it in Annex C.
--------------- -------
"Instruments" shall mean all "instruments," as such term is defined in
-----------
the Code, now owned or hereafter acquired by any Credit Party, wherever located
and, in any event, including all certificated securities, certificates of
deposit and all notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" shall mean, collectively, all Trademarks, all
---------------------
Patents, all Copyrights and all Licenses now held or hereafter acquired by any
Credit Party, together with all
A-11
<PAGE>
franchises, tax refund claims, rights of indemnification, payments under
insurance, indemnities, warranties and guarantees payable with respect to the
foregoing.
"Interest Payment Date" shall mean (a) as to any Index Rate Loan, the
---------------------
first Business Day of each Fiscal Quarter to occur while such Loan is
outstanding, (b) as to any LIBOR Rate Loan, the last day of the applicable LIBOR
Period; provided, that in the case of any LIBOR Period greater than three months
--------
in duration, interest shall be payable at three month intervals and on the last
day of such LIBOR Period; and provided further that, in addition to the
-------- -------
foregoing, each of (x) the Commitment Termination Date and (y) the Termination
Date shall be deemed to be an "Interest Payment Date" with respect to any
---------------------
interest which is then accrued under this Agreement.
"Inventory" shall mean all "inventory," as such term is defined in the
---------
Code, now or hereafter owned or acquired by any Credit Party, wherever located,
and, in any event, including all inventory, merchandise, goods and other
personal property which are held by or on behalf of such Credit Party for sale
or lease or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies, and all accessions and additions thereto and all Documents
covering any of the foregoing.
"Investment" shall mean, with respect to Borrower and its
----------
Subsidiaries: (a) the acquisition (whether for cash, property, services or
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership, limited liability company or other ownership interests or other
securities of any other Person, other than an Acquisition; (b) the making of, or
commitment to make, any advance, loan or other extension of credit to any other
Person (other than as contemplated by Section 6.05(b), (c) or (d)), including
--------------- --- ---
the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person; and
(c) the incurrence of any Guaranteed Indebtedness or other contingent obligation
with respect to Indebtedness or other liability of any other Person (other than
Indebtedness of a Credit Party otherwise permitted by Section 6.04 and without
------------
double counting as to any such Guaranteed Indebtedness or other obligation
incurred concurrently by Borrower and any of its Subsidiaries).
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
---
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
---
thereto.
"JCAHO" shall mean the Joint Commission on Accreditation of Health
-----
Care Organizations.
"Joint Venture Partners" shall mean all Persons directly or indirectly
----------------------
holding Stock in any of Borrower's Subsidiaries, other than Borrower or any of
its Subsidiaries.
A-12
<PAGE>
"Leases" shall mean all of those leasehold estates in real property
------
now owned or hereafter acquired by any Credit Party, as lessee or sublessee.
"Lenders" shall mean the lenders originally party to this Agreement
-------
and their respective assigns under Section 10.02 of this Agreement.
-------------
"Letter of Credit Fee" shall have the meaning assigned to it in
--------------------
Section 1.09.
- ------------
"Letter of Credit Issuer" shall have the meaning set forth in
-----------------------
paragraph 1 of Annex B.
-------
"Letter of Credit Obligations" shall mean all outstanding obligations
----------------------------
incurred by Lenders at the request of Borrower, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance or
guaranty, by a Letter of Credit Issuer, of Letters of Credit. The amount of such
Letter of Credit Obligations at any time shall equal the maximum amount which
may be payable by Lenders thereupon or pursuant thereto at such time.
"Letter of Credit Sublimit" shall have the meaning set forth in
-------------------------
paragraph 1 of Annex B.
-------
"Letters of Credit" shall mean commercial or standby letters of credit
-----------------
issued at the request and for the account of Borrower for which Lenders have
incurred Letter of Credit Obligations pursuant to Section 1.06 and Annex B.
------------ -------
"LIBOR Period" shall have the meaning assigned to it in Annex C.
------------ -------
"LIBOR Rate Loan" shall have the meaning assigned to it in Annex C.
--------------- -------
"License" shall mean any Patent License, Trademark License or other
-------
license of rights or interests not granted by a Governmental Authority now held
or hereafter acquired by any Credit Party.
"Lien" shall mean any mortgage, deed to secure debt or deed of trust,
----
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the Code or comparable law of any jurisdiction).
"Life Companies" shall have the meaning attributed to such term in the
--------------
SocGen Credit Agreement.
"Life Company Obligations" shall mean all obligations of Borrower
------------------------
under and in respect of the "Life Company Senior Notes" and the "Life Company
Subordinated Notes," as those
A-13
<PAGE>
terms are defined in the SocGen Credit Agreement, including without limitation,
the Life Companies Prepayment Premium.
"Life Companies Prepayment Premium" shall mean the amount of yield
---------------------------------
maintenance or make-whole amount that Borrower pays in cash to the Life
Companies in connection with the Refinancing.
"Loan" shall mean any or all of the Revolving Credit Loan, Term Loan A
----
and Term Loan B.
"Loan Account" shall have the meaning set forth in Section 1.13.
------------ ------------
"Loan Documents" shall mean this Agreement, the GE Capital Fee Letter,
--------------
the Notes, the Collateral Documents and all agreements, instruments, documents
and certificates in favor of the Administrative Agent or Lenders executed in
connection with the transactions contemplated by this Agreement, including,
without limitation, those that are identified in the Schedule of Closing
Documents attached as Annex D, and all other pledges, powers of attorney,
-------
consents, assignments, and other documents and agreements, whether heretofore,
now or hereafter executed by or on behalf of Borrower or any other Credit Party
and delivered to the Administrative Agent in connection with this Agreement or
the financing transactions contemplated hereby, other than the Related
Transaction Documents.
"Loans" shall mean, collectively, the Revolving Credit Loan, Term Loan
-----
A and Term Loan B.
"Louisiana DHH" shall mean the Department of Health and Hospitals of
-------------
the State of Louisiana.
"Louisiana DHH Claims" shall mean, collectively, certain demands for
--------------------
repayment of disproportionate share funds previously paid by Louisiana DHH to
Bayou Oaks Hospital and Three Rivers Hospital in respect of certain teaching
pool funds and previously paid by Louisiana DHH to Three Rivers Hospital in
respect of Three Rivers Hospital's annual Medicaid census for the calendar year
ending December 31, 1994, as more fully described in correspondence dated
September 4, 1997 from McGlinchey Stafford to Ernst & Young, LLP.
"Managed Facility" shall mean any hospital or other facility providing
----------------
psychiatric or behavioral care services managed by Borrower or any of Borrower's
Subsidiaries pursuant to a Management Agreement.
"Management Agreement" shall mean either (i) an agreement between
--------------------
Borrower or one or more of Borrower's Subsidiaries and one or more Managed
Facilities, pursuant to which Borrower or its Subsidiary agrees to provide
certain management services to such Managed Facilities and pursuant to which
Borrower or such subsidiary derives annual revenue exceeding $500,000, or (ii)
an agreement between Borrower or one or more of Borrower's Subsidiaries and one
or more
A-14
<PAGE>
managed care customers, pursuant to which Borrower or its Subsidiary agrees to
provide mental health care and substance abuse services and pursuant to which
Borrower or such Subsidiary derives annual fees exceeding $1,000,000.
"Margin Stock" shall have the meaning specified in Regulation G, T, U
------------
or X of the Federal Reserve Board, as in effect from time to time.
"Material Adverse Event" shall mean an event, occurrence or
----------------------
circumstance that, individually or together with all other events, occurrences
or circumstances, whether or not of like kind and whether or not related, has
had or resulted in, or could reasonably be expected to have or result in, (a)
with respect to Borrower or any Material Subsidiary, a material adverse effect
on the business, assets, operations, prospects, revenues or financial or other
condition of Borrower and its Subsidiaries taken as a whole or of such Material
Subsidiary and its Subsidiaries taken as a whole, as the case may be, or (b)
with respect to Borrower, a material adverse effect on (i) the ability of
Borrower to pay or perform the Obligations in accordance with the terms thereof,
(ii) the Collateral or the Administrative Agent's Liens on the Collateral or the
priority of such Liens, or (iii) the rights and remedies of the Administrative
Agent or any Lender under this Agreement and the other Loan Documents. When the
term "Material Adverse Event" is used otherwise than with specific reference to
a specific Person or group of Persons, it shall be deemed to be used with
reference to Borrower and its Subsidiaries taken as a whole.
"Material Contracts" shall mean (a) each Management Agreement, and (b)
------------------
each contract to which Borrower or any of its Subsidiaries is now or hereafter a
party, either (i) involving aggregate consideration payable to or by Borrower or
such Subsidiary, contingent or otherwise, in excess of $2,000,000 (excluding
employment agreements entered into in the ordinary course of business); or (ii)
the breach or termination by any party of which would be a Material Adverse
Event.
"Material Subsidiary" shall mean, at any time, any Subsidiary of
-------------------
Borrower (i) whose consolidated EBITDA or net revenues, determined for such
Subsidiary and all of its Subsidiaries, or (ii) that owns, leases or operates a
hospital or other facility whose EBITDA or net revenues, in each case determined
for the most recent Rolling Four-Quarter Period for which Borrower is required
to deliver a Compliance Certificate to the Administrative Agent pursuant to
Annex F, equals five percent (5%) or more of Borrower's consolidated EBITDA or
- -------
net revenues for such Rolling Four-Quarter Period.
"Meadowlake Hospital" shall mean the psychiatric and chemical
-------------------
dependency hospital located at 2216 South Van Buren, Enid, Oklahoma, owned by
HSA.
"Medicaid" shall mean, collectively, the health care assistance
--------
program established by Title XIX of the Social Security Act (42 U.S.C.
(S)(S)1396 et seq.) and any statutes succeeding thereto, and all laws, rules,
regulations, manuals, orders, guidelines or requirements pertaining to such
program including (a) all federal statutes (whether set forth in Title XIX of
the Social Security Act or elsewhere) affecting such program; (b) all state
statutes and plans for medical assistance
A-15
<PAGE>
enacted in connection with such program and federal rules and regulations
promulgated in connection with such program; and (c) all applicable provisions
of all rules, regulations, manuals, orders and administrative, reimbursement,
guidelines and requirements of all government authorities promulgated in
connection with such program (whether or not having the force of law), in each
case as the same may be amended, supplemented or otherwise modified from time to
time.
"Medicare" shall mean, collectively, the health insurance program for
--------
the aged and disabled established by Title XVIII of the Social Security Act (42
U.S.C. (S)(S)1395 et seq.) and any statutes succeeding thereto, and all laws,
rules, regulations, manuals, orders or guidelines pertaining to such program
including (a) all federal statutes (whether set forth in Title XVIII of the
Social Security Act or elsewhere) affecting such program; and (b) all applicable
provisions of all rules, regulations, manuals, orders and administrative,
reimbursement, guidelines and requirements of all Governmental Authorities
promulgated in connection with such program (whether or not having the force of
law), in each case as the same may be amended, supplemented or otherwise
modified from time to time
"Minimum LIBOR Rate Loan Amount" shall have the meaning assigned to it
------------------------------
in Section 1.01(a).
---------------
"Mortgaged Property" shall mean all Real Property subject to the
------------------
Mortgages and serving as security for the Obligations, consisting of hospitals
owned or leased by certain of the Credit Parties on the Closing Date and
identified on Schedule 1.01 hereto, together with all additional Real Property
-------------
becoming subject to a Mortgage after the Closing Date pursuant to Section
-------
5.14(a), all as more particularly described in Exhibit A to the Mortgages.
- -------
"Mortgages" shall mean the mortgages, deeds of trust or deeds to
---------
secure debt with respect to the Mortgaged Property, substantially in the form of
Exhibit E hereto with such changes thereto as shall be necessary or appropriate
- ---------
for use in the States of Alabama, Arizona, Florida, Louisiana, Missouri,
Michigan, North Carolina, Oklahoma, South Carolina, Texas, Utah and West
Virginia or any other state in which a Credit Party hereafter acquires Real
Property that becomes subject to a Mortgage pursuant to Section 5.14(a), in each
---------------
case executed by the appropriate Credit Party in favor of the Administrative
Agent or a trustee for the benefit of the Administrative Agent, including all
amendments, modifications and supplements thereto, and shall refer to the
Mortgages as the same may be in effect at the time such reference becomes
operative.
"Multi-employer Plan" shall mean a "Multi-employer plan," as defined
-------------------
in Section 4001(a) (3) of ERISA, to which Borrower, any of its Subsidiaries or
any ERISA Affiliate is making, is obligated to make, or has made or been
obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"Net Cash Proceeds" shall mean (a) in respect of any casualty or
-----------------
condemnation described in Section 5.12 and any sale or other disposition of
------------
assets permitted by Section 6.08, all cash proceeds received in respect thereof,
------------
net of (i) commissions and other reasonable and customary transaction costs,
fees and expenses properly attributable to such transaction and payable by
A-16
<PAGE>
Borrower in connection therewith (in each case paid to non-Affiliates, other
than reasonable legal fees and expenses paid to Haythe & Curley), (ii) transfer
and other taxes payable in connection therewith, (iii) amounts payable to
holders of senior Liens (to the extent such Liens constitute Permitted Liens
hereunder), if any, and (iv) an appropriate reserve for income taxes payable in
accordance with GAAP in connection therewith, and (b) in respect of the issuance
of Stock or debt securities described in Section 1.04(f)(ii) and (iii), all cash
------------------- -----
proceeds received in respect thereof, net of (i) underwriting discounts and
commissions and (ii) other reasonable costs, fees and expenses properly
attributable to such transaction and payable by Borrower in connection therewith
(in each case paid to non-Affiliates, other than reasonable legal fees and
expenses paid to Haythe & Curley).
"Net Eligible Accounts shall mean the net book value of Borrower's and
---------------------
its Subsidiaries' Eligible Accounts, determined on a consolidated basis in
accordance with GAAP, less (i) any amount thereof attributable to Eligible
----
Accounts owned by any Subsidiary of Borrower (other than FPM Ohio or TCV) that
is not a Credit Party or in which the Administrative Agent otherwise does not
have a perfected first priority Lien pursuant to the Security Agreement (other
than Eligible Accounts of FPM Ohio or TCV); and (ii) that percentage thereof, in
the case of Eligible Accounts owned by FPM Ohio, Gulf Coast Treatment Center,
TCV or any other Subsidiary of Borrower permitted to be created or acquired by
this Agreement that, at the time of computation, is not a wholly-owned
Subsidiary, equal to the percentage of the Stock of such Subsidiary that is not
held, directly or indirectly, by Borrower.
"1997 Audited Financial Statements" shall have the meaning assigned to
---------------------------------
it in paragraph 1(a) of Schedule 3.04.
-------------
"Non-Use Fee" shall have the meaning assigned to it in Section 1.09.
----------- ------------
"Note" shall mean any of (i) a Term Loan A Note, (ii) a Term Loan B
----
Note or (iii) a Revolving Credit Note; and "Notes" shall mean, collectively, any
-----
two or more of such Notes, as the context requires.
"Notice of Request for Letter of Credit" shall have the meaning
--------------------------------------
assigned to it in Annex B.
-------
"Notice of Revolving Credit Advance" shall have the meaning assigned
----------------------------------
to it in Section 1.01(b).
---------------
"Obligations" shall mean all loans, advances, debts, liabilities and
-----------
obligations for the performance of covenants, or for the payment of monetary
amounts (whether or not such performance is then required or contingent, or
amounts are liquidated or determinable) owing by Borrower or any other Credit
Party to Lenders or the Agents, and all covenants regarding such amounts, of
any kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under any of the Loan Documents. This
term includes all principal, interest (including interest which accrues after
the commencement of any case or proceeding referred
A-17
<PAGE>
to in Section 8.01(g), (h) or (i)), Fees, Charges, Claims, expenses, reasonable
--------------- --- ---
attorneys' fees and any other sum chargeable to Borrower or any other Credit
Party under any of the Loan Documents.
"Oklahoma LLC" shall mean Meadowlake/Western Alliance LLC, an Oklahoma
------------
limited liability company, 50% of the issued and outstanding Stock of which is
owned, directly or indirectly, by Borrower as of the date of this Agreement.
"Patent License" shall mean rights under any written agreement now
--------------
owned or hereafter acquired by any Credit Party granting any right with respect
to any invention on which a Patent is in existence.
"Patents" shall mean all of the following in which any Credit Party
-------
now holds or hereafter acquires any interest: (a) all letters patent of the
United States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State or Territory thereof, or any other country, and (b) all
reissues, divisions, continuations, continuations-in-part or extensions thereof.
"Payment Account" shall mean that certain account of the
---------------
Administrative Agent, account number 50-232-854 in the name of GECC/CAF
Depository at Bankers Trust Company, 1 Bankers Trust Plaza, New York, New York
10006, ABA number 021-001-033, ref. CFA 4624 or such other account as may be
designated by the Administrative Agent.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined
------------
in Section 3(2) of ERISA (other than a Multi-employer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which
Borrower, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permitted Acquisition" shall have the meaning assigned to it in
---------------------
Section 6.01.
- ------------
"Permitted Encumbrances" shall mean the following encumbrances: (a)
----------------------
Liens for taxes or assessments or other governmental Charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of Section 5.02; (b) pledges or deposits securing obligations under
------------
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (c) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which Borrower or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (d) deposits securing public or statutory
obligations of Borrower or any of its Subsidiaries; (e) inchoate and unperfected
workers', mechanics', suppliers' or similar liens arising in the ordinary course
of business; (f) carriers',
A-18
<PAGE>
warehousemen's or other similar possessory liens arising in the ordinary course
of business and securing obligations not yet past due and in an outstanding
aggregate amount not in excess of $50,000 at any time; (g) deposits securing, or
in lieu of, surety, appeal or customs bonds in proceedings to which Borrower or
any of its Subsidiaries is a party; (h) any attachment or judgment lien, unless
the judgment it secures shall not, within 30 days after the entry thereof, have
been discharged or execution thereof stayed pending appeal, or shall not have
been discharged within 30 days after the expiration of any such stay; (i) zoning
restrictions, restrictive covenants, easements, licenses, or other restrictions
on the use of Real Property or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially impair the use,
value, or marketability of such Real Property, Leases or leasehold estates; and
(j) protective UCC filings made by lessors of equipment to a Credit Party in
transactions not involving the granting of a Lien on property owned by such
Credit Party.
"Permitted Joint Ventures" shall mean, collectively, FPM Ohio,
------------------------
Oklahoma LLC, South Florida LLC, South Florida LP, TCV and any other Subsidiary
of Borrower created or acquired after the Closing Date with the consent of the
Administrative Agent and the Required Lenders that is not directly or indirectly
wholly-owned by Borrower.
"Permitted Liens" shall mean Permitted Encumbrances and other Liens
---------------
specifically permitted by Section 6.07.
------------
"Person" shall mean any individual, sole proprietorship, partnership,
------
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, Managed Facility, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean an employee benefit plan, as defined in Section 3(3)
----
of ERISA, which Borrower, any of its Subsidiaries or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Practice Guarantees" shall mean physician or mental practice health
-------------------
practice guarantees pursuant to which any Credit Party guarantees or otherwise
agrees (a) to pay a physician or mental health professional with admitting
privileges to or on the medical staff of a hospital, clinic or other health care
facility owned or operated by such Credit Party a minimum periodic income or
revenue, or (b) to pay obligations of a physician or mental health professional
with admitting privileges to or on the medical staff of a hospital, clinic or
other health care facility owned or operated by such Credit Party.
"Preferred Stock Designation" shall mean the certificate of
---------------------------
designation in substantially the form of Exhibit A to the Preferred Stock
Purchase Agreement, duly authorized by resolution of Borrower's Board of
Directors pursuant to authority contained in Borrower's certificate of
incorporation and filed with the Secretary of State of the State of Delaware on
or before the
A-19
<PAGE>
Closing Date, as amended, modified or supplemented from time to time with the
consent of the Administrative Agent and the Required Lenders.
"Preferred Stock Purchase Agreement" shall mean the Preferred Stock
----------------------------------
Purchase Agreement dated of even date herewith between Borrower, as issuer, and
GE Capital, as purchaser, as in effect on the Closing Date and as the same may
be amended, modified or supplemented with the consent of the Administrative
Agent and the Required Lenders.
"Proceeds" shall mean all "proceeds," as such term is defined in the
--------
Code and, in any event, including, with respect to any Person: (a) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to such
Person from time to time with respect to any of its property or assets; (b) any
and all payments (in any form whatsoever) made or due and payable to such Person
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of such Person's property
or assets by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority); (c) any claim of such Person
against third parties (i) for past, present or future infringement of any Patent
or Patent License or (ii) for past, present or future infringement or dilution
of any Trademark or Trademark License or for injury to the goodwill associated
with any Trademark, Trademark registration or Trademark licensed under any
Trademark License; (d) any recoveries by such Person against third parties with
respect to any litigation or dispute concerning any of such Person's property or
assets; and (e) any and all other amounts from time to time paid or payable
under or in connection with any of such Person's property or assets, upon
disposition or otherwise.
"Projections" shall have the meaning assigned to it in Schedule 3.04.
----------- -------------
"Property" shall mean all property, real or personal, tangible or
--------
intangible, now or hereafter owned by Borrower or any of its Subsidiaries.
"Pro Rata Share" shall mean, as to each of the Lenders, the ratable
--------------
share or interest of such Lender determined according to (a) as among the Term
Loan A Lenders, the ratio that the respective principal amounts of the Term Loan
A Notes then held by each of them bears to the sum of such amounts then held by
all of them, (b) as among the Term Loan B Lenders, the respective principal
amounts of the Term Loan B Notes then held by each of them bears to the sum of
such amounts then held by all of them, (c) as among the Revolving Credit
Lenders, the ratio that the respective principal amounts of their Revolving
Credit Commitments (or, after the Commitment Termination Date, the respective
principal amounts of the Revolving Credit Loan then held by each of them) bears
to the sum of such amounts then held by all of them, and (d) as among all of the
Lenders, the ratio that the sum of the respective amounts set forth in clauses
(a), (b) and (c) then held by each Lender bears to the sum of such amounts then
held by all of them.
"Qualified Plan" shall mean an employee pension benefit plan, as
--------------
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
IRC Section 401(a), and which Borrower, any of its Subsidiaries or any ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
A-20
<PAGE>
"Ramsay Affiliates" shall mean Persons, exclusive of Borrower and its
-----------------
Subsidiaries, who directly, or indirectly through one or more intermediaries,
are controlled by Paul J. Ramsay, an individual with an address at 154 Pacific
Highway, Greenwich, NSW 2065, Australia. As used in this paragraph, the term
"control" (including the term "controlled by") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Persons, whether through stock ownership, membership,
partnership, voting rights, governing boards, committees, division or other
bodies with one or more common members, directors, trustees, officers or any
managers or otherwise.
"Ramsay Common Stock Subscription Agreement" shall mean the Common
------------------------------------------
Stock Purchase Agreement dated as of the Closing Date pursuant to which one or
more Ramsay Affiliates agree, in the event that (i) Borrower or any of its
Subsidiaries pay or become liable for the payment of any amount in excess of
$1,300,000 in respect of the Louisiana DHH Claims, whether pursuant to a
settlement or other agreement, by offset of current accounts receivable of
Borrower or any of its Subsidiaries due from Louisiana DHH, by entry of judgment
or otherwise, and (ii) the amount of such excess actually paid by or offset
against Borrower and its Subsidiaries exceeds $500,000 during any Fiscal Year,
to purchase such number of shares of common stock of Borrower as, at a purchase
price of $5.17 per share, shall have a dollar value equal to the amount of such
excess over $500,000; as amended, modified or supplemented from time to time
with the consent of the Administrative Agent and the Required Lenders.
"Ramsay Preferred Stock Designation" shall mean the certificate of
----------------------------------
designation in substantially the form of Exhibit A to the Ramsay Preferred Stock
Subscription Agreement, duly authorized by resolution of Borrower's Board of
Directors pursuant to authority contained in Borrower's certificate of
incorporation and filed with the Secretary of State of the State of Delaware on
or before the Closing Date; as amended, modified or supplemented from time to
time with the consent of the Administrative Agent and the Required Lenders.
"Ramsay Preferred Stock Purchase Agreement" shall mean the Preferred
-----------------------------------------
Stock Purchase Agreement dated as of the Closing Date pursuant to which one or
more Ramsay Affiliates agree to purchase 4,000 shares of Series 1997-A Preferred
Stock on the Closing Date, for an aggregate purchase price of $4,000,000.
"RCRA" is defined in the definition of "Environmental Laws."
----
"Real Property" shall mean all real property owned, leased or operated
-------------
by Borrower or any other Credit Party.
"Refinancing" shall mean the consummation of the payoff of the Life
-----------
Company Obligations, the payoff of the SocGen Obligations and the cash
collateralization of the SocGen Letters of Credit, all as contemplated by
Section 2.01(b) hereof.
- ---------------
"Related Transactions" shall mean the issuance of the Bridge Notes
--------------------
pursuant to the Bridge Note Purchase Agreement, the issuance of the Series 1997
Preferred Stock pursuant to the
A-21
<PAGE>
Preferred Stock Purchase Agreement, the issuance of the Series 1997-A Preferred
Stock pursuant to the Ramsay Preferred Stock Purchase Agreement, the payment of
all fees, costs and expenses associated with all of the foregoing and the
execution and delivery of all of the Related Transaction Documents.
"Related Transaction Documents" shall mean the Bridge Note Purchase
-----------------------------
Agreement, the Bridge Notes, the Preferred Stock Purchase Agreement, the
Preferred Stock Designation, the Ramsay Common Stock Subscription Agreement, the
Ramsay Preferred Stock Purchase Agreement, the Ramsay Preferred Stock
Designation, and all agreements, instruments, documents and certificates
executed by or on behalf of Borrower in connection with the Related
Transactions.
"Release" shall mean, as to any Person, any release or any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing or migration of a Hazardous Material into the
indoor or outdoor environment by such Person (or by a Person under such Person's
direction or control), including the movement of a Hazardous Material through or
in the air, soil, surface water, ground water or property; but shall exclude any
release, discharge, emission or disposal in material compliance with a then
effective permit or order of a Governmental Authority.
"Reportable Event" shall mean any of the events described in Section
----------------
4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Required Lenders" shall mean, at any time, Lenders holding at least
----------------
51% in interest of (i) the Revolving Credit Commitments (or, from and after the
Revolving Credit Commitment Termination Date, the outstanding principal amount
of the Revolving Credit Loan), (ii) the outstanding principal amount of Term
Loan A, and (iii) the outstanding principal amount of Term Loan B, but in no
event fewer than two Lenders at any time while there are two or more Lenders
hereunder.
"Required Revolving Lenders" shall mean Revolving Lenders holding at
--------------------------
least 51% in interest of the Revolving Credit Commitments (or, from and after
the Revolving Credit Commitment Termination Date, the outstanding principal
amount of the Revolving Credit Loan), but in no event fewer than two Revolving
Lenders at any time while there are two or more Revolving Lenders hereunder.
"Reserves" shall mean, with respect to the Borrowing Base, such
--------
reserves as the Administrative Agent may, in good faith based on the
Administrative Agent's reasonable and customary credit considerations, establish
from time to time either (i) based on a material deterioration in the
collectibility, or a material decline in the value, of the Eligible Accounts, or
(ii) with respect to contingent or known material liabilities.
"Responsible Financial Officer" shall mean any of the chief executive
-----------------------------
officer, chief operating officer, chief financial officer, chief accounting
officer, corporate controller or treasurer of Borrower.
A-22
<PAGE>
"Restricted Payment" shall mean, with respect to any Person: (a) the
------------------
declaration or payment of any dividend payable in cash or other property or
assets (but excluding Stock of such Person) or the making of any other payment
or distribution of cash or other property or assets in respect of such Person's
Stock; (b) any payment on account of the purchase, redemption, defeasance or
other retirement of such Person's Stock or any other payment or distribution
made in respect thereof, either directly or indirectly; or (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
Subordinated Indebtedness.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing for
--------------------
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's ter mination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC or Sections
601-609 of ERISA.
"Revolving Credit Advance" shall have the meaning assigned to it in
------------------------
Section 1.01(a).
- ---------------
"Revolving Credit Commitment" shall mean, as to any Revolving Lender,
---------------------------
the commitment of such Revolving Lender to make its Pro Rata Share of Revolving
Credit Advances and/or incur Letter of Credit Obligations, as set forth opposite
such Revolving Lender's name on the signature pages hereto or in the most recent
Assignment Agreement executed by such Revolving Lender, and "Revolving Credit
----------------
Commitments" shall mean, as to all Revolving Lenders, the aggregate commitment
- -----------
of all Revolving Lenders to make Revolving Credit Advances and/or incur Letter
of Credit Obligations in the amount of up to $16,000,000 as of the Closing Date,
and up to $20,000,000 as of the Revolving Credit Commitment Adjustment Date, as
either such amount may be adjusted, from time to time in accordance with this
Agreement.
"Revolving Credit Commitment Adjustment Date" shall mean such date, if
-------------------------------------------
any, as all of the following conditions shall first have been satisfied and
remain satisfied:
(i) Borrower shall have delivered to the Administrative Agent a copy of
Borrower's Form 10-K for the Fiscal Year ending June 30, 1998, conforming to the
requirements set forth in paragraph 4 of Annex F;
-------
(ii) Borrower shall have delivered to the Administrative Agent a Compliance
Certificate for such Fiscal Year, conforming to the requirements set forth in
paragraph 5(b) of Annex F;
-------
(iii) Borrower's EBITDA for such Fiscal Year shall be not less than
$16,500,000, computed on the basis set forth in such Compliance Certificate but
adjusted to exclude, without duplication, any amount included in Net Income for
such Fiscal Year consisting of (a) favorable cost report settlements in excess
of $2,000,000 in the aggregate for such Fiscal Year; (b) litigation settlements
in favor of Borrower or its Subsidiaries received during the Fiscal Year; (c)
interest income in excess of $500,000 in the aggregate for such Fiscal Year;
A-23
<PAGE>
(d) extraordinary gains and gains from asset sales during such Fiscal Year; and
(e) other income during such Fiscal Year not derived from the business
operations conducted by Borrower's Subsidiaries in the ordinary course.
(iv) Borrower shall have delivered to the Administrative Agent such
schedules, work papers and other documents as the Administrative Agent shall
request in order to verify the adjustments described in clause (iii) above;
(v) Borrower's Excess Borrowing Availability (determined on a pro forma
--- -----
basis, with trade payables being paid in a manner consistent with past
practices, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) shall be not less than $4,000,000
(both before and after giving effect to the redemption of the Series 1997-A
Preferred Stock);
(vi) GE Capital no longer is the holder of the Bridge Notes;
(vii) the Syndication Agent shall have successfully syndicated not less
than $17,500,000 of the principal amount of the Revolving Credit Commitments and
the Loans held by GE Capital (assuming that the Revolving Credit Commitments
are increased to $20,000,000 on the Revolving Credit Commitment Adjustment Date)
and such syndication shall have been closed by the execution and delivery of an
Assignment Agreement duly executed by GE Capital, the Administrative Agent and
Borrower and the payment to GE Capital of the sums due to it in respect of such
Assignment Agreement; and
(vii) no Default or Event of Default shall have occurred and be
continuing.
"Revolving Credit Commitment Maturity Date" shall mean September 30,
-----------------------------------------
2002, or such later date as shall be agreed to among all of the parties hereto
and set forth in an amendment to this Agreement.
"Revolving Credit Commitment Termination Date" shall mean the earliest
--------------------------------------------
of: (a) the Revolving Credit Commitment Maturity Date, (b) the date of
termination of the Revolving Credit Commitments pursuant to Section 8.02, and
------------
(c) the date of termination of the Revolving Credit Commitments in accordance
with the provisions of Section 1.04(c).
---------------
"Revolving Credit Loan" shall mean the aggregate amount of Revolving
---------------------
Credit Advances outstanding at any time.
"Revolving Credit Notes" shall mean the promissory notes provided for
----------------------
by Section 1.01(c) and all promissory notes delivered in substitution or
---------------
exchange therefor, substantially in the form of Exhibit B attached hereto, in
---------
each case as the same may be modified and supplemented and in effect from time
to time.
A-24
<PAGE>
"Revolving Lender" shall mean any Lender having a Revolving Credit
----------------
Commitment set forth opposite such Lender's name on the signature pages to this
Agreement or set forth for such Lender in the records maintained by the
Administrative Agent pursuant to Section 10.02.
-------------
"RMCI" shall mean Ramsay Managed Care, Inc., a Delaware corporation.
----
"SEC" shall mean the Securities and Exchange Commission, or any
---
successor thereto.
"Security Agreement" shall mean the Security Agreement, substantially
------------------
in the form of Exhibit F attached hereto, between each of the Credit Parties and
---------
the Administrative Agent, including all amendments, modifications and
supplements thereto, and shall refer to the Security Agreement as the same may
be in effect at the time such reference becomes operative.
"Senior Subordinated Note Agreement" shall mean the purchase
----------------------------------
agreement, indenture or other agreement pursuant to which the Senior
Subordinated Notes are issued and are to be governed, as amended, modified or
supplemented from time to time, to the extent permitted by Section 6.20, or
------------
otherwise with the consent of the Administrative Agent and the Required Lenders.
"Senior Subordinated Notes" shall mean the $17,500,000 in aggregate
-------------------------
principal amount of senior subordinated notes contemplated to be issued by
Borrower subsequent to the Closing Date, as amended, modified or supplemented
from time to time, to the extent permitted by Section 6.20, or otherwise with
------------
the consent of the Administrative Agent and the Required Lenders.
"Series 1997 Preferred Stock" shall mean the $2,500,000 in aggregate
---------------------------
stated value of Borrower's Class B Preferred Stock, Series 1997, to be issued
pursuant to the Preferred Stock Designation and purchased pursuant to the
Preferred Stock Purchase Agreement.
"Series 1997-A Preferred Stock" shall mean the $4,000,000 in aggregate
-----------------------------
stated value of Borrower's Class B Preferred Stock, Series 1997-A, to be issued
pursuant to the Ramsay Preferred Stock Designation and purchased pursuant to the
Ramsay Preferred Stock Purchase Agreement.
"SocGen" shall mean Societe Generale, a French banking corporation, in
------
its capacity as "Issuing Bank" and "Agent" under the SocGen Credit Agreement, as
such terms are used therein.
"SocGen Cash Collateral Account" shall mean the bank account in the
------------------------------
name of SocGen in which cash collateral is held to secure the reimbursement
obligations with respect to the SocGen Letters of Credit.
"SocGen Cash Collateral Agreement" shall mean the Release of
--------------------------------
Collateral, Termination and Cash Collateral Agreement, dated as of the Closing
Date, in form and substance reasonably satisfactory to the Administrative Agent
and providing for (i) the cash collateralization of Borrower's reimbursement
obligations with respect to the SocGen Letters of Credit, (ii) the release of
Borrower and certain of its Subsidiaries from certain provisions of the SocGen
Credit Agreement, (iii) the termination of all Liens securing the SocGen
Obligations (other than the Liens in certain
A-25
<PAGE>
cash or cash-equivalent collateral granted under such Agreement) and (iv)
certain future assurances, in each case effective upon the payment to SocGen of
an amount equal to the SocGen Obligations and the cash collateral in respect of
the SocGen Letters of Credit contemplated by Section 2.02(b)(ii).
-------------------
"SocGen Credit Agreement" shall mean the Credit Agreement dated as of
-----------------------
May 15, 1993 among Borrower, certain of Borrower's subsidiaries, the lenders
party thereto and SocGen, as amended by a Consent and Amendment dated as of
April 12, 1995, a Second Amendment dated as of September 15, 1995, a Third
Amendment dated as of August 15, 1996, a Fourth Amendment dated as of May 15,
1997, a Fifth Amendment dated as of June 4, 1997 and the SocGen Cash Collateral
Agreement.
"SocGen Lenders" shall mean the lenders party to the SocGen Credit
--------------
Agreement on the Closing Date.
"SocGen Letters of Credit" shall mean the Letters of Credit issued by
------------------------
SocGen and outstanding under the SocGen Credit Agreement as of the Closing Date.
"SocGen Obligations" shall mean all obligations of Borrower to SocGen
------------------
and the SocGen Lenders under the SocGen Credit Agreement, including without
limitation, all outstanding term loans and all accrued and unpaid interest, fees
and other amounts owing to the SocGen Lenders thereunder, but excluding any
reimbursement obligations with respect to the SocGen Letters of Credit.
"Solvent" shall mean, with respect to any Person on a particular date
-------
that, on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guarantees and pension plan liabilities) at any time shall
be computed as the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can be reasonably be expected
to become an actual or matured liability.
"South Florida LLC" shall mean U.B.H. Holdings, L.C., a Florida
-----------------
limited liability company, 50% of the issued and outstanding Stock of which is
owned, directly or indirectly, by Borrower as of the date of this Agreement.
"South Florida LP" shall mean University Behavioral Health at The
----------------
University of South Florida, Ltd., a Florida limited partnership, 50% of the
issued and outstanding Stock of which is owned, directly or indirectly, by
Borrower as of the date of this Agreement.
A-26
<PAGE>
"Stock" shall mean all shares, options, warrants, general or limited
-----
partnership interests, member interests, participation or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity whether voting or nonvoting, including
common stock, preferred stock, or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
SEC under the Exchange Act).
"Stock Pledge Agreement" shall mean the Stock Pledge Agreement,
----------------------
substantially in the form of Exhibit G hereto, between each of the Credit
---------
Parties holding Stock in other Credit Parties and the Administrative Agent,
including all amendments, modifications and supplements thereto, and shall refer
to the Stock Pledge Agreement as the same may be in effect at the time such
reference becomes operative.
"Subordinated Indebtedness" shall mean the Indebtedness evidenced by
-------------------------
or in respect of (a) the Bridge Notes, and (b) any of (i) the Senior
Subordinated Notes, (ii) any Indebtedness (other than the Senior Subordinated
Notes) refinancing the Bridge Notes, (iii) any refinancing of the Senior
Subordinated Notes or any Indebtedness permitted by clause (ii), and (iv) any
refinancing of any Indebtedness permitted by clause (iii);
provided that, Indebtedness described in clause (b) (other than Indebtedness
- --------
incurred in favor of any Ramsay Affiliates) shall qualify as Subordinated
Indebtedness only if it meets the requirements set forth in clauses (i)-(viii)
below:
(i) any such Indebtedness shall have a principal amount no greater
than the principal amount of the Bridge Notes or other Indebtedness being
refinanced;
(ii) any such Indebtedness shall have a rate of interest no greater
than the rate of interest applicable to the Indebtedness being refinanced, or
otherwise acceptable to the Administrative Agent and the Required Lenders;
(iii) any such Indebtedness shall not provide for any
amortization, redemption or sinking fund payment prior to the date that is 366
days following the scheduled maturity of the Term Loan B Notes;
(iv) any such Indebtedness and all claims and obligations in respect
thereof shall be subordinated to the prior payment in full in cash of the
Obligations (and any refunding, extension, refinancing or modification thereof)
upon terms and conditions satisfactory to the Administrative Agent and the
Required Lenders in their good faith discretion (which shall include, without
limitation, such payment blockage, payover, standstill, bankruptcy voting
rights, notice and other provisions as the Administrative Agent or the Required
Lenders shall request);
(v) any such Indebtedness shall be unsecured;
A-27
<PAGE>
(vi) the covenants, default provisions, terms of any "equity kicker"
or similar compensation payable in respect of such Subordinated Indebtedness and
all other terms and conditions set forth in the Senior Subordinated Note
Agreement or other governing indenture or agreement with respect to any such
Indebtedness shall be satisfactory to the Administrative Agent and the Required
Lenders in their good faith discretion;
(vii) no Default or Event of Default shall have occurred and be
continuing or will exist as a result of the issuance thereof; and
(viii) the proceeds of any such Indebtedness shall be used to
redeem in full all of the outstanding Bridge Notes or other Subordinated
Indebtedness then outstanding; and
provided, further, that Indebtedness incurred by Borrower in favor of any Ramsay
- -------- -------
Affiliates in connection with a refinancing of the Bridge Notes shall qualify as
Subordinated Indebtedness only if, in addition to meeting the requirements set
forth in clauses (i), (iii), (v) and (viii) above, such Indebtedness, and the
documents and instruments governing such Indebtedness, are substantively
identical to the forms of the Bridge Notes and the Bridge Note Purchase
Agreement with the following exceptions: (a) the notes issued in respect of such
Indebtedness shall be of a single class or series having identical terms and
conditions; (b) the rate of interest on such Indebtedness shall accrue and be
payable at a rate not to exceed eleven percent (11%) per annum in lieu of the
rates provided by Section 2.01(a) of the Bridge Note Purchase Agreement, plus a
default rate of interest of not more than an additional 2% per annum as provided
by Section 2.01(b) of the Bridge Note Purchase Agreement; (c) no fees shall be
payable to such Ramsay Affiliates in connection with the incurrence of such
Indebtedness other than as specifically contemplated by clause (e) below; (d) no
prepayment premium shall be payable in respect of any optional or mandatory
prepayment thereof as provided by Sections 2.03 and 2.04 of the Bridge Note
Purchase Agreement; (e) Section 3.01 of the Bridge Note Purchase Agreement shall
be modified to change the date "March 30, 1998" to that date which is the six-
month anniversary of the date of issuance of such Indebtedness; to change the
reference to "nine percent (9%)" in clause (a) thereof to "four percent (4%);"
to change the definition of "Base Amount" as used in clause (a) thereof from the
dollar amount set forth in the definition thereof in Section 10.02 of the Bridge
Note Purchase Agreement to that dollar amount as shall be equal to 85% of
Borrower's aggregate common equity value, based on the market price of
Borrower's Common Stock over the 30 trading days prior to the issuance of such
Indebtedness; and by deleting clause (b) thereof in its entirety; (f) Article 4
of the Bridge Note Purchase Agreement shall be modified by deleting Sections
4.03 and 4.04 thereof in their entirety; (g) Article 6 of the Bridge Note
Purchase Agreement shall be modified by deleting Section 6.11 thereof in its
entirety; (h) Article 7 thereof shall be deleted in its entirety; (i) Section
8.01(e) of the Bridge Note Purchase Agreement shall be modified so that an Event
of Default shall occur thereunder only to the extent that an Event of Default
under the Senior Credit Agreement or any other agreement, document or instrument
relating to Indebtedness referred to therein causes such Indebtedness to be
accelerated and such acceleration is not thereafter rescinded; (j) the
definition of "Closing Date" shall be modified to reflect the actual date of
issuance of such Indebtedness; (k) other changes may be made to the form of the
Bridge Note Purchase Agreement so that the terms and conditions thereof are more
favorable to Borrower than those set forth in the Bridge Note Purchase
Agreement; and (l) other changes of
A-28
<PAGE>
a conforming nature shall be made to the form of the Bridge Note Purchase
Agreement as are necessary to reflect the foregoing terms and conditions.
"Subsidiary" shall mean, with respect to any Person: (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Stock whether by proxy, agreement,
operation of law or otherwise; (b) any partnership in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%, or of which any such Person is a general partner or may exercise the powers
of a general partner; and (c) any limited liability company in which such Person
and/or one or more Subsidiaries of such Person shall have an interest (whether
voting or economic) of more than 50%, or of which any such Person is a manager.
"Subsidiary Guaranty" shall mean the Guaranty, substantially in the
-------------------
form of Exhibit H attached hereto, made by each of the Credit Parties (other
---------
than Borrower) in favor of Lenders, including all amendments, modifications and
supplements thereto, and shall refer to the Subsidiary Guaranty as the same may
be in effect at the time such reference become operative.
"Summa Merger Agreement" shall mean the Agreement and Plan of Merger
----------------------
dated July 1, 1997 among Summa Healthcare Group, Inc., Borrower and Ramsay
Acquisition Corp.
"Syndication Agent" shall mean GECC Capital Markets Group, Inc., in
-----------------
its capacity as Syndication Agent hereunder.
"Target" shall have the meaning assigned to it in Section 6.01.
------ ------------
"TCV" shall mean Transitional Care Ventures, Inc., a Delaware
---
corporation, 60% of the issued and outstanding Stock of which is owned, directly
or indirectly, by Borrower as of the date of this Agreement.
"Term Loan A" shall have the meaning assigned to it in Section 1.02.
----------- ------------
"Term Loan A Lender" shall mean any Lender making available to
------------------
Borrower a ratable portion of Term Loan A pursuant to Section 1.02 hereof, as
------------
set forth opposite such Lender's name on the signature pages to this Agreement
or in the records maintained by the Administrative Agent pursuant to Section
-------
10.02.
- -----
"Term Loan A Note" shall mean a promissory note of Borrower payable to
----------------
each Term Loan A Lender or its registered assigns, in substantially the form of
Exhibit C-1 hereto, evidencing
- -----------
A-29
<PAGE>
the aggregate indebtedness of Borrower to such Lender resulting from the ratable
portion of Term Loan A made by such Lender.
"Term Loan B" shall have the meaning assigned to it in Section 1.03.
----------- ------------
"Term Loan B Lender" shall mean any Lender making available to
------------------
Borrower a ratable portion of Term Loan B pursuant to Section 1.03 hereof, as
------------
set forth opposite such Lender's name on the signature pages to this Agreement
or in the records maintained by the Administrative Agent pursuant to Section
-------
10.02.
- -----
"Term Loan B Note" shall mean a promissory note of Borrower payable to
----------------
each Term Loan B Lender or its registered assigns, in substantially the form of
Exhibit C-2 hereto, evidencing the aggregate indebtedness of Borrower to such
- -----------
Lender resulting from the ratable portion of Term Loan B made by such Lender.
"Term Loans" shall mean, collectively, Term Loan A and Term Loan B.
----------
"Term Notes" shall mean, collectively, the Term Loan A Notes and the
----------
Term Loan B Notes.
"Termination Date" shall mean the date on which: (a) the Revolving
----------------
Credit Commitments have been terminated in full, (b) Lenders shall have no
further obligation to make any credit extensions or financial accommodations
hereunder, (c) all outstanding Obligations have been indefeasibly paid in full,
and (d) Borrower shall have funded the amounts required, if any, under Annex B
-------
into the Cash Collateral Account in respect of Letter of Credit Obligations, if
any, then outstanding.
"Three Rivers Hospital" shall mean the vacant hospital facility
---------------------
located at 20050 Crestwood Drive, Covington, Louisiana, and owned by Ramsay
Louisiana, Inc.
"Title IV Plan" shall mean a Pension Plan, other than a Multi-employer
-------------
Plan, which is covered by Title IV of ERISA.
"Trademark License" shall mean rights under any written agreement now
-----------------
owned or hereafter acquired by any Credit Party granting any right to use any
Trademark or Trademark registration.
"Trademarks" shall mean all of the following in which any Credit Party
----------
now holds or hereafter acquires any interest: (a) all common law and statutory
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency
A-30
<PAGE>
of the United States, any State or Territory thereof, or any other country or
any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; and (c) all licenses thereunder and together with the goodwill
associated with and symbolized by such trademark.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
--------------------------
amount, if any, of the sum of: (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such Title IV
Plan, and (b) for a period of five (5) years following a transaction reasonably
likely to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by Borrower, any of its Subsidiaries or any ERISA
Affiliate as a result of such transaction.
"United States" shall mean the United States of America and, with
-------------
respect to matters of geography, shall mean the fifty States thereof and the
District of Columbia.
"Welfare Plans" shall mean any welfare plan, as defined in Section
-------------
3(1) of ERISA, which is maintained or contributed to by Borrower, any of its
Subsidiaries or any ERISA Affiliate.
"Withdrawal Liability" shall mean, at any time, the aggregate amount
--------------------
of the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase
in contributions pursuant to Section 4243 of ERISA with respect to all Multi-
employer Plans.
2. Certain Matters of Construction. (a) Except as otherwise set
-------------------------------
forth in Annex G, any accounting term used in this Agreement or the other Loan
-------
Documents shall have, unless otherwise specifically provided therein, the
meaning customarily given such term in accordance with GAAP.
(b) All other undefined terms contained in this Agreement or the other
Loan Documents shall, unless the context indicates otherwise, have the meanings
provided for by the Code as in effect in the State of New York to the extent
the same are used or defined therein.
(c) The words "herein," "hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the annexes,
exhibits and schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
(d) For purposes of this Agreement and the other Loan Documents, the
following additional rules of construction shall apply: (i) wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter; (ii) the term "including" shall not be limiting or exclusive,
unless specifically indicated to the contrary; (iii) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (iv) all references to any
A-31
<PAGE>
instruments or agreements, including references to any of the Loan Documents,
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
(e) Unless otherwise indicated, all references in this Agreement to
articles, sections, subsections, schedules, annexes, exhibits and attachments
shall refer to the corresponding articles, sections, subsections, schedules,
annexes, exhibits and attachments of or to this Agreement. All schedules,
annexes, exhibits and attachments hereto, or expressly identified to this
Agreement, are incorporated herein by reference and, taken together, shall
constitute but a single agreement. Unless otherwise expressly set forth herein,
or in a written amendment referring to such schedules and annexes, all schedules
and annexes referred to herein shall mean the schedules and annexes as in effect
as of the Closing Date.
A-32
<PAGE>
Annex B to
Credit Agreement
----------------
LETTERS OF CREDIT
-----------------
1. Issuance. The Revolving Lenders agree, subject to the terms and
--------
conditions hereinafter set forth, to incur Letter of Credit Obligations in
respect of the issuance of Letters of Credit by either (i) a Revolving Lender
(including GE Capital) or (ii) a bank or other legally authorized Person
selected by GE Capital and customarily utilized by GE Capital in transactions of
the type evidenced by this Agreement (each, a "Letter of Credit Issuer"). If
-----------------------
the Letter of Credit Issuer is not a Revolving Lender, then all Letters of
Credit shall be issued for the account of Borrower, but shall be guaranteed by
GE Capital. In either case, all of the Revolving Lenders shall be deemed to
have purchased a risk participation in the obligations of each Revolving Lender
that is a Letter of Credit Issuer, or of GE Capital to any Letter of Credit
Issuer that is not a Revolving Lender, with respect to such Letters of Credit,
on the terms and conditions hereinafter set forth. All such Letters of Credit
shall be issued on terms requested by Borrower and reasonably acceptable to the
Administrative Agent and shall support obligations of Borrower or a Subsidiary
of Borrower incurred in the ordinary course of its business, including
obligations incurred in connection with the payment of its statutory or
contractual deposits, insurance premiums, utility and other operating ex penses
and obligations, all as Borrower shall request by written notice given in
accordance with the provisions of paragraph 5 below and received by the
Administrative Agent not less than five (5) Business Days prior to the requested
date of issuance of any such Letter of Credit; provided, that the aggregate
--------
amount of all Letter of Credit Obligations at any one time outstanding (whether
or not then due and payable) shall not exceed the lesser of (a) $2,500,000 (the
"Letter of Credit Sublimit") and (b) the Borrowing Base minus the outstanding
------------------------- -----
Revolving Credit Loan; and further provided, that (i) each such Letter of Credit
------- --------
shall have an expiry date which is not later than one year following the date of
issuance thereof, renewable for successive periods of one year each as Borrower
shall request by written notice given in accordance with the provisions of
paragraph 5 below and received by the Administrative Agent not less than five
(5) Business Days prior to the requested date of renewal of any Letter of Credit
previously issued and currently outstanding hereunder, and (ii) the Revolving
Lenders shall be under no obligation to incur Letter of Credit Obligations in
respect of any Letter of Credit having an expiry date that is later than the
Revolving Credit Commitment Maturity Date.
2. Revolving Credit Advances; Participation.
----------------------------------------
(a) In the event that GE Capital or any other Revolving Lender shall
make any payment on or pursuant to any Letter of Credit Obligation, such payment
shall then be deemed automatically to constitute a Revolving Credit Advance
regardless of whether a Default or Event of Default shall have occurred and be
continuing and notwithstanding the termination of the Revolving Credit
Commitments or Borrower's failure to satisfy the conditions precedent set forth
in Article 2, and each Revolving Lender shall be obligated to pay its Pro Rata
---------
Share thereof to the Administrative Agent, for disbursement to the Revolving
Lender making such payment, in accordance with this
B-1
<PAGE>
Agreement. The failure of any Revolving Lender to make available to the
Administrative Agent its Pro Rata Share of any such Revolving Credit Advance or
payment by GE Capital or any Revolving Lender that is a Letter of Credit Issuer
under or in respect of a Letter of Credit shall not relieve any other Revolving
Lender of its obligation hereunder to make available to the Administrative Agent
its Pro Rata Share thereof, but no Revolving Lender shall be responsible for the
failure of any other Revolving Lender to make available such other Revolving
Lender's Pro Rata Share of any such payment. For purposes of computing interest
under Section 1.07, a Revolving Credit Advance made in satisfaction of a Letter
------------
of Credit Obligation shall be deemed to have been made as of the date on which
the Letter of Credit Issuer or GE Capital makes the related payment under or in
respect of the underlying Letter of Credit.
(b) If it shall be illegal or unlawful for Borrower to incur Revolving
Credit Advances as contemplated by paragraph (a) above because of an Event of
Default described in Section 8.01(g), (h) or (i) or otherwise or if it shall be
--------------- --- ---
illegal or unlawful for any Revolving Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to a Letter of Credit
Issuer, or if the Letter of Credit Issuer is a Revolving Lender, then (i)
immediately and without further action whatsoever, each Revolving Lender shall
be deemed to have irrevocably and unconditionally purchased from GE Capital (or
such Letter of Credit Issuer, as the case may be) an undivided interest and
participation equal to such Revolving Lender's Pro Rata Share of the Letter of
Credit Obligations in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from GE
Capital (or such Letter of Credit Issuer, as the case may be) an undivided
interest and participation in such Revolving Lender's Pro Rata Share of the
Letter of Credit Obligations with respect to such Letter of Credit on the date
of such issuance. Each Revolving Lender shall fund its participation in all
payments or disbursements made under the Letters of Credit in the same manner as
provided in this Agreement with respect to Revolving Credit Advances.
3. Cash Collateral.
---------------
(a) In the event that any Letter of Credit Obligation, whether or not
then due or payable, shall for any reason be outstanding on the Revolving Credit
Commitment Termination Date, Borrower will either (i) cause the underlying
Letter of Credit to be returned and canceled and the Revolving Lenders'
corresponding Letter of Credit Obligations to be terminated, (ii) pay to the
Administrative Agent cash in an amount equal to 105% of the maximum amount then
available to be drawn under such Letter of Credit, or (iii) deliver a stand-by
letter (or letters) of credit in guarantee of such Letter of Credit Obligations,
which stand-by letter (or letters) of credit shall have an expiry date not less
than thirty (30) days after the expiry date of, and shall be in an amount equal
to 105% of the aggregate maximum amount then available to be drawn under, each
of the Letters of Credit to which such outstanding Letter of Credit Obligations
relate and shall be issued by a Person, and shall be subject to such terms and
conditions, as are satisfactory to the Administrative Agent in its sole
discretion. Such cash shall be held by the Administrative Agent in a cash
collateral account (the "Cash Collateral Account") which shall be in the name,
------------------------
sole dominion and control of the Administrative Agent (as a cash collateral
account) subject to the terms of this Annex B. Borrower agrees to execute and
-------
deliver to the Administrative Agent such documentation with respect
B-2
<PAGE>
to the Cash Collateral Account as the Administrative Agent may reasonably
request, and Borrower hereby pledges and grants to the Administrative Agent, for
the ratable benefit of the Lenders, a security interest in all such cash held in
the Cash Collateral Account from time to time and all in terest thereon and the
proceeds thereof, as additional security for the payment of all amounts due in
respect of the Letter of Credit Obligations, whether or not then due.
(b) From time to time after cash is deposited in the Cash Collateral
Account, Lender may apply such cash then held in the Cash Collateral Account to
the payment of any amounts, in such order as the Administrative Agent may elect,
as shall be or shall become due and payable by Borrower to the Revolving Lenders
with respect to such Letter of Credit Obligations and, once all Letter of Credit
Obligations have been satisfied, to any other Obligations yet outstanding as and
when due and payable, with any remainder being payable to Borrower.
(c) Neither Borrower nor any Person claiming on behalf of or through
Borrower shall have any right to withdraw any of the cash held in the Cash
Collateral Account, except that upon the termination of any Letter of Credit
Obligation in accordance with its terms and the payment of all amounts payable
by Borrower to the Administrative Agent in respect thereof, any funds remaining
in the Cash Collateral Account in excess of the then remaining Letter of Credit
Obligations and any other outstanding Obligations to the Revolving Lenders shall
be returned to Borrower.
(d) The Administrative Agent shall have no obligation to invest any
cash deposited in the Cash Collateral Account, to deposit any such cash in an
interest-bearing account or to invest or reinvest any of the cash so held, but
all interest and earnings thereon, if any, shall become a part of the cash
collateral held in the Cash Collateral Account, subject to all of the terms and
conditions hereof.
4. Fees and Expenses. Borrower agrees to pay to the Administrative
-----------------
Agent for the benefit of the Revolving Lenders, as compensation to the Revolving
Lenders for all Letter of Credit Obligations incurred hereunder, in addition to
the Letter of Credit Fee payable pursuant to Section 1.09, all reasonable out-
------------
of-pocket costs and expenses incurred by the Administrative Agent or any
Revolving Lender on account of such Letter of Credit Obligations. In addition,
Borrower shall pay to each Letter of Credit Issuer that is a Revolving Lender,
or shall reimburse GE Capital for its payment to any Letter of Credit Issuer
(other than a Revolving Lender), on demand, such fees (including all per annum
fees), charges and expenses of such Letter of Credit Issuer in respect of the
issuance, negotiation, acceptance, amendment, transfer and payment of such
Letter of Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
5. Request for Incurrence of Letter of Credit Obligations. Borrower
------------------------------------------------------
shall give the Administrative Agent at least five (5) Business Days' prior
written notice in substantially the form of Exhibit A hereto, (a "Notice of
--------- ---------
Request for Letter of Credit") requesting the incurrence of any Letter of
- ----------------------------
Credit Obligation, specifying the date such Letter of Credit Obligation is to be
incurred, identifying the beneficiary to which such Letter of Credit Obligation
relates and describing in reasonable detail the nature of the transactions
proposed to be supported thereby. The notice shall
B-3
<PAGE>
be accompanied by a signed letter of credit application and agreement and the
form of the Letter of Credit so requested to be issued (which shall be
acceptable to the Letter of Credit Issuer). Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower and approvals
by the Administrative Agent may be made and transmitted pursuant to electronic
codes and security measures mutually agreed upon and established by and among
Borrower, the Administrative Agent and the Letter of Credit Issuer.
6. Obligation Absolute. Borrower agrees to reimburse the
-------------------
Administrative Agent, each Revolving Lender and each Letter of Credit issuer for
any amount paid by each of them in connection with any Letter of Credit
Obligation or any drawing under a Letter of Credit, to the extent that such is
not otherwise paid in accordance with paragraph 2(a) hereof. The reimbursement
obligation of Borrower hereunder shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligation of each Revolving Lender to make payments to GE
Capital and to each Revolving Lender that is a Letter of Credit Issuer with
respect to Letters of Credit shall be unconditional and irrevocable. Such
obligations of Borrower and each of the Revolving Lenders shall be paid strictly
in accordance with the terms hereof under all circumstances including the
following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
this Agreement or the other Loan Documents or any other agreement;
(b) the existence of any claim, set-off, defense or other right which
Borrower or any of its Affiliates or any Revolving Lender may at any time have
against a beneficiary or any transferee of any Letter of Credit (or any Persons
or entities for whom any such transferee may be acting), the Administrative
Agent, any Revolving Lender, or any other Person, whether in connection with
this Agreement, the Letters of Credit, the transactions contemplated herein or
therein or any unrelated transaction (including any underlying transaction
between Borrower or any of its Affiliates and the beneficiary for which the
Letter of Credit was procured);
(c) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(d) the payment by GE Capital or any Letter of Credit Issuer (except
as otherwise expressly provided in paragraph (7)(b)(iii) below) under any Letter
of Credit or guaranty thereof against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such
Letter of Credit or such guaranty;
(e) any other circumstance or happening whatsoever, which is similar
to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have occurred
and be continuing.
B-4
<PAGE>
7. Indemnification; Nature of Revolving Lenders' Duties.
----------------------------------------------------
(a) In addition to amounts payable as elsewhere provided in this
Agreement, Borrower hereby agrees to pay and to protect, indemnify, and save
harmless the Administrative Agent, GE Capital, each other Revolving Lender and
each Letter of Credit Issuer from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including attorneys'
fees) which the Administrative Agent, GE Capital, any other Revolving Lender or
any Letter of Credit Issuer may incur or be subject to as a consequence, direct
or indirect, of (A) the issuance of any Letter of Credit or guaranty thereof, or
(B) the failure of GE Capital or of any Letter of Credit Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or Governmental Authority, in each case other than
to the extent solely as a result of the gross negligence or willful misconduct
of the Administrative Agent, GE Capital, such Revolving Lender or such Letter of
Credit Issuer (as finally determined by a court of competent jurisdiction).
(b) As between the Administrative Agent, GE Capital or any other
Revolving Lender and any Letter of Credit Issuer, on the one hand, and Borrower,
on the other, Borrower assumes all risks of the acts and omissions of, or misuse
of any Letter of Credit by the beneficiaries of any Letter of Credit. In
furtherance and not in limitation of the foregoing, to the fullest extent
permitted by law neither the Administrative Agent, GE Capital, any other
Revolving Lender nor any Letter of Credit Issuer shall be responsible: (i) for
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
document issued by any party in connection with the application for and issuance
of any Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of
any Letter of Credit to comply fully with conditions required in order to demand
payment under such Letter of Credit; provided that, in the case of any payment
--------
by GE Capital or any Letter of Credit Issuer party hereto under any Letter of
Credit or guaranty thereof, GE Capital or such other Letter of Credit Issuer
party hereto shall be liable to the extent such payment was made solely as a
result of its gross negligence or willful misconduct (as finally determined by a
court of competent jurisdiction) in determining that the demand for payment
under such Letter of Credit or guaranty thereof complies on its face with any
applicable requirements for a demand for payment under such Letter of Credit or
guaranty thereof; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) for errors in interpretation of
technical terms; (vi) for any loss or delay in the transmission or otherwise of
any document required in order to make a payment under any Letter of Credit or
guaranty thereof or of the proceeds thereof; (vii) for the credit of the
proceeds of any drawing under any Letter of Credit or guaranty thereof; and
(viii) for any consequences arising from causes beyond the control of the
Administrative Agent, GE Capital, any other Revolving Lender or any Letter of
Credit Issuer. None of the above shall affect, impair, or prevent the vesting
of any of the Administrative Agent's, GE Capital's, any other Revolving Lender's
or any Letter of Credit Issuer's rights or powers under this Annex B or
-------
otherwise under this Agreement.
B-5
<PAGE>
(c) Nothing contained herein shall be deemed to limit or to expand any
waivers, covenants or indemnities made by Borrower in favor of any Letter
of Credit Issuer in any letter of credit application, reimbursement
agreement or similar document, instrument or agreement between Borrower and
such Letter of Credit Issuer.
B-6
<PAGE>
Exhibit A
to Annex B
----------
NOTICE OF REQUEST FOR LETTER OF CREDIT
--------------------------------------
TO: GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent
1. This NOTICE OF REQUEST FOR LETTER OF CREDIT is executed and
delivered by the undersigned Responsible Financial Officer of Ramsay Health
Care, Inc., a Delaware corporation ("Borrower"), to General Electric Capital
--------
Corporation, in its capacity as Administrative Agent, pursuant to paragraph 5 of
Annex B to that certain Credit Agreement, dated as of September 30, 1997 (as it
- -------
may be amended, modified or supplemented from time to time, the "Credit
------
Agreement"), entered into among Borrower, the Lenders from time to time parties
- ---------
thereto, General Electric Capital Corporation, as Administrative Agent, and GECC
Capital Markets Group, Inc., as Syndication Agent. Any terms used herein and
not defined herein shall have the meanings defined in Annex A to the Credit
-------
Agreement.
2. Borrower hereby requests that the Administrative Agent arrange
for the issuance of a Letter of Credit pursuant to Annex B to the Credit
--------
Agreement, as follows:
(a) Amount of Letter of Credit: U.S.$________________
(b) Date of Issuance: ___________ ___, _____
(c) Type of Letter of Credit:
[_] Documentary
[_] Standby
(d) Beneficiary under Letter of Credit:
Name: _____________________________
Address: _____________________________
_____________________________
_____________________________
(e) Expiry Date: ______________ ___, _____
(f) Purpose of Letter of Credit:
_______________________________________
__________________________________________________________________________.
B-7
<PAGE>
(g) Additional Information/Terms: ____________________________________
________________________________________________________________________________
_____________________________________________________________________________.
3. The requested Letter of Credit is (check one box only):
[_] a new Letter of Credit
[_] a supplement, modification, amendment, renewal, or extension to
or of the following outstanding Letter(s) of Credit:________________________
____________________________________________________________________________
____________________________________________________________________________.
4. In connection with the issuance of the Letter of Credit requested
herein and the incurrence of the Letter of Credit Obligations by the Revolving
Lenders hereunder, Borrower hereby represents, warrants, and certifies to the
Administrative Agent and the Revolving Lenders that, as of the date of the
incurrence of the Letter of Credit Obligations by the Revolving Lenders (or, in
the case of any supplement, modification, amendment, renewal or extension to or
of any outstanding Letter of Credit, as of the date hereof):
(a) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects on the date hereof as though made on and as of the date hereof, except
to the extent that any such representation or warranty expressly relates solely
to an earlier date and except for changes therein permitted or contemplated by
the Credit Agreement;
(b) No event has occurred and is continuing, or will result from the
issuance of the Letter of Credit requested hereby or the incurrence by the
Revolving Lenders of Letter of Credit Obligations in connection therewith, which
constitutes or would constitute a Default or an Event of Default; and
(c) After giving effect to the issuance of the Letter of Credit
requested hereby and the incurrence by the Revolving Lenders of Letter of Credit
Obligations in connection therewith, the aggregate principal amount of the
Revolving Credit Loan shall not exceed the Borrowing Availability.
[IF ANY OF THE FOREGOING STATEMENTS IS NOT TRUE AND CORRECT, ATTACH A
STATEMENT SPECIFYING IN DETAIL THE CIRCUMSTANCES THEREOF AND THE ACTIONS
BORROWER IS TAKING OR PROPOSES TO TAKE WITH RESPECT THERETO.]
5. Attached hereto is a letter of credit application and agreement,
in the form provided to Borrower by the Administrative Agent, duly executed by
Borrower.
B-8
<PAGE>
6. As of the date of the incurrence by the Revolving Lenders of
Letter of Credit Obligations pursuant to this request (or, in the case of any
supplement, modification, amendment, renewal or extension to or of any
outstanding Letter of Credit, as of the date hereof), the aggregate amount of
all outstanding Letter of Credit Obligations (including the amount included in
this Request) is equal to or less than the Letter of Credit Sublimit.
7. The Borrowing Base on __________ ___, _____ was $___________, as
indicated on the most recent Borrowing Base Certificate delivered to the
Administrative Agent pursuant to the Credit Agreement. The undersigned has no
reason to believe that the Borrowing Base if currently computed would be less
than the aggregate amount of all Letter of Credit Obligations outstanding and
the outstanding Revolving Credit Loan (after giving effect to the issuance of
the Letter of Credit requested hereby).
8. This Notice of Request for Letter of Credit is executed by a
Responsible Financial Officer of Borrower, on behalf of Borrower. The
undersigned, in such capacity, hereby certifies each and every matter contained
herein to be true and correct.
IN WITNESS WHEREOF, the undersigned Responsible Financial Officer has
executed this Notice of Request for Letter of Credit this ____ day of
______________, ____.
_________________________________
Name:
Title:
This Notice of Request for Letter of Credit is to be telecopied to the
Administrative Agent as indicated no later than five (5) Business Days prior to
the requested date of issuance of the Letter of Credit requested above:
To: Quamei Matsuura
Telephone Number: (404) 814-3123
Telecopier Number: (404) 262-9175
B-9
<PAGE>
Annex C to
Credit Agreement
----------------
INTEREST RATES, ETC.
--------------------
1. Interest Rate.
-------------
(a) Except as otherwise provided below, interest shall accrue and be
payable on the outstanding principal balance of Term Loan A, Term Loan B and the
Revolving Credit Loan from the date Term Loan A, Term Loan B and each Revolving
Credit Advance is made at the following rates per annum: (i) with respect to the
Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index
Margin or, at the election of Borrower, the applicable LIBOR Rate plus the
Applicable Revolver LIBOR Margin; (ii) with respect to Term Loan A, the Index
Rate plus the Applicable Term Loan A Index Margin or, at the election of
Borrower, the applicable LIBOR Rate plus the Applicable Term Loan A LIBOR
Margin; and (iii) with respect to Term Loan B, the Index Rate plus the
Applicable Term Loan B Index Margin or, at the election of Borrower, the
applicable LIBOR Rate plus the Applicable Term Loan B LIBOR Margin.
(b) All computations of interest shall be made by the Administrative
Agent on the basis of a three hundred and sixty (360) day year, in each case for
the actual number of days occurring in the period for which such interest is
payable. The Index Rate shall be determined each day based upon the Index Rate
as in effect each day. Each determination by the Administrative Agent of an
interest rate hereunder shall be conclusive, absent manifest error.
(c) The Applicable Margins in effect on the Closing Date will be those
specified under Level IV of the second grid set forth below. The Applicable
Margins will be adjusted (up or down) prospectively, on a quarterly basis in
accordance with paragraph (d) below, based upon Borrower's Leverage Ratio for
the Rolling Four-Quarter Period ended on the last day of each Fiscal Quarter,
calculated on the basis set forth in Annex G. Adjustments in Applicable Margins
-------
will be determined by reference to the following grids:
<TABLE>
<CAPTION>
If the Leverage Ratio is: Level of Applicable Margins:
------------------------- ----------------------------
<S> <C>
less than 2.00:1.00 Level I
less than 2.50:1.00, but greater than 2.00:1.00 Level II
less than 3.00:1.00, but greater than 2.50:1.00 Level III
greater than 3.00:1.00 Level IV
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
Applicable Margins
-------------------------------------------
- --------------------------------------------------------------------------
Level I Level II Level III Level IV
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Applicable Revolver Index 1/2 of 1% 3/4 of 1% 1% 1-1/4%
Margin
- --------------------------------------------------------------------------
Applicable Revolver LIBOR 2% 2-1/4% 2-1/2% 2-3/4%
Margin
- --------------------------------------------------------------------------
Applicable Term Loan A Index 1/2 of 1% 3/4 of 1% 1% 1-1/4%
Margin
- --------------------------------------------------------------------------
Applicable Term Loan A LIBOR 2% 2-1/4% 2-1/2% 2-3/4%
Margin
- --------------------------------------------------------------------------
Applicable Term Loan B Index 1-1/4% 1-1/4% 1-1/2% 1-3/4%
Margin
- --------------------------------------------------------------------------
Applicable Term Loan B LIBOR 2-3/4% 2-3/4% 3% 3-1/4%
Margin
- --------------------------------------------------------------------------
</TABLE>
(d) All adjustments in the Applicable Margins based on the foregoing
grid will be implemented quarterly on a prospective basis, for each Fiscal
Quarter commencing at least five (5) days after the date of delivery to the
Administrative Agent and each of the Lenders of the quarterly unaudited or
annual audited (as applicable) Financial Statements of Borrower evidencing the
need for an adjustment, commencing with Borrower's Financial Statements for the
Fiscal Quarter ending March 31, 1998. Concurrently with the delivery of such
Financial Statements, Borrower shall deliver to the Administrative Agent and
each of the Lenders a certificate, signed by a Responsible Financial Officer of
Borrower, setting forth in reasonable detail the basis for the continuance of,
or any change in, the Applicable Margins. Failure to deliver such Financial
Statements on a timely basis shall, in addition to any other remedy provided for
in this Agreement, result in an increase in the Applicable Margins to those set
forth in Level IV of the foregoing grid, until three (3) Business Days following
the delivery of Financial Statements demonstrating that such an increase is not
required. If an Event of Default shall have occurred or be continuing at the
time any reduction in the Applicable Margins is to be implemented, that
reduction shall be deferred until three (3) Business Days following the date on
which such Event of Default is waived or cured.
(e) If an Event of Default shall have occurred and be continuing, the
Administrative Agent may (or, upon the written request of the Required Lenders,
shall), by written notice to Borrower, increase each of the Applicable Margins
to the Default Rate, effective as of the initial date of such Event of Default
and continuing until the date on which such Event of Default is waived or cured;
provided, however, that, upon the occurrence of an Event of Default specified
- -------- -------
C-2
<PAGE>
in Sections 8.01(g), (h) or (i), the Applicable Margins shall automatically
---------------- --- ---
increase to the Default Rate.
2. LIBOR Rate. So long as no Default or Event of Default shall have
----------
occurred and be continuing, and subject to the additional conditions precedent
set forth in Article 2 of this Agreement, Borrower shall have the option to (i)
---------
request that any Revolving Credit Advance be made as a LIBOR Rate Loan, (ii)
convert at any time all or any part of outstanding Loans from Index Rate Loans
to LIBOR Rate Loans, (iii) convert any LIBOR Rate Loan to an Index Rate Loan,
subject to payment of LIBOR breakage costs in accordance with paragraph 5 below
if such conversion is made prior to the expiration of the LIBOR Period
applicable thereto, or (iv) continue all or any portion of any Loan as a LIBOR
Rate Loan upon the expiration of the applicable LIBOR Period and the succeeding
LIBOR Period of that continued Loan shall commence on the last day of the LIBOR
Period of the Loan to be continued. Any Loan to be made or continued as, or
converted into, a LIBOR Rate Loan must be in a minimum amount equal to
$1,000,000 and integral multiples of $250,000 in excess of such amount. Any
such election must be made by 11:00 A.M. (New York time) on the third (3rd)
LIBOR Business Day prior to (1) the date of any proposed Revolving Credit
Advance which is to bear interest at a rate based on the LIBOR Rate, (2) the end
of each LIBOR Period with respect to any LIBOR Rate Loan to be continued as
such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to
a LIBOR Rate Loan for a LIBOR Period designated by Borrower in such election.
If no election is received with respect to a LIBOR Rate Loan by 11:00 A.M. (New
York time) on the third (3rd) LIBOR Business Day prior to the end of the LIBOR
Period with respect thereto (or if a Default or an Event of Default shall have
occurred and be continuing or the additional conditions precedent set forth in
Article 2 shall not have been satisfied), that LIBOR Rate Loan shall be
- ---------
converted to an Index Rate Loan at the end of its LIBOR Period. No Loan may be
made as or converted into a LIBOR Rate Loan until after the Closing Date and,
until the earlier of the completion of the Syndication Agent's syndication of
this Agreement or sixty (60) days after the Closing Date, Borrower may not
request LIBOR Periods of more than one month and there shall not be more than
one LIBOR Rate Loan in existence at any time.
3. Notices and Procedures.
----------------------
(a) Borrower must make each election provided for in paragraph 2 above
by notice to the Administrative Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a "Notice of Conversion/Continuation") in the
---------------------------------
form of Exhibit A hereto.
---------
(b) The Administrative Agent shall be entitled to rely upon and shall
be fully protected under this Agreement in relying upon any Notice of
Continuation/Conversion believed by the Administrative Agent to be genuine and
to assume that the persons executing and delivering the same were duly
authorized unless the responsible individual acting thereon for the
Administrative Agent shall have actual notice to the contrary.
4. Savings Clause. Notwithstanding anything to the contrary set
--------------
forth in this Annex C, if, at any time until payment in full of all of the
-------
Obligations, any rate of interest payable hereunder exceeds the highest rate of
interest permissible under any law which a court of competent
C-3
<PAGE>
jurisdiction shall, in a final determination, deem applicable hereto (the
"Maximum Lawful Rate"), then in such event and so long as the Maximum Lawful
- --------------------
Rate would be so exceeded, such rate of interest shall be equal to the Maximum
Lawful Rate; provided, that if at any time thereafter any rate of interest
--------
payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue
to pay interest to the Administrative Agent hereunder at the Maximum Lawful Rate
until such time as the total interest received by all of the Lenders hereunder
is equal to the total interest which Lenders would have received had the
interest rate or rates payable hereunder been (but for the operation of this
paragraph 4) the interest rate or rates payable since the Closing Date as
otherwise provided in this Agreement. Thereafter, the interest rate or rates
payable hereunder shall be the rate or rates of interest provided in paragraph
1, unless and until any rate of interest again exceeds the Maximum Lawful Rate,
in which event this paragraph 4 shall again apply. In no event shall the total
interest received by Lenders pursuant to the terms hereof exceed the amount
which Lenders could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. In the event
the Maximum Lawful Rate is calculated pursuant to this paragraph 4, (x) if
required by applicable law, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made, and (y) if permitted by applicable law, Borrower
and Lenders shall (i) characterize any nonprincipal payment as an expense, fee
or premium rather than as interest, (ii) exclude voluntary prepayments and the
effect thereof, and (iii) amortize, pro rate, allocate and spread in equal or
unequal parts the total amount of interest throughout the entire contemplated
term of the Obligations so that interest for the entire term of this Agreement
does not exceed the Maximum Lawful Rate. In the event that a court of competent
jurisdiction, notwithstanding the provisions of this paragraph 4, shall make a
final determination that Lenders have received interest hereunder or under any
of the Loan Documents in excess of the Maximum Lawful Rate, Lenders shall, to
the extent permitted by applicable law, promptly apply such excess first to any
lawful interest due and not yet paid hereunder, then to the outstanding
principal of the Obligations, then to Fees and any other unpaid Obligations, and
thereafter shall refund any excess to Borrower or as a court of competent
jurisdiction may otherwise order.
5. Breakage Costs. To induce Lenders to provide the LIBOR Rate
--------------
option on the terms provided herein, if (i) any LIBOR Rate Loans are repaid in
whole or in part prior to the last day of any applicable LIBOR Period (whether
that repayment is made pursuant to any provision of this Agreement or any other
Loan Document or is the result of acceleration, by operation of law or
otherwise); (ii) Borrower shall default in payment when due of the principal
amount of or interest on any LIBOR Rate Loan; (iii) Borrower shall default in
making any borrowing of, conversion into or continuation of LIBOR Rate Loans
after Borrower has given notice requesting the same in accordance herewith; or
(iv) Borrower shall fail to make any prepayment of a LIBOR Rate Loan after
Borrower has given a notice thereof in accordance herewith, Borrower shall
indemnify and hold harmless each Lender from and against all losses, costs and
expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this paragraph 5, each Lender
shall be deemed to have actually funded its relevant LIBOR Rate Loan through the
purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to
the amount of that LIBOR Rate Loan and having a maturity comparable to the
C-4
<PAGE>
relevant LIBOR Period; provided, however, that each Lender may fund each of its
-------- -------
LIBOR Rate Loans in any manner it sees fit, and the foregoing assumption shall
be utilized only for the calculation of amounts payable under this paragraph 5.
This covenant shall survive the termination of this Agreement and the payment of
the Notes and all other Obligations payable hereunder. As promptly as
practicable under the circumstances, each Lender shall provide Borrower with its
written calculation of all amounts payable pursuant to this paragraph 5, and,
absent manifest error, such calculation shall be binding on the parties hereto
unless Borrower shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
6. Definitions. Capitalized terms used in this Annex C and not
----------- -------
defined in Annex A or Annex G to this Agreement shall have the following
------- -------
respective meanings:
"Applicable Margins" shall mean, collectively, the Applicable Revolver
------------------
Index Margin, the Applicable Term Loan A Index Margin, the Applicable Term Loan
B Index Margin, the Applicable Revolver LIBOR Margin, the Applicable Term Loan A
LIBOR Margin and the Applicable Term Loan B LIBOR Margin.
"Applicable Revolver Index Margin" shall mean the per annum interest
--------------------------------
rate margin from time to time in effect and payable in addition to the Index
Rate applicable to the Revolving Credit Loan, as determined by reference to
paragraph 1 of this Annex C.
-------
"Applicable Revolver LIBOR Margin" shall mean the per annum interest
---------------------------------
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to the Revolving Credit Loan, as determined by reference to paragraph
1 of this Annex C.
-------
"Applicable Term Loan A Index Margin" shall mean the per annum
-----------------------------------
interest rate from time to time in effect and payable in addition to the Index
Rate applicable to Term Loan A, as determined by reference to paragraph 1 of
this Annex C.
-------
"Applicable Term Loan A LIBOR Margin" shall mean the per annum
-----------------------------------
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to Term Loan A, as determined by reference to paragraph 1 of
this Annex C.
-------
"Applicable Term Loan B Index Margin" shall mean the per annum
-----------------------------------
interest rate from time to time in effect and payable in addition to the Index
Rate applicable to Term Loan B, as determined by reference to paragraph 1 of
this Annex C.
-------
"Applicable Term Loan B LIBOR Margin" shall mean the per annum
-----------------------------------
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to Term Loan B, as determined by reference to paragraph 1 of
this Annex C.
-------
"Federal Funds Rate" shall mean, for any day, a floating rate equal to
------------------
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by the Administrative
Agent.
C-5
<PAGE>
"Index Rate" shall mean, for any day, a floating rate equal to the
----------
higher of (i) the rate publicly quoted from time to time by The Wall Street
---------------
Journal as the "base rate on corporate loans at large U.S. money center
- -------
commercial banks" (or, if The Wall Street Journal ceases quoting a base rate of
-----------------------
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each
change in any interest rate provided for in this Agreement based upon the Index
Rate shall take effect at the time of such change in the Index Rate.
"Index Rate Loan" shall mean a Loan or any portion thereof bearing
---------------
interest by reference to the Index Rate.
"LIBOR Business Day" shall mean a Business Day on which banks in the
------------------
city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Period" shall mean, with respect to any LIBOR Rate Loan, each
------------
period commencing on a LIBOR Business Day selected by Borrower pursuant to this
Agreement and ending one, two or three or, if available from each of the
Lenders, six months thereafter, as selected by Borrower's irrevocable notice to
the Administrative Agent as set forth in paragraph 3 above; provided that the
--------
foregoing provision relating to LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding
LIBOR Business Day unless the result of such extension would be to carry such
LIBOR Period into another calendar month in which event such LIBOR Period shall
end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Revolving
Credit Commitment Termination Date shall end two (2) LIBOR Business Days prior
to such date;
(c) any LIBOR Period pertaining to a LIBOR Rate Loan that begins on
the last LIBOR Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a payment
or prepayment of any LIBOR Rate Loan during a LIBOR Period for such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no more
than five (5) separate LIBOR Rate Loans in existence at any one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest
----------
determined by the Administrative Agent equal to:
C-6
<PAGE>
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on the second full LIBOR Business Day next preceding the first day
of each LIBOR Period (unless such date is not a Business Day, in which event the
next succeeding Business Day will be used); divided by
------- --
(b) a number equal to 1.0 minus the aggregate (but without
-----
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of the Federal Reserve Board) which
are required to be maintained by a member bank of the Federal Reserve System
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16th of
1%) or, if there is not a nearest one sixteenth of one percent (1/16th of 1%),
to the next highest one sixteenth of one percent (1/16th of 1%).
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to the
Administrative Agent and Borrower.
"LIBOR Rate Loan" shall mean a Loan or any portion thereof bearing
---------------
interest by reference to the LIBOR Rate.
"Maximum Lawful Rate" shall have the meaning assigned to it in
-------------------
paragraph 4 of this Annex C.
-------
"Notice of Conversion/Continuation" shall have the meaning assigned to
---------------------------------
it in paragraph 3 of this Annex C.
-------
C-7
<PAGE>
Exhibit A to
Annex C
----------
NOTICE OF CONTINUATION/CONVERSION
---------------------------------
TO: GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent
1. This NOTICE OF CONTINUATION/CONVERSION is executed and delivered
by the undersigned Responsible Financial Officer of Ramsay Health Care, Inc., a
Delaware corporation ("Borrower"), to General Electric Capital Corporation, in
--------
its capacity as Administrative Agent, pursuant to paragraph 3(a) of Annex C to
-------
that certain Credit Agreement, dated as of September 30, 1997 (as it may be
amended, modified or supplemented from time to time, the "Credit Agreement"),
----------------
entered into among Borrower, the Lenders from time to time parties thereto,
General Electric Capital Corporation, as Administrative Agent, and GECC Capital
Markets Group, Inc., as Syndication Agent. Any terms used herein and not
defined herein shall have the meanings assigned in Annexes A and C to the Credit
--------- -
Agreement.
2. Borrower hereby elects pursuant to paragraph 2 of Annex C that
-------
[all of] [$_____________ of] [CHOOSE ONE] [the Revolving Credit Loan] [Term Loan
A] [Term Loan B] [CHOOSE ONE] convert from [a LIBOR Rate Loan to an Index Rate
Loan] [an Index Rate Loan to a LIBOR Rate Loan for a LIBOR Period of [one] [two]
[three] [if available, six months]] [CHOOSE ONE] commencing on ___________ ___,
____. [REPEAT FOR EACH CONVERSION]
3. Borrower hereby elects pursuant to paragraph 2 of Annex C that
-------
[all of] [$_____________ of] [CHOOSE ONE] [the Revolving Credit Loan] [ Term
Loan A] [Term Loan B] [CHOOSE ONE] presently constituting a LIBOR Rate Loan and
having a LIBOR Period ending on ___________ ___, _____ continue as a LIBOR Rate
Loan for a LIBOR Period of [one] [two] [three] [if available, six months]
[CHOOSE ONE] commencing on ___________ ___, ____. [REPEAT FOR EACH CONTINUATION]
4. Borrower represents and warrants that (a) no Default or Event of
Default has occurred and is continuing; (b) each Loan continued as or converted
into a LIBOR Rate Loan is in a minimum principal amount of $1,000,000 and
integral multiples of $250,000 in excess thereof; and (c) after giving effect to
the conversions and continuations requested hereby, no more than five LIBOR
Periods will be in effect at any time.
5. This Notice is delivered to the Administrative Agent not later
than 11:00 A.M. (New York time) on the third full LIBOR Business Day preceding
the first day of the LIBOR Period selected by Borrower.
C-8
<PAGE>
IN WITNESS WHEREOF, the undersigned Responsible Financial Officer has
executed and delivered this Notice of Continuation/Conversion this _____ day of
_____________, ____.
______________________________
Name:
Title:
This Notice of Continuation/Conversion is to be telecopied to the Administrative
Agent as indicated:
To: Quamei Matsuura
Telephone Number: (404) 814-3123
Telecopier Number: (404) 262-9175
C-9
<PAGE>
Annex D to
Credit Agreement
----------------
SCHEDULE OF CLOSING DOCUMENTS
-----------------------------
In addition to this Agreement, duly executed by Borrower, each other Credit
Party and each Lender, as required by Section 2.01(a), the Administrative Agent
---------------
shall have received the following, each, unless otherwise specified below, dated
the Closing Date, in form and substance reasonably satisfactory to the
Administrative Agent and its counsel, unless otherwise specified below:
1. PRINCIPAL LOAN DOCUMENTS.
------------------------
(a) Fee Letter. The GE Capital Fee Letter.
----------
(b) Notes. A duly executed Revolving Credit Note, Term Loan A Note
-----
and Term Loan B Note, payable to the order of each Lender, as applicable.
(c) Borrowing Base Certificate. An original Borrowing Base
--------------------------
Certificate, duly executed by a Responsible Financial Officer of Borrower.
(d) Notice of Revolving Credit Advance. An original Notice of
----------------------------------
Revolving Credit Advance, duly executed by a Responsible Financial Officer of
Borrower.
2. COLLATERAL DOCUMENTS.
--------------------
(a) Security Agreement. The Security Agreement, duly executed by each
------------------
Credit Party.
(b) Subsidiary Guaranty. The Subsidiary Guaranty, duly executed by
-------------------
each Subsidiary of Borrower that is a Credit Party.
(c) Financing Statements. Financing Statements (Form UCC-l) (the
--------------------
"Financing Statements") in proper form for filing under the Uniform Commercial
- ---------------------
Code, or chattel mortgages in proper form for filing under other applicable law,
of all jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Lien created by the Security
Agreement.
(d) Lien Searches. Certified copies of Requests for Information (Form
-------------
UCC-11), or other evidence satisfactory to the Administrative Agent, as of a
date not more than forty-five (45) days prior to the Closing Date, listing all
effective financing statements or chattel mortgages which name each Credit Party
(under its present name, any previous name or any trade or doing business name)
as debtor and which are filed in the jurisdictions referred to in paragraph (c)
above, together with copies of such other financing statements (none of which
shall cover the Collateral purported
D-1
<PAGE>
to be covered by the Security Agreement, other than as set forth on Schedule
--------
6.07 and other than those to be terminated in connection with the Refinancing).
- ----
(e) Recordings. Evidence of the completion of the pre-filing of the
----------
Financing Statements with all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Lien created by
the Security Agreement.
(f) Instruments. All promissory notes and other instruments owned by
-----------
any Credit Party, endorsed in blank.
(g) Stock Pledge Agreement. The Stock Pledge Agreement, duly executed
----------------------
by Borrower and each Credit Party that holds Stock of any other Person, together
with delivery to the Administrative Agent of:
(i) Certificates or other evidences of ownership representing
the Pledged Shares (as defined therein);
(ii) Appropriate undated stock powers (or the equivalent
thereof) executed in blank; and
(iii) Evidence that all action necessary or, in the judgment of
the Administrative Agent, desirable to perfect and protect the security
interests created by the Stock Pledge Agreement has been taken.
(h) Collateral Documents Relating to the Mortgaged Property.
-------------------------------------------------------
(i) The Mortgages. The Mortgages, covering the Mortgaged
-------------
Property, duly executed by the appropriate Credit Party in form acceptable
for recordation with the appropriate recording offices;
(ii) Surveys. As-built surveys (in customary ALTA form) with
-------
respect to the Mortgaged Property, either updated to a date not more than
thirty (30) days prior to the Closing Date or accompanied by a surveyor's
certificate sufficient to permit the title insurance policy contemplated by
paragraph (v) below to be issued without exception for general matters of
survey;
(iii) SNDA's. Subordination and non-disturbance agreements from
------
the lessees with respect to any Mortgaged Property that is leased by any
Credit Party to any Person.
(iv) Landlords' Consents. Landlords' consents from the
-------------------
lessors with respect to any Mortgaged Property that is leased by any Credit
Party from any Person.
(v) Fixture Filings. Fixture financing statements in respect
---------------
of the Mortgaged Property, duly executed by the appropriate Credit Party;
D-2
<PAGE>
(vi) Title Insurance. Assurance from a title insurance company
---------------
acceptable to the Administrative Agent that it is committed to cause
the Mortgages to be recorded and, upon recordation of the Mortgages,
to issue its ALTA lender's title insurance policies in a form
reasonably acceptable to the Administrative Agent and in an amount
reasonably satisfactory to the Administrative Agent, showing the
Mortgages as the "insured mortgage" and insuring the validity and
priority of the Mortgages as first priority Liens upon the Mortgaged
Property, subject only to those title exceptions which are permitted
under this Agreement or the Mortgages; and
(vii) Phase I Environmental Reports. Phase I Environmental
-----------------------------
Assessments, in form and substance acceptable to the Administrative
Agent, with respect to each of the following Mortgaged Properties:
Benchmark Regional, Brynn Marr, Chestnut Ridge, Havenwyck and Hill
Crest.
(i) Miscellaneous. A collateral assignment of the Ramsay Common Stock
-------------
Subscription Agreement, duly acknowledged by the appropriate Ramsay Affiliates.
3. THIRD PARTY AGREEMENTS.
----------------------
(a) Insurance. Evidence that the insurance required by the terms of
---------
this Agreement and the Security Agreement is in full force and effect, including
a certificate of insurance that evidences the existence of each policy of
insurance, payment of all premiums therefor and compliance with the terms of
this Agreement.
(b) Payoff Letters, Etc. (i) The payoff letters from the indenture
--------------------
trustee for the Life Companies contemplated by Section 2.01(b)(i); (ii) with
------------------
appropriate documents executed by or on behalf of the indenture trustee for the
Life Companies, in form and substance reasonably satisfactory to the
Administrative Agent, releasing any Liens on the Property of Borrower and any
other Credit Party securing the Life Company Obligations; (iii) the payoff
letter from SocGen contemplated by Section 2.01(b)(ii); (iv) the SocGen Cash
-------------------
Collateral Agreement; and (v) appropriate documents executed by or on behalf of
SocGen and the SocGen Lenders, in form and substance reasonably satisfactory to
the Administrative Agent, releasing any Liens on the Property of Borrower and
any other Credit Party securing the SocGen Obligations and the reimbursement
obligations with respect to the SocGen Letters of Credit, other than those
created pursuant to the SocGen Cash Collateral Agreement; all of which
documents, in the case of clauses (ii) and (v) above, shall have been delivered
to the Administrative Agent or its counsel pursuant to escrow instructions from
the Life Companies and SocGen, respectively, in form and substance reasonably
satisfactory to the Administrative Agent, or shall otherwise be made available
to the Administrative Agent on the Closing Date in a manner reasonably
satisfactory to the Administrative Agent .
4. DOCUMENTS DELIVERED BY BORROWER.
(a) Board Resolutions and Incumbency Certificates. A certificate of
---------------------------------------------
the Secretary or an Assistant Secretary of Borrower and each of the other Credit
Parties certifying:
D-3
<PAGE>
(i) the resolutions adopted by the Board of Directors of
such Credit Party approving each Loan Document to which such Credit
Party is a party and the transactions contemplated hereby and thereby;
(ii) all documents evidencing other necessary corporate
action by such Credit Party and required governmental and third party
approvals with respect to each such Loan Document; and
(iii) the names and true signatures of the authorized officers
of such Credit Party.
(b) Articles or Certificates of Incorporation, By-Laws and Good
-----------------------------------------------------------
Standing Certificates. Each of the following documents:
- ---------------------
(i) the articles or certificates of incorporation of
Borrower and each of the other Credit Parties as in effect on the
Closing Date, certified by the Secretaries of State of their
respective States of incorporation no more than thirty days prior to
the Closing Date, and the by-laws of Borrower and each of the other
Credit Parties as in effect on the Closing Date, certified by the
respective Secretaries, Assistant Secretaries or other appropriate
officers or directors of Borrower and each such Credit Party;
(ii) "long form" good standing certificates for Borrower and
each of the other Credit Parties from the Secretaries of State of
their respective States of incorporation as of a date no more than
thirty days prior to the Closing Date; and
(iii) good standing certificates for Borrower and each of the
other Credit Parties from the Secretaries of State of each of the
states in which Borrower or any of such Credit Parties is required to
qualify as a foreign corporation authorized to transact business, as
of a date no more than thirty days prior to the Closing Date.
(c) Financial Statements. Copies of the Financial Statements
--------------------
described in Schedule 3.04 in form and substance satisfactory to the
-------------
Administrative Agent.
(d) Projections. Copies of the Projections described in Schedule 3.04
----------- -------------
in form and substance satisfactory to the Administrative Agent.
(e) Proposed Text of Press Release. Not later than two Business Days
------------------------------
prior to the Closing Date, the proposed text of any press release or other
disclosure proposed to be issued by Borrower with respect to the transactions
contemplated by this Agreement, for the Administrative Agent's review in
accordance with Section 11.14(a).
----------------
(f) Officer's Certificate. A certificate of a Responsible Financial
---------------------
Officer of Borrower affirming that the conditions set forth in Section 2.02 have
------------
been satisfied as of the Closing Date.
D-4
<PAGE>
(g) Other Certificates. Certificates from a Responsible Financial
------------------
Officer of Borrower as to each of (i) the Bridge Note Purchase Agreement and
(ii) the Preferred Stock Purchase Agreement.
(h) Payment Instructions. Payment instructions from Borrower
--------------------
providing for the payment in full of (i) all of the Life Obligations, (ii) the
cash collateral required to be deposited in respect of the SocGen Letters of
Credit, (iii) all Fees payable to the Agents on the Closing Date, (iv) the fees
and expenses of King & Spalding, special counsel to the Administrative Agent, in
connection with the transactions contemplated by this Agreement, and any special
local counsel to the Administrative Agent retained by the Administrative Agent
in connection with the transactions contemplated by this Agreement, and (v) all
title insurance premiums, intangible taxes and recording fees payable in
connection with the recording of the Mortgages and the issuance of the title
insurance policies referred to in paragraph 2(h) above.
5. LEGAL OPINIONS.
--------------
Opinions of (i) Haythe & Curley, special counsel to Borrower, in
substantially the form of Exhibit I to this Agreement; and (ii) special local
---------
counsel to the Administrative Agent in each jurisdiction in which Mortgaged
Property is located, in form and substance satisfactory to the Administrative
Agent.
D-5
<PAGE>
Annex E to
Credit Agreement
----------------
INSURANCE REQUIREMENTS
----------------------
1. Coverage Requirements. The insurance policies maintained by
---------------------
Borrower shall provide for, without limitation, the following insurance
coverage:
(a) "All Risk" physical damage insurance on all of Borrower's and the
other Credit Parties' tangible real and personal property and assets, wherever
located, and covering, without limitation, fire and extended coverage, boiler
and machinery coverage, flood, earthquake, theft, burglary, explosion, collapse,
business interruption and extra expense coverage, and all other hazards and
risks ordinarily insured against by owners or users of such properties in
similar businesses, on a replacement cost and agreed amount basis;
(b) Comprehensive general liability insurance on an "occurrence basis"
against claims for personal injury, bodily injury and property damage with a
minimum limit of $1,000,000 per occurrence and $3,000,000 in the aggregate.
Such coverage shall include premises/operations, broad form contractual
liability, underground, explosion and collapse hazard, independent contractors,
broad form property coverage, products and completed operations liability and
other standard coverages normally included in comprehensive general liability
insurance;
(c) Professional and errors and omissions liability insurance with a
minimum limit of $1,000,000 per occurrence and $3,000,000 in the aggregate;
(d) Statutory limits of worker's compensation insurance, which shall
include employee's occupational disease and employer's liability in the amount
of $500,000 for each accident, occurrence or employee, as applicable;
(e) Automobile liability insurance for all owned, non-owned or hired
automobiles insuring against claims for personal injury, bodily injury and
property damage with a minimum combined single limit of $1,000,000 per
occurrence;
(f) Umbrella insurance of $5,000,000 per occurrence and $25,000,000 in
the aggregate, scheduling coverage required under paragraphs (b), (c), (d) and
(e) above as underlying;
(g) Crime insurance with respect to employee dishonesty in an amount
not less than $1,000,000;
(h) Fiduciary liability insurance with respect to defined benefit and
group welfare plans in an amount not less than $1,000,000; and
E-1
<PAGE>
(i) directors' and officers' liability insurance in an amount not less
than $15,000,000.
2. Requirements for All Policies. All of such policies (i) shall
-----------------------------
have deductibles reasonably acceptable to the Administrative Agent (it being
agreed that the deductibles in effect on the Closing Date are acceptable to the
Administrative Agent on such date); (ii) shall provide that the Administrative
Agent will be notified by written notice at least thirty (30) days prior to such
policy's cancellation or material modification; (iii) shall be in full force and
effect; (iv) shall be in form and with Borrower's current insurers or other
insurers reasonably recognized as adequate by the Administrative Agent (it being
agreed that insurers with an A.M. Best rating lower than "A" will not be
considered adequate); and (iv) shall provide coverage of such risks and for such
amounts as is customarily maintained for businesses of the scope and size of
Borrower's and as otherwise reasonably acceptable to the Administrative Agent.
3. Requirements for Policies Covering Collateral. Each insurance
---------------------------------------------
policy covering real and personal property shall contain an endorsement, in form
and substance reasonably acceptable to the Administrative Agent, showing loss
payable to the Administrative Agent, for the ratable benefit of the Lenders, as
its interests appear (Form 438 BFU or its equivalent as determined by the
Administrative Agent) and extra expense and business interruption endorsements
and shall contain a clause which provides that the Administrative Agent's
interest under such policy shall not be invalidated by any act or omission to
act of, or any breach of warranty by, the insured, or by any change in the
title, ownership or possession of the insured property, or by the use of the
property for purposes more hazardous than is permitted in such policy.
E-2
<PAGE>
Annex F to
Credit Agreement
----------------
FINANCIAL STATEMENTS, PROJECTIONS AND NOTICES
---------------------------------------------
1. Within thirty-five (35) days after the close of each Fiscal
Month:
(a) a Borrowing Base Certificate as of the last day of such Fiscal
Month, substantially in the form of Exhibit A to this Annex F;
-------
(b) (i) an unaudited consolidated and consolidating income statement
for Borrower for such Fiscal Month and that portion of the current Fiscal Year
ending as of the close of such Fiscal Month, together with comparisons to the
corresponding income statement for the prior year's equivalent period, both on a
monthly and year-to-date basis, and to budget, and (ii) Borrower's consolidated
balance sheet as at the end of such Fiscal Month;
(c) a monthly Eligible Accounts aging, accompanied by such supporting
detail and documentation as the Administrative Agent may reasonably request; and
(d) a monthly inpatient/outpatient statistical report, in form and
substance reasonably satisfactory to the Administrative Agent, setting forth
(i) net revenue per patient day for both acute inpatient and residential
treatment programs, (ii) patient days and equivalent patient days for both acute
inpatient and residential treatment centers, (iii) average daily census for both
acute inpatient and residential treatment centers, (iv) total acute inpatient
full time equivalents, (v) total full time equivalents per average daily census,
(vi) average length of stay for both acute inpatient and residential treatment
centers, (vii) admissions for both acute inpatient and residential treatment
centers, (viii) day/partial visits, (ix) outpatient visits, (x) outpatient full
time equivalents and (xi) total number of licensed beds, in each case prepared
on a consolidated basis for all facilities, a consolidating basis by facility
and on a "same store" basis, with a comparison to the prior year and current
budget for the current month and year-to-date period.
2. Within five (5) days after delivery to the SEC, but in any event
within fifty (50) days after the close of each Fiscal Quarter, Borrower's Form
10-Q for such Fiscal Quarter.
3. Concurrently with the delivery of the Financial Statements
required by paragraph 2:
(a) a consolidated aged statement of Accounts Receivable Financial
Class as of the last day of such Fiscal Quarter and an Accounts Receivable
Statistical Report by facility as of the last day of such Fiscal Quarter, in
each case in the form customarily prepared by Borrower and furnished to the
Administrative Agent prior to the Closing Date; and
F-1
<PAGE>
(b) a Compliance Certificate of a Responsible Financial Officer of
Borrower for such Fiscal Quarter, substantially in the form of Exhibit B to this
Annex F.
- -------
4. Within five days after delivery to the SEC, but in any event
within one hundred five (105) days after the close of each Fiscal Year,
commencing with the Fiscal Year ended June 30, 1997, Borrower's Form 10-K for
such Fiscal Year, including the annual audited financial statements of Borrower,
consisting of a consolidated balance sheet and the related consolidated
statements of operations, retained earnings and cash flow, setting forth in
comparative form the figures for the previous Fiscal Year, which financial
statements shall be prepared in accordance with GAAP, certified without
qualification by Ernst & Young LLP or another firm of independent certified
public accountants of recognized national standing selected by Borrower and
reasonably acceptable to the Administrative Agent, and, commencing with the
Fiscal Year ending June 30, 1998, accompanied by a statement in reasonable
detail prepared by such accountants showing the calculations used in determining
Borrower's compliance with the financial covenants set forth in Annex G.
-------
5. Concurrently with the delivery of the Financial Statements
required by paragraph 4:
(a) the annual letter of representation from a Responsible Financial
Officer of Borrower to such accountants in connection with their audit
examination; and
(b) commencing with the Fiscal Year ending June 30, 1998, a Compliance
Certificate of a Responsible Financial Officer of Borrower for such Fiscal Year,
substantially in the form of Exhibit B to this Annex F.
-------
6. Not later than one hundred forty (140) days after the close of
each Fiscal Year, commencing with the Fiscal Year ended June 30, 1997, an
unaudited consolidating balance sheet for Borrower and its consolidated
Subsidiaries as of the last day of such Fiscal Year.
7. Not later than one hundred fifty (150) days after the close of
each Fiscal Year, commencing with the Fiscal Year ended June 30, 1997, the
annual management letter from such accountants to Borrower in connection with
their audit examination.
8. Not later than sixty (60) days after the close of each Fiscal
Year, commencing with the Fiscal Year ending June 30, 1998, financial
projections for the next succeeding Fiscal Year which shall include financial
projections for Borrower for such Fiscal Year in form reasonably acceptable to
the Administrative Agent (similar in form and content to the Projections)
approved by Borrower's board of directors and, in each case, the following:
(a) projected balance sheets of Borrower as of the end of such Fiscal
Year;
(b) projected cash flow statements and forecasted Excess Borrowing
Availability, including summary details of cash disbursements (including Capital
Expenditures) for such Fiscal Year; and
F-2
<PAGE>
(c) projected statements of operations of Borrower for such Fiscal
Year, on a quarterly basis, prepared on a consolidated basis and on a
consolidating basis for each major business segment of Borrower (i.e., hospital
----
based services, managed care and contract services) and, in the case of net
revenues, on a consolidating basis in the format currently utilized by Borrower
(i.e., acute inpatient, residential treatment center, outpatient, subacute,
----
managed care, contract services and other);
in each case including a description of major assumptions used in generating
such balance sheets, cash flows and income statements (including, without
limitation, assumptions with respect to Acquisitions during such Fiscal Year),
and other appropriate supporting details as are reasonably requested by the
Administrative Agent.
9. As soon as practicable, but in any event within two (2) Business
Days after Borrower becomes aware of the existence of any Default or Event of
Default, or any Material Adverse Event with respect to Borrower and its
Subsidiaries, taken as a whole, telephonic or telegraphic notice from a
Responsible Financial Officer of Borrower specifying the nature of such Default
or Event of Default or development or information, including the anticipated
effect thereof, which notice shall be promptly confirmed in writing within five
(5) days.
10. Upon the Administrative Agent's request, copies of all federal,
state, local and foreign tax returns, information returns and reports in respect
of income, franchise or other taxes on or measured by income (excluding sales,
use or like taxes) filed by Borrower.
11. Promptly upon their becoming available, copies of any
registration statements and the regular, periodic and special reports which
Borrower shall have filed with the SEC (or any governmental agency substituted
therefor) or any national securities exchange, including, without limitation,
Borrower's annual and quarterly reports on Forms 10-K and 10-Q.
12. Promptly upon the mailing thereof to the shareholders of Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed.
13. As soon as possible, and in any event within 10 days after
Borrower knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a Responsible Financial Officer of Borrower
setting forth details respecting such event or condition and the action, if any,
that Borrower, any of its Subsidiaries or any ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by Borrower or any ERISA Affiliate with respect to such
event or condition):
(a) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which PBGC has
not by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
--------
to meet the minimum funding standard of Section 412 of the IRC
F-3
<PAGE>
or Section 302 of ERISA shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the IRC);
(b) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan;
(c) the institution by PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or the receipt by Borrower, any of its Subsidiaries or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(d) the complete or partial withdrawal by Borrower, any of its
Subsidiaries or any ERISA Affiliate under Section 4201 or 4204 of ERISA from a
Multiemployer Plan, or the receipt by Borrower, any of its Subsidiaries or any
ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization
or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA; and
(e) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Borrower, any of its Subsidiaries or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days.
14. As soon as possible, but in any event within ten (10) days after
the occurrence thereof, notice of any matters arising after the Closing Date
that, if existing or occurring as of the Closing Date, would have been required
to be set forth on Schedule 3.08.
-------------
15. As soon as possible, but in any event within ten (10) Business
Days after the occurrence thereof, notice of any change in the information set
forth in Schedules 3.09, 3.16 or 3.20 after the Closing Date.
-------------- ---- ----
16. Upon receipt thereof, copies of (i) any material notice or other
material communication delivered by or on behalf of Borrower to any Person in
connection with the Bridge Note Purchase Agreement, the Senior Subordinated Note
Agreement or any other agreement or other document relating to Subordinated
Indebtedness at the same time and by the same means as such notice or other
communication is delivered to such Person, and (ii) any material notice or other
material communication received by Borrower from any Person in connection with
the Bridge Note Purchase Agreement, the Senior Subordinated Note Agreement or
any other agreement, document or instrument relating to Subordinated
Indebtedness promptly after such notice or other communication is received by
Borrower.
17. Such other reports and information respecting Borrower's
business, financial condition or prospects as the Administrative Agent or the
Required Lenders may, from time to time, reasonably request.
F-4
<PAGE>
Exhibit A to
Annex F
-------
BORROWING BASE CERTIFICATE
--------------------------
TO:GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent
Reference is made to that certain Credit Agreement, dated as of September
30, 1997 (as it may be amended, modified or supplemented from time to time, the
"Credit Agreement"), among Ramsay Health Care, Inc., a Delaware corporation
----------------
("Borrower"), the Lenders from time to time party thereto (the "Lenders"),
- ---------- -------
General Electric Capital Corporation, as Administrative Agent, and GECC Capital
Markets, Inc., as Syndication Agent. Terms defined in Annex A to the Credit
-------
Agreement and not otherwise defined in this Borrowing Base Certificate
("Certificate") shall have the meanings assigned to them in the Credit
- -------------
Agreement. This Certificate is delivered pursuant to paragraph 1(a) of Annex F
-------
to the Credit Agreement for the Fiscal Month ending _________ ___, ___, and the
calculations set forth herein are as of the last day of such Fiscal Month (the
"Calculation Date").
- -----------------
The undersigned hereby certifies that he or she is the _______________ of
Borrower and in such capacity is a Responsible Financial Officer of Borrower
authorized and empowered to issue this Certificate for and on behalf of
Borrower; that he or she has performed or supervised the calculations contained
herein; that the calculations contained herein are based upon Borrower's Net
Eligible Accounts determined in accordance with GAAP; and that the following
calculations determine the Borrowing Base, Borrowing Availability and Excess
Borrowing Availability as of the Calculation Date and are derived from the books
and records of Borrower.
1. Borrower's consolidated Eligible Accounts: $ _________
2. Subtractions:
A. Eligible Accounts (other than of FPM Ohio
or TCV) not owned by a Credit Party: $ (_________)
B. Eligible Accounts (other than of FPM Ohio
or TCV) not pledged to Lenders: $ (_________)
C. Eligible Accounts owned by non-wholly
owned Subsidiaries: $ (_________)
Eligible Accounts owned by $ _________
FPM Ohio:
Multiplier: x 49% = $ (_________)
F-5
<PAGE>
<TABLE>
<S> <C> <C>
Eligible Accounts owned by
Gulf Coast Treatment Center: $ _________
Multiplier: x 4% = $ (_________)
Eligible Accounts owned by TCV: $ _________
Multiplier: x 40% = $ (_________)
D. Total Subtractions: $ (________)
3. Net Eligible Accounts: $ _________
4. Advance Rate: x 70% = $ _________
5. Reserves established by the Administrative
Agent and communicated to Borrower: $( )*
=========
6. Borrowing Base (Item 4 minus Item 5): $ _________
-----
7. Lesser of Item 6 or the amount of the
Revolving Credit Commitments : $ _________
8. Principal amount of all outstanding Letter of
Credit Obligations, including any Letters of
Credit requested concurrently herewith: $( )
=========
9. Borrowing Availability (Item 7 less Item 8): $ _________*
----
10. Principal amount of the Revolving Credit
Loan, including any Revolving Credit
Advance requested concurrently herewith: $( )
=========
11. Excess Borrowing Availability (Item 9 less Item 10): $ _________*
----
</TABLE>
The information contained in this Borrowing Base Certificate (including the
information upon which the foregoing calculations are based) is true and
complete in all material respects as of the Calculation Date or as of any more
recent date on which the undersigned Responsible Financial Officer of Borrower
has obtained or acquired new information.
- ---------------
* Subject to the Administrative Agent's right to establish additional
Reserves.
F-6
<PAGE>
Except as disclosed in this Borrowing Base Certificate (or in the Borrowing
Base Certificate most recently delivered by Borrower) there has been no material
adverse change in any Net Eligible Accounts since the date of the last Borrowing
Base Certificate delivered to the Administrative Agent.
IN WITNESS WHEREOF, the undersigned, in his or her capacity as a
Responsible Financial Officer, has executed and delivered this Borrowing Base
Certificate and made the certifications contained herein.
Dated this ___ day of _____________, ____.
_________________________________
Name:
Title:
F-7
<PAGE>
Exhibit B to
Annex F
------------
COMPLIANCE CERTIFICATE
----------------------
TO: GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent
Reference is made to that certain Credit Agreement, dated as of September
30, 1997 (as it may be amended, modified or supplemented from time to time, the
"Credit Agreement"), among Ramsay Health Care, Inc., a Delaware corporation
----------------
("Borrower"), the Lenders from time to time party thereto, General Electric
- ----------
Capital Corporation, as Administrative Agent, and GECC Capital Markets Group,
Inc., as Syndication Agent. Terms defined in Annexes A and G to the Credit
--------- -
Agreement and not otherwise defined in this Compliance Certificate
("Certificate") shall have the meanings assigned to them in the Credit
-----------
Agreement. This Certificate is delivered pursuant to [paragraph 3(b)]
[paragraph 5(b)] [CHOOSE ONE] of Annex F to the Credit Agreement for the [Fiscal
-------
Quarter] [Fiscal Year] [CHOOSE ONE] ending __________ ___, ____, and the
calculations set forth herein are as of the last day of such fiscal period (the
"Calculation Date"). This Certificate is delivered with respect to the
----------------
Financial Statements delivered to the Administrative Agent pursuant to
[paragraph 2] [paragraph 4] [CHOOSE ONE] of Annex F to the Credit Agreement as
-------
at the Calculation Date, and for the period then ended (the "Financial
---------
Statements").
- ----------
The undersigned hereby certifies that he or she is the ___________ of
Borrower and in such capacity is a Responsible Financial Officer of Borrower
authorized and empowered to issue this Certificate for and on behalf of
Borrower; that he or she has reviewed the Financial Statements delivered to the
Administrative Agent herewith; and that he or she has made or supervised such
examinations and investigations as are reasonably necessary to determine whether
Borrower is in compliance with all the terms and provisions set forth in the
Credit Agreement to be observed or performed by Borrower, to determine whether a
Default or Event of Default has occurred and is continuing, and to set forth
accurately the computations required to show compliance with each of the
financial covenants set forth in Annex G to the Credit Agreement (the "Financial
------- ---------
Covenants") as of the Calculation Date and for the periods indicated, all as
- ---------
more specifically set forth below.
The undersigned hereby further certifies as follows:
1.FINANCIAL STATEMENTS; NO DEFAULT OR EVENT OF DEFAULT.
----------------------------------------------------
[FOR QUARTERLY CERTIFICATE:] The Financial Statements are complete and do
not contain any material error, misstatement or omission and present fairly in
accordance with GAAP (subject to normal year-end adjustments and the absence of
footnotes) the financial position, the results of operations and the cash flow
of Borrower as at the end of the Fiscal Quarter to which such Financial
Statements relate and for the period then ended, and to the knowledge of the
undersigned [there was no Default or Event of Default in existence as of such
time] [only those
F-8
<PAGE>
Defaults or Events of Default specified on Attachment 1 hereto were in existence
------------
as of such time] [CHOOSE ONE].
[FOR ANNUAL CERTIFICATE:] The Financial Statements are complete and
correct and present fairly in accordance with GAAP the financial position, the
results of operations and the changes in financial position of Borrower as at
the end of such Fiscal Year and for the period then ended and [there was no
Default or Event of Default in existence as of such time] [only those Defaults
or Events of Default specified on Attachment 1 hereto were in existence as of
------------
such time] [CHOOSE ONE].
2. COMPLIANCE WITH FINANCIAL COVENANTS.
-----------------------------------
Computations showing compliance with each of the Financial Covenants set
forth in Annex G to the Credit Agreement, as of the Calculation Date and for the
-------
periods indicated, are as follows:
<TABLE>
<CAPTION>
A. EBITDA (paragraph 1(a) of Annex G)
------ -------
EBITDA, determined as of the Calculation Date, for the Rolling
Four-Quarter Period specified in paragraph 1(a) of Annex G:
-------
<S> <C> <C>
1. Net Income: $_____________
2. Interest Expense: $_____________
3. Tax Expense: $_____________
4. Depreciation, amortization, etc.: $_____________
5. Extraordinary gains: $(____________)
6. Non-cash portion of extraordinary losses $_____________
7. Losses from asset sales: $_____________
8. Gains from asset sales: $(____________)
9. Cash payments with respect to extraordinary losses
related to a prior period: $(____________)
10. Net income resulting from reversal of 6/30/97 reserves: $(____________)
11. Actual EBITDA (Item 1 plus Item 2 plus Item 3 plus
Item 4 minus Item 5 plus Item 6 plus Item 7 minus
Item 8 minus Item 9 minus Item 10): $_____________
12. Minimum EBITDA (as set forth for the Rolling Four-
Quarter Period specified in paragraph 1(a) of Annex G): $_____________
</TABLE>
F-9
<PAGE>
<TABLE>
<S> <C> <C>
B. LEVERAGE RATIO (paragraph 1(b) of Annex G)
-------------- -------
Leverage Ratio, determined as of the Calculation Date, for the Rolling
Four-Quarter Period specified in paragraph 1(b) of Annex G:
-------
1. Funded Debt: $_____________
2. EBITDA (Item A11 above): $_____________
3. Actual Ratio (Item 1 divided by Item 2): ________:1.00
4. Maximum Ratio (as set forth for the applicable Rolling
Four-Quarter Period in paragraph 1(b) of Annex G): ________:1.00
C. FIXED CHARGE COVERAGE RATIO
---------------------------
(paragraph 1(c) of Annex G)
Fixed Charge Coverage Ratio, determined as of the Calculation Date,
for the Rolling Four-Quarter Period specified in paragraph 1(c) of
Annex G:
-------
1. EBITDA (Item A11 above): $_____________
2. Capital Expenditures: (____________)
3. Cash Tax Expense: (____________)
4. Certain Cash Payments: (____________)
5. Numerator (Item 1 minus Item 2 minus
Item 3 minus Item 4): _____________
6. Interest Expense: _____________
7. Principal Amortization: _____________
8. Earn-out Payments: =============
9. Denominator (Item 6 plus Item 7 plus Item 8): $____________
10. Actual Ratio (Item 5 divided by Item 9): 1.25:1.00
11. Minimum Ratio (as set forth for the applicable Rolling
Four-Quarter Period in paragraph 1(c) of Annex G): ________:1.00
</TABLE>
F-10
<PAGE>
<TABLE>
<S> <C> <C>
D. INTEREST COVERAGE RATIO (paragraph 1(d) of Annex G)
----------------------- -------
Interest Coverage Ratio, determined as of the Calculation Date, for
the Rolling Four-Quarter Period specified in paragraph 1(d) of
Annex G:
1. EBITDA (Item A11 above): $_____________
2. Capital Expenditures: $(____________)
3. Numerator (Item 1 minus Item 2): $_____________
4. Interest Expense: $_____________
5. Actual Ratio (Item 3 divided by Item 4): ________:1.00
6. Minimum Ratio (as set forth for the applicable Rolling Four-
Quarter Period in paragraph 1(d) of Annex G): ________:1.00
E. TANGIBLE NET WORTH (paragraph 1(e) of Annex G)
------------------ -------
Tangible Net Worth, determined as of the Calculation Date:
1. Shareholders' equity: $_____________
2. Intangible assets: $(____________)
3. Actual Tangible Net Worth (Item 1 minus Item 2): $_____________
4. Base Amount: $ 27,000,000
5. Cumulative positive Net Income after June 30, 1997: $_____________
6. Multiplier: x 50% = $_____________
7. Minimum Tangible Net Worth (Item 4 plus Item 6): $_____________
F. CAPITAL EXPENDITURES (paragraph 1(f) of Annex G):
-------------------- --------
Capital Expenditures for Fiscal Year to Date: $_____________
Maximum Permitted Capital Expenditures for such Fiscal Year: $_____________
G. INVESTMENTS (Section 6.03)
-----------
Aggregate Practice Guarantees: $_____________
</TABLE>
F-11
<PAGE>
<TABLE>
<S> <C> <C>
Maximum Permitted Amount: $ 1,000,000
Aggregate amount paid to purchase minority Stock interests: $_____________
Maximum Permitted Amount: $ 1,000,000
INDEBTEDNESS (Section 6.04(c))
------------
H.
Aggregate amount of Capital Lease Obligations, Indebtedness
secured by purchase money Liens and other Indebtedness permitted
under clause (c) of Section 6.04 of the Credit Agreement: $_____________
Maximum Permitted Amount: $ 2,000,000
I. AFFILIATE AND EMPLOYEE LOANS AND
--------------------------------
TRANSACTIONS (Section 6.05(d))
Aggregate principal amount of loans outstanding from Borrower or any of its
Subsidiaries to its officers, directors and employees: $_____________
Maximum Permitted Amount: $ 1,000,000
3. CALCULATION OF EXCESS CASH FLOW
-------------------------------
Computations showing Borrower's Excess Cash Flow (as defined in Annex A)
-------
for the Fiscal Year ending June 30, ____ are as follows (include in annual
certificates only, commencing with the Fiscal Year ending 6/30/98):
1. EBITDA (Item A11 above): $_____________
Less the sum of:
----
(a) Interest Expense: $_____________
(b) Principal Payments on
Funded Debt: $_____________
(c) Cash Capital Expenditures: $_____________
(d) Cash Tax Expense: $_____________
2. The sum of Items (a)-(d): $(____________)
3. Working Capital Decreases: $_____________
</TABLE>
F-12
<PAGE>
<TABLE>
<S> <C> <C>
4. Working Capital Increases: $(____________)
5. Cash portion of extraordinary gains from current
or prior periods: $_____________
6. Excess Cash Flow (Item 1 minus Item 2 plus
Item 3 minus Item 4 plus Item 5): $_____________
----- ----
9. Required Prepayment (50% of Item 6): $_____________
</TABLE>
4. MATERIAL SUBSIDIARIES
---------------------
Attached hereto is a schedule setting forth the names and jurisdictions of
incorporation of each Material Subsidiary as of the Calculation Date, and all
representatives and warranties set forth in Article 3 with respect to such
Material Subsidiaries are true and correct in all material respects as of the
date made or deemed made under the Credit Agreement.
5. NO MATERIAL ADVERSE EVENT
-------------------------
To the best of my knowledge, [EXCEPT AS DESCRIBED IN ATTACHMENT 2 OR IN AN
------------
EARLIER COMPLIANCE CERTIFICATE,] no Material Adverse Event with respect to
Borrower and its Subsidiaries taken as a whole has occurred since the date of
the last audited Financial Statements delivered pursuant to Section 3.04 of the
------------
Credit Agreement or paragraph 4 of Annex F to the Credit Agreement.
-------
IN WITNESS WHEREOF, the undersigned, in his or her capacity as a
Responsible Financial Officer, has executed and delivered this Compliance
Certificate and made the certifications contained herein.
Dated: this ____ day of ____________, ______
_________________________________
Name:
Title:
F-13
<PAGE>
Annex G to
Credit Agreement
----------------
FINANCIAL COVENANTS
-------------------
1. Financial Covenants. Borrower shall not breach or fail to comply
-------------------
with any of the following financial covenants:
(a) Borrower shall maintain, as of the end of each Rolling Four-
Quarter Period set forth below, EBITDA of not less than the amount set forth
below for the Rolling Four-Quarter Period corresponding thereto:
Rolling Four-Quarter
--------------------
Period Ending Amount
------------- ------
12/31/97 - 6/30/99 $13,500,000
9/30/99 - 6/30/00 $14,000,000
Each Rolling Four-Quarter Period thereafter $14,500,000
(b) Borrower shall maintain, as of the end of each Rolling Four-
Quarter Period set forth below, a Leverage Ratio of not more than the ratio set
forth below for the Rolling Four-Quarter Period corresponding thereto:
Rolling Four-Quarter
--------------------
Period Ending Ratio
------------- -----
12/31/97 - 9/30/98 4.00:1.00
12/31/98 - 3/31/99 3.75:1.00
6/30/99 - 9/30/00 3.50:1.00
12/31/00 - 3/31/01 3.25:1.00
6/30/01 - 12/31/01 3.00:1.00
Each Rolling-Four Quarter Period thereafter 2.75:1.00
(c) Borrower shall maintain, as of the end of each Rolling Four-
Quarter Period, commencing with the Rolling Four-Quarter Period ending December
31, 1997, a Fixed Charge Coverage Ratio of not less than 1.25:1.00.
(d) Borrower shall maintain, as of the end of each Rolling Four-
Quarter Period set forth below, an Interest Coverage Ratio of not less than the
ratio set forth below for the Rolling Four-Quarter Period corresponding thereto:
G-1
<PAGE>
Rolling Four-Quarter
--------------------
Period Ending Ratio
------------- -----
12/31/97 - 12/31/99 1.75:1.00
Each Rolling-Four Quarter Period thereafter 2.00:1.00
(e) Borrower shall maintain, as of the last day of each Fiscal
Quarter, commencing December 31, 1997, a Tangible Net Worth of not less than an
amount equal to the sum of (i) $27,000,000, plus (ii) fifty percent (50%) of
----
Borrower's cumulative positive Net Income for each Fiscal Quarter ended
subsequent to June 30, 1997, through and including the Fiscal Quarter then ended
(but without reduction for negative Net Income).
(f) Borrower shall not make Capital Expenditures in excess of
$3,500,000 in the aggregate during its Fiscal Year ending June 30, 1998,
$4,000,000 in the aggregate during its Fiscal Year ending June 30, 1999,
$4,500,000 in the aggregate during its Fiscal Year ending June 30, 2000 and
$5,000,000 in the aggregate during any Fiscal Year thereafter.
2. Transitional Rules; Pro Forma Adjustments.
-----------------------------------------
(a) Transitional Rules. Notwithstanding anything to the contrary set
------------------
forth herein:
(i) in calculating Borrower's compliance with the financial covenants
set forth in paragraphs 1(c) and (d) above for the Rolling Four-Quarter Periods
ending December 31, 1997, March 31, 1998 and June 30, 1998, the "Rolling Four-
Quarter Period" ending December 31, 1997 shall mean the Fiscal Quarter then
ended; the "Rolling Four-Quarter Period" ending March 31, 1998 shall mean the
two Fiscal Quarters then ended; and the "Rolling Four-Quarter Period" ending
June 30, 1998 shall mean the three Fiscal Quarters then ended; and
(ii) solely for the purpose of preparing a pro forma Compliance
---------
Certificate for the purposes of Section 6.01(l)(iii) hereof for the Rolling
--------------------
Four-Quarter Periods ending December 31, 1997, March 31, 1998 and June 30, 1998,
(A) paragraph 2(a)(i) above shall be disregarded; and (C) in calculating
Borrower's compliance with the financial covenants set forth in paragraphs 1(c)
and (d) above, Capital Expenditures, Fixed Charges, Interest Expense and Tax
Expense for the Rolling Four-Quarter Period ending December 31, 1997 shall be
deemed to be the Capital Expenditures, Fixed Charges, Interest Expense and Tax
Expense for the Fiscal Quarter then ended, multiplied by four (4); Capital
Expenditures, Fixed Charges, Interest Expense and Tax Expense for the Rolling
Four-Quarter Period ending March 31, 1998 shall be deemed to be the Capital
Expenditures, Fixed Charges, Interest Expense and Tax Expense for the two Fiscal
Quarters then ended, multiplied by two (2); and Capital Expenditures, Fixed
Charges, Interest Expense and Tax Expense for the Rolling Four-Quarter Period
ending June 30, 1998 shall be deemed to be the Capital Expenditures, Fixed
Charges, Interest Expense and Tax Expense for the three Fiscal Quarters then
ended, multiplied by one and one-third (1-1/3); provided, however, that in no
-------- -------
event shall
G-2
<PAGE>
the Capital Expenditures so annualized exceed $3,500,000 for the purposes of
this paragraph 2(a)(ii).
(b) Pro Forma Adjustments. In calculating Borrower's compliance with
---------------------
the financial covenants set forth in paragraphs 1(a), (b), (c) and (d) above,
the following adjustments shall be made on a pro forma basis to reflect the
---------
effect of Acquisitions occurring after the Closing Date and during the relevant
Rolling Four-Quarter Period:
(i) For the purposes of paragraphs 1(a), (b), (c) and (d),
EBITDA shall be adjusted on a pro forma basis to include the actual
---------
historical EBITDA of such acquired entity for such period (as
defined in this Annex G, but determined for such entity) , as if
-------
such entity had been acquired on the first day of such period, to
eliminate, as of the first day of such period, any Indebtedness
refinanced in such Acquisition and to include, as of the first day of
such period, any Indebtedness incurred in connection with such
Acquisition (including any portion thereof incurred to fund such
refinancing);
(ii) For the purposes of paragraph 1(b), Funded Debt shall be
adjusted on a pro forma basis to reflect, as of the first day of such
---------
period, any Funded Debt incurred, assumed or refinanced in connection
with such Acquisition; and
(iii) For the purposes of paragraphs 1(c) and (d), Capital
Expenditures, Fixed Charges, Interest Expense and Tax Expense shall be
adjusted on a pro forma basis to include the actual Capital
---------
Expenditures, Fixed Charges, Interest Expense and Tax Expense of such
acquired entity for such period, as if such entity had been acquired
on the first day of such period, including, any interest attributable
to any Indebtedness incurred in connection with such Acquisition, but
excluding any Interest Expense or other Fixed Charges attributable to
any Indebtedness refinanced in such Acquisition.
3. Definitions and Rules of Construction.
-------------------------------------
(a) Defined Terms. Capitalized terms used in this Annex G and not
------------- -------
defined in Annex A to this Agreement shall have the following respective
-------
meanings:
"Capital Expenditures" shall mean, with respect to any fiscal period
--------------------
of Borrower, all of Borrower's consolidated expenditures during such period for
any fixed assets or improvements, or for replacements, substitutions or
additions thereto, that have a useful life of more than one year and that are
required to be capitalized under GAAP, and, in any event, shall include Capital
Lease Obligations and all asset purchases secured by purchase money security
interests.
"Capital Lease" shall mean any lease of any property (whether real,
-------------
personal or mixed) by any Person as lessee that, in accordance with GAAP, either
would be required to be classified and accounted for as a capital lease on a
consolidated balance sheet of such Person or otherwise be disclosed as such in a
note to such balance sheet.
G-3
<PAGE>
"Capital Lease Obligation" shall mean, as of any date, the amount of
------------------------
the obligation of the lessee under a Capital Lease that, in accordance with
GAAP, would appear on a consolidated balance sheet of such lessee in respect of
such Capital Lease or otherwise be disclosed as such in a note to such balance
sheet.
"EBITDA" shall mean, with respect to any fiscal period of Borrower,
------
(i) Net Income for such period, plus (ii) Interest Expense for such period, plus
---- ----
(iii) Tax Expense for such period, plus (iv) to the extent deducted in
----
determining Net Income, Borrower's depreciation, amortization and other similar
non-cash charges for such period (including, without limitation, Borrower's
amortization of the Life Companies Prepayment Premium), minus (v) to the extent
-----
included in determining Net Income, Borrower's extraordinary gains for such
period, plus (vi) to the extent included in determining Net Income, the non-cash
----
portion of any of Borrower's extraordinary losses for such period, plus (vii)
----
any losses from asset sales for such period, minus (viii) any gains from asset
-----
sales for such period, all determined in accordance with GAAP on a consolidated
basis, minus (ix) any cash payments made with respect to extraordinary losses
-----
related to a prior period, minus (x) to the extent included in determining Net
-----
Income, any consolidated net income derived from the reversal of a reserve
reflected in the 1997 Audited Financial Statements for which there was not a
corresponding cash payment.
"Fixed Charge Coverage Ratio" shall mean, with respect to any fiscal
---------------------------
period of Borrower, the ratio of (a) the sum of (i) EBITDA for such period,
minus (ii) Capital Expenditures during such period, minus (iii) that portion of
- ----- -----
Tax Expense paid in cash during such period, minus (iv) any payment made in cash
-----
for which the offsetting entry on Borrower's Financial Statements is a debit to
a reserve reflected in the 1997 Audited Financial Statements, rather than an
expense or reduction of revenues on Borrower's income statement, to (b) Fixed
Charges for such period.
"Fixed Charges" shall mean, with respect to any fiscal period of
-------------
Borrower, the sum of (i) Interest Expense for such period, plus (ii) regularly
----
scheduled payments of principal paid on Funded Debt during such period, plus
----
(iii) without duplication as to item (ii), payments in respect of "earn out" or
other contingent payment obligations permitted by Section 6.01(e).
---------------
"Funded Debt" shall mean all of Borrower's consolidated Indebtedness
-----------
which by the terms of the agreement governing or instrument evidencing such
Indebtedness matures more than one year from or is directly or indirectly
renewable or extendible at its option under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year from the date of creation thereof, including in each instance
current maturities of long-term debt (and the current portion of long-term debt
in the last year of its term), revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and shall also include, without
limitation, (i) Indebtedness arising under or in connection with any interest
rate swap agreement or arrangements, (ii) the Revolving Credit Loan, the Term
Loans, the Letter of Credit Obligations and the other Obligations, (iii)
Subordinated Indebtedness, and (iv) without duplication, any "earn out" or other
contingent payment obligations permitted by Section 6.01(e).
---------------
"GAAP" shall mean generally accepted accounting principles in the
----
United States as in effect from time to time, consistently applied.
G-4
<PAGE>
"Interest Coverage Ratio" shall mean, with respect to any fiscal
-----------------------
period of Borrower, the ratio of (a) the sum of (i) EBITDA for such period,
minus (ii) Capital Expenditures during such period, to (b) Interest Expense for
- -----
such period.
"Interest Expense" shall mean, with respect to any fiscal period of
----------------
Borrower, Borrower's consolidated interest expense paid in cash for such period,
including the interest component of any Capital Lease Obligation, but excluding
the Life Companies Prepayment Premium to the extent otherwise included in
Interest Expense.
"Leverage Ratio" shall mean, with respect to any fiscal period of
--------------
Borrower, the ratio of (a) Funded Debt as of the last day of such period to (b)
EBITDA for such period.
"Net Income" shall mean, with respect to any fiscal period of
----------
Borrower, Borrower's consolidated net income (or loss) from continuing
operations for such period.
"Rolling Four-Quarter Period" shall mean, as of the end of any Fiscal
---------------------------
Quarter of Borrower, the immediately preceding four Fiscal Quarters (except as
set forth in paragraph 2(a) above), including the Fiscal Quarter then ending.
"Tangible Net Worth" shall mean, as of any date, (a) Borrower's
------------------
consolidated shareholders' equity, minus (b) Borrower's consolidated intangible
-----
assets, including, without limitation, the following:
(i) any surplus resulting from the write-up of assets
subsequent to the Audit Date;
(ii) goodwill, including any amounts (however designated on the
balance sheet) representing the cost of acquisitions of Subsidiaries
in excess of underlying tangible assets;
(iii) patents, trademarks, copyrights, etc.; and
(iv) deferred charges (including, but not limited to,
unamortized debt discount and expense, organization expenses and
experimental and development expenses, but excluding prepaid
expenses).
"Tax Expense" shall mean, with respect to any fiscal period of
-----------
Borrower, Borrower's consolidated provision for income taxes for such period.
4. Rules of Construction. Any accounting term used in this Annex G
--------------------- -------
or elsewhere in this Agreement shall have, unless otherwise specifically
provided, the meaning customarily given such term in accordance with GAAP, and
all financial computations shall be computed, unless otherwise specifically
provided, on a consolidated basis in accordance with GAAP consistently applied.
That certain items or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing. In
the event that any
G-5
<PAGE>
"Accounting Changes" (as defined below) occur and such changes result in a
change in the calculation of the financial covenants, standards or terms used in
this Annex G or elsewhere in this Agreement, then Borrower and the
-------
Administrative Agent agree to enter into negotiations in order to amend such
provisions of this Agreement, subject to the approval of the Required Lenders,
so as equitably to reflect such Accounting Changes with the desired result that
the criteria for evaluating Borrower's financial condition shall be the same
after giving effect to such Accounting Changes as if such Accounting Changes had
not been made. "Accounting Changes" means (i) changes in accounting principles
------------------
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (d) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. and (ii)
changes in accounting principles concurred in by Borrower's independent public
accountants. In the event that Borrower, the Administrative Agent and the
Required Lenders shall have agreed upon any such required amendment, then, after
such amendment has been evidenced in writing and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in this Annex G or elsewhere in this Agreement shall, only to the
-------
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If Borrower, the
Administrative Agent and the Required Lenders cannot agree upon any required
amendment within thirty (30) days following the date of implementation of any
Accounting Change, then all financial statements delivered in accordance with
Annex F to this Agreement and all calculations of financial covenants and other
- -------
standards and terms in accordance with this Annex G shall be prepared, delivered
-------
and made without regard to the underlying Accounting Change.
G-6
<PAGE>
Schedule 3.04 to
Credit Agreement
----------------
FINANCIAL STATEMENTS AND PROJECTIONS
------------------------------------
1. Historical Financial Statements. Copies of the consolidated
-------------------------------
balance sheet of Borrower and its Subsidiaries as of June 30, 1997 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the Fiscal Year then ended, accompanied by the audit report thereon of
Ernst & Young LLP (collectively, the "1997 Audited Financial Statements") have
---------------------------------
been furnished by Borrower to the Administrative Agent and each Lender prior to
the date of this Agreement. The 1997 Audited Financial Statements have been
prepared in conformity with GAAP and present fairly, in all material respects,
the consolidated financial position of Borrower as at the date thereof, and the
consolidated results of operations and cash flows of Borrower for the Fiscal
Year then ended.
2. Projections. Borrower's (a) consolidated projections of balance
-----------
sheets, cash flow statements, working capital requirements for cash flow
statements, balance sheet ratios and rollforwards, prepared on an annual
basis for the Fiscal Years ending June 30, 1998, 1999, 2000, 2001 and 2002;
(b) consolidated and consolidating (by facility) projections of income
statements, prepared on an annual basis for the Fiscal Years ending June 30,
1998, 1999, 2000, 2001 and 2002; and (c) consolidated projections of GE
Capital debt rollforward, interest expense and amortization of loan costs,
prepared on an annual basis for the Fiscal Years ending June 30, 1998, 1999,
2000, 2001, 2002 and (except as to amortization of loan costs) 2003
(collectively, the "Projections"), copies of which have been delivered by
-----------
Borrower to the Administrative Agent. To the best knowledge of Borrower, no
facts exist as of the Closing Date which would result in any material change
in such Projections.
1
<PAGE>
Exhibit A to
Credit Agreement
----------------
NOTICE OF REVOLVING CREDIT ADVANCE
----------------------------------
TO: GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent
1. This NOTICE OF REVOLVING CREDIT ADVANCE is executed and delivered
by the undersigned Responsible Financial Officer of RAMSAY HEALTH CARE, INC., a
Delaware corporation ("Borrower"), to General Electric Capital Corporation, in
--------
its capacity as Administrative Agent, pursuant to Section 1.01(b) of that
certain Credit Agreement, dated as of September 30, 1997 (as it may be amended,
modified or supplemented from time to time, the "Credit Agreement"), entered
----------------
into among Borrower, the Lenders from time to time party thereto, General
Electric Capital Corporation, as Administrative Agent, and GECC Capital Markets
Group, Inc., as Syndication Agent. Any terms used herein and not defined herein
shall have the meanings assigned in Annex A to the Credit Agreement.
-------
2. Borrower hereby requests that the Revolving Lenders make a
Revolving Credit Advance for the account of Borrower pursuant to Section 1.01(b)
of the Credit Agreement, as follows:
(a) Amount of requested Revolving Credit Advance:
$_________________.
(b) Date of requested Revolving Credit Advance:
______________ ___, ____.
(c) Disbursement Account into which such Revolving Credit Advance is
to be made:
Account No.:______________________________________
_______________________________________[Bank Name]
_____________________________________[Bank Address]
ABA#____________________________________________
Attention:_________________________________________
3. [Borrower hereby elects that [all of] [$_________ of] [CHOOSE
ONE] the requested Revolving Credit Advance, which amount is equal to $1,000,000
or an integral multiple of $250,000 in excess thereof, be made as a LIBOR Rate
Loan having a LIBOR Period of [one] [two] [three] [if applicable, six] months
[CHOOSE ONE] commencing on the date of the requested Revolving Credit Advance.]
4. In connection with the Revolving Credit Advance requested herein,
Borrower hereby represents, warrants and certifies to the Administrative Agent
and each Revolving Credit Lender that, as of the date of the Revolving Credit
Advance requested herein:
1
<PAGE>
(a) Borrower's representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects on the date hereof as though made on and as of the date hereof, except
to the extent that any such representation or warranty expressly relates solely
to an earlier date and except for changes therein permitted or contemplated by
the Credit Agreement;
(b) No event has occurred and is continuing, or will result from the
making of the Revolving Credit Advance requested hereby, which constitutes or
would constitute a Default or an Event of Default; and
(c) After giving effect to the Revolving Credit Advance requested
hereby, the aggregate principal amount of the Revolving Credit Loan shall not
exceed the Borrowing Availability.
[IF ANY OF THE FOREGOING STATEMENTS IS NOT TRUE AND CORRECT, ATTACH A
STATEMENT SPECIFYING IN DETAIL THE CIRCUMSTANCES THEREOF AND THE ACTIONS
BORROWER IS TAKING OR PROPOSES TO TAKE WITH RESPECT THERETO.]
5. The Borrowing Base on ___________ ____, ____, was $_________, as
indicated on the most recent Borrowing Base Certificate delivered to the
Administrative Agent pursuant to the Credit Agreement. The undersigned has no
reason to believe that the Borrowing Base, if currently computed, would be less
than the aggregate amount of all Letter of Credit Obligations outstanding and
the outstanding Revolving Credit Loan (after giving effect to the Revolving
Credit Advance requested hereby).
6. This Notice of Revolving Credit Advance is executed by a
Responsible Financial Officer of Borrower, on behalf of Borrower. The
undersigned, in such capacity, hereby certifies each and every matter contained
herein to be true and correct.
IN WITNESS WHEREOF, the undersigned, in his or her capacity as a
Responsible Financial Officer, has executed this Notice of Revolving Credit
Advance this ____ day of ________________, ____.
_______________________________
Name:
Title:
This Notice of Revolving Credit Advance is to be telecopied to the
Administrative Agent as indicated no later than 11:00 A.M. (New York time) on
the Business Day preceding the date of the proposed Revolving Credit Advance or,
if all or any portion of the Revolving Credit Advance is to be made as a LIBOR
Rate Loan, on the third full LIBOR Business Day preceding the date of the
proposed Revolving Credit Advance:
To: Quamei Matsuura
Telephone Number: (404) 814-3123
Telecopier Number: (404) 262-9175
2
<PAGE>
Exhibit B to
Credit Agreement
----------------
REVOLVING CREDIT NOTE
---------------------
_____________ $_________ __, 199__
FOR VALUE RECEIVED, the undersigned, RAMSAY HEALTH CARE, INC., a
Delaware corporation ("Borrower"), promises to pay to the order of
--------
_______________________________ ("Lender"), the principal amount of
------
_______________________ _____________ AND NO/100 DOLLARS ($____________) or such
lesser principal amount as may be outstanding under Lender's Pro Rata Share of
the Revolving Credit Loan (as defined in the "Credit Agreement" hereinafter
referred to), in immediately available funds, without setoff, deduction or
counterclaim, together with interest on the unpaid principal amount of this Note
outstanding from time to time from the date hereof until the date of payment in
full, payable as hereinafter set forth.
Reference is made to the Credit Agreement, dated as of September 30,
1997 (as it may be amended, modified or supplemented from time to time, the
"Credit Agreement"), by and among Borrower, the Lenders from time to time party
- -----------------
thereto (including Lender), General Electric Capital Corporation, as
Administrative Agent, and GECC Capital Markets Group, Inc., as Syndication
Agent. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings attributed to those terms in the Credit
Agreement. This Note is one of the "Revolving Credit Notes" referred to in the
Credit Agreement, and any holder hereof is entitled to all of the rights,
remedies, benefits and privileges provided for in the Credit Agreement. The
Credit Agreement, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events and upon the terms
and conditions therein specified.
The principal indebtedness evidenced by this Note shall be payable as
provided in the Credit Agreement and in any event on the Commitment Termination
Date.
Interest shall be payable on the outstanding daily unpaid principal
amount of the portion of the Revolving Credit Loan evidenced hereby from the
Closing Date until payment in full and shall accrue and be payable at the rates
and on the dates set forth in the Credit Agreement, both before and after
default and before and after maturity and judgment. Upon the occurrence and
during the continuation of an Event of Default, the Administrative Agent may
(or, upon the written request of the Required Lenders, shall), by written notice
to Borrower, increase each of the Applicable Margins on which the rate or rates
of interest payable hereunder are based to the Default Rate to the fullest
extent permitted by applicable law. Notwithstanding anything to the contrary
contained herein, no provisions of this Note shall require the payment or permit
the collection of interest in excess of the Maximum Lawful Rate and this Note is
expressly subject to the usury savings provision set forth in Annex C to the
-------
Credit Agreement.
1
<PAGE>
The Administrative Agent shall keep a record of Revolving Credit
Advances made by it under the Credit Agreement and payments received by it with
respect to the Revolving Credit Loan, and such record shall be presumptive
evidence of the amounts owing under the Revolving Credit Notes on the basis more
fully set forth in Section 1.13 of the Credit Agreement.
------------
Borrower promises to pay all reasonable costs and expenses of any
rightful holder hereof incurred in collecting Borrower's obligations hereunder
or in enforcing or attempting to enforce any of such holder's rights hereunder,
including reasonable attorneys' fees and disbursements, whether or not an action
is filed in connection therewith, in accordance with the provisions of the
Credit Agreement.
Borrower hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable law.
THE REVOLVING CREDIT ADVANCES EVIDENCED BY THIS NOTE HAVE BEEN AND
WILL BE FUNDED FROM, AND WILL BE REPAID IN, NEW YORK, NEW YORK, AND THIS NOTE
SHALL BE INTERPRETED UNDER, GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE.
RAMSAY HEALTH CARE, INC.
By:____________________________[SEAL]
Remberto G. Cibran
President
2
<PAGE>
Exhibit C-1 to
Credit Agreement
----------------
TERM LOAN A NOTE
----------------
_____________ $_________ __, 199__
FOR VALUE RECEIVED, the undersigned, RAMSAY HEALTH CARE, INC., a
Delaware corporation ("Borrower"), promises to pay to the order of
--------
____________________________ ______________("Lender"), the principal amount of
------
_____________________________________ AND NO/100 DOLLARS ($____________), in
immediately available funds, without setoff, deduction or counterclaim, together
with interest on the unpaid principal amount of this Note outstanding from time
to time from the date hereof until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Credit Agreement, dated as of September 30,
1997 (as it may be amended, modified or supplemented from time to time, the
"Credit Agreement"), by and among Borrower, the Lenders from time to time party
- -----------------
thereto, General Electric Capital Corporation, as Administrative Agent for such
Lenders, and GECC Capital Markets Group, Inc., as Syndication Agent. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
with the meanings attributed to those terms in the Credit Agreement. This Note
is one of the "Term Loan A Notes" referred to in the Credit Agreement, and any
holder hereof is entitled to all of the rights, remedies, benefits and
privileges provided for in the Credit Agreement. The Credit Agreement, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events and upon the terms and conditions therein
specified.
The principal amount of this Note shall be payable in seventeen (17)
quarterly installments, the first two of which shall be in the amount of
$_________ each, the third through sixth of which shall be in the amount of
$_________ each, the seventh through tenth of which shall be in the amount of
$_________ each, the eleventh through fourteenth of which shall be in the amount
of $_________ each and the fifteenth through seventeenth of which shall be in
the amount of $_________ each, payable on the first day of each January, April,
July and October hereafter, commencing July 1, 1998 and continuing through and
including July 1, 2002, and in an eighteenth and final installment in an amount
equal to the remaining principal balance hereof on September 30, 2002.
This Note is subject to voluntary prepayment in whole or in part as
provided in Section 1.04(d) of the Credit Agreement and is subject to mandatory
---------------
prepayment as provided in Section 1.04(a) and (f) of the Credit Agreement.
--------------- ---
Interest shall be payable on the outstanding principal balance hereof
from the date first written above until payment in full and shall accrue and be
payable at the rates and on the dates set
1
<PAGE>
forth in the Credit Agreement, both before and after default and before and
after maturity and judgment. Upon the occurrence and during the continuation of
an Event of Default, the Administrative Agent may (or, upon the written request
of the Required Lenders, shall), by written notice to Borrower, increase each of
the Applicable Margins on which the rate or rates of interest payable hereunder
are based to the Default Rate, to the fullest extent permitted by applicable
law. Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Lawful Rate and this Note is expressly subject to the
usury savings provision set forth in Annex C to the Credit Agreement.
-------
Borrower promises to pay all reasonable costs and expenses of any
rightful holder hereof incurred in collecting Borrower's obligations hereunder
or in enforcing or attempting to enforce any of such holder's rights hereunder,
including reasonable attorneys' fees and disbursements, whether or not an action
is filed in connection therewith, in accordance with the provisions of the
Credit Agreement.
Borrower hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable law.
THE TERM LOAN EVIDENCED BY THIS NOTE HAS BEEN FUNDED FROM, AND WILL BE
REPAID IN, NEW YORK, NEW YORK, AND THIS NOTE SHALL BE INTERPRETED UNDER,
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
RAMSAY HEALTH CARE, INC.
By:_________________________[SEAL]
Remberto G. Cibran
President
2
<PAGE>
Exhibit C-2 to
Credit Agreement
----------------
TERM LOAN B NOTE
----------------
$ _____________ _________ __, 199__
FOR VALUE RECEIVED, the undersigned, RAMSAY HEALTH CARE, INC., a
Delaware corporation ("Borrower"), promises to pay to the order of
--------
_____________________________ ____________ ("Lender"), the principal amount of
------
_______________________________________ AND NO/100 DOLLARS ($____________), in
immediately available funds, without setoff, deduction or counterclaim, together
with interest on the unpaid principal amount of this Note outstanding from time
to time from the date hereof until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Credit Agreement, dated as of September 30,
1997 (as it may be amended, modified or supplemented from time to time, the
"Credit Agreement"), by and among Borrower, the Lenders from time to time party
- -----------------
thereto, General Electric Capital Corporation, as Administrative Agent for such
Lenders, and GECC Capital Markets Group, Inc., as Syndication Agent. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
with the meanings attributed to those terms in the Credit Agreement. This Note
is one of the "Term Loan B Notes" referred to in the Credit Agreement, and any
holder hereof is entitled to all of the rights, remedies, benefits and
privileges provided for in the Credit Agreement. The Credit Agreement, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events and upon the terms and conditions therein
specified.
The principal amount of this Note shall be payable in twenty-seven
(27) quarterly installments, the first twenty of which shall be in the amount of
$_________ each, the twenty-first through twenty-fourth of which shall be in the
amount of $_________ each and the twenty-fifth through twenty-seventh of which
shall be in the amount of $_________ each, payable on the first day of each
January, April, July and October hereafter, commencing January 1, 1998 and
continuing through and including July 1, 2004, and in a twenty-eighth and final
installment in an amount equal to the remaining principal balance hereof on
September 30, 2004.
This Note is subject to voluntary prepayment in whole or in part as
provided in Section 1.04(d) of the Credit Agreement and is subject to mandatory
---------------
prepayment as provided in Section 1.04(a) and (f) of the Credit Agreement.
--------------- ---
Interest shall be payable on the outstanding principal balance hereof
from the date first written above until payment in full and shall accrue and be
payable at the rates and on the dates set forth in the Credit Agreement, both
before and after default and before and after maturity and judgment. Upon the
occurrence and during the continuation of an Event of Default, the
1
<PAGE>
Administrative Agent may (or, upon the written request of the Required Lenders,
shall), by written notice to Borrower, increase each of the Applicable Margins
on which the rate or rates of interest payable hereunder are based to the
Default Rate, to the fullest extent permitted by applicable law. Notwithstanding
anything to the contrary contained herein, no provisions of this Note shall
require the payment or permit the collection of interest in excess of the
Maximum Lawful Rate and this Note is expressly subject to the usury savings
provision set forth in Annex C to the Credit Agreement.
-------
Borrower promises to pay all reasonable costs and expenses of any
rightful holder hereof incurred in collecting Borrower's obligations hereunder
or in enforcing or attempting to enforce any of such holder's rights hereunder,
including reasonable attorneys' fees and disbursements, whether or not an action
is filed in connection therewith, in accordance with the provisions of the
Credit Agreement.
Borrower hereby waives presentment, demand for payment, dishonor,
notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable law.
THE TERM LOAN EVIDENCED BY THIS NOTE HAS BEEN FUNDED FROM, AND WILL BE
REPAID IN, NEW YORK, NEW YORK, AND THIS NOTE SHALL BE INTERPRETED UNDER,
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.
RAMSAY HEALTH CARE, INC.
By:_________________________[SEAL]
Remberto G. Cibran
President
2
<PAGE>
Exhibit D to
Credit Agreement
----------------
ASSIGNMENT AND ACCEPTANCE
Dated _________, 19__
Reference is made to the Credit Agreement dated as of September 30, 1997
(the "Credit Agreement") among RAMSAY HEALTH CARE, INC., a Delaware corporation
----------------
("Borrower"), the Lenders from time to time party thereto, GENERAL ELECTRIC
--------
CAPITAL CORPORATION, as administrative agent (the "Administrative Agent"), and
--------------------
GECC CAPITAL MARKETS GROUP, INC., as syndication agent (the "Syndication
-----------
Agent"). Terms defined in the Credit Agreement are used herein with the same
meanings.
_______________________ (the "Assignor") and ___________ (the "Assignee")
-------- --------
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, all of the Assignor's
rights and obligations under the Credit Agreement as of the date hereof with
respect to the percentage interest[s] specified in Section 1 of Schedule 1
----------
hereto of [the Revolving Credit Commitments and Term Loan A,] [Term Loan B,] and
the corresponding Notes held by the Assignor [SELECT EITHER OR BOTH, AS
APPLICABLE]. After giving effect to such sale and assignment, the amount of [the
Assignee's Revolving Credit Commitment, Pro Rata Share of the Revolving Credit
Loan and Letter of Credit Obligations and Pro Rata Share of Term Loan A,] [the
--- ----
Assignee's Pro Rata share of Term Loan B] [SELECT EITHER OR BOTH, AS APPLICABLE]
--- ----
will be as set forth in Section 2 of Schedule 1.
----------
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
and the other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or any
other instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or any of its Subsidiaries or the performance or
observance by Borrower or any of its Subsidiaries of any of its obligations
under the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto; and (iv) attaches the Notes referred to in
paragraph 1 above and requests that the Administrative Agent exchange such Notes
for [a new Revolving Credit Note payable to the order of the Assignee in an
amount equal to the Revolving Credit Commitment assumed by the Assignee pursuant
hereto and a new Term Loan A Note, payable to the Assignee or its registered
assigns in an amount equal to the Pro Rata Share of Term Loan A purchased by the
Assignee pursuant hereto, and if the Assignor retained any
1
<PAGE>
Revolving Credit Commitment and share of Term Loan A under the Credit Agreement,
a new Revolving Credit Note payable to the order of the Assignor in an amount
equal to the Revolving Credit Commitment so retained by the Assignor and a new
Term Loan A Note, payable to the Assignor or its registered assigns in an amount
equal to the Pro Rata Share of Term Loan A so retained by the Assignor,] [a new
Term Loan B Note, payable to the Assignee or its registered assigns in an amount
equal to the Pro Rata Share of Term Loan B purchased by the Assignee pursuant
hereto, and if the Assignor retained any share of Term Loan B under the Credit
Agreement, a new Term Loan B Note, payable to the Assignor or its registered
assigns in an amount equal to the Pro Rata Share of Term Loan B so retained by
the Assignor,] [SELECT EITHER OR BOTH, AS APPLICABLE] all as specified in
Section 3 of Schedule 1.
----------
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement and the other Loan Documents, together with copies of the
Financial Statements referred to in Schedule 3.04 of the Credit Agreement or
-------------
furnished pursuant to Section 4.01 of the Credit Agreement and such other
------------
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Administrative Agent,
the Syndication Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement and the other Loan Documents; (iii) represents and warrants that it is
purchasing the applicable Loans for its own account, for investment purposes and
not with a view to the distribution thereof, (iv) appoints and authorizes the
Administrative Agent to take such action as administrative agent on its behalf
and to exercise such powers under the Credit Agreement and the other Loan
Documents as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement are required to be performed by it as a
Lender; [and] (vi) specifies that its Domestic Lending Office (and address for
notices) and Eurodollar Lending Office are the offices set forth beneath its
name on the signature pages hereof [and] [(vii) attaches the Internal Revenue
Service Form W-8 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that the Assignee is not a United
States citizen or resident (or that the Assignee is filing as a foreign
corporation, partnership, estate or trust) and providing the name and address of
the Assignee or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States.]*
4. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee and the execution hereof by Borrower to evidence its
consent, it will be delivered to the Administrative Agent for acceptance and
recording by the Administrative Agent. The effective date of this Assignment
and Acceptance (the "Effective Date") shall be the later of (a) the date of
--------------
consent thereto by Borrower, (b) the date of acceptance thereof by the
Administrative Agent and (c) the date specified in Section 4 of Schedule 1.
----------
- ---------------
* Insert if the Assignee is organized under the laws of a jurisdiction
outside the United States.
2
<PAGE>
5. Upon such consent by Borrower and acceptance and recording by the
Administrative Agent, as of the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
6. Upon such consent by Borrower and acceptance and recording by the
Administrative Agent, from and after the Effective Date, the Administrative
Agent shall make all payments under the Credit Agreement and the Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.
7. The Assignee and the Assignor have attached a check in the amount
of $3,500 payable by the [Assignee] [Assignor] [SELECT ONE] to the order of the
Administrative Agent, or the Administrative Agent has received $3,500 by wire
transfer of immediately available funds from the [Assignee] [Assignor] [SELECT
ONE], as a processing and recording fee in satisfaction of Section 10.02(a)(vii)
of the Credit Agreement.
8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE.
9. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.
- ----------
[NAME OF ASSIGNOR]
By:______________________________
Name:
Title:
3
<PAGE>
[NAME OF ASSIGNEE]
By:______________________________
Name:
Title:
Assignee's Domestic Lending Office
(and address for notices):
_________________________________
_________________________________
_________________________________
Attention:______________________
Assignee's Eurodollar Lending Office:
_________________________________
_________________________________
_________________________________
Attention:______________________
Consented to this ____ day
of _______________, 19__
RAMSAY HEALTH CARE, INC.
By:________________________________
Name:
Title:
Accepted and consented to this
____ day of ____________, 19__
GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent
By:______________________________
Name:
Title:
4
<PAGE>
Schedule 1 to Assign-
ment and Acceptance
-------------------
Section 1. Percentage Interest Purchased by Assignee:
- ---------
Revolving Credit Commitments ________%*
Term Loan A: ________%*
Term Loan B: ________%
Section 2. Amount of:
- ---------
Assignee's Revolving Credit Commitment: $___________*
Assignee's Pro Rata Share of Revolving Credit Loan: $___________*
Assignee's Pro Rata Share of Letter of Credit Obligations: $___________*
Assignee's Pro Rata Share of Term Loan A: $___________*
Assignee's Pro Rata Share of Term Loan B: $___________
Section 3.
A Revolving Credit Note payable to the Assignee in the
amount of $___________
A Revolving Credit Note payable to the Assignor in the
amount of $___________
A Term Loan A Note payable to the Assignee in the
amount of $___________
A Term Loan A Note payable to the Assignor in the
amount of $___________
A Term Loan B Note payable to the Assignee in the
amount of $___________
A Term Loan B Note payable to the Assignor in the
amount of $___________
Section 4.
- ---------
Effective Date:** __________, 19__
- ---------------
* Must be pro rata.
--------
** This date should be no earlier than the date of acceptance of this
Assignment by the Administrative Agent.
5
<PAGE>
EXHIBIT 10.107
_____________________________________________________________________________
SUBORDINATED NOTE PURCHASE AGREEMENT
Dated as of September 30, 1997
among
RAMSAY HEALTH CARE, INC.,
as Issuer
and
GENERAL ELECTRIC CAPITAL CORPORATION
and
PAUL RAMSAY HOLDINGS PTY. LIMITED,
as Purchasers
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE 1
AUTHORIZATION OF NOTES;
SALE AND PURCHASE OF NOTES
--------------------------
SECTION 1.01 Authorization of Bridge Notes...................... 1
-----------------------------
SECTION 1.02 Sale and Purchase of Bridge Notes.................. 2
----------------------------------
SECTION 1.03 Use of Proceeds.................................... 2
----------------
SECTION 1.04 Investment Representations......................... 3
--------------------------
ARTICLE 2
TERMS OF THE BRIDGE NOTES
-------------------------
SECTION 2.01 Interest........................................... 3
--------
SECTION 2.02 Principal and Interest Payments.................... 3
--------------------------------
SECTION 2.03 Optional Prepayments............................... 4
---------------------
SECTION 2.04 Mandatory Prepayments.............................. 4
----------------------
SECTION 2.05 Payments, Interest Rate Computations,
-------------------------------------
Other Computations, etc............................ 4
-----------------------
SECTION 2.06 Proration of Payments.............................. 5
---------------------
SECTION 2.07 Savings Clause..................................... 6
---------------
ARTICLE 3
CONTINGENT PAYMENT OBLIGATION
-----------------------------
SECTION 3.01 Contingent Payment Obligation...................... 6
-----------------------------
SECTION 3.02 Notice of Exit Event............................... 7
--------------------
SECTION 3.03 Determination of Contingent Payment Amount......... 7
------------------------------------------
SECTION 3.04 Payment of Contingent Payment Amount............... 8
------------------------------------
SECTION 3.05 Notices............................................ 8
-------
ARTICLE 4
CONDITIONS TO CLOSING
---------------------
SECTION 4.01 This Agreement; Bridge Note Documents.............. 9
-------------------------------------
SECTION 4.02 Approvals.......................................... 9
---------
SECTION 4.03 Payment of Fees.................................... 9
---------------
SECTION 4.04 Consummation of Related Transactions............... 9
------------------------------------
SECTION 4.05 Representations and Warranties True and Correct.... 9
-----------------------------------------------
i
<PAGE>
SECTION 4.06 No Material Adverse Event......................... 9
-------------------------
SECTION 4.07 No Default or Event of Default.................... 9
------------------------------
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 5.01 Corporate Existence; Compliance with Law.......... 10
----------------------------------------
SECTION 5.02 Corporate Power; Authorization; Enforceable
-------------------------------------------
Obligations...................................... 10
------------
SECTION 5.03 Financial Statements.............................. 11
--------------------
SECTION 5.04 Material Adverse Events........................... 11
-----------------------
SECTION 5.05 Ownership of Property; Liens...................... 11
----------------------------
SECTION 5.06 Restrictions; No Default; Material Contracts...... 11
--------------------------------------------
SECTION 5.07 Labor Matters..................................... 11
-------------
SECTION 5.08 Ventures, Subsidiaries and Affiliates;
--------------------------------------
Outstanding Stock and Indebtedness................ 12
----------------------------------
SECTION 5.09 Government Regulation............................. 12
---------------------
SECTION 5.10 Margin Regulations................................ 12
------------------
SECTION 5.11 Taxes............................................. 12
-----
SECTION 5.12 ERISA............................................. 13
-----
SECTION 5.13 No Litigation..................................... 14
-------------
SECTION 5.14 Brokers........................................... 14
-------
SECTION 5.15 Patents, Trademarks, Copyrights and Licenses...... 15
--------------------------------------------
SECTION 5.16 Full Disclosure................................... 15
---------------
SECTION 5.17 Environmental Matters............................. 15
---------------------
SECTION 5.18 Insurance Policies................................ 16
------------------
SECTION 5.19 Solvency.......................................... 16
--------
SECTION 5.20 Licenses and Permits.............................. 16
--------------------
SECTION 5.21 Compliance with Law............................... 17
-------------------
SECTION 5.22 Health Care Professionals......................... 17
-------------------------
SECTION 5.23 Management Agreements............................. 17
---------------------
SECTION 5.24 Patient Referrals, Etc............................ 17
-----------------------
SECTION 5.25 Pending Revocations, Etc.......................... 18
-------------------------
SECTION 5.26 Investigations and Audits......................... 18
-------------------------
SECTION 5.27 Payment Adjustments............................... 18
-------------------
SECTION 5.28 Certain Agreements................................ 19
------------------
SECTION 5.29 Related Transaction Documents..................... 19
-----------------------------
SECTION 5.30 Authorized and Outstanding Shares of Capital Stock 19
---------------------------------------------------
ii
<PAGE>
ARTICLE 6
AFFIRMATIVE COVENANTS
---------------------
SECTION 6.01 Reports and Notices............................... 20
-------------------
SECTION 6.02 Maintenance of Existence and Conduct of Business.. 20
------------------------------------------------
SECTION 6.03 Payment of Charges and Claims..................... 20
-----------------------------
SECTION 6.04 Books and Records................................. 20
-----------------
SECTION 6.05 Litigation........................................ 20
----------
SECTION 6.06 Insurance......................................... 21
---------
SECTION 6.07 Compliance with Laws.............................. 21
--------------------
SECTION 6.08 Environmental Matters............................. 21
---------------------
SECTION 6.09 Application of Proceeds........................... 21
-----------------------
SECTION 6.10 Fiscal Year....................................... 21
-----------
SECTION 6.11 Redemption of Bonds............................... 21
-------------------
SECTION 6.12 Permits, Etc...................................... 22
-------------
SECTION 6.13 Further Assurances................................ 22
------------------
ARTICLE 7
NEGATIVE COVENANTS
SECTION 7.01 Acquisitions...................................... 22
------------
SECTION 7.02 Mergers, Etc...................................... 24
------------
SECTION 7.03 Investments....................................... 25
-----------
SECTION 7.04 Indebtedness...................................... 25
------------
SECTION 7.05 Affiliate and Employee Loans and Transactions..... 25
---------------------------------------------
SECTION 7.06 Liens............................................. 26
-----
SECTION 7.07 Sale of Stock and Assets.......................... 27
------------------------
SECTION 7.08 Material Contracts................................ 27
------------------
SECTION 7.09 ERISA............................................. 27
-----
SECTION 7.10 Financial Covenants............................... 27
-------------------
SECTION 7.11 Sale Lease-backs.................................. 28
----------------
SECTION 7.12 Restricted Payments............................... 28
-------------------
SECTION 7.13 Margin Regulations................................ 28
------------------
SECTION 7.14 Limitation on Dividend Restrictions, Etc.......... 28
----------------------------------------
SECTION 7.15 Accounting Changes................................ 29
------------------
SECTION 7.16 Changes Relating to Senior Indebtedness........... 29
---------------------------------------
iii
<PAGE>
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
SECTION 8.01 Events of Default................................. 29
-----------------
SECTION 8.02 Remedies.......................................... 31
---------
SECTION 8.03 Waivers by the Company............................ 31
----------------------
ARTICLE 9
SUBORDINATION PROVISIONS
-------------------------
SECTION 9.01 Subordination..................................... 32
--------------
SECTION 9.02 Subordination Upon Default in Senior Indebtedness. 32
-------------------------------------------------
SECTION 9.03 Subordination Upon Bankruptcy, Etc................ 33
-----------------------------------
SECTION 9.04 No Suspension of Remedies......................... 34
--------------------------
SECTION 9.05 Payments and Distributions Received............... 34
------------------------------------
SECTION 9.06 Subrogation....................................... 35
------------
SECTION 9.07 Relative Rights................................... 35
----------------
SECTION 9.08 Subordination May Not Be Impaired by the Company.. 35
-------------------------------------------------
SECTION 9.09 Section Not to Prevent Events of Default.......... 35
----------------------------------------
SECTION 9.10 Holders of Bridge Note Obligations Entitled to
----------------------------------------------
Assume Payments Not Prohibited in Absence
-----------------------------------------
of Notice........................................ 36
---------
SECTION 9.11 Amendments to Documents........................... 36
------------------------
SECTION 9.12 Waivers........................................... 37
--------
SECTION 9.13 Agreement Not to Contest Liens.................... 37
------------------------------
SECTION 9.14 Reinstatement..................................... 37
--------------
ARTICLE 10
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
SECTION 10.01 Terms Defined in the Senior Credit Agreement..... 38
--------------------------------------------
SECTION 10.02 Other Defined Terms.............................. 38
-------------------
SECTION 10.03 Certain Matters of Construction.................. 45
-------------------------------
ARTICLE 11
REGISTRATION; EXCHANGE; SUBSTITUTION OF BRIDGE NOTES
----------------------------------------------------
SECTION 11.01 Registration of Bridge Notes..................... 46
----------------------------
SECTION 11.02 Transfers........................................ 46
---------
SECTION 11.03 Transfer and Exchange of Bridge Notes............ 46
--------------------------------------
SECTION 11.04 Replacement of Bridge Notes...................... 47
---------------------------
iv
<PAGE>
ARTICLE 12
MISCELLANEOUS
-------------
SECTION 12.01 Complete Agreement............................... 47
-------------------
SECTION 12.02 Amendments and Waivers........................... 47
-----------------------
SECTION 12.03 Fees and Expenses; Taxes......................... 48
------------------------
SECTION 12.04 No Waiver........................................ 49
----------
SECTION 12.05 Remedies......................................... 50
---------
SECTION 12.06 Severability..................................... 50
-------------
SECTION 12.07 Conflict of Terms................................ 50
------------------
SECTION 12.09 Notices.......................................... 51
--------
SECTION 12.10 Section Titles................................... 53
---------------
SECTION 12.11 Counterparts..................................... 53
-------------
SECTION 12.12 Time of the Essence.............................. 53
--------------------
SECTION 12.13 Publicity........................................ 53
----------
SECTION 12.14 Confidentiality.................................. 53
----------------
SECTION 12.15 GOVERNING LAW.................................... 54
--------------
SECTION 12.16 WAIVER OF JURY TRIAL............................. 54
---------------------
SECTION 12.17 Indemnification.................................. 55
----------------
SECTION 12.18 Successors and Assigns........................... 55
-----------------------
SECTION 12.19 Survival......................................... 56
---------
v
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Schedule of Closing Documents
Annex B - Financial Statements, Projections and Notices
Annex C - Financial Covenants
Schedule 5.03 - Financial Statements and Projections
Schedule 5.04 - Contingent Liabilities; Restricted Payments
Schedule 5.07 - Labor Matters
Schedule 5.08 - Subsidiaries, Joint Ventures and Affiliates
Schedule 5.11 - Tax Matters
Schedule 5.12 - ERISA Plans
Schedule 5.13 - Litigation
Schedule 5.17 - Certain Environmental Matters
Schedule 5.30 - Certain Options, Etc.
Schedule 7.03 - Investments
Schedule 7.05 - Transactions with Affiliates and Employees
Schedule 7.06 - Liens
Exhibit A - Form of Series A Bridge Note
Exhibit B - Form of Series B Bridge Note
Exhibit C - Form of Opinion of the Company's Counsel
vi
<PAGE>
SUBORDINATED NOTE PURCHASE AGREEMENT
THIS SUBORDINATED NOTE PURCHASE AGREEMENT ("Agreement") is entered into as
---------
of September 30, 1997, by and among RAMSAY HEALTH CARE, INC., a Delaware
corporation (the "Company"), GENERAL ELECTRIC CAPITAL CORPORATION, a New York
-------
corporation ("GE Capital"), and PAUL RAMSAY HOLDINGS PTY. LIMITED ACN 008 446
----------
151, an Australian corporation ("Ramsay Holdings"), (GE Capital and Ramsay
---------------
Holdings are hereinafter each individually referred to as a "Purchaser", and
---------
collectively, as "Purchasers"), for the benefit of the parties and each other
----------
Person that may hereafter become a registered holder of a Bridge Note (as
hereinafter defined) in accordance with Article 11 below (Purchasers and any
----------
such holder, individually a "Holder", and collectively, the "Holders").
------ -------
RECITALS
--------
A. The Company desires to issue its Increasing Rate Senior Subordinated
Bridge Notes due September 30, 2005 in the aggregate principal amount of
$17,500,000, all on the terms and subject to the conditions contained herein;
B. Purchasers are willing, on the terms and conditions set forth herein,
to purchase such Bridge Notes on the date hereof; and
C. The proceeds of such Bridge Notes will be used in the manner described
in Section 1.03 below;
------------
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE 1
AUTHORIZATION OF NOTES;
SALE AND PURCHASE OF NOTES
--------------------------
SECTION 1.01 Authorization of Bridge Notes.
-----------------------------
(a) The Company has duly authorized the issuance and sale, on the
terms and subject to the conditions set forth herein, of its Increasing Rate
Senior Subordinated Bridge Notes due September 30, 2005 (the "Bridge Notes") in
------------
the aggregate principal amount of Seventeen Million Five Hundred Thousand
Dollars ($17,500,000), to be dated the date of issuance thereof, to mature on
<PAGE>
September 30, 2005, and to bear interest on the unpaid balance thereof from the
date thereof until the principal shall have been paid in full at the rates of
interest set forth herein.
(b) Fifteen Million Dollars ($15,000,000) in aggregate principal
amount of such Bridge Notes shall be designated as Series A Bridge Notes and
shall be substantially in the form of Exhibit A (the "Series A Bridge Notes")
--------- ---------------------
and Two Million Five Hundred Thousand Dollars ($2,500,000) in aggregate
principal amount of such Bridge Notes shall be designated as Series B Bridge
Notes and shall be substantially in the form of Exhibit B (the "Series B Bridge
--------- ---------------
Notes"). The Series A Bridge Notes alone will be entitled to the benefits of
- -----
Article 3 hereof and to the priority of application of prepayments set forth in
- ---------
Section 2.05 but the Series A Bridge Notes and Series B Bridge Notes shall rank
- ------------
pari passu and otherwise be identical in all respects.
- ---- -----
(c) The Bridge Notes shall rank pari passu with all other Indebtedness
---- -----
of the Company other than Senior Indebtedness. The term "Bridge Notes" as used
herein shall mean and include each Bridge Note delivered pursuant to any
provisions of this Agreement, and each Bridge Note delivered in substitution,
amendment, modification, extension or exchange for any such Bridge Note pursuant
to any such provision of this Agreement.
SECTION 1.02 Sale and Purchase of Bridge Notes.
---------------------------------
(a) The Company agrees to sell to GE Capital and, on the terms and
subject to the conditions of this Agreement, GE Capital agrees to purchase from
the Company, all of the Series A Bridge Notes, at a purchase price equal to 100%
of the principal amount thereof.
(b) The Company agrees to sell to Ramsay Holdings and, on the terms
and subject to the conditions of this Agreement, Ramsay Holdings agrees to
purchase from the Company, all of the Series B Bridge Notes, at a purchase price
equal to 100% of the principal amount thereof.
(c) The sale and purchase of the Bridge Notes (the "Closing") will
-------
occur at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia
30303 at 10:00 A.M., on the Closing Date. At the Closing, (i) the Company shall
deliver to GE Capital all of the Series A Bridge Notes, against delivery by GE
Capital to the Company of immediately available funds in an amount equal to the
aggregate principal amount of the Series A Bridge Notes, and (ii) the Company
shall deliver to Ramsay Holdings all of the Series B Bridge Notes, against
delivery by Ramsay Holdings of immediately available funds in an amount equal to
the aggregate principal amount of the Series B Bridge Notes, with each such
delivery to be in the manner set forth in written instructions provided by the
Company to each Purchaser at least one Business Day prior to the Closing Date.
SECTION 1.03 Use of Proceeds. The proceeds from the sale of the Bridge
---------------
Notes shall be used by the Company (i) to effect the Refinancing, and (ii) for
the payment of costs and expenses of the transactions contemplated by this
Agreement and the Related Transactions that are payable by the Company.
2
<PAGE>
SECTION 1.04 Investment Representations. Each Purchaser and, by its
--------------------------
purchase of any Bridge Note hereafter, each other Holder represents and warrants
that:
(a) it is an "accredited investor," as that term is defined in
Regulation D under the Securities Act, and has such knowledge, skill,
sophistication and experience in business and financial matters, based on actual
participation, that it is capable of evaluating the merits and risks of the
purchase of Bridge Notes from the Company and the suitability thereof for such
Purchaser;
(b) it is acquiring its Bridge Note for its own account, for
investment purposes and not with a view to the distribution thereof; provided,
--------
however, that the foregoing representation and warranty shall not be construed
- -------
as imposing any limitation on any Purchaser's or any other Holder's right to
transfer any Bridge Note that is not otherwise expressly set forth in this
Agreement or required under applicable law; and
(c) it will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Bridge Notes (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of any
of the Bridge Notes), except in compliance with the Securities Act.
ARTICLE 2
TERMS OF THE BRIDGE NOTES
-------------------------
SECTION 2.01 Interest.
--------
(a) Interest on the outstanding principal amount of the Bridge Notes
shall accrue and be payable at a rate per annum equal to (i) eleven percent
(11%) from the Closing Date to and including December 31, 1997, (ii) eleven and
one-half percent (11-1/2%) from January 1, 1998 to and including March 31, 1998,
(iii) twelve percent (12%) from April 1, 1998 to and including June 30, 1998,
(iv) twelve and one-half percent (12-1/2%) from July 1, 1998 to and including
September 30, 1998, and (v) thirteen percent (13%) per annum at all times from
and after October 1, 1998.
(b) If an Event of Default shall have occurred and be continuing, the
Required Holders may, by written notice to the Company, increase each of the
interest rates specified in paragraph (a) to the Default Rate, effective as of
the initial date of such Event of Default and continuing until the date on which
such Event of Default is waived or cured; provided, however, that, upon the
-------- -------
occurrence of an Event of Default specified in Sections 8.01(g), (h) or (i), the
---------------- --- ---
interest rates specified in paragraph (a) shall automatically increase to the
Default Rate.
SECTION 2.02 Principal and Interest Payments.
-------------------------------
(a) If not sooner paid, the entire principal amount of the Bridge
Notes shall be due and payable in full on the Stated Maturity Date.
3
<PAGE>
(b) Accrued interest on the Bridge Notes shall be payable, without
duplication, (i) in arrears for the preceding three-month period, on the first
Business Day of each March, June, September and December hereafter, commencing
December 1, 1997, (ii) on the Maturity Date, (iii) with respect to any portion
of the Bridge Notes prepaid or repaid pursuant to Section 2.04, on the date such
------------
prepayment or repayment is due and, in the case of a voluntary prepayment, on
the date set forth in any notice required for such prepayment; (iv) on the date
of acceleration of the Bridge Notes pursuant to Section 8.02; and (v) in the
------------
case of interest accruing at the Default Rate, upon demand.
SECTION 2.03 Optional Prepayments. Prior to the Stated Maturity Date, the
--------------------
Company may, from time to time on any Business Day, make a voluntary prepayment,
in whole or in part, of the outstanding principal amount of the Bridge Notes;
provided, however, that (i) all such voluntary prepayments shall require at
- -------- -------
least three (3) Business Days' prior written notice to the Holders, (ii) all
such voluntary prepayments shall be in a minimum amount of $1,000,000 (subject
to the Company's right to prepay in full the entire unpaid principal amount of
the Bridge Notes), (iii) all such prepayments shall be applied in accordance
with the provisions of Section 2.05, and (iv) concurrently with such prepayment
------------
the Company shall pay to the Holders (x) all accrued but unpaid interest on the
amount prepaid, (y) in the case of a prepayment in full, any Contingent Payment
amount then due and payable in respect of the Series A Bridge Notes pursuant to
Article 3 hereof, and (z) if paid on or after September 30, 1998 but before
- ---------
September 30, 2004, but not otherwise, a Prepayment Premium in the amount
specified in the definition thereof.
SECTION 2.04 Mandatory Prepayments. Prior to the Stated Maturity Date, the
---------------------
Company shall:
(a) prepay the entire outstanding principal amount of the Bridge Notes
concurrently with the receipt by the Company of the proceeds of issuance of the
Senior Subordinated Notes; and
(b) subject to any restrictions imposed by the Senior Credit
Documents, at the option of the Required Holders, prepay the entire outstanding
principal amount of the Bridge Notes upon the occurrence of a Change of Control
or a Sale of the Company;
in each case together with (x) accrued but unpaid interest on the amount
prepaid, (y) in the case of a prepayment in full, any Contingent Payment Amount
then due and payable in respect of the Series A Bridge Notes pursuant to Article
-------
3 hereof and (z) if paid on or after September 30, 1998 but before September 30,
- -
2004, but not otherwise, a Prepayment Premium in the amount specified herein.
SECTION 2.05 Payments, Interest Rate Computations, Other Computations, etc.
-------------------------------------------------------------
All payments by the Company of the principal amount of the Bridge Notes pursuant
to Section 2.02 and all regularly scheduled payments of interest on the Bridge
------------
Notes pursuant to Section 2.01 shall be made by the Company to the Holders pro
------------ ---
rata according to the unpaid principal amounts of their respective Bridge Notes.
- ----
All prepayments by the Company of the principal amount of the Bridge Notes
pursuant to Section 2.03 and 2.04, together with interest on the amount prepaid
------------ ----
and any
4
<PAGE>
Prepayment Premium payable in connection therewith, shall be payable first to
the Holders of Series A Bridge Notes until all of the Series A Bridge Notes are
paid in full, pro rata as among such Holders, and second to the Holders of
--------
Series B Bridge Notes, pro rata as among such Holders until all of the Series B
--------
Bridge Notes are paid in full. All other amounts payable to any Holder under
this Agreement or any other Bridge Note Document, including, without limitation,
the Contingent Payment Amount payable to the Holders of Series A Bridge Notes,
shall be paid to such Holder entitled thereto. All such payments required to be
made to each Holder shall be made, without setoff, deduction or counterclaim,
not later than 12:00 Noon (New York time) on the date due, in immediately
available funds, to such account as each Holder shall specify from time to time
by notice to the Company. Funds received after that time shall be deemed to have
been received by the Holders on the following Business Day. All interest shall
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Whenever any payment to be made hereunder shall otherwise be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and, with respect to payments of principal, such extension of time
shall be included in the computation of accrued interest.
SECTION 2.06 Proration of Payments.
---------------------
(a) Except as otherwise provided in Section 2.05, the Company shall
------------
not prepay or otherwise retire in whole or in part, or purchase or otherwise
acquire, directly or indirectly, any Bridge Notes held by any Holder unless the
Company shall have offered to prepay or otherwise retire, purchase or acquire,
as the case may be, the same proportion of the aggregate principal amount of the
Bridge Notes held by each other Holder at the time outstanding upon the same
terms and conditions. Any Bridge Notes prepaid or otherwise retired, purchased
or acquired by the Company or any of its Subsidiaries shall not be deemed to be
outstanding for any purpose under this Agreement.
(b) Except as otherwise provided in Section 2.05, if any Holder shall
------------
obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of principal of or interest on
the Bridge Notes or other Bridge Note Obligations in excess of such Holder's pro
---
rata share of payments then or therewith obtained thereon by all Holders, such
- ----
Holder which has received in excess of its pro rata share shall purchase from
--- ----
the other Holders such participations in the Bridge Notes or other Bridge Note
Obligations held by them as shall be necessary to cause such purchaser to share
the excess payment or other recovery ratably with each of them; provided,
--------
however, that if all or any portion of the excess payment or other recovery is
- -------
thereafter recovered from such purchasing Holder, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. The Company agrees that any Holder so purchasing a
participation from another Holder pursuant to this Section 2.06 (b) may, to the
----------------
fullest extent permitted by law, exercise all its rights of payment with respect
to such participation as fully as if such Holder were the direct creditor of the
Company in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Holder receives a secured claim
in lieu of a setoff to which this Section 2.06(b) applies, such Holder shall, to
---------------
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Holders under this Section 2.06(b) to
---------------
share in the benefits of any recovery on such secured claim.
5
<PAGE>
SECTION 2.07 Savings Clause. Notwithstanding anything to the contrary set
--------------
forth in this Agreement, if, at any time until payment in full of all of the
Bridge Note Obligations, any rate of interest payable hereunder (including,
without limitation, any amounts payable to the Series A Holders pursuant to
Article 3 hereof that are treated as interest under applicable law) exceeds the
- ---------
highest rate of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto (the
"Maximum Lawful Rate"), then in such event and so long as the Maximum Lawful
- --------------------
Rate would be so exceeded, such rate of interest shall be equal to the Maximum
Lawful Rate; provided, that if at any time thereafter any rate of interest
--------
payable hereunder is less than the Maximum Lawful Rate, the Company shall
continue to pay interest to the Holders hereunder at the Maximum Lawful Rate
until such time as the total interest received by the Holders hereunder is equal
to the total interest which the Holders would have received had the interest
rate or rates payable hereunder been (but for the operation of this Section
-------
2.07) the interest rate or rates payable since the date of incurrence of the
Bridge Note Obligations as otherwise provided in this Agreement. Thereafter,
the interest rate or rates payable hereunder shall be the rate or rates of
interest provided in Section 2.01 unless and until any rate of interest again
------------
exceeds the Maximum Lawful Rate, in which event this Section 2.07 shall again
------------
apply. In no event shall the total interest received by the Holders pursuant to
the terms hereof exceed the amount which the Holders could lawfully have
received had the interest due hereunder been calculated for the full term hereof
at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated
pursuant to this Section 2.07, (x) if required by applicable law, such interest
------------
shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made, and (y) if
permitted by applicable law, the Company shall (i) characterize any nonprincipal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effect thereof, and (iii) amortize, pro rate,
allocate and spread in equal or unequal parts the total amount of interest
throughout the entire contemplated term of the Bridge Note Obligations so that
interest for the entire term of this Agreement does not exceed the Maximum
Lawful Rate. In the event that a court of competent jurisdiction,
notwithstanding the provisions of this Section 2.07, shall make a final
------------
determination that the Company has received interest hereunder in excess of the
Maximum Lawful Rate, the Company shall, to the extent permitted by applicable
law, promptly apply such excess first to any lawful interest due and not yet
paid hereunder, then to the outstanding principal of the Bridge Note
Obligations, then to any other unpaid Bridge Note Obligations, and thereafter
shall refund any excess to the Company or as a court of competent jurisdiction
may otherwise order.
ARTICLE 3
CONTINGENT PAYMENT OBLIGATION
-----------------------------
SECTION 3.01 Contingent Payment Obligation. In the event that the Series A
-----------------------------
Bridge Notes have not been repaid in full on or before March 30, 1998, then, in
addition to interest payable at the rates specified in Section 2.01 hereof, the
------------
Company shall pay to the Holders of the Series A Bridge Notes, concurrently with
the Exit Event, an amount (the "Contingent Payment Amount") equal to either (a)
-------------------------
if the Series A Bridge Notes have not been repaid in full on or before March 30,
1998, but are repaid in full on or before September 30, 1998, nine percent (9%)
of the excess, if any, of (i) the product of (x) the number of Outstanding
Shares of Common Stock as of the Determination Date,
6
<PAGE>
multiplied by (y) the Current Market Price per Share of Common Stock as of the
- -------------
Determination Date, over (ii) the Base Amount; or (b) if the Series A Bridge
----
Notes have not been repaid in full on or before September 30, 1998, fourteen
percent (14%) of the product of (i) the number of Outstanding Shares of Common
Stock as of the Determination Date, multiplied by (ii) the Current Market Price
-------------
per Share of Common Stock as of the Determination Date. If Series A Bridge
Notes are held by more than one Holder at such time, the Contingent Payment
Amount shall be paid to the Holders of Series A Bridge Notes pro rata, based on
--------
the proportion that the principal amount of the Series A Bridge Note held by
each such Holder bears to the aggregate principal amount of all Series A Bridge
Notes.
SECTION 3.02 Notice of Exit Event. As soon as is reasonably practicable
--------------------
after the Company has knowledge that an Exit Event will or is reasonably likely
to occur, but in no event later than the Determination Date with respect
thereto, it shall provide written notice thereof (an "Exit Event Notice") to all
-----------------
of the Holders of the Series A Bridge Notes, setting forth the nature of the
Exit Event and the actual or proposed date thereof. Promptly after giving an
Exit Event Notice pursuant to this Section 3.02, the Company shall cause the
------------
Contingent Payment Amount to be determined on the basis set forth in Section
-------
3.03, as soon as is reasonably practicable, but in any event within five
- ----
Business Days following the Determination Date.
SECTION 3.03 Determination of Contingent Payment Amount.
------------------------------------------
(a) The determination of the Current Market Price per Share of Common
Stock as of the Determination Date, the number of Outstanding Shares of Common
Stock as of the Determination Date and the resulting Contingent Payment Amount
shall be made by the firm of independent accountants of recognized national
standing then retained by the Company, at the sole expense of the Company.
Concurrently with the determination of the Contingent Payment Amount pursuant to
this Section 3.03(a), but in any event within five Business Days following the
---------------
Determination Date, the Company shall provide written notice to each Series A
Holder (a "Contingent Payment Amount Notice"), setting forth the Contingent
--------------------------------
Payment Amount as so determined, and attaching thereto a schedule prepared by
its independent public accountants showing in reasonable detail the calculation
thereof.
(b) The Required Series A Holders shall have the right to object to
the Current Market Price per Share of Common Stock as of the Determination Date,
the number of Outstanding Shares of Common Stock as of the Determination Date or
the Contingent Payment Amount as so determined and set forth in the Contingent
Payment Amount Notice (including, without limitation, any determination of the
Current Market Price per Share of Common Stock made pursuant to the second
sentence of the definition thereof), by giving written notice (an "Objection
---------
Notice") to the Company specifying the nature of their objection, within three
- ------
Business Days following receipt of the Contingent Payment Amount Notice pursuant
to paragraph (a) hereof and, unless such objection is resolved by agreement of
the Company and the Required Series A Holders on or before the Exit Date, the
Company and the Required Series A Holders shall each have the right to subject
the disputed determination to separate firms of independent accountants of
recognized national standing (or, in the case of a determination of the Current
Market Price per Share of Common Stock made by an independent brokerage firm, to
separate independent brokerage firms) for a joint resolution of such
7
<PAGE>
objection (neither of which shall be the firm of independent accountants
regularly retained by the Company or the independent brokerage firm determining
the Current Market Price per Share of Common Stock pursuant to the second
sentence of the definition thereof). If such firms cannot jointly resolve such
objection, then, unless otherwise directed by agreement of the Company and the
Required Series A Holders, such firms shall choose another firm of independent
accountants of recognized national standing, which firm shall resolve such
objection. In such case, the Current Market Price per Share of Common Stock as
of the Determination Date, the number of Outstanding Shares as of the
Determination Date and the Contingent Payment Amount so determined shall be
conclusive and binding on the Company, all of the Holders of Series A Bridge
Notes and all Persons claiming under or through any of them.
(c) In the event that an Objection Notice is given pursuant to
paragraph (b), the cost of the independent accountants selected by the Company
shall be borne solely by the Company, the cost of the independent accountants
selected by the Required Series A Holders shall be borne solely by the Required
Series A Holders, and the cost of any independent accountants chosen by the
Company's and the Required Series A Holders' independent accountants to resolve
any objection shall be borne one-half each by the Required Series A Holders and
the Company.
SECTION 3.04 Payment of Contingent Payment Amount. On the date of and
------------------------------------
concurrently with the Exit Event, the Company shall pay to each Holder of Series
A Bridge Notes the ratable portion of the Contingent Payment Amount payable to
such Holder, at the option of the Company, by (i) wire transfer to an account in
a bank located in the United States designated by such Holder for such purpose
or (ii) delivery to such Holder of that number of fully paid and non-assessable
shares of Common Stock, duly registered under the Securities Act (if such
registration is required to sell such shares to the public) and listed on the
securities exchange on which the Common Stock is then listed or, if not so
listed, listed on the NASDAQ automated quotation system, and having a value that
is most nearly equal to the Contingent Payment Amount, or ratable portion
thereof payable to such Holder, based on the Current Market Value per Share of
Common Stock as of the Determination Date together with either (x) an amount of
cash equal to the aggregate par value of such Common Stock, which shall be used
by such Holder to pay to the Company such amount (not to exceed the par value of
such Common Stock) as shall, in the written opinion of counsel to the Company,
be necessary so that such Common Stock will be fully paid and non-assessable, or
(y) a written opinion of counsel to the Company to the effect that such Common
Stock will be fully paid and non-assessable as issued, without the payment by
the Holder to the Company of an amount equal to the par value of such Common
Stock as of the time of issuance; provided, however, that if the Company is then
-------- -------
prohibited by the terms of the Senor Credit Agreement from paying the Contingent
Payment Amount in cash pursuant to clause (i), the Company shall pay it by
delivering shares of Common Stock, together with any cash payable pursuant to
clause (ii).
SECTION 3.05 Notices. Each Exit Event Notice, Contingent Payment Amount
-------
Notice and Objection Notice given pursuant to this Article 3 shall be given by
---------
telecopier, with a copy thereof by hand delivery or by reputable overnight
courier, and otherwise in compliance with Section 12.09.
-------------
8
<PAGE>
ARTICLE 4
CONDITIONS TO CLOSING
---------------------
The obligations of Purchasers to purchase the Bridge Notes on the Closing
Date shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Article 4:
---------
SECTION 4.01 This Agreement; Bridge Note Documents. This Agreement or
-------------------------------------
counterparts hereof shall have been duly executed by, and delivered to, the
Company and Purchasers; and Purchasers shall have received such documents,
instruments, agreements and legal opinions as Purchasers shall reasonably
request in connection with the transactions contemplated by this Agreement and
the other Bridge Note Documents, including all those listed in the Schedule of
Closing Documents attached hereto as Annex A, each in form and substance
-------
satisfactory to Purchasers.
SECTION 4.02 Approvals. Purchasers shall have received (i) satisfactory
---------
evidence that the Company has obtained all required consents and approvals of
all Persons, including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Bridge Note Documents
and the consummation of the Related Transactions or (ii) an officer's
certificate in form and substance reasonably satisfactory to Purchasers
affirming that no such consents or approvals are required.
SECTION 4.03 Payment of Fees. The Company shall have paid to GE Capital
---------------
the fees required to be paid on the Closing Date in the respective amounts
specified in the GE Capital Fee Letter, and shall have reimbursed GE Capital for
all reasonable legal fees and all other out-of-pocket costs and expenses of
closing presented as of the Closing Date.
SECTION 4.04 Consummation of Related Transactions. Purchasers shall have
------------------------------------
received fully executed copies of the Senior Credit Agreement, the Preferred
Stock Purchase Agreement and each of the other Related Transaction Documents,
each of which shall be in form and substance satisfactory to Purchasers and
their counsel, all conditions precedent to the obligations of the Senior Lenders
to make extensions of credit under the Senior Credit Agreement shall have been
satisfied or waived and the Related Transactions shall have been consummated in
accordance with the terms of the Related Transaction Documents.
SECTION 4.05 Representations and Warranties True and Correct. No
-----------------------------------------------
representation or warranty by the Company contained herein or in any of the
other Bridge Note Documents shall be untrue or incorrect.
SECTION 4.06 No Material Adverse Event. No Material Adverse Event shall
-------------------------
have occurred since the Audit Date.
SECTION 4.07 No Default or Event of Default. No Default or Event of
------------------------------
Default shall have occurred and be continuing or would result after giving
effect to the consummation of the transactions contemplated hereby.
9
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Purchasers to enter into this Agreement, the Company represents
and warrants to each Purchaser and each other Holder of any Bridge Note that, as
of the Closing Date:
SECTION 5.01 Corporate Existence; Compliance with Law. The Company and
----------------------------------------
each of its Subsidiaries: (a) is a corporation duly organized or, in the case of
certain of its Subsidiaries, a partnership or a limited liability company duly
formed; (b) is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation; (c) is duly qualified to do
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification
except where a failure to be so qualified and in good standing is not a Material
Adverse Event; (d) has the requisite corporate, partnership or limited liability
company power and authority, as the case may be, and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its business as now, heretofore
and proposed to be conducted; and (d) is in compliance with its articles or
certificate of incorporation and bylaws, its partnership agreement or limited
liability company operating agreement, as the case may be.
SECTION 5.02 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by the Company of this Agreement and the
other Bridge Note Documents: (a) are within the Company's corporate power; (b)
have been duly authorized by all necessary corporate and shareholder action; (c)
are not in contravention of any provision of the Company's certificate of
incorporation or bylaws or other organizational documents; (d) do not violate
any law or regulation, or any order or decree of any Governmental Authority; (e)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary or any of their respective property is bound, including, without
limitation, the Related Transaction Documents or any other agreement, document
or instrument relating to Senior Indebtedness; (f) do not result in the creation
or imposition of any Lien upon any of the Property of the Company or any of its
Subsidiaries; and (g) do not require the consent or approval of any
Governmental Authority or any other Person, except those consents and approvals
referred to in Section 4.02, all of which have been duly obtained,
------------
made or complied with and are in full force and effect. Each of the Bridge Note
Documents has been duly executed and delivered for the benefit of or on behalf
of the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except as
the enforceability of such Bridge Note Document may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditor's
rights and remedies in general.
10
<PAGE>
SECTION 5.03 Financial Statements. The Company has delivered to
--------------------
Purchasers the Financial Statements identified in Schedule 5.03, and each of
-------------
such Financial Statements complies with the description thereof contained in
Schedule 5.03.
- -------------
SECTION 5.04 Material Adverse Events. Except as set forth in Schedule
----------------------- --------
5.04, the Company and its Subsidiaries have no material obligations, material
contingent liabilities, or material liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the
Financial Statements identified in Schedule 5.03. Except as otherwise permitted
-------------
hereunder or as set forth in Schedule 5.04, no Restricted Payment has been made
-------------
since the Audit Date, and no shares of Stock of the Company have been, or are
now required to be, redeemed, retired, purchased or otherwise acquired for value
by the Company or any of its Subsidiaries. Since the Audit Date, no Material
Adverse Event has occurred and is continuing.
SECTION 5.05 Ownership of Property; Liens. The Company and each of its
----------------------------
Subsidiaries holds (a) good and insurable fee simple title to all Real Property
owned by it, subject only to Permitted Encumbrances of the types described in
paragraphs (a) and (i) of the definition thereof, (b) valid and insurable
leasehold interests in all Leases to which it is a party, subject only to
Permitted Encumbrances of the types described in paragraphs (a) and (i) of the
definition thereof, and (c) good and valid title to, or valid leasehold
interests in, all of its other properties and assets, subject only to Permitted
Liens. None of the properties and assets of the Company or any of the other
Credit Parties are subject to any Liens, except Permitted Encumbrances, Liens
set forth in Schedule 7.06 and the Lien in favor of the Senior Agent pursuant to
-------------
the Senior Documents.
SECTION 5.06 Restrictions; No Default; Material Contracts. No contract,
--------------------------------------------
lease, agreement or other instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets is bound or affected and no provision of any charter,
corporate restriction, applicable law or governmental regulation would cause a
Material Adverse Event. Neither the Company nor any of its Subsidiaries is in
default and, to the Company's knowledge, no third party is in default, under or
with respect to any Material Contract, except in each case to the extent that
such default is not a Material Adverse Event. No Default or Event of Default
has occurred and is continuing.
SECTION 5.07 Labor Matters. Except as set forth in Schedule 5.07, there
------------- -------------
are no strikes or other labor disputes against the Company or any of its
Subsidiaries that are pending or, to the Company's knowledge, threatened that
would be a Material Adverse Event. Hours worked by and payment made to
employees of the Company or its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters,
except where such violations are not Material Adverse Events. All payments due
from the Company or any of its Subsidiaries on account of employee health and
welfare insurance have been paid or accrued as a liability on the books of the
Company or such Subsidiary, except in each case to the extent that a failure to
pay or accrue such payment is not a Material Adverse Event. Except as set forth
in Schedule 5.07, neither the Company nor any of its Subsidiaries has any
-------------
obligation under any collective bargaining agreement or any agreement providing
for management services to be provided to the Company. Except as set forth on
Schedule 5.07, there is no organizing activity involving the
- -------------
11
<PAGE>
Company or any of its Subsidiaries pending or, to the Company's knowledge,
threatened by any labor union or group of employees. Except as set forth in
Schedule 5.07, there are no representation proceedings pending or, to the
- -------------
Company's knowledge, threatened with the National Labor Relations Board with
respect to the Company or any of its Subsidiaries, and no labor organization or
group of employees of the Company or any of its Subsidiaries has made a pending
demand for recognition. Except as set forth on Schedule 5.07, there are no
-------------
complaints or charges against the Company or any of its Subsidiaries pending
or, to the knowledge of the Company, threatened to be filed with any fed eral,
state, local or foreign court, governmental agency or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or any of its
Subsidiaries, which if adversely determined would be a Material Adverse Event.
SECTION 5.08 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth in Schedule 5.08, (a) the Company has no
- ------------ -------------
Subsidiaries and is not engaged in any joint venture or partnership with any
other Person, and is not an Affiliate of any other Person; (b) each Subsidiary
of the Company is wholly-owned by the Company; and (c) there are no outstanding
rights to purchase, options, warrants or similar rights or agreements pursuant
to which the Company or any of its Subsidiaries may be required to issue, sell
or purchase any Stock or other equity security of a Subsidiary of the Company.
Schedule 5.08 lists all of the Subsidiaries of the Company that are Material
- -------------
Subsidiaries.
SECTION 5.09 Government Regulation. The Company is not: (a) an
---------------------
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940 as amended; or (b) subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or any other federal or state regulatory statute that
requires the approval of any Governmental Authority in order for the Company to
incur Indebtedness, or to perform its obligations hereunder, or under any other
Bridge Note Document.
SECTION 5.10 Margin Regulations. The Company is not engaged in the
------------------
business of extending credit for the purpose of purchasing or carrying Margin
Stock and no proceeds of the Bridge Notes will be used to purchase or carry any
Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock. The Company will not take any action, or permit to
be taken any action under its control, which might cause any Bridge Note
Document or any document or instrument delivered pursuant hereto or thereto to
violate any regulation of the Federal Reserve Board.
SECTION 5.11 Taxes. All federal, and all material state, local and
-----
foreign, tax returns, reports and statements, including information returns,
required to be filed by the Company and its Subsidiaries, have been filed with
the appropriate Governmental Authority and all material Charges and other
impositions shown thereon to be due and payable have been paid prior to the date
on which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof, or any such fine, penalty, interest, late charge or loss has
been paid; (ii) proper and accurate amounts have been withheld by the Company
and each of its Subsidiaries from its employees for all periods in
12
<PAGE>
compliance in all material respects with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities; (iii) Schedule 5.11 sets forth those taxable years for
-------------
which any of the tax returns of the Company or any of its Subsidiaries are
currently being audited by the IRS or any other applicable Governmental
Authority, and any assessments or threatened assessments in connection with such
audit or otherwise currently outstanding; (iv) except as described in Schedule
--------
5.11, neither the Company nor any of its Subsidiaries has executed or filed with
- ----
the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges; (v) neither the Company nor any of its Subsidiaries
has agreed or been requested to make any adjustment under IRC Section 481(a) by
reason of a change in accounting method or otherwise; and (vi) except as
described in Schedule 5.11, the Company has no obligation under any written tax
-------------
sharing agreement.
SECTION 5.12 ERISA.
-----
(a) Schedule 5.12 lists all Plans maintained or contributed to by the
-------------
Company and each of its Subsidiaries and all Qualified Plans maintained or
contributed to by any ERISA Affiliate, and separately identifies the Title IV
Plans, Multi-employer Plans, any multiple employer plans subject to Section 4064
of ERISA, unfunded Pension Plans, Welfare Plans and Retiree Welfare Plans. IRS
determination letters regarding the qualified status under IRC Section 401 of
each such Qualified Plan have been received as of the dates listed in Schedule
--------
5.12. Each of the favorable determination letters considers the requirements of
- ----
the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1986 and
the Omnibus Budget Reconciliation Act of 1987. To the knowledge of the Company,
the Qualified Plans as amended continue to qualify under Section 401 of the IRC,
the trusts created thereunder continue to be exempt from tax under the
provisions of IRC Section 501(a), and nothing has occurred which would cause the
loss of such qualification or tax-exempt status. Each Qualified Plan so amended
has been submitted to the IRS for a determination letter as to the ongoing
qualified status of the Plan under the IRC within the applicable IRC Section
401(b) remedial amendment period for the Tax Reform Act of 1986; and each such
Plan shall be amended, including retroactive amendments, as required during such
determination letter process to maintain the qualified status of such Plans. To
the knowledge of the Company, each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the IRC, including the
filing of all reports required under the IRC or ERISA which are true and correct
as of the date filed, and all required contributions and benefits have been paid
in accordance with the provisions of each such Plan. Neither the Company, nor
any of its Subsidiaries nor any ERISA Affiliate, with respect to any Qualified
Plan, has failed to make any contribution or pay any amount due as required by
IRC Section 412 or Section 302 of ERISA. With respect to all Retiree Welfare
Plans, the present value of future anticipated expenses pursuant to the
Company's most recent actuarial projections of liabilities does not exceed
$500,000, and copies of such projections have been provided to Purchasers. The
Company has no Pension Plans, other than Qualified Plans and the unfunded
Pension Plans listed in Schedule 5.12, and the Company has not engaged in a
-------------
prohibited transaction, as defined in IRC Section 4975 or Section 406 of ERISA,
in connection with any Plan which would subject the Company (after giving effect
to any exemption) to a material tax on prohibited transactions imposed by IRC
Section 4975 or any other material liability.
13
<PAGE>
(b) Except as set forth in Schedule 5.12: (i) no Title IV Plan has any
-------------
Unfunded Pension Liability; (ii) no ERISA Event or event described in Section
4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably
expected to occur; (iii) there are no pending, or to the knowledge of the
Company, threatened claims, actions or lawsuits (other than claims for benefits
in the normal course), asserted or instituted against (x) any Plan or its
assets, (y) to the Company's knowledge, any fiduciary with respect to any Plan
or (z) the Company, any of its Subsidiaries or any ERISA Affiliate with respect
to any Plan; (iv) neither the Company, nor any of its Subsidiaries nor any ERISA
Affiliate has incurred or reasonably expects to incur any Withdrawal Liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 of ERISA as a
result of a complete or partial withdrawal from a Multi-employer Plan; (v)
within the last five (5) years neither the Company, nor any of its Subsidiaries
nor any ERISA Affiliate has engaged in a transaction which resulted in a Title
IV Plan with Unfunded Pension Liabilities being transferred outside of the
"controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any
such entity; (vi) no Plan which is a Retiree Welfare Plan provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment (except as may be
required by IRC Section 4980B or Part 6 of Title I of ERISA and at the sole
expense of the participant or the beneficiary of the participant); (vii) the
Company, each of its Subsidiaries and each ERISA Affiliate have complied in all
material respects with the notice and continuation coverage requirements of IRC
Section 4980B and the proposed or final regulations thereunder; and (viii) no
liability under any Plan has been funded, nor has such obligation been satisfied
with, the purchase of a contract from an insurance company that is not rated AAA
by Standard & Poor's Rating Group and the equivalent by each other nationally
recognized rating agency.
SECTION 5.13 No Litigation. Except as set forth in Schedule 5.13, no
------------- -------------
action, claim or proceeding is pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators (a) which challenges the Company's
right, power, or competence to enter into or perform any of its obligations
under the Bridge Note Documents, or the validity or enforceability of any Bridge
Note Document or any action taken thereunder, or (b) which has a reasonable risk
of being determined adversely to the Company or any of its Subsidiaries and
which, if so determined, would be a Material Adverse Event. To the knowledge of
the Company, there does not exist a state of facts which is reasonably likely to
give rise to such proceedings. Except as set forth in Schedule 5.13, there is
-------------
no litigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries which seeks damages in excess of $500,000
or injunctive relief or alleges criminal misconduct on the part of the Company
or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
is a party to any consent decree.
SECTION 5.14 Brokers. No broker or finder acting on behalf of the
-------
Company or any of its Subsidiaries brought about the obtaining, making or
closing of the transactions contemplated by this Agreement or of the Related
Transactions and neither the Company nor any of its Subsidiaries has any
obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
14
<PAGE>
SECTION 5.15 Patents, Trademarks, Copyrights and Licenses. The Company
--------------------------------------------
and each of its Subsidiaries own or have valid licenses for all patents, patent
applications, copyrights, service marks, trademarks, trademark applications and
trade names which are necessary to conduct its business. The Company and each
of its Subsidiaries conduct business without infringement or claim of
infringement of any such license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of others, except
in each case to the extent that such infringement or claim of infringement is
not a Material Adverse Event. To the Company's knowledge, there is no
infringement or claim of infringement by others of any material license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of the Company or any of its Subsidiaries.
SECTION 5.16 Full Disclosure. No information contained in this
---------------
Agreement, the other Bridge Note Documents, the Financial Statements or any
written statement, notice, report or certificate furnished by or on behalf of
the Company or any Affiliate thereof pursuant to the terms of this Agree ment
or any other Bridge Note Document, which has previously been delivered to
Purchasers, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. With
respect to all business plans and other forecasts and projections furnished by
or on behalf of the Company and made available to Purchasers relating to the
financial condition, operations, business, properties or prospects of the
Company and its Subsidiaries, (i) to the knowledge of the Company, no facts
exist concerning the Company or any of its Subsidiaries which would result in
any material change of any of such business plans, forecasts and projections,
(ii) such business plans, forecasts and projections are based upon estimates and
assumptions deemed reasonable by the Company at the time of preparation thereof,
which as a whole are fair in light of current conditions known to the Company,
have been prepared on the basis of the assumptions stated therein, and reflect a
reasonable estimate by the Company of the results of operations and other
information projected therein.
SECTION 5.17 Environmental Matters.
---------------------
Except as set forth in Schedule 5.17: (i) the Real Property is free of
-------------
contamination from any Hazardous Material except for such contamination that
would not materially adversely impact the value or marketability of such Real
Property; (ii) neither the Company nor any of its Subsidiaries has caused or
suffered to occur any Release of Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Property that would give rise to any material
liability for corrective or remedial action under any Environmental Laws except
in each case to the extent that the failure to do so would not be a Material
Adverse Event; (iii) the Company and each of its Subsidiaries are and have been
in compliance with all Environmental Laws, except in each case to the extent
that the failure to do so would not be a Material Adverse Event; (iv) the
Company and each of its Subsidiaries have obtained, and are in compliance with,
all Environmental Permits required by Environmental Laws for the operations of
their respective businesses, except in each case to the extent that the failure
to do so would not be a Material Adverse Event, and all such Environmental
Permits are valid, uncontested and in good standing; (v) Neither the Company nor
any of its Subsidiaries is involved in operations
15
<PAGE>
or knows of any facts, circumstances or conditions, including, without
limitation, any generation, use, treatment, storage, disposal, handling, other
management or Release of Hazardous Materials, that are reasonably likely to
result in any material Environmental Liabilities of the Company or such
Subsidiary, and, to the knowledge of the Company, neither the Company nor any of
its Subsidiaries has permitted any current or former tenant or occupant of the
Real Property to engage in any such operations; (vi) there is no litigation
against the Company or any of its Subsidiaries arising under or related to any
Environmental Laws, Environmental Permits or Hazardous Material; (vii) no
written notice has been received by the Company or any of its Subsidiaries
identifying it as a "potentially responsible party" or requesting information
under CERCLA or analogous state statutes in respect of any actual or potential
Environmental Liabilities and, to the knowledge of the Company, there are no
facts, circumstances or conditions that may result in the Company or any of its
Subsidiaries being identified as a "potentially responsible party" under CERCLA
or analogous state statutes; (viii) the Company and each of its Subsidiaries
have provided to Purchasers copies of all existing environmental reports,
reviews and audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to the Company or any of its
Subsidiaries; and (ix) to the knowledge of the Company, the Real Property owned
or leased does not contain any underground storage tanks that have ever leaked;
are not registered with appropriate government officials (to the extent such
registration is required) or fail to meet any applicable legal requirement,
including, without limitation to, tightness-testing requirements.
SECTION 5.18 Insurance Policies. The certificate of insurance furnished
------------------
by the Company to Purchasers pursuant to paragraph 2 of Annex A lists all
-------
insurance of any nature maintained for current occurrences by the Company and
each of its Subsidiaries, as well as a summary of the terms of such insurance.
Such insurance complies with the standards set forth in Section 6.06.
------------
SECTION 5.19 Solvency. Both before and after giving effect to (a) the
--------
entering into by the Company of this Agreement and the other Bridge Note
Documents; (b) the Indebtedness incurred hereunder on the Closing Date; (c) the
disbursement of the proceeds of the purchase of the Bridge Notes hereunder
pursuant to the instructions of the Company; (d) the consummation of the
Refinancing and the Related Transactions; and (e) the payment and accrual of all
transaction costs in connection with the foregoing, the Company and each of its
Subsidiaries is Solvent.
SECTION 5.20 Licenses and Permits. The Company and each of its
--------------------
Subsidiaries have all licenses, permits, consents or approvals from or by, and
have made all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for the ownership of its
property and the operation and conduct of its business, including, but not
limited to: (i) licenses, certifications, approvals, and accreditations as a
provider of health care services including those necessary for it to be eligible
to receive payment and compensation and to participate under Medicare, Medicaid,
and any other federal, state, local or commercial health benefit programs
pursuant to which the Company and each of its Material Subsidiaries currently
receives reimbursement for health care items and services provided; and (ii)
licenses, certifications, approvals, and accreditations necessary to engage in
activities deemed to be the "business of insurance" and to engage in utilization
review activities under applicable State law; except in each case to the extent
that a failure to have such licenses, permits, consents, approvals, certificates
or accreditation from, to have made such filings
16
<PAGE>
with, or to have given such notices to, any such Governmental Authority would
not be a Material Adverse Event with respect to the Company or any Material
Subsidiary.
SECTION 5.21 Compliance with Law. The Company and each of its
-------------------
Subsidiaries is in compliance with all applicable laws relating to its business,
including, but not limited to: (i) all applicable requirements for participation
in and for the receipt of reimbursement under Medicare, Medicaid, and any other
federal, state, local or commercial health benefit program pursuant to which the
Company and each of its Subsidiaries currently receives reimbursement for health
care items and services; (ii) all State laws relating to the "business of
insurance" and utilization review activities in any State in which the Company
and each of its Subsidiaries engages in such business and/or activities; (iii)
all State laws relating to the provision of inpatient psychiatric services and
residential behavioral treatment programs, including, but not limited to, laws
relating to the marketing of psychiatric services, patient referral services,
involuntary admissions, patient rights, and the confidentiality of patient
medical records; except in each case to the extent that a failure to be in
compliance would not be a Material Adverse Event with respect to the Company or
any Material Subsidiary.
SECTION 5.22 Health Care Professionals. To the knowledge of the Company,
-------------------------
all health care professionals who are employees or independent contractors of
the Company or any of its Subsidiaries have obtained all licenses, permits,
certifications, accreditations or approvals necessary to practice the
professions in which such employees or independent contractors are engaged, and
are otherwise in compliance with all State licensing laws relating to the
practice of such professions, and, as applicable, are in compliance with all
requirements for participation in and for the receipt of reimbursement under
Medicare, Medicaid and any federal, state, local or commercial health benefit
program pursuant to which the Company and each of its Subsidiaries currently
receives reimbursement for health care items and services, except in each case
to the extent that a failure to obtain such licenses, permits, certifications,
accreditations or approvals, or to be in compliance with such laws and
requirements would not be a Material Adverse Event with respect to the Company
or any Material Subsidiary.
SECTION 5.23 Management Agreements. None of the Management Agreements
---------------------
to which the Company or any Material Subsidiary is a party, nor any of the
transactions contemplated thereunder, violates any applicable statute, rule or
regulation (i) relating to the eligibility of a Managed Facility to receive
payment and to participate as an accredited and certified provider of health
care services under Medicare, Medicaid or any other federal, state, local or
commercial health benefit program pursuant to which such Managed Facility
currently receives reimbursement for health care items and services, or
applicable to such Managed Facility as a result of its participation in such
programs; (ii) relating to the licenses and permits required in connection
therewith; or (iii) relating to the practice of any health care profession or
the sharing of fees generated in connection therewith; except in each case to
the extent that such violation would not be a Material Adverse Event for the
Company or such Material Subsidiary.
SECTION 5.24 Patient Referrals, Etc. The Company and each of its
-----------------------
Subsidiaries, and any business arrangement with physicians, other health care
professionals, and institutional health care
17
<PAGE>
providers involving the Company and any of its Subsidiaries, are in compliance
with all federal and state laws that prohibit direct or indirect payments for
patient referrals, that prohibit referrals to an entity with which the referring
provider has a financial relationship, and that regulate procedures and
practices with respect to reimbursement, cost reports, claims for reimbursement,
and billing for items and services under Medicare, Medicaid and other federal,
state, and local health benefit programs, as well as with regard to commercial
payors, including, but not limited to, the Ethics in Patient Referrals Act of
1989, 42 U.S.C. (S) 1395nn, as amended, the Medicare and Medicaid Patient and
Program Protection Act of 1987, 42 U.S.C. (S) 1320-7b(b), as amended, and the
relevant provisions of the Health Insurance Portability and Accountability Act
of 1996, except in each case to the extent that a failure to be in compliance
with such laws would not be a Material Adverse Event with respect to the Company
or any Material Subsidiary.
SECTION 5.25 Pending Revocations, Etc. Neither the Company nor any of
-------------------------
its Subsidiaries has received notification from any Governmental Authority that
any such Governmental Authority has taken or intends to take action to revoke,
terminate, restrict or cancel any license, certificate, certification or permit
of the Company or any of its Subsidiaries to engage in the practice of any
health care profession, to provide any health care service, to operate a health
care facility, program or service or to participate under Medicare, Medicaid or
any other federal, state, or local health benefit program, except in each case
to the extent that any such revocation, termination, restriction or
cancellation, singly or in the aggregate, would not be a Material Adverse Event
with respect to the Company or any Material Subsidiary.
SECTION 5.26 Investigations and Audits. Neither the Company nor any of
-------------------------
its Subsidiaries has received notice of any pending investigation by JCAHO, HCFA
or any other Governmental Authority (which investigation is not otherwise
conducted in the ordinary course of business) or of any pending criminal, civil
or administrative action, audit or investigation by a fiscal intermediary or by
or on behalf of HCFA or any other Governmental Authority (which action, audit or
investigation is of a criminal nature or is otherwise not conducted in the
ordinary course of business) and, to the knowledge of the Company, no such
action, audit or investigation is threatened with respect to the Company or any
of its Subsidiaries, except in each case to the extent that any such action,
audit or investigation (i) could not reasonably be expected materially and
adversely to affect the Company's or any Material Subsidiary's right to receive
reimbursement under, or right to participate in, Medicare, Medicaid or any other
federal, state, or local health benefit program to which such Person would
otherwise be entitled, and (ii) would not otherwise be a Material Adverse Event
with respect to the Company or any Material Subsidiary.
SECTION 5.27 Payment Adjustments. With respect to any audit by
-------------------
Medicare, Medicaid, or any other federal, state, local or commercial third party
payor pending with respect to the Company or any of its Subsidiaries, neither
the Company nor any of its Subsidiaries has received notice of any requests or
assertions of adjustments or claims for repayment by it of costs and/or payments
previously made to it by any third party payor and, to the knowledge of the
Company, none of such audits provides for any such adjustments or claims, except
in each case to the extent that any such adjustments or claims, individually or
in the aggregate, would not be a Material Adverse Event with respect to the
Company or any Material Subsidiary.
18
<PAGE>
SECTION 5.28 Certain Agreements. The Company has provided to Purchasers
------------------
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject: (a) licenses and permits held by the
Company or any Material Subsidiary, except in each case to the extent that the
failure to hold such license or permit would not be a Material Adverse Event
with respect to the Company or such Material Subsidiary (including agreements,
accreditations or certifications as a provider of health care services eligible
to receive payment and compensation and to participate under Medicare, Medicaid
or any other federal, state, local or commercial health benefit program); and
(b) all Management Agreements to which it or any Material Subsidiary is or is to
become a party.
SECTION 5.29 Related Transaction Documents The Company has delivered to
-----------------------------
the Purchasers a complete and correct copy of each of the Related Transaction
Documents (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith), and neither the Company nor any of its Subsidiaries
and, to the knowledge of the Company, no other Person party thereto is in
default in the performance or compliance with any provisions thereof. Each of
the Related Transaction Documents complies with, and the Related Transactions
have been consummated in accordance with, all applicable laws. Each of the
Related Transaction Documents is in full force and effect, and has not been
terminated, rescinded or withdrawn. All requisite approvals by Governmental
Authorities having jurisdiction over the Company, any of its Subsidiaries and,
to the knowledge of the Company, other Persons referenced therein, with respect
to the Related Transactions, have been obtained, and no such approvals impose
any conditions to the consummation of the Related Transactions or to the conduct
by the Company or any of its Subsidiaries of its business thereafter. Each of
the representations and warranties made by the Company in the Related
Transaction Documents is true and correct in all material respects.
SECTION 5.30 Authorized and Outstanding Shares of Capital Stock. After
--------------------------------------------------
giving effect to the issuance of the Series 1997 Preferred Stock pursuant to the
Preferred Stock Purchase Agreement, as of the Closing Date the authorized
capital stock of the Company consists of 21,800,000 shares, of which (a)
20,000,000 shares consist of Common Stock, 10,586,122 of which are issued and
outstanding; (b) 800,000 shares consist of Class A Preferred Stock, par value
$1.00 per share, none of which are issued and outstanding; and (c) 1,000,000
shares consist of Class B Preferred Stock, par value $1.00 per share ("Class B
-------
Preferred Stock"), 152,231 shares of which have been authorized and designated
- ---------------
as "Series C," 142,486 of which are issued and outstanding; 100,000 shares of
which have been authorized and designated as "Series 1996," all of which are
issued and outstanding; 100,000 shares of which have been authorized and
designated as "Series 1997," all of which are issued and outstanding; and 4,000
shares of which have been authorized and designated as "Series 1997-A," all of
which are issued and outstanding. Except for warrants issuable under the Summa
Merger Agreement and except as set forth on Schedule 5.30, (i) no Options or
-------------
Convertible Securities are authorized or outstanding, and (ii) there is no
commitment of the Company to issue any such Options or Convertible Securities.
19
<PAGE>
ARTICLE 6
AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees (for itself and its Subsidiaries) that,
unless the Required Holders shall otherwise consent in writing, from and after
the date hereof and until the Maturity Date:
SECTION 6.01 Reports and Notices. The Company shall deliver to the
-------------------
Holders the Financial Statements, projections, certificates and notices at the
times and in the manner set forth in Annex B.
-------
SECTION 6.02 Maintenance of Existence and Conduct of Business. The
------------------------------------------------
Company shall (and shall cause each of its Subsidiaries, other than Inactive
Subsidiaries, to): (a) except in the case of a Subsidiary that is permitted to
merge out of existence pursuant to Section 7.02, do or cause to be done all
------------
things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; and (c) at
all times maintain, preserve and protect all of its Intellectual Property
material to the conduct of its business, and preserve all the remainder of its
Property material to the conduct of its business, and keep the same in good
repair, working order and condition (taking into consideration ordinary wear and
tear).
SECTION 6.03 Payment of Charges and Claims. The Company shall (and
-----------------------------
shall cause each of its Subsidiaries to) pay and discharge, or cause to be paid
and discharged in accordance with the terms thereof, (a) all Charges imposed
upon it or any such Subsidiary or its or their income and profits, or any of its
Property (real, personal or mixed), and (b) all lawful claims for labor,
materials, supplies and services or otherwise, which if unpaid by law become a
Lien on its Property; provided, that the Company or any such Subsidiary shall
--------
not be required to pay any such Charge or claim which is being contested in good
faith by proper legal actions or proceedings, so long as at the time of
commencement of any such action or proceeding and during the pendency thereof
(i) no Default or Event of Default shall have occurred and be continuing, (ii)
adequate reserves with respect thereto are established and are maintained in
accordance with GAAP, (iii) such contest operates to suspend collection of the
contested Charges or claims and is maintained and prosecuted continuously with
dili gence, and (iv) the Company shall promptly pay or discharge such contested
Charges and all additional charges, interest penalties and expenses, if any, if
such contest is terminated or discontinued adversely to the Company.
SECTION 6.04 Books and Records. The Company shall (and shall cause each
-----------------
of its Subsidiaries to) keep adequate records and books of account with respect
to its business activities, in which proper entries, reflecting all of its
consolidated and consolidating financial transactions, are made in accordance
with GAAP and on a basis consistent with the 1997 Audited Financial Statements.
SECTION 6.05 Litigation. The Company shall notify the Holders in
----------
writing, promptly upon learning thereof, of any litigation, suit, administrative
proceeding or other action commenced
20
<PAGE>
or threatened in writing against the Company or any Subsidiary of the Company,
which (a) involves an amount in excess of $1,000,000, or (b) would be a Material
Adverse Event if adversely determined.
SECTION 6.06 Insurance. The Company shall, at its sole cost and
---------
expense, maintain or cause to be maintained for itself and each of its
Subsidiaries with financially sound and reputable insurers, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar businesses and similarly situated, and of such types and in
such amounts as are customarily carried under similar circumstances by such
other corporations (it being understood that the maintenance of all insurance
required by the Senior Credit Documents shall be deemed to satisfy the foregoing
requirement). The Company will, and will cause each of the Subsidiaries to,
furnish to the Holder, upon the request of the Required Holders, information as
to the insurance carried.
SECTION 6.07 Compliance with Laws. The Company shall (and shall cause
--------------------
each of its Subsidiaries to) comply with all federal, state and local laws,
permits and regulations applicable to it, including those relating to health
care; health care licensing, permits and accreditation; ERISA and labor matters;
and the filing of tax returns and payment of taxes (including, without
limitation, the withholding, collection, payment and deposit of employees'
income, unemployment and Social Security taxes), except in each case to the
extent that a failure to so comply with any laws, permits and regulations
relating to health care and to health care licensing, permits and accreditation
would not be a Material Adverse Event with respect to the Company or any
Material Subsidiary, and to the extent that a failure to so comply with any
other laws, permits and regulations would not be a Material Adverse Event.
SECTION 6.08 Environmental Matters. The Company shall, and shall cause
---------------------
each of its Subsidiaries and each other Person leasing, occupying or operating
any of the Real Property (to the extent that any such other Person is within its
control) to: (a) conduct its operations and keep and maintain its Real Property
in compliance with all Environmental Laws and Environmental Permits except in
each case to the extent that any such noncompliance would not be a Material
Adverse Event; (b) implement any and all investigation, remediation, removal and
response actions which are reasonably necessary to comply with Environmental
Laws and Environmental Permits pertaining to the presence, generation,
treatment, storage, use, disposal, transportation or Release of any Hazardous
Material on, at, in, under, above, to, from or about any of its Real Property
and (c) notify the Designated Holder promptly after the Company becomes aware of
any violation of Environmental Laws or Environmental Permits or any Release on,
at, in, under, above, to, from or about any Real Property which is reasonably
likely to result in Environmental Liabilities in excess of $1,000,000.
SECTION 6.09 Application of Proceeds. The Company shall use the
-----------------------
proceeds of the Bridge Notes as provided in Section 1.03.
------------
SECTION 6.10 Fiscal Year. The Company shall (and shall cause each of
-----------
its Subsidiaries to) maintain as its fiscal year the twelve month accounting
period ending on June 30 of each year.
SECTION 6.11 Redemption of Bonds. The Company shall:
-------------------
21
<PAGE>
(a) not later than October 1, 1997, call for redemption on November 3, 1997
the Greenbrier Bonds and the Gulf Coast Bonds, and not later than October 31,
1997, call for redemption on December 1, 1997 the Coastal Carolina Bonds, in
each case in accordance with the procedures set forth in the Greenbrier
Indenture, the Gulf Coast Indenture and the Coastal Carolina Indenture,
respectively; and
(b) not later than November 7, 1997, cause to be redeemed the Greenbrier
Bonds and the Gulf Coast Bonds, and not later than December 5, 1997, cause to be
redeemed the Coastal Carolina Bonds, in each case by a drawing on the
appropriate SocGen Letter of Credit and in accordance with the procedures set
forth in the Greenbrier Indenture, the Gulf Coast Indenture and the Coastal
Carolina Indenture, respectively.
SECTION 6.12 Permits, Etc. The Company shall (and shall cause each of
-------------
its Subsidiaries, other than Inactive Subsidiaries, to) (i) obtain and maintain
all permits, licenses, certifications, accreditations, and other approvals as
may be necessary for the operation of the business of the Company and each of
its Material Subsidiaries under applicable law, except in each case to the
extent that a failure to obtain or maintain any of such permits, licenses,
certifications, accreditations or other approvals would not be a Material
Adverse Event, and (ii) obtain and maintain its qualification for participation
in and the receipt of reimbursement under Medicare, Medicaid and any other
federal, state or local governmental health benefit program or commercial health
benefit program providing for payment or reimbursement for services rendered by
such Person, as applicable, except to the extent that the loss or relinquishment
of such qualification does not constitute a Material Adverse Event with respect
to the Company or any Material Subsidiary. The Company will promptly furnish or
cause to be furnished to the Holders copies of all reports and correspondence it
or any of its Material Subsidiaries sends or receives relating to any loss or
revocation (or threatened loss or revocation) of any material permit, license,
certification, accreditation, approval or qualification required to be
maintained pursuant to this Section 6.12.
------------
SECTION 6.13 Further Assurances. The Company agrees, at its expense and
------------------
upon the reasonable request of the Required Holders, to duly execute and
deliver, or cause to be duly executed and delivered, to the Holders such further
instruments and do and cause to be done such further acts as may be necessary or
desirable in the reasonable opinion of the Required Holders to carry out more
effectually the provisions and purposes of this Agreement or any other Bridge
Note Document.
ARTICLE 7
NEGATIVE COVENANTS
The Company covenants and agrees (for itself and its Subsidiaries) that,
unless the Required Holders shall otherwise consent in writing, from and after
the date hereof and until the Maturity Date:
SECTION 7.01 Acquisitions. The Company will not, and will not permit
------------
any of its Subsidiaries to, make any Acquisition, except that the Company and
its Subsidiaries may make
22
<PAGE>
Acquisitions of any assets or Person (the "Target") (in each case a "Permitted
------ ---------
Acquisition"), subject to the satisfaction of each of the following conditions:
- -----------
(a) such Permitted Acquisition shall be consensual and shall have been
approved by the Target's board of directors, if a corporation, and otherwise by
such other body or Person as shall have the necessary authority to so approve;
(b) the aggregate consideration paid by the Company or any of its
Subsidiaries in respect of such Permitted Acquisition, including (i) the cash
consideration paid by the Company or any of its Subsidiaries in respect of such
Permitted Acquisition, (ii) the principal amount of any Indebtedness incurred by
the Company or any of its Subsidiaries in connection with such Permitted
Acquisition (without duplication as to any Indebtedness incurred to fund any of
the cash consideration included in clause (i), and excluding any "earn out"
obligation to the extent that such obligation is not required to be reflected as
a liability on the consolidated balance sheet of the Company in accordance with
GAAP, (iii) the amount of any Indebtedness of the Target that, immediately after
the consummation of such Permitted Acquisition, would be reflected on a
consolidated balance sheet of the Company in accordance with GAAP, (iv) the
amount of the Target's working capital deficit (i.e., the excess, if any, of the
----
Target's current liabilities (excluding the current portion of long term debt)
over its current assets) that, immediately after the consummation of such
Permitted Acquisition, would be reflected on a consolidated balance sheet of the
Company in accordance with GAAP, and (v) the value of any Stock issued by the
Company in connection with such Permitted Acquisition, shall not exceed
$15,000,000 with respect to each Permitted Acquisition.
(c) at the time of such Permitted Acquisition, no Default or Event of
Default shall have occurred and be continuing or would result therefrom;
(d) such Permitted Acquisition shall be permitted under the terms of the
Senior Credit Agreement;
(e) the Target shall not have incurred an operating loss for the trailing
twelve-month period preceding the date of the Permitted Acquisition, as
determined based upon the Target's financial statements for its most recently
completed fiscal year and its most recent interim financial period completed
within sixty (60) days prior to the date of consummation of such Permitted
Acquisition;
(f) the Company shall have performed a review of the financial statements
of the Target and shall have determined that such financial statements present
fairly in all material respects the financial position and results of operations
of the Target as of the dates and for the periods covered by such financial
statements;
(g) the Company shall have performed a due diligence review of the Target
in a prudent manner and, based on such review, shall have determined that there
is no regulatory or other issue in respect of the Target that could reasonably
be expected materially and adversely to affect the ongoing operations of the
Target;
23
<PAGE>
(h) the Company shall have delivered to the Holders not less than 15 days
prior to the consummation of the Permitted Acquisition:
(i) a certificate of a Responsible Financial Officer of the
Company to the effect set forth in paragraphs (a)-(g) above, together
with such supporting documentation as the Required Holders shall
reasonably request;
(ii) a pro forma Compliance Certificate, as of the date and
---------
for the period covered by the most recent Compliance Certificate
required to be delivered pursuant to Annex C, prepared on a pro forma
------- ---------
basis as if (A) the Permitted Acquisition had occurred on the first day
of such period, (B) any sale or other disposition of Stock or assets
occurring after the first day of such period, but on or before the date
on which such Compliance Certificate is delivered, had occurred on the
first day of such period, (C) any Indebtedness to be incurred by the
Company or any of its Subsidiaries in connection with the Permitted
Acquisition had been incurred as of the first day of such period, and
(D) any Indebtedness to be repaid in connection with such Permitted
Acquisition had been repaid as of the first day of such period
(calculated on the basis set forth in Section 6.01(l)(v) of the Senior
------------------
Credit Agreement, as in effect on the Closing Date);
(iii) a certificate of a Responsible Financial Officer of the
Company to the effect that: (1) the Company or its Subsidiary effecting
the proposed Permitted Acquisition will be Solvent upon the
consummation of the Permitted Acquisition; (2) the Company's average
daily Excess Borrowing Availability under the Senior Credit Agreement
for the most recent month-end for which the Company is required to
deliver a Borrowing Base Certificate under the Senior Credit Agreement
would have exceeded $2,000,000 on a pro forma basis (calculated on the
---------
basis set forth in Section 6.01(l)(v) of the Senior Credit Agreement,
------------------
as in effect on the Closing Date) and such Excess Borrowing
Availability of $2,000,000 (calculated on the same basis) shall
continue through and including the date of consummation of such
Permitted Acquisition; and (3) based on the Compliance Certificate most
recently delivered pursuant to Annex B and the pro forma Compliance
---------
Certificate delivered pursuant to clause (ii) above, the Company will
be in compliance with the financial covenants set forth in Annex C
-------
after giving effect to the Permitted Acquisition;
provided, however, that the Company may consummate the proposed Acquisition of
- -------- -------
Summa Health Care Group, Inc., substantially on the terms and conditions set
forth in the Summa Merger Agreement, without regard to the foregoing provisions
of this Section 7.01 other than those set forth in paragraphs (c) and (d) above.
------------
SECTION 7.02 Mergers, Etc. The Company shall not (nor permit any of its
------------
Subsidiaries to), directly or indirectly, by operation of law or otherwise merge
with, consolidate with, or otherwise combine with, any Person, other than (i) a
merger effecting a Permitted Acquisition, (ii) a merger effecting a disposition
of Stock permitted by Section 7.07, (iii) a merger or consolidation between or
------------
among any of the Company's Subsidiaries (other than RMCI), or (iv) a merger or
consolidation
24
<PAGE>
between the Company and any of its Subsidiaries (other than RMCI) in which the
Company is the surviving entity.
SECTION 7.03 Investments. The Company shall not (nor permit any of its
-----------
Subsidiaries to), directly or indirectly, make or maintain any Investment
except: (a) Cash Equivalents; (b) time deposits maturing no more than 30 days
from the date of creation thereof with a Senior Lender or A-rated banks; (c)
Investments in Gulf Coast Treatment Center and wholly-owned Subsidiaries of the
Company (limited, in the case of loans to RMCI, to the extent set forth in
Section 7.05(c)); (d) Investments in other Subsidiaries of the Company to the
- ---------------
extent outstanding on the Closing Date and, in the case of TCV, other
Investments to the extent set forth in Section 7.05(d); (e) Investments in
---------------
Permitted Joint Ventures (other than TCV) not to exceed $1,000,000 in the
aggregate at any time outstanding; (f) Practice Guarantees (evidenced by written
agreements), provided that the aggregate outstanding amount of Practice
Guarantees and commitments to give Practice Guarantees shall not at any time
exceed $1,000,000; (g) extensions of credit to patients, evidenced by accounts
receivable for services rendered, made in the ordinary course of business and
consistent with past practice; (h) other Investments outstanding on the date
hereof and listed in Schedule 7.03; (i) the purchase by the Company or any
-------------
Subsidiary of the Company of Stock of any Subsidiary of the Company that is not
directly or indirectly wholly-owned by the Company on the Closing Date, provided
--------
that the aggregate amount paid by the Company and its Subsidiaries for such
Stock shall not exceed $2,000,000 in the aggregate; and (j) other Investments
not exceeding $1,000,000 in the aggregate made during any Fiscal Year.
SECTION 7.04 Indebtedness. The Company shall not (nor permit any of its
------------
Subsidiaries to) create, incur or assume any Indebtedness (including Guaranteed
Indebtedness) unless the creation, incurrence or assumption of such Indebtedness
would not cause the Leverage Ratio to exceed 4.00:1.00, determined on a pro
---
forma basis for the Rolling Four-Quarter Period ending on the last day of the
- -----
most recent Fiscal Quarter for which a Compliance Certificate is required to be
furnished to the Holders pursuant to Annex B hereof, calculated as if such
-------
Indebtedness had been created, incurred or assumed on the first day of such
period.
SECTION 7.05 Affiliate and Employee Loans and Transactions. The Company
---------------------------------------------
shall not (nor permit any of its Subsidiaries to) enter into any lending,
borrowing or other commercial transaction with, or make any payments or
transfers of funds or assets (including payment of any management, consulting,
advisory or similar fee) to, or issue any shares of the Company's Stock, or any
warrant, option or other right to acquire shares of the Company's Stock, or any
securities convertible into the Company's Stock, to, any of its Affiliates;
provided, that (a) the Company may borrow money from Ramsay Affiliates, provided
- --------
that the Indebtedness owed to any such Ramsay Affiliate is Subordinated
Indebtedness meeting the requirements of the Senior Credit Agreement, and repay
such Subordinated Indebtedness in accordance with the terms thereof (including
the subordination provisions); (b) the Company and its Subsidiaries may engage
in commercial transactions (including transfers of assets and lending or
borrowing transactions) between or among the Company and its Subsidiaries (other
than Permitted Joint Ventures and RMCI); (c) the Company and its Subsidiaries
may engage in lending or borrowing transactions with RMCI provided that, prior
to the Revolving Credit Commitment Adjustment Date, such transactions do not
cause the
25
<PAGE>
intercompany accounts due to the Company from RMCI to exceed $14,500,000 at any
time; (d) the Company and its Subsidiaries may engage in lending or borrowing
transactions with TCV to the extent that such transactions do not cause the
intercompany account due to the Company from TCV to exceed $10,100,000 at any
time; (e) the Company and its Subsidiaries may make Investments in Permitted
Joint Ventures to the extent permitted by Section 7.03(e) and, additionally, may
provide legal, accounting, insurance and other shared services to the Permitted
Joint Ventures of the types provided on the Closing Date and may lease Real
Property to the Permitted Joint Ventures, all on terms that are no less
favorable to the Company and its Subsidiaries than might be obtained in an
arm's-length transaction from a Person that is not an Affiliate of the Company
or such Subsidiary; (f) the Permitted Joint Ventures may engage in commercial
transactions with their Subsidiaries on terms that are no less favorable to the
Permitted Joint Ventures than might be obtained in an arm's-length transaction
from a Person that is not an Affiliate of such Permitted Joint Venture; (g) the
Company and its Subsidiaries may extend loans to their respective officers,
directors and employees in a maximum aggregate principal amount outstanding at
any time for all officers, directors and employees of $1,000,000, other than
loans to officers or directors to whom any other amount is due by the Company or
any of its Subsidiaries that is not permitted to be paid to such officer or
director by virtue of this Section 7.05, unless such loan is for a business
------------
purpose of the Company or such Subsidiary that is unrelated to the circumstances
of the other amount due to such officer or director; (h) the Company may issue
shares of the Company's Stock, or any warrant, option or other right to acquire
shares of the Company's Stock, or any security convertible into the Company's
Stock, to any Affiliate on terms that are no less favorable to the Company than
might be obtained in an arm's-length transaction from a Person that is not an
Affiliate of the Company; (i) the Company and its Subsidiaries may make
Restricted Payments to the extent permitted under Section 7.12; (j) the Company
------------
and its Subsidiaries may pay salary and wages and provide stock options and
other executive compensation to its executive officers, to the extent approved
by the Company's Board of Directors or the compensation committee thereof; (k)
the Company may pay reasonable and customary directors' fees to its directors;
(l) the Company and its Subsidiaries may pay reasonable legal fees and
reasonable out-of-pocket expenses to Haythe & Curley for services rendered;
(m) RMCI may pay $50,000 of the sums due to Peter J. Evans referenced in
paragraph 12 of Schedule 7.05 at any time and may pay the balance of the sums
-------------
due to Peter J. Evans and the sums due to Luis E. Lamella referenced in
paragraph 12 of Schedule 7.05 after the Revolving Credit Commitment Adjustment
-------------
Date; and (n) the Comany and Ramsay Acquisition Corp. may consummate the
transactions contemplated by the Summa Merger Agreement. Set forth in Schedule
7.05 is a list of all such lending, borrowing or other transactions with
Affiliates as of the Closing Date.
SECTION 7.06 Liens. The Company shall not (nor permit any of its
-----
Subsidiaries to) create or permit to exist any Lien on any of its properties or
assets except for: (a) presently existing or hereafter created Liens in favor of
the Senior Agent or the Senior Lenders to secure the Senior Obligations; (b)
Liens set forth in Schedule 7.06 existing on the Closing Date; (c) Permitted
-------------
Encumbrances; (d) other Liens securing Indebtedness not to exceed $5,000,000 in
the aggregate at any time outstanding; and (e) extensions and renewals of Liens
referred to in paragraphs (b) and (d) above, provided that any such extension or
renewal Lien is limited to the property or assets covered by the Lien extended
or renewed and does not secure Indebtedness in an amount greater than the amount
of the outstanding Indebtedness secured thereby immediately prior to such
extension, renewal or replacement.
26
<PAGE>
SECTION 7.07 Sale of Stock and Assets. The Company shall not (nor permit
------------------------
any of its Subsidiaries to) sell, transfer, convey, assign or otherwise dispose
of any of its properties or other assets, including the capital Stock of any of
their respective Subsidiaries (whether in a public or a private offering or
otherwise) or any of their Accounts, other than the following:
(a) the sale of Meadowlake Hospital on the terms of the purchase
option set forth in the Lease Agreement, dated as of August 1, 1997, by and
between HSA and Baptist Healthcare of Oklahoma, Inc.;
(b) the sale of Three Rivers Hospital or the Stock of Ramsay
Louisiana, Inc;
(c) the sale of other properties or assets (including the capital
Stock of any of their respective Subsidiaries) having a book value of not more
than ten percent (10%) of the book value of the Company's consolidated assets as
to each such sale or other disposition, determined as of the time of such
disposition, or in excess of twenty percent (20%) of the book value of the
Company's consolidated assets, in the aggregate as to all such sales or other
dispositions, determined as of the date of the last such disposition;
(d) the sale or other disposition of Investments; and
(e) transfers of assets among the Company and its Subsidiaries,
lending and borrowing transactions specifically permitted by Section 7.05(b),
---------------
(c) and (d) and Restricted Payments specifically permitted by Section 7.12.
- --- --- ------------
SECTION 7.08 Material Contracts. The Company shall not (nor permit any of
------------------
its Subsidiaries to) enter into, cancel or terminate any Material Contract or
amend or otherwise modify any Material Contract if any of the foregoing actions
would be a Material Adverse Event.
SECTION 7.09 ERISA. Neither the Company nor any of its Subsidiaries nor
-----
any ERISA Affiliate shall acquire any new ERISA Affiliate that maintains or has
an obligation to contribute to a Pension Plan that has either an "accumulated
funding deficiency," as defined in Section 302 of ERISA, or any "unfunded vested
benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case of any
Pension Plan other than a Multi-employer Plan and in Section 4211 of ERISA in
the case of a Multi-employer Plan if such acquisition would be a Material
Adverse Event. Additionally, neither the Company nor any of its Subsidiaries
nor any ERISA Affiliate shall, to the extent that any of the following actions
would be a Material Adverse Event: (a) permit or suffer any condition set forth
in Schedule 5.12 to cease to be met and satisfied at any time; (b) terminate any
-------------
Pension Plan that is subject to Title IV of ERISA where such termination could
reasonably be anticipated to result in liability to the Company or such
Subsidiary; (c) permit any accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, to be incurred with respect to any Pension Plan; fail to
make any contributions or fail to pay any amounts due and owing as required by
the terms of any Plan before such contributions or amounts become delinquent; or
(d) make a complete or partial withdrawal (within the meaning of Section 4201 of
ERISA) from any Multi-employer Plan.
27
<PAGE>
SECTION 7.10 Financial Covenants. The Company shall not breach or fail to
-------------------
comply with any of the financial covenants set forth in Annex C, each of which
-------
shall be calculated in accordance with Annex C (and based upon the Financial
-------
Statements delivered hereunder).
SECTION 7.11 Sale Lease-backs. The Company shall not (nor permit any of
----------------
its Subsidiaries to) enter into any sale-leaseback or similar transaction
involving any of its property or assets if such transaction would cause the
Company to be in violation of any of the financial covenants set forth in Annex
-----
C, for the Rolling Four-Quarter Period ending on the last day of the most recent
- -
Fiscal Quarter for which a Compliance Certificate is required to be furnished to
the Holders pursuant to Annex B hereof, calculated as if such transaction had
-------
occurred on the first day of such period.
SECTION 7.12 Restricted Payments. The Company shall not (nor permit any of
-------------------
its Subsidiaries to) make any Restricted Payment to any Person, except that (a)
the Company may pay dividends on its Series 1997 Preferred Stock and, after the
Revolving Credit Commitment Adjustment Date, on any other class of its preferred
stock provided that (i) the Company's Fixed Charge Coverage Ratio would not be
less than 1.25:1.00, determined on a pro forma basis for the most recent Rolling
---------
Four-Quarter Period for which the Company is required to deliver a Compliance
Certificate to the Holders pursuant to Annex B hereof, based on the Company's
-------
actual Fixed Charge Coverage Ratio as set forth therein, but calculated as if
such dividends were included in Fixed Charges for the purpose of such
computation (or, if the Company has delivered to the Senior Agent a pro forma
---------
Compliance Certificate for such period pursuant to Section 6.01(l)(iii) of the
Senior Credit Agreement (as in effect on the Closing Date), based on the
Company's pro forma Fixed Charge Coverage Ratio as set forth therein but
---------
calculated as if such dividends were included in pro forma Fixed Charges for
---------
such period for the purpose of such computation), (ii) no Default or Event of
Default exists or would be caused by such payment, and (iii) such payment is
otherwise permitted by law; (b) the Company may redeem its Series 1997-A
Preferred Stock at any time after the Revolving Credit Commitment Adjustment
Date, provided that (i) no Default or Event of Default exists or would be caused
by such redemption, and (ii) such redemption is otherwise permitted by law; (c)
any Subsidiary of the Company may pay cash dividends (or, in the case of a
Subsidiary that is a partnership or limited liability company, cash
distributions) (i) to the Company or to another Subsidiary of the Company and
(ii) to any other Person holding such Subsidiary's Stock, provided that any such
dividends or distributions are paid on a basis which is pro rata to all Persons
--------
holding such Stock (including the Company or a Subsidiary, as applicable); and
(d) the Company may repurchase Stock of the Company from former employees of the
Company or its Subsidiaries for amounts not to exceed $500,000 in the aggregate
during the term of this Agreement.
SECTION 7.13 Margin Regulations. The Company shall not use the proceeds of
------------------
the Bridge Notes to purchase or carry any Margin Stock or any equity security of
a class which is registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
SECTION 7.14 Limitation on Dividend Restrictions, Etc. The Company shall
----------------------------------------
not (nor permit any of its Subsidiaries to), directly or indirectly, enter into
any agreement with any Person which directly or indirectly restricts, prohibits
or requires the consent of any Person with respect to
28
<PAGE>
the payment of dividends or distributions or the making or repayment of
intercompany loans by a Subsidiary of the Company to the Company.
SECTION 7.15 Accounting Changes. The Company shall not make any
------------------
significant change in accounting treatment and reporting practices except for
changes concurred in by the Company's independent public accountants.
SECTION 7.16 Changes Relating to Senior Indebtedness. The Company shall
---------------------------------------
not change or amend the terms of the Senior Credit Agreement, the Senior Credit
Documents or the Senior Indebtedness if the effect thereof would be to cause the
principal amount of Senior Indebtedness outstanding or committed at any time to
exceed $55,000,000.
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
SECTION 8.01 Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
-----
of Default" hereunder:
- ----------
(a) the Company (i) fails to make any payment or prepayment of
principal of the Bridge Notes when due and payable, (ii) fails to make any
payment of the Contingent Payment Amount when due and payable, (iii) fails to
make any payment of interest on the Bridge Notes or any of the other Bridge Note
Obligations when due and payable and such failure shall remain unremedied for
more than five (5) Business Days, or (iv) fails to pay or reimburse any Holder
for any expense reimbursable hereunder or under any other Bridge Note Document
within fifteen (15) Business Days following such Holder's demand for such
reimbursement or payment of expenses.
(b) The Company shall fail or neglect to perform, keep or observe any
of the provisions of Sections 1.03, 6.06, 6.09, 6.10, or 6.11, of Article 7, or
------------- ---- ---- ---- ---- ---------
of any of the provisions set forth in Annex C.
-------
(c) the Company shall fail or neglect to perform, keep or observe any
of the provisions of Section 6.01 or any provisions set forth in Annex B and the
------------ -------
same shall remain unremedied for three (3) Business Days or more after receipt
of written notice thereof from any Holder.
(d) The Company shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Bridge Note Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.01) and the same shall remain unremedied for thirty (30) days or more
- ------------
after the earlier of (i) receipt of written notice thereof from any Holder and
(ii) the Company knows such failure or neglect.
(e) An Event of Default occurs under the Senior Credit Agreement; or a
default or breach shall occur under any other agreement, document or instrument
to which the Company or
29
<PAGE>
any of its Subsidiaries is a party which is not cured within any applicable
grace period, and such default or breach (i) involves the failure to make any
payment when due in respect of any Indebtedness (other than the Bridge Note
Obligations) of the Company or any of its Subsidiaries in excess of $5,000,000
in the aggregate, or (ii) causes, or permits any holder of such Indebtedness or
a trustee to cause, Indebtedness or a portion thereof in excess of $5,000,000 in
the aggregate to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, regardless of whether such default is
waived, or such right is exercised, by such holder or trustee.
(f) Any representation or warranty herein or in any Bridge Note
Document or in any written statement, report, financial statement or certificate
made or delivered to any Holder by the Company is untrue or incorrect in any
material respect as of the date when made or deemed made.
(g) Assets of the Company or any of its Subsidiaries with a fair
market value of $5,000,000 or more shall be attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors of the
Company or any of its Subsidiaries and such condition continues for thirty (30)
days or more.
(h) A case or proceeding shall have been commenced against the Company
or any of its Subsidiaries seeking a decree or order in respect of the Company
or such Subsidiary (i) under Title 11 of the United States Code, as now
constituted or hereafter amended or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for the
Company or any of its Subsidiaries or of any substantial part of any of the
Company's or such Subsidiary's assets, or (iii) ordering the winding-up or
liquidation of the affairs of the Company or such Subsidiary, and such case or
proceeding shall remain undismissed or unstayed for sixty (60) days or more or
such court shall enter a decree or order granting the relief sought in such case
or proceeding.
(i) The Company or any of its Subsidiaries (i) shall file a petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) shall fail to contest in a timely and appropriate
manner or shall consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Company or any of its Subsidiaries or of any substantial part
of the Company's or such Subsidiary's assets, (iii) shall make an assignment for
the benefit of creditors, or (iv) shall take any corporate action in furtherance
of any of the foregoing, or (v) shall admit in writing its inability to, or
shall be generally unable to, pay its debts as such debts become due.
(j) A final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate at any time outstanding shall be rendered against
the Company or any of its Subsidiaries unless such judgment or judgments shall,
within thirty (30) days after the entry thereof, have been discharged or
execution thereof stayed or bonded pending appeal, or shall have been discharged
prior to the expiration of any such stay.
30
<PAGE>
(k) Any material provision of any Bridge Note Document shall for any
reason cease to be valid, binding and enforceable in accordance with its terms
(or the Company or any of its Subsidiaries shall challenge the enforceability of
any Bridge Note Document or shall assert in writing, or engage in any action or
inaction based on any such assertion, that any provision of any of the Bridge
Note Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms).
(l) Any Material Adverse Event occurs and is continuing.
SECTION 8.02 Remedies.
--------
(a) Subject to the terms and conditions of Article 9 below, if any
---------
Event of Default shall have occurred and be continuing, the Required Holders may
(i) by written notice to the Company, declare all or any portion of the Bridge
Note Obligations to be forthwith due and payable, including the outstanding
principal amount of the Bridge Notes, any interest thereon and any Contingent
Payment Amount then due and payable, whereupon such Bridge Note Obligations
shall become and be due and payable; and (ii) without notice, at any time or
times, exercise any rights and remedies provided to the Holders under the Bridge
Notes and the Bridge Note Documents and/or at law or equity; provided, however,
-------- -------
that upon the occurrence of an Event of Default specified in Section 8.01(g),
---------------
(h) or (i), the Bridge Notes and Bridge Note Obligations shall become
- --- ---
immediately due and payable, in each case without declaration, notice or demand
by or to any Person.
(b) Anything in this Agreement to the contrary notwithstanding, each
Holder hereby agrees with each other Holder that no Holder shall take any action
to protect or enforce its rights arising out of this Agreement, the Bridge Notes
or the other Bridge Note Documents (including exercising any rights of set-off)
without first obtaining the prior written consent of the Required Holders, it
being the intent of Holders that any such action to protect or enforce rights
under this Agreement and the Bridge Notes shall be taken in concert and at the
direction or with the consent of the Required Holders.
SECTION 8.03 Waivers by the Company. Except as otherwise provided for in
----------------------
this Agreement and the other Bridge Note Documents, to the fullest extent
permitted by applicable law, the Company waives (a) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment and maturity of any or all
Bridge Note Documents, and (b) any bond or security which might be required by
any court prior to allowing the Holders to exercise any of their remedies. The
Company acknowledges that it has been advised by counsel of its choice with
respect to this Agreement, the other Bridge Note Documents and the transactions
contemplated by this Agreement and the other Bridge Note Documents.
31
<PAGE>
ARTICLE 9
SUBORDINATION PROVISIONS
-------------------------
SECTION 9.01 Subordination. Notwithstanding any other provision of this
-------------
Agreement or the Bridge Notes to the contrary, each Purchaser covenants and
agrees, and each subsequent Holder, by the acceptance of any Bridge Note, shall
be deemed to have covenanted and agreed, that the payment of the Bridge Note
Obligations shall be subordinate and subject in right of payment, to the extent
and in the manner hereinafter set forth, to the prior payment in full in cash of
all Senior Indebtedness. The provisions of this Article 9 shall constitute a
---------
continuing offer to all Persons who, in reliance upon such provisions, become
holders of, or continue to hold, Senior Indebtedness, and each holder of Senior
Indebtedness shall be deemed to have acquired Senior Indebtedness in reliance
upon the provisions of this Article 9.
---------
SECTION 9.02 Subordination Upon Default in Senior Indebtedness.
-------------------------------------------------
(a) In the event that:
(i) there shall occur and be continuing a Senior Payment
Default, or
(ii) there shall occur and be continuing any Senior Covenant
Default,
then no payment in cash or other property, other than a payment consisting
solely of the proceeds of any other Subordinated Indebtedness then permitted to
be incurred by the Company pursuant to the Senior Credit Documents and other
than a payment solely in Junior Securities, shall be made by the Company on
account of the Bridge Note Obligations:
(x) in case of a Senior Payment Default, unless and
until all Senior Indebtedness shall have been paid in full in
cash, such Senior Payment Default shall have been cured or waived,
or the benefits of this paragraph (a) shall have been waived in
writing by or on behalf of the Senior Lenders (or the Senior Agent
on their behalf) required to effect such a waiver, or
(y) in case of a Senior Covenant Default, for a
period (the "Blockage Period") commencing on the earlier of (A)
---------------
the date the Company and the Designated Holder of the Bridge Note
Obligations receives written notice of such Senior Covenant
Default from the Senior Lenders holding at least a majority in
outstanding principal amount of the Senior Indebtedness (or the
Senior Agent on their behalf), specifying that such notice is a
"Blockage Notice" given pursuant to this Section 9.02 (a "Blockage
------------ --------
Notice") and (B) if such Senior Covenant Default results from the
------
acceleration of the Bridge Note Obligations, the date of such
acceleration, and, in any case, ending on the earlier of (i) 179
days after such date and (ii) the date, if any, on which all
Senior Indebtedness shall have been paid in full in cash, such
Senior Covenant Default shall have been cured or waived, or the
benefits of this
32
<PAGE>
paragraph (a) shall have been waived in writing by or on behalf of
the Senior Lenders (or the Senior Agent on their behalf) required to
effect such a waiver;
provided that (A) no Senior Covenant Default which existed or was continuing on
- --------
the date of the commencement of any Blockage Period shall be, or be made, the
basis for a subsequent Blockage Notice and (B) during any 360-day period the
total number of days subject to any Blockage Period or Blockage Periods shall
not exceed 179.
(b) Immediately upon expiration of any period under this Section 9.02
------------
during which no payment may be made on account of the Bridge Note Obligations,
the Company may, subject to the provisions of paragraph (a), resume making any
payments on account of the Bridge Note Obligations (including any payments in
respect thereof missed during such period).
(c) Except as provided in Section 9.03 hereof and this Section 9.02,
------------ ------------
nothing contained in this Agreement shall prevent the Company from making at any
time payments on account of the Bridge Note Obligations required to be made
under this Agreement, the Bridge Notes, or any other document or instrument
evidencing any of the Bridge Note Obligations.
(d) The provisions of this Section 9.02 shall not modify or limit in
------------
any way the application of Section 9.03.
------------
SECTION 9.03 Subordination Upon Bankruptcy, Etc.
----------------------------------
(a) In the event of (x) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, (y) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy or (z) any assignment for the benefit of
creditors or any other marshaling of assets and liabilities of the Company
(each, an "Insolvency Proceeding"), then and in any such event:
---------------------
(i) Upon any payment or distribution of assets of the
Company to creditors of the Company, the Senior Lenders shall be
entitled to receive payment in full in cash of all obligations with
respect to the Senior Indebtedness before any Holder shall be entitled
to receive any payment in respect of the Bridge Note Obligations.
(ii) Until all Senior Indebtedness is paid in full in cash,
any distribution to which any Holder would be entitled but for this
Article 9 shall be made to the Senior Lenders, as their interests may
---------
appear; provided, however, that notwithstanding any provision of this
-------- -------
Article 9 to the contrary, each Holder may receive and retain Junior
---------
Securities.
(iii) For purposes of this Article 9, a distribution may
---------
consist of cash, securities or other property, by set-off or otherwise.
33
<PAGE>
(iv) Upon any distribution of assets of the Company, the
Holders shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction in which such Insolvency Proceeding is
pending, or a certificate of the liquidating trustee, the Senior Agent
or other Person making any distribution to such Holders, for the purpose
of ascertaining the Persons entitled to participate in such distribution
(subject in all events in the case of the Holders to the provisions of
this Section 9.03), the holders of the Senior Indebtedness, the amount
------------
thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 9.
---------
(b) If any holder of Bridge Note Obligations does not file a proper
claim or proof of debt as shall be necessary in order to have the claims of such
holder allowed in any Insolvency Proceeding commenced by or against the Company
or involving the Company's assets, in the form required in such Insolvency
Proceeding, at least 10 days prior to the expiration of the time to file such
claim or proof of debt, the Senior Lenders (or the Senior Agent on their behalf)
are hereby irrevocably authorized and shall have the right (but not the
obligation) to file an appropriate claim or proof of debt in such Insolvency
Proceeding for and on behalf of such holder of Bridge Note Obligations. The
holders of Bridge Note Obligations shall retain all rights to vote and otherwise
act in any Insolvency Proceeding in their capacity as such holders (including
the right to vote to accept or reject any Plan) to the extent provided by
applicable law, except that such holders shall not be empowered to vote in any
such Insolvency Proceeding with respect to any Plan that contains provisions
that are inconsistent with the priority of the Senior Indebtedness over the
Bridge Note Obligations.
SECTION 9.04 No Suspension of Remedies. A Senior Payment Default or a
-------------------------
Senior Covenant Default with respect to the Senior Indebtedness does not suspend
the rights of the Holders to accelerate the maturity of the Bridge Notes
pursuant to Section 8.02, or, subject to the rights of the Senior Lender under
------------
Section 9.05 hereof, to pursue any other rights or remedies hereunder or under
- ------------
applicable law; provided, however, so long as the Senior Indebtedness is
-------- -------
outstanding or any commitment therefor is in effect, the Holders hereby agree,
for the benefit of the Senior Lenders not to accelerate the Bridge Notes and all
other Bridge Note Obligations pursuant to Section 8.02 until the earlier of (i)
------------
120 days after the delivery by the Designated Holder to the Senior Agent (or
another designated representative of the Senior Lenders) of written notice of
the intent of the Holders to so accelerate the Bridge Notes and all other Bridge
Note Obligations or (ii) acceleration of the Senior Indebtedness, and thereupon,
the Holders may proceed to protect and enforce their rights by appropriate
judicial proceedings. In the event that the Senior Indebtedness has been
accelerated and such acceleration is subsequently rescinded, then, to the extent
that any of the Holders has accelerated the maturity of the Bridge Notes or any
of the other Bridge Note Obligations solely by virtue of the acceleration of the
Senior Indebtedness (and not by virtue of any other Event of Default that has
occurred and is continuing hereunder), such acceleration shall automatically be
rescinded as well.
SECTION 9.05 Payments and Distributions Received. If any Holder shall have
-----------------------------------
received any payment from or distribution of assets of the Company in respect of
the Bridge Note Obligations in contravention of the terms of this Article 9
---------
before all Senior Indebtedness is paid in full, then and in such event such
payment or distribution shall be received and held in trust for and shall be
paid over or delivered to the holders of the Senior Indebtedness (pro rata on
--------
the basis of the respective amounts
34
<PAGE>
of such Senior Indebtedness held by them) remaining unpaid, to the extent
necessary to pay all such Senior Indebtedness in full in cash after giving
effect to any concurrent payment or distribution to the holders of the Senior
Indebtedness, for application to the payment in full of such Senior
Indebtedness.
SECTION 9.06 Subrogation. Upon the indefeasible payment and discharge in
-----------
full of the Senior Indebtedness and the termination of all commitments by the
Senior Lenders to make additional Senior Indebtedness available to the Company,
the Holders shall be subrogated to the rights of the Senior Lenders to receive
payments or distributions of cash, property or securities of the Company
applicable to Senior Indebtedness until the principal of, and interest on, the
Bridge Note Obligations shall be paid in full, and no payments or distributions
(direct or indirect) to the Senior Lenders of cash, property or securities to
which the Holders would be entitled except for the provisions herein shall, as
among the Company, its creditors (other than the Senior Lenders) and the
Holders, be deemed to be a payment or distribution by the Company to or on
account of the Senior Indebtedness. In no event, however, shall any Holders
have any rights or claims against the Senior Lenders for any impairment of any
Holder's subrogation rights that might result from any Senior Lender's or the
Senior Agent's release of any Lien upon any collateral securing the Senior
Obligations, forgiveness, compromise, extension or discharge of any Senior
Obligations, release of any the Company or any guarantor, or vote to accept or
reject any Plan.
SECTION 9.07 Relative Rights. This Article 9 defines the relative rights
--------------- ---------
of the Holders and the Senior Lenders. Nothing in this Article 9 shall: (i)
---------
impair, as among the Company and the Holders, the obligation of the Company,
which is absolute and unconditional, to pay principal of and interest (including
any interest payable at the Default Rate) on the Bridge Notes, the Contingent
Payment Amount (in the case of the Series A Bridge Notes) and other items
constituting Bridge Note Obligations in accordance with their terms; (ii) affect
the relative rights of the Holders and creditors of the Company other than
Senior Lenders; or (iii) prevent any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights, if any,
under this Article 9 of Senior Lenders. The Holders acknowledge that the
---------
holders of the Senior Indebtedness and the Holders are entitled to exercise
certain rights and powers with respect to the Company from time to time, whether
before or after the occurrence of a default, and the exercise of a similar power
or right by one creditor may preclude the exercise of a similar power or right
by one or more other creditors.
SECTION 9.08 Subordination May Not Be Impaired by the Company. No right of
------------------------------------------------
any holder of any Senior Indebtedness to enforce the subordination of the Bridge
Note Obligations shall be impaired by any failure to act by the Company or such
holder of Senior Indebtedness or by the failure of the Company or such holder to
comply herewith.
SECTION 9.09 Section Not to Prevent Events of Default. The failure to make
----------------------------------------
a payment on account of principal of or interest on or other amounts
constituting Bridge Note Obligations by reason of any provision of this Article
-------
9 shall not be construed as preventing the occurrence of a Default or an Event
- -
of Default hereunder or a default or event of default under or in respect of the
Bridge Notes or any other document or instrument evidencing any of the Bridge
Note Obligations.
35
<PAGE>
SECTION 9.10 Holders of Bridge Note Obligations Entitled to Assume
-----------------------------------------------------
Payments Not Prohibited in Absence of Notice.
- --------------------------------------------
(a) No Holder shall at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to it,
unless and until such Holder shall have received written notice thereof at its
principal office from the Company or from any Senior Lender (or the Senior Agent
on its behalf); and prior to the receipt of any such written notice each such
Holder shall be entitled to assume conclusively that no such facts exist.
(b) Each Holder shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a Senior Lender (or an
agent on such Senior Lender's behalf) to establish that such notice has been
given. In the event that such Holder determines in good faith that further
evidence is required with respect to the right of any holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article 9, such Holder may request such Person to furnish evidence to the
- ---------
reasonable satisfaction of such Holder as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article 9, and if such evidence is not furnished such
---------
Holder may defer any payment to such Person pending judicial determination as to
the right of such Person to receive such payment.
SECTION 9.11 Amendments to Documents.
-----------------------
(a) The Senior Lenders, the Senior Agent and the Company shall be
authorized to amend any of the Senior Credit Documents to which they are a party
in accordance with the terms thereof, and without prior notice to or the consent
of any of the holders of the Bridge Note Obligations, to the extent not
prohibited by Section 7.16 hereof.
------------
(b) Without the prior written consent of the required Senior Lenders
(or the Senior Agent on their behalf), no provision of the Bridge Note Documents
shall be amended, modified or supplemented if the effect thereof would be to (i)
increase the interest rate on the Bridge Notes; (ii) change the dates upon which
payments of principal or interest are due on the Bridge Notes other than to
extend such dates; (iii) change any default or event of default other than to
delete or make less restrictive any default provision therein; (iv) change or
add any covenant with respect thereto other than to make less restrictive any
such covenant; (v) change the redemption or prepayment provisions thereof other
than to extend the dates therefor or to reduce the premiums payable in
connection therewith; (vi) grant any security or collateral to secure payment
thereof; or (vii) change or amend any other term if such change or amendment
would materially increase the obligations of the Company or confer additional
material rights to the Holders in a manner adverse to the Company, any of its
Subsidiaries, the Senior Agent or any Senior Lender; provided, however, that
-------- -------
nothing contained in this Article 9 or elsewhere in this Agreement shall be
---------
construed to require the consent of the Senior Lenders to any waiver by the
Holders of any Default or Event of Default, or of any of the rights and remedies
of the Holders hereunder.
36
<PAGE>
SECTION 9.12 Waivers. The Company and the Holders each hereby waives any
-------
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Senior Lenders (or the Senior Agent on their behalf).
To the fullest extent permitted by applicable law, the Company and the Holders
each hereby further waives: presentment, demand, protest, notice of protest,
notice of default or dishonor, notice of payment or nonpayment and any and all
other notices and demands of any kind in connection with all negotiable
instruments evidencing all or any portion of the Senior Indebtedness; the right
to require the Senior Lenders to marshall any securities, or to enforce any Lien
that the Senior Lenders may now or hereafter have in any collateral securing the
Senior Obligations or to pursue any claim it may have against any guarantor of
the Senior Obligations, as a condition to the Senior Lenders' entitlement to
receive any payment on account of the Senior Obligations; notice of the
acceptance of this Agreement by the Senior Lenders; and notice of any loans,
letters of credit, guaranties, or other credit made available to the Company,
extensions of time granted, amendments to the Senior Credit Agreement or the
other Senior Credit Documents, or other action taken in reliance hereon.
Without limiting the provisions of Section 9.11(a) hereof, each Holder hereby
---------------
consents and agrees that the Senior Lenders may, without in any manner
impairing, releasing or otherwise affecting the subordination provided for in
this Agreement or any of the Senior Lenders' rights hereunder and without prior
notice to or the consent of any Holder; release, renew, extend, compromise or
postpone the time of payment of any of the Senior Indebtedness; substitute,
exchange or release any or all of the collateral securing the Senior Obligations
or decline or neglect to perfect the Senior Lenders' Lien upon any of such
collateral; add or release any Person primarily or secondarily liable from any
of the Senior Indebtedness; amend or modify any of the Senior Credit Documents
or waive any default or event of default under the Senior Credit Documents; and
increase or decrease the amount of the Senior Indebtedness, the rates of
interest, or the amount of any other charges payable in connection therewith,
provided that the principal amount of the Senior Indebtedness may be increased
to the extent not prohibited by Section 7.16 hereof.
------------
SECTION 9.13 Agreement Not to Contest Liens. In no event shall any Holder
------------------------------
institute, or join as a party in the institution of, or assist in the
prosecution of, any action, suit or proceeding seeking a determination that any
of the Liens granted to the Senior Agent for the benefit of the Senior Lenders
under any of the Senior Credit Documents is invalid, unperfected or avoidable,
or is or should be subordinated to the interests of any other Person.
SECTION 9.14 Reinstatement. The provisions of this Article 9 shall
------------- ---------
continue to be effective or reinstated, as the case may be, if at any time any
payment of the Senior Indebtedness is rescinded or returned by the Senior
Lenders or the Senior Agent upon the insolvency, bankruptcy or reorganization of
the Company or otherwise, all as though such payment had not been made.
37
<PAGE>
ARTICLE 10
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
SECTION 10.01 Terms Defined in the Senior Credit Agreement. Except as
--------------------------------------------
otherwise set forth in Section 10.02, capitalized terms used herein and defined
-------------
in Annex A of the Senior Credit Agreement shall have the meanings set forth
therein.
SECTION 10.02 Other Defined Terms. In addition to the terms defined in
-------------------
the Senior Credit Agreement, the terms set forth below shall have the following
respective meanings:
"Agreement" shall mean this Subordinated Note Purchase Agreement,
---------
including all Annexes, Schedules, and Exhibits attached or otherwise identified
hereto, all restatements, modifications and supplements hereof or hereto, and
any appendices, attachments, exhibits or schedules to any of the foregoing, and
shall refer to this Agreement as the same may be in effect at the time such
reference becomes operative; provided, that any reference to the Schedules to
--------
this Agreement shall be deemed a reference to the Schedules as in effect as of
the Closing Date, unless otherwise provided in a written amendment thereto.
"Base Amount" shall mean $39,254,000.
-----------
"Blockage Notice" shall have the meaning assigned to it in Section
--------------- -------
9.02(a).
- -------
"Blockage Period" shall have the meaning assigned to it in Section
--------------- -------
9.02(a).
- -------
"Bridge Note Documents" shall mean, collectively, this Agreement, the
---------------------
GE Capital Fee Letter, the Bridge Notes, and each other document, instrument and
certificate executed and delivered by the Company as of the date hereof or at
any time thereafter, in connection with the transactions contemplated by this
Agreement, in each case, as amended, modified or supplemented from time to time.
"Bridge Note Obligations" shall mean all obligations of the Company
-----------------------
(monetary or otherwise) arising under or in connection with this Agreement, the
GE Capital Fee Letter, the Bridge Notes and the other Bridge Note Documents,
(including without limitation all principal, interest and Prepayment Premiums
and, in the case of the Series A Bridge Notes, the Contingent Payment Amount
payable under this Agreement).
"Bridge Notes" shall have the meaning assigned to it in Section 1.01.
------------ ------------
"Change of Control" shall mean any of the following: (a) any person
-----------------
or group of persons (within the meaning of the Exchange Act), other than Ramsay
Affiliates, shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the SEC under the Exchange Act) of the issued and
outstanding shares of capital stock of the Company having the right to cast 30%
or more of the votes for the election of directors of the Company under ordinary
circumstances; (b) Ramsay Affiliates shall fail
38
<PAGE>
to hold beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the SEC under the Exchange Act) of that number of the issued and outstanding
shares of capital stock of the Company having the right to cast at least
4,000,000 votes for the election of directors of the Company under ordinary
circumstances (such number to be appropriately adjusted for stock splits,
reverse stock splits and similar events involving such capital stock); or (c)
during any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of the Company
(together with any new directors whose election by the board of directors of the
Company or whose nomination for election by the stockholders of the Company was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose elections or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office.
"Claim" shall have the meaning assigned to it in Section 12.17.
----- -------------
"Closing Date" shall mean September 30, 1997, the date of the purchase
------------
and sale of the Bridge Notes pursuant to this Agreement.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
------------
of the Company as constituted on the Closing Date and any capital stock into
which such Common Stock may thereafter be changed.
"Company" shall have the meaning assigned to it in the preamble to
-------
this Agreement.
"Contingent Payment Amount" shall have the meaning assigned to it in
-------------------------
Section 3.01.
- ------------
"Convertible Securities" shall mean evidences of indebtedness, shares
----------------------
of stock or other securities which are convertible into or exchangeable for
shares of Common Stock.
"Current Market Price per Share of Common Stock" shall mean the
----------------------------------------------
greater of (a) the daily market price for the trading day immediately preceding
the Determination Date, or (b) the average of the daily market prices for the 30
consecutive trading days immediately preceding the Determination Date. The
daily market price for each such trading day shall be (i) the last sale price on
such day on the principal stock exchange on which such Common Stock is then
listed or admitted to trading, (ii) if no sale takes place on such day on any
such exchange, the average of the last reported closing bid and asked prices on
such day as officially quoted on any such exchange, (iii) if the Common Stock is
not then listed or admitted to trading on any stock exchange, the last sale
price on such day as reported in the National Association of Securities Dealers,
Inc. Automated Quotations System, or if the Common Stock is not on the National
Market List, the average of the last reported closing bid and asked prices on
such day in the over-the-counter market, as furnished by the National Quotation
Bureau, Inc., (iv) if neither such corporation at the time is engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business, (v) if there is no such firm, as furnished by any member of
the NASD selected mutually by the Required Series A Holders and the Company or,
if they cannot agree upon such selection, as selected by two such
39
<PAGE>
members of the NASD, one of which shall be selected by the Required Series A
Holders and one of which shall be selected by the Company. If at any time the
Current Market Price per Share of Common Stock cannot be ascertained by
reference to clauses (i)-(v) above, then the Current Market Price per Share of
Common Stock shall, subject to the provisions of Section 3.03(b), 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 last calendar month ending prior to 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 of recognized national standing
selected by the Board of Directors of the Company, as of a date which is within
15 days preceding the date as of which the determination is to be made.
"Default" shall mean any Event of Default or any condition or event
-------
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Default Rate" shall mean the rate of interest otherwise in effect
------------
pursuant to Section 2.01(a) hereof, plus two percent (2%) per annum.
--------------- ----
"Designated Holder" shall mean, initially, GE Capital, and at any time
-----------------
hereafter that GE Capital ceases to hold Bridge Notes which represent at least a
majority of the aggregate principal amount then outstanding under all Bridge
Notes, such Person as the Required Holders shall elect as their representative
for purposes of Article 9, effective upon receipt by the Senior Agent in
---------
accordance with Section 11.10 of the Senior Credit Agreement of notice of the
-------------
election of such Designated Holder.
"Determination Date" shall mean the tenth Business Day preceding the
------------------
date on which an Exit Event occurs.
"Event of Default" shall have the meaning assigned to it in Section
---------------- -------
8.01.
- ----
"Exit Event" shall mean the first of the following events to occur
----------
after March 30, 1998: (a) the fifth anniversary of the Closing Date, (b) the
repayment in full of the Series A Bridge Notes, (c) an event which, pursuant to
Section 2.04 hereof, requires the prepayment in full of the Series A Bridge
- ------------
Notes, (d) a Change of Control, (e) a Sale of the Company, or (f) the closing of
any underwritten public offering by the Company or any of its Subsidiaries for
cash of any class of debt or equity securities to be issued by the Company or
such Subsidiary, pursuant to an effective registration statement under the
Securities Act, other than on Forms S-4 or S-8, or any successor to such Forms
for securities to be offered in a transaction of the type referred to in Rule
145 under the Securities Act or to employees of the Company pursuant to any
employee benefit plan, respectively.
"GE Capital" shall have the meaning assigned to it in the preamble to
----------
this Agreement.
"Holder" shall have the meaning assigned to it in the preamble to this
------
Agreement.
40
<PAGE>
"Indemnified Person" shall have the meaning assigned to it in Section
------------------ -------
12.17.
- -----
"Insolvency Proceeding" shall have the meaning assigned to it in
---------------------
Section 9.03(a).
- ---------------
"Junior Securities" shall mean (i) the securities of the Company
-----------------
(including senior securities) provided for by a Plan that has been proposed in a
case under the Bankruptcy Code and confirmed by final order of the bankruptcy
court having jurisdiction over such case, and (ii) shares of common stock or
other equity securities, and debt securities, the payment of which is
subordinated, at least to the extent provided in this Agreement with respect to
the Bridge Note Obligations, to the payment of all Senior Indebtedness at the
time outstanding and to the payment of all debt securities issued in exchange
therefor to the Senior Lenders, which shares or other equity or debt securities
have been provided for by a Plan which has been adopted or agreed to other than
pursuant to a proceeding referred to in clause (i) of this definition and which
has been approved or agreed to by the Senior Lenders.
"Material Contracts" shall mean (a) each Management Agreement, and (b)
------------------
each contract to which the Company or any of its Subsidiaries is now or
hereafter a party, either (i) involving aggregate consideration payable to or by
the Company or such Subsidiary, contingent or otherwise, in excess of
$5,000,000; or (ii) the breach or termination by any party of which would be a
Material Adverse Event.
"Maturity Date" shall mean the earlier of the Stated Maturity Date or
-------------
such other date when the Bridge Notes or portion thereof shall be or become due
and payable in accordance with the terms of this Agreement, whether by required
repayment, prepayment, declaration or otherwise.
"Maximum Lawful Rate" shall have the meaning assigned to it in Section
------------------- -------
2.07.
- ----
"NASD" shall mean the National Association of Securities Dealers,
----
Inc., or any successor corporation thereto.
"Options" shall mean rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire shares of Common Stock or Convertible Securities,
other than the option to acquire Common Stock pursuant to Section 3.04 hereof.
------------
"Outstanding Shares of Common Stock" shall mean, as of the
----------------------------------
Determination Date, the number of shares of Common Stock issued and outstanding
on such date, plus the number of shares of Common Stock issuable on such date
----
upon exercise of all outstanding Options and conversion of all outstanding
Convertible Securities, whether or not then exercisable or convertible, minus
-----
the number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of shares of Common Stock issuable in
respect of such Options outstanding on such date would purchase at the Current
Market Value per share of Common Stock on such date.
41
<PAGE>
"Plan" shall mean a plan proposed in an Insolvency Proceeding for the
----
reorganization or rehabilitation of the Company, a composition or extension of
the Company's debts and liabilities or a liquidation in whole or in part of the
Company's assets.
"Purchaser" shall have the meaning assigned to it in the preamble to
---------
this Agreement.
"Prepayment Premium" shall mean, with respect to the principal amount
------------------
of any Bridge Note being prepaid on or after September 30, 1998 but before
September 30, 2004, an amount equal to such principal amount multiplied by the
percentage designated below based on the date when such prepayment occurs:
Date Percentage
---- ----------
On or after September 30, 1998 but
before September 30, 1999 5%
On or after September 30, 1999 but
before September 30, 2000 4.167%
On or after September 30, 2000 but
before September 30, 2001 3.333%
On or after September 30, 2001 but
before September 30, 2002 2.500%
On or after September 30, 2002 but
before September 30, 2003 1.667%
On or after September 30, 2003 but
before September 30, 2004 0.833%
"Ramsay Holdings" shall have the meaning assigned to it in the
---------------
preamble to this Agreement.
"Required Holders" shall mean Holders holding, in the aggregate, more
----------------
than 50% of the outstanding principal amount of the Bridge Notes at any time.
"Required Series A Holders" shall mean Holders holding, in the
-------------------------
aggregate, more than 50% of the outstanding principal amount of the Series A
Bridge Notes at any time.
"Related Transactions" shall mean the incurrence of the Senior
--------------------
Indebtedness pursuant to the Senior Credit Agreement, the issuance of the
Series 1997 Preferred Stock pursuant to the Preferred Stock Purchase Agreement,
the issuance of the Series 1997-A Preferred Stock pursuant to the Ramsay
Preferred Stock Purchase Agreement, the payment of all fees, costs and expenses
42
<PAGE>
associated with all of the foregoing and the execution and delivery of all of
the Related Transaction Documents.
"Related Transaction Documents" shall mean the Senior Credit
-----------------------------
Agreement, the Senior Credit Documents, the Preferred Stock Purchase Agreement,
the Preferred Stock Designation, the Ramsay Common Stock Subscription Agreement,
the Ramsay Preferred Stock Purchase Agreement, the Ramsay Preferred Stock
Designation, and all agreements, instruments, documents and certificates
executed by or on behalf of the Company in connection with the Related
Transactions.
"Sale of the Company" shall mean (i) the sale by the shareholders of
-------------------
the Company in one or more related transactions of shares of Stock then issued
and outstanding (including, without limitation, pursuant to a tender offer for
such shares) representing a majority of the total number of votes eligible to be
cast by all holders of the Company's Stock for the election of directors of the
Company under ordinary circumstances; (ii) the merger or consolidation of the
Company with or into any other Person (other than a merger in which the Company
is the corporation surviving the merger and which is permitted pursuant to
Section 7.02 hereof); (iii) the sale by the Company or any of its Subsidiaries
- ------------
of the capital stock of one or more of its Subsidiaries, the merger of one or
more of the Company's Subsidiaries with and into any Person other than a direct
or indirect wholly-owned Subsidiary of the Company or the sale by the Company or
any of its Subsidiaries of other assets of the Company or any of its
Subsidiaries, in one or more transactions, whether or not related, involving
Stock or assets representing or aggregating 50% or more of the consolidated book
value of the Company's assets as of the Closing Date; or (iv) any
recapitalization of the Company shall occur pursuant to which Ramsay Affiliates
shall have acquired beneficial ownership of issued and outstanding shares of
capital stock of the Company having the right to cast more than 66-2/3% of the
total number of votes in an election of directors of the Company under ordinary
circumstances.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect from time to time.
"Senior Agent" shall mean General Electric Capital Corporation, in its
------------
capacity as Administrative Agent for the Senior Lenders under the Senior Credit
Agreement, and its successors in such capacity under the Senior Credit
Agreement.
"Senior Covenant Default" shall mean any default under any Senior
-----------------------
Indebtedness (other than a Senior Payment Default) that permits the Senior
Lenders or the Senior Agent to accelerate the maturity of the Senior
Indebtedness or that has been the basis for the acceleration of the maturity of
the Senior Indebtedness.
"Senior Credit Agreement" shall mean that certain Credit Agreement,
-----------------------
dated as of the date hereof, by and among the Company, the Senior Lenders, the
Senior Agent and GECC Capital Markets Group, Inc., as Syndication Agent, as
amended, restated, refinanced, supplemented or otherwise modified from time to
time.
43
<PAGE>
"Senior Credit Documents" shall mean and include (i) the Senior Credit
-----------------------
Agreement, the other "Loan Documents" (as defined in the Senior Credit
Agreement), and all other instruments or agreements now or hereafter evidencing
or securing the payment of the whole or any part of the Senior Indebtedness and
(ii) all renewals, extensions, substitutions, refundings, refinancings,
restructurings or replacements thereof (including all successive renewals,
extensions, substitutions, refundings, refinancings, restructurings or
replacements of any Senior Credit Documents, whether or not with the same
lenders or holders, and whether or not with the same entity as the Company so
long as such borrower is a successor or assign of the Company).
"Senior Indebtedness" shall mean (i) all Senior Obligations now or
-------------------
hereafter existing under or with respect to any of the Senior Credit Documents,
whether such Senior Obligations are now or hereafter existing and however and
whenever made or incurred, and whether direct or indirect, absolute or
contingent, due or to become due, or secured or unsecured, including all
principal, interest and premium on, and all other amounts payable in respect of,
any of such Senior Obligations, and all commitment or other fees, indemnity
amounts, reimbursement obligations and other amounts owed by the Company or any
of its Subsidiaries to the Senior Lenders thereunder, (ii) any and all loans now
or hereafter made or other credit extended by the Senior Lenders to the Company,
including, without limitation, during the pendency of any Insolvency Proceeding
of the Company, (iii) all interest at any time accrued with respect to the
foregoing (including any interest that accrues during the pendency of any
bankruptcy case of the Company, whether or not the Senior Lenders are
authorized by Section 506 of the Bankruptcy Code to collect such interest from
the Company), and (iv) all reasonable costs and expenses incurred by the Senior
Agent or the Senior Lenders in connection with its or their enforcement of any
rights or remedies under the Senior Credit Documents, the collection of any of
the Senior Indebtedness or the protection of, or realization upon, any
collateral securing the Senior Obligations after the occurrence and during the
continuance of an "Event of Default" (as defined in the Senior Credit
Agreement), including, without limitation, attorneys' fees, court costs,
appraisal and consulting fees, auctioneer's fees, rent, storage, insurance
premiums and like items and whether or not such amounts are allowed as a claim
against the Company under the Bankruptcy Code, in each case to the extent that
the Company is now or hereafter becomes liable to pay any such amounts to the
Senior Lenders or the Senior Agent in connection with any of the foregoing items
(i)-(iii) under any agreement or by applicable law.
"Senior Lenders" shall mean all of the "Lenders" that are parties to
--------------
the Senior Credit Agreement from time to time.
"Senior Obligations" shall mean all "Obligations" (as defined in the
------------------
Senior Credit Agreement) now or hereafter existing under or with respect to any
of the Senior Credit Documents.
"Senior Payment Default" shall mean any default in the payment of any
----------------------
Senior Indebtedness that permits the Senior Lender to accelerate the maturity of
the Senior Indebtedness or that has been the basis for the acceleration of the
maturity of the Senior Indebtedness.
44
<PAGE>
"Series A Bridge Notes" shall have the meaning assigned to it in
---------------------
Section 1.01(b).
- ---------------
"Series B Bridge Notes" shall have the meaning assigned to it in
---------------------
Section 1.01(b).
- ---------------
"Stated Maturity Date" shall mean September 30, 2005.
--------------------
SECTION 10.03 Certain Matters of Construction.
-------------------------------
(a) Except as otherwise set forth in Annex C, any accounting term used
-------
in this Agreement or the other Bridge Note Documents shall have, unless
otherwise specifically provided therein, the meaning customarily given such term
in accordance with GAAP.
(b) All other undefined terms contained in this Agreement or the other
Bridge Note Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code as in effect in the State of New York to the
extent the same are used or defined therein.
(c) The words "herein," "hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the annexes,
exhibits and schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
(d) For purposes of this Agreement and the other Bridge Note
Documents, the following additional rules of construction shall apply: (i)
wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the femi nine and the neuter; (ii) the term "including" shall not be limiting
or exclusive, unless specifically indicated to the contrary; (iii) all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations; and (iv) all references to any
instruments or agreements, including references to any of the Bridge Note
Documents, shall include any and all modifications or amendments thereto and any
and all extensions or renewals thereof.
(e) Unless otherwise indicated, all references in this Agreement to
articles, sections, subsections, schedules, annexes, exhibits and attachments
shall refer to the corresponding articles, sections, subsections, schedules,
annexes, exhibits and attachments of or to this Agreement. All schedules,
annexes, exhibits and attachments hereto, or expressly identified to this
Agreement, are incorporated herein by reference and, taken together, shall
constitute but a single agreement. Unless otherwise expressly set forth herein,
or in a written amendment referring to such schedules and annexes, all schedules
and annexes referred to herein shall mean the schedules and annexes as in effect
as of the Closing Date.
45
<PAGE>
ARTICLE 11
REGISTRATION; EXCHANGE; SUBSTITUTION OF BRIDGE NOTES
----------------------------------------------------
SECTION 11.01 Registration of Bridge Notes. The Company shall keep at its
----------------------------
principal executive office a register for the registration of transfers of
Bridge Notes. The name and address of each Holder, each transfer thereof and
the name and address of each transferee of one or more Bridge Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Bridge Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof, and
the Company shall not be affected by any notice or knowledge to the contrary.
The Company shall give to any Holder, promptly upon request therefor, a complete
and correct copy of the names and addresses of all Holders.
SECTION 11.02 Transfers.
---------
(a) Subject to compliance with applicable securities laws, the Holders
may transfer all or any portion of the Bridge Notes held by them at any time to
any Person, provided, however, that (i) Ramsay Holdings may not transfer any
-------- -------
Bridge Notes of which it is the Holder at any time while GE Capital is the
Holder of any Bridge Notes, other than transfers to Ramsay Affiliates pursuant
to which such Ramsay Affiliates agree to be bound by this clause (i), and (ii)
no Holder may transfer Bridge Notes to any Person other than a bank, savings and
loan association or other financial institution, a commercial lender or an
insurance company, investment fund or other institutional investor, or to an
Affiliate of the Holder, without the prior written consent of the Company, such
consent not unreasonably to be withheld.
(b) The Company shall assist any Holder permitted to transfer Bridge
Notes under this Section 11.02 as reasonably required to enable the transferring
-------------
Holder to effect any such transfer, including the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
reasonably requested and the preparation of informational materials for, and the
participation of management in meetings with, potential transferees. The
Company shall certify the correctness, completeness and accuracy of all
descriptions of the Company, its Subsidiaries and their affairs contained in any
selling materials provided by it and all other information provided by it and
included in such materials, except that any Projections delivered by the Company
shall only be certified by the Company as having been prepared by the Company in
compliance with the representations contained in Schedule 3.04 of the Senior
Credit Agreement.
SECTION 11.03 Transfer and Exchange of Bridge Notes. Upon surrender of any
-------------------------------------
Bridge Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered Holder or his attorney duly authorized in writing and
accompanied by (i) the address for notices of each transferee of such Bridge
Note or part thereof, (ii) evidence of the payment of any applicable transfer
taxes, and (iii) an executed agreement from the transferee in favor of the
Company, making the representations and warranties set forth in Section 1.04 and
------------
agreeing to be bound by the terms and conditions of this Agreement), the Company
shall execute and deliver, at its expense, one or more new Bridge Notes (as
requested by the registered
46
<PAGE>
Holder thereof) in exchange therefor, in an aggregate principal amount of the
surrendered Bridge Note. Each such new Bridge Note shall be payable to such
Person as such Holder shall request and shall be substantially in the form of
Exhibit A or B, as applicable. Each such new Bridge Note shall be dated and
- --------- -
bear interest from the date to which interest shall have been paid on the
surrendered Bridge Note or dated the date of the surrendered Bridge Note if no
interest shall have been paid thereon. Bridge Notes shall not be transferred in
denominations of less than $1,000,000; provided that if necessary to enable the
--------
registration of transfer by a Holder of all of its Bridge Notes, one Bridge Note
may be in a denomination of less than $1,000,000. Transfers hereunder shall be
made by the Company to the extent permitted by applicable law.
SECTION 11.04 Replacement of Bridge Notes. Upon receipt by the Company of
---------------------------
written notice from any Holder of the loss, theft, destruction or mutilation of
any Bridge Note held by such Holder and (a) in the case of loss, theft or
destruction, of security reasonably satisfactory to the Company (or, in the case
of GE Capital or any other Holder that is an institutional investor, an
unsecured agreement of indemnity from such Holder), or (b) in the case of
mutilation, upon surrender and cancellation thereof, the Company, at its own
expense, shall execute and deliver, in lieu thereof, a new Bridge Note, dated
and bearing interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Bridge Note or dated the date of such
lost, stolen, destroyed or mutilated Bridge Note if no interest shall have been
paid thereon.
ARTICLE 12
MISCELLANEOUS
-------------
SECTION 12.01 Complete Agreement. This Agreement, the other Bridge Note
------------------
Documents, the Senior Credit Agreement, the other Senior Credit Documents and
the Preferred Stock Purchase Agreement constitute the complete agreement among
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements, commitments, understandings or inducements (oral or
written, expressed or implied) relating to a financing of substantially similar
form, purpose or effect, including the commitment letter and fee letter, each
dated August 7, 1997 between the Company and GE Capital.
SECTION 12.02 Amendments and Waivers.
----------------------
(a) No amendment, modification, termination or waiver of any provision
of this Agreement, or any consent to any departure by the Company therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Company and by the Required Holders, the Required Series A Holders or all
affected Holders, as applicable. Except as set forth in Section 12.02(b) below,
----------------
all such amendments, modifications, terminations or waivers requiring the
consent of any Holders shall require the written consent of the Required
Holders.
(b) No amendment, modification, termination or waiver shall, unless in
writing and signed by each Holder holding a Bridge Note directly affected
thereby, do any of the following: (i) reduce the principal of, rate of interest
on, or any fees payable with respect to any Bridge Note of
47
<PAGE>
any affected Holder; (ii) extend any scheduled payment date or final maturity
date of the principal amount of any Bridge Note of any affected Holder; (iii)
waive, forgive, defer, extend or postpone any payment of interest or fees as to
any affected Holder; (iv) change the percentage of the aggregate unpaid
principal amount of the Bridge Notes which shall be required for Holders or any
of them to take any action hereunder; or (v) amend or waive this Section 12.02
-------------
or the definition of the term "Required Holders" insofar as such definition
affects the substance of this Section 12.02.
-------------
(c) No amendment, modification, termination or waiver affecting the
rights or duties of the Designated Holder under this Agreement or any other
Bridge Note Document shall be effective unless in writing and signed by the
Designated Holder, in addition to the Holders required hereinabove to take such
action.
(d) No amendment, modification, termination or waiver shall, unless in
writing and signed by all of the Holders of Series A Bridge Notes, amend or
waive (i) any provision of Article 3 hereof or (ii) the definition of "Required
---------
Series A Holders."
(e) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver of any
provision of any Bridge Note shall be effective without the written concurrence
of the holder of that Bridge Note. No notice to or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 12.02 shall be
-------------
binding upon each holder of the Bridge Notes at the time outstanding and each
future holder of the Bridge Notes.
SECTION 12.03 Fees and Expenses; Taxes.
------------------------
(a) The Company shall reimburse GE Capital for all reasonable out-of-
pocket expenses incurred in connection with the preparation, negotiation,
execution and delivery of the Bridge Note Documents (including the reasonable
fees and expenses of GE Capital's special counsel, advisors and consultants
retained in connection with the transactions contemplated by the Bridge Note
Documents and for advice in connection therewith). The Company shall reimburse
GE Capital (and, with respect to clauses (iii), (iv) and (v) below, all Holders)
for all reasonable fees, costs and expenses, including the reasonable fees,
costs and expenses of counsel or other advisors to the Holders (including
environmental and management consultants and appraisers) for advice, assistance,
or other representation in connection with:
(i) wire transfer fees and other costs of the forwarding to
the Company of the proceeds of the Bridge Notes;
(ii) any amendment, modification or waiver of, or consent
with respect to, any of the Bridge Note Documents or any advice in
connection with the administration of the transactions contemplated by
the Bridge Note Documents or the rights of the Holders thereunder;
48
<PAGE>
(iii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by any Holder, the Company or any other
Person) in any way relating to any of the Bridge Note Documents or any
other agreement to be executed or delivered in connection therewith or
herewith, whether as party, witness, or otherwise, including any
litigation, contest, dispute, suit, case, proceeding or action, and any
appeal or review thereof, in connection with a case commenced by or
against the Company or any other Person that may be obligated to Holders
by virtue of the Bridge Note Documents; including any such litigation,
contest, dispute, suit, proceeding or action arising in connection with
any work-out or restructuring of the Bridge Notes during the pendency of
one or more Events of Default; provided, that the Company shall not be
--------
liable to reimburse any Holder for any such fees, costs or expenses
incurred by it in the defense of any Claim as to which such Holder would
not be entitled to indemnification by virtue of the proviso to Section
-------
12.17.
------
(iv) any attempt to enforce any remedies of any Holder
against the Company under any of the Bridge Note Documents; or
(v) any work-out or restructuring of the Bridge Note
Documents during the pendency of one or more Events of Default;
including all reasonable attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings; and all reasonable out-of-pocket expenses, costs,
charges and other fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section 12.03 shall be payable, on demand, by the Company to the
-------------
respective Holders, as applicable. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: reasonable fees,
costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
(b) In addition, the Company agrees to pay any present or future
transfer, intangible personal property, stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from the
issuance, sale or delivery of the Bridge Notes by the Company to Purchasers
pursuant to this Agreement or the issuance of Common Stock to Purchasers
pursuant to Section 3.04 hereof, in each case within ten (10) Business Days
------------
after demand by either Purchaser therefor (including penalties, interest and
expenses arising therefrom or with respect thereto), whether or not such taxes
were correctly or legally asserted.
SECTION 12.04 No Waiver. No failure on the part of any Holder, at any time
---------
or times, to require strict performance by the Company of any provision of this
Agreement and any of the other Bridge Note Documents shall waive, affect or
diminish any right of the Holders thereafter to demand
49
<PAGE>
strict compliance and performance therewith. Any suspension or waiver of a
Default or Event of Default shall not suspend, waive or affect any other Default
or Event of Default whether the same is prior or subsequent thereto and whether
of the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of the Company contained in this
Agreement or any of the other Bridge Note Documents and no Default or Event of
Default by the Company shall be deemed to have been suspended or waived by the
Holders, unless such waiver or suspension is by an instrument in writing signed
by an officer of or other authorized employee of each of the Required Holders,
the Required Series A Holders or all Holders, as required by Section 12.02
-------------
above, and directed to the Company specifying such suspension or waiver.
SECTION 12.05 Remedies. The rights and remedies of the Holders under this
--------
Agreement and the other Bridge Note Documents shall be cumulative and
nonexclusive of any other rights and remedies which the Holders may have under
any other agreement, including the Bridge Note Documents, by operation of law or
otherwise.
SECTION 12.06 Severability. Wherever possible, each provision of this
------------
Agreement and each of the other Bridge Note Documents shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement or any of the other Bridge Note Documents shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or any of the other Bridge Note Documents.
SECTION 12.07 Conflict of Terms. Except as otherwise provided in this
-----------------
Agreement or any of the other Bridge Note Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision contained in
any of the other Bridge Note Documents, the provisions contained in this
Agreement shall govern and control.
SECTION 12.08 Setoff and Sharing of Payments.
------------------------------
(a) Subject to the terms of Article 9 hereof, in addition to any
---------
rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Holder is hereby authorized to the extent
permitted by applicable law at any time or from time to time, without notice to
the Company or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all balances held by
it at any of its offices for the account of the Company or any of its
Subsidiaries (regardless of whether such balances are then due to the Company or
such Subsidiary) and any other properties or assets any time held or owing by
that Holder to or for the credit or for the account of the Company or such
Subsidiary against and on account of any of the Bridge Note Obligations which
are not paid when due.
(b) Any Holder exercising a right to set off or otherwise receiving
any payment on account of the Bridge Note Obligations in excess of its ratable
share thereof shall purchase for cash (and the other Holders shall sell) such
participations in each such other Holder's ratable share of the
50
<PAGE>
Bridge Note Obligations as would be necessary to cause such Holder to share the
amount so set off or otherwise received with each other Holder in accordance
with their respective ratable shares. The Company agrees, to the fullest extent
permitted by law, that (a) any Holder may exercise its right to set off with
respect to amounts in excess of its ratable share of the Bridge Note Obligations
and may sell participations in such amount so set off to other Holders and (b)
any Holders so purchasing a participation in the Bridge Notes or other Bridge
Note Obligations held by other Holders may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Holder were a direct holder of the Bridge Notes and the
other Bridge Note Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the set-off amount or
payment otherwise received is thereafter recovered from the Holder that has
exercised the right of set-off, the purchase of participations by that Holder
shall be rescinded and the purchase price restored without interest.
SECTION 12.09 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another party, or whenever any of the parties desires to give or
serve upon another party any communication with respect to this Agreement or any
of the other Bridge Note Documents, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
deemed to have been validly served, given or delivered (a) upon the earlier of
actual receipt and three (3) Business Days after deposit in the United States
Mail, registered or certified mail, return receipt requested, with proper
postage prepaid, (b) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 12.09), (c) one Business Day after deposit with a
-------------
reputable overnight courier with all charges prepaid, or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated below or to such
other address (or facsimile number) as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to any Person (other than the Company or a Holder)
designated below to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
If to GE Capital, at: General Electric Capital Corporation
3379 Peachtree Road, N.E.
Suite 560
Atlanta, Georgia 30326
Attention: Ms. Cheryl P. Boyd
Telecopy No.: (404) 266-3438
51
<PAGE>
with copies to: General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Region Counsel - Commercial Finance
Telecopy No.: (203) 316-7889
and King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John Hays Mershon, Esq.
Telecopy No.: (404) 572-5100
If to Ramsay Holdings at: Paul Ramsay Holdings Pty. Limited
154 Pacific Highway
St. Leonards NSW 2065
Australia
Attention: Director
Telecopy No.: 011-612-943-3460
with a copy to: Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy No.: (212) 682-0200
If to any other Holder: At its last known address appearing
on the books of the Company maintained
for such purpose in accordance with Section 11.01
-------------
If to the Company, at: Ramsay Health Care, Inc.
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Chief Financial Officer
Telecopy No.: (305) 569-4647
with a copy to: Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy No.: (212) 682-0200
52
<PAGE>
SECTION 12.10 Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
SECTION 12.11 Counterparts. This Agreement may be executed in any number
-------------
of separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
SECTION 12.12 Time of the Essence. Time is of the essence of this
-------------------
Agreement and each of the other Bridge Note Documents.
SECTION 12.13 Publicity.
---------
(a) Except to the extent otherwise required by law, the Company shall
not use the name of or refer to GE Capital, or any of its Affiliates, in any
press release or other disclosure made in connection with the transactions
contemplated by this Agreement without the prior written consent of GE Capital,
and shall provide to GE Capital the proposed text of any such press release or
other disclosure for review not later than two Business Days prior to the
proposed date of release or disclo sure thereof.
(b) Subject to a reasonable prior review, the Company consents to GE
Capital's publishing a tombstone or similar advertising material relating to the
financing transaction contem plated by this Agreement.
SECTION 12.14 Confidentiality. The Company has furnished and will furnish
---------------
to Purchasers certain information concerning the Company which the Company has
advised is non-public, proprietary or confidential in nature ("Confidential
------------
Information"). Each Purchaser confirms to the Company, for itself, that it is
- -----------
such Purchaser's policy and practice to maintain in confidence all Confidential
Information which is provided to it under agreements providing for the extension
of credit and which is identified to it as such, and that it will protect the
confidentiality of Confidential Information submitted to it with respect to the
Company under this Agreement, commensurate with its efforts to maintain the
confidentiality of its own Confidential Information, provided, however, that (a)
-------- -------
nothing contained herein shall prevent either Purchaser from disclosing
Confidential Information (i) to its Affiliates and their respective directors,
officers and employees and to any legal counsel, auditors, appraisers,
consultants or other persons retained by it or its Affiliates as professional
advisors, on the condition that such information not be further disclosed except
in compliance with this Section 12.14; (ii) under color of legal authority,
-------------
including, without limitation, to any regulatory authority having jurisdiction
over it or its operations or to or under the authority of any court deemed by it
to be of competent jurisdiction; (iii) to any actual or potential transferee of
such Purchaser's Bridge Notes pursuant to Section 11.02 or any actual or
-------------
potential assignee of such Purchaser's rights and obligations under this
Agreement pursuant to Section 12.18 hereof, to the extent such actual or
-------------
potential assignee has agreed to maintain such information in confidence on the
basis set forth in this Section 12.14; and (iv) as necessary in connection with
-------------
the exercise of its remedies under this Agreement or any of the other Bridge
Note Documents; (b) the terms of this Section 12.14 shall be inapplicable to any
-------------
information furnished to it which is in its possession prior to the delivery to
it of
53
<PAGE>
such information by the Company, or otherwise has been obtained by it on a non-
confidential basis, or which was or becomes available to the public or otherwise
part of the public domain (other than as a result of such Purchaser's failure to
abide hereby), or which was not non-public, proprietary or confidential when the
Company delivered it to such Purchaser; and (c) the determination by such
Purchaser as to the application of any of the circumstances described in the
foregoing clauses (a) and (b) will be conclusive if made reasonably and in good
faith.
SECTION 12.15 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
-------------
OF THE BRIDGE NOTE DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE BRIDGE NOTE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF
THE OTHER BRIDGE NOTE DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR ANY OF THE OTHER BRIDGE NOTE DOCUMENTS; PROVIDED, THAT THE
--------
PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY
A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, NEW YORK; AND FURTHER PROVIDED, THAT
------- --------
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY COURT OF COMPETENT
JURISDICTION IN ANY OTHER JURISDICTION TO COLLECT THE BRIDGE NOTE OBLIGATIONS,
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDERS. THE
COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL
--------------------
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
IN SECTION 12.09 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
-------------
COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3)
BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
SECTION 12.16 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
--------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE
54
<PAGE>
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER BRIDGE
NOTE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 12.17 Indemnification. The Company shall indemnify and hold each
---------------
Holder, their respective Affiliates, and their respective officers, directors,
employees, attorneys and agents (each, an "Indemnified Person"), harmless from
------------------
and against any and all suits, actions, costs, fines, deficiencies, penalties,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys' fees and disbursements and other costs of investigations
or defense, including those incurred upon any appeal) (each, a "Claim") which
-----
may be instituted or asserted against or incurred by such Indemnified Person as
the result of credit having been extended under this Agreement or any other
Bridge Note Document or otherwise arising in connection with the transactions
contemplated hereunder and thereunder, including any and all Environmental
Liabilities and regardless of whether the Indemnified Person is a party to such
Claim; provided, that the Company shall not be liable for any indemnification to
--------
such Indemnified Person with respect to any portion of any such Claim which
results solely from such Indemnified Person's gross negligence, willful
misconduct or breach of this Agreement as determined by a final judgment of a
court of competent jurisdiction. NO HOLDER OR ANY OTHER INDEMNIFIED PERSON
SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED UNDER THE BRIDGE NOTE DOCUMENTS OR OTHERWISE IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 12.18 Successors and Assigns. This Agreement, the Bridge Notes and
----------------------
the other Bridge Note Documents shall be binding on and shall inure to the
benefit of the Company, the Holders and their respective successors and
permitted assigns (including, in the case of the Company, a debtor-in-possession
on behalf of the Company), except as otherwise provided herein or therein. The
Company may not assign, delegate, transfer, hypothecate or otherwise convey its
rights, benefits, obligations or duties hereunder or under any of the Bridge
Note Documents without the prior express written consent of the Required
Holders. Any such purported assignment, transfer, hypothecation or other
conveyance by the Company without such prior express written consent shall be
void. The terms and provisions of this Agreement and the other Bridge Note
Documents are for the purpose of defining the relative rights and obligations of
the Company and the Holders with respect to the transactions contemplated hereby
and there shall be no third party beneficiaries of any of the terms and
provisions of this Agreement or any of the other Bridge Note Documents.
55
<PAGE>
Annex A to Subordinated
Note Purchase Agreement
-----------------------
SCHEDULE OF CLOSING DOCUMENTS
-----------------------------
In addition to this Agreement, duly executed by the Company and each
Purchaser, as required by Article 4, Paragraph (a), Purchasers shall have
------------------------
received the following, each dated the Closing Date, in form and substance
satisfactory to Purchasers and their respective counsel, unless otherwise
specified below:
1. PRINCIPAL BRIDGE NOTE DOCUMENTS.
-------------------------------
(a) Fee Letter. The GE Capital Fee Letter.
----------
(b) Notes. A duly executed Series A Bridge Note payable to GE Capital in
-----
the principal amount of $15,000,000 and a duly executed Series B Bridge Note
payable to Ramsay Holdings in the principal amount of $2,500,000.
2. THIRD PARTY AGREEMENTS.
----------------------
(a) Insurance. Evidence that the insurance required by the terms of this
---------
Agreement is in full force and effect, including a certificate of insurance that
evidences the existence of each policy of insurance, payment of all premiums
therefor and compliance with the terms of this Agreement.
3. DOCUMENTS DELIVERED BY THE COMPANY.
----------------------------------
(a) Board Resolutions and Incumbency Certificates. A certificate of the
---------------------------------------------
Secretary or an Assistant Secretary of the Company certifying:
(i) the resolutions adopted by the Board of Directors of the
Company approving each Bridge Note Document and the transactions
contemplated thereby, and any other documents evidencing other necessary
corporate action by the Company;
(ii) all documents evidencing any required governmental and
third party approvals with respect to each such Bridge Note Document or,
in lieu thereof, the officer's certificate contemplated by paragraph
(b)(ii) of Article 4; and
------- -
(iii) the names and true signatures of the authorized officers
of the Company.
(b) Certificate of Incorporation, By-Laws and Good Standing Certificates.
--------------------------------------------------------------------
Each of the following documents:
A-1
<PAGE>
(i) the certificate of incorporation of the Company as in
effect on the Closing Date, certified by the Secretary of State of its
State of incorporation no more than 30 days prior to the Closing Date,
and the by-laws of the Company as in effect on the Closing Date,
certified by the Secretary, Assistant Secretary or other appropriate
officers or directors of the Company;
(ii) a "long form" good standing certificate for the Company
from the Secretary of State of its State of incorporation as of a date
no more than 30 days prior to the Closing Date; and
(iii) good standing certificates for the Company from the
Secretary of State of the state in which the Company is required to
qualify as a foreign corporation authorized to transact business, as of
a date no more than 30 days prior to the Closing Date.
(c) Financial Statements. Copies of the Financial Statements described in
--------------------
Schedule 5.04 in form and substance satisfactory to Purchasers.
- -------------
(d) Projections. Copies of the Projections described in Schedule 5.04 in
----------- -------------
form and substance satisfactory to Purchasers.
(e) Proposed Text of Press Release. Not later than two Business Days prior
------------------------------
to the Closing Date, the proposed text of any press release or other disclosure
proposed to be issued by the Company with respect to the transactions
contemplated by this Agreement, for GE Capital's review in accordance with
Section 12.13(a).
- ----------------
(f) Officer's Certificate. A certificate of a Responsible Financial
---------------------
Officer of Company affirming that the conditions set forth in Article 4 have
---------
been satisfied as of the Closing Date.
(g) Other Certificates. Certificates from a Responsible Financial Officer
------------------
of the Company as to each of (i) the Senior Credit Agreement and (ii) the
Preferred Stock Purchase Agreement.
(h) Payment Instructions. Payment instructions from the Company providing
--------------------
for the disbursement of the proceeds of the sale of the Bridge Notes in
accordance with Section 1.03.
------------
4. LEGAL OPINION.
-------------
The opinion of Haythe & Curley, special counsel to the Company. in
substantially the form of Exhibit C to this Agreement.
---------
A-2
<PAGE>
Annex B to Subordinated
Note Purchase Agreement
-----------------------
FINANCIAL STATEMENTS, PROJECTIONS AND NOTICES
---------------------------------------------
1. Within thirty-five (35) days after the close of each Fiscal Month, (i)
an unaudited consolidated and consolidating income statement for the Company for
such Fiscal Month and that portion of the current Fiscal Year ending as of the
close of such Fiscal Month, together with comparisons to the corresponding
income statement for the prior year's equivalent period, both on a monthly and
year-to-date basis, and to budget, and (ii) the Company's consolidated balance
sheet as at the end of such Fiscal Month.
2. Within five (5) days after delivery to the SEC, but in any event
within fifty (50) days after the close of each Fiscal Quarter, the Company's
Form 10-Q for such Fiscal Quarter, together with a Compliance Certificate of a
Responsible Financial Officer of the Company for such Fiscal Quarter,
substantially in the form of Exhibit A to this Annex B.
-------
3. Within five days after delivery to the SEC, but in any event within
one hundred five (105) days after the close of each Fiscal Year, the Company's
Form 10-K for such Fiscal Year, including the annual audited financial
statements of the Company, consisting of a consolidated balance sheet and the
related consolidated statements of operations, retained earnings and cash flow,
setting forth in comparative form the figures for the previous Fiscal Year,
which financial statements shall be prepared in accordance with GAAP, certified
without qualification by Ernst & Young LLP or another firm of independent
certified public accountants of recognized national standing selected by the
Company and reasonably acceptable to the Required Holders, and accompanied by a
statement in reasonable detail prepared by such accountants showing the
calculations used in determining the Company's compliance with the financial
covenants set forth in Annex D.
-------
4. Concurrently with the delivery of the Financial Statements required by
paragraph 3:
(a) the annual letter of representation from a Responsible Financial
Officer of the Company to such accountants in connection with their audit
examination; and
(b) a Compliance Certificate of a Responsible Financial Officer of the
Company for such Fiscal Year, substantially in the form of Exhibit A to this
Annex B.
- -------
5. Not later than one hundred fifty (150) days after the close of each
Fiscal Year, the annual management letter from such accountants to the Company
in connection with their audit examination.
6. Not later than sixty (60) days after the close of each Fiscal Year,
financial projections for the next succeeding Fiscal Year which shall include
financial projections for the Company for such
B-1
<PAGE>
Fiscal Year in form reasonably acceptable to the Required Holders (similar in
form and content to the Projections) approved by the Company's board of
directors and, in each case, the following:
(a) projected balance sheets of the Company as of the end of such Fiscal
Year;
(b) projected cash flow statements and forecasted Excess Borrowing
Availability, including summary details of cash disbursements (including Capital
Expenditures) for such Fiscal Year; and
(c) projected statements of operations of the Company for such Fiscal Year,
on a quarterly basis, prepared on a consolidated basis and on a consolidating
basis for each major business segment of the Company (i.e., hospital based
----
services, managed care and contract services) and, in the case of net revenues,
on a consolidating basis in the format currently utilized by the Company (i.e.,
----
acute inpatient, residential treatment center, outpatient, subacute, managed
care, contract services and other);
in each case including a description of major assumptions used in generating
such balance sheets, cash flows and income statements (including, without
limitation, assumptions with respect to Acquisitions during such Fiscal Year),
and other appropriate supporting details as are reasonably requested by the
Required Holders.
7. As soon as practicable, but in any event within two (2) Business Days
after the Company becomes aware of the existence of any Default or Event of
Default, or any Material Adverse Event with respect to the Company and its
Subsidiaries, taken as a whole, telephonic or telegraphic notice from a
Responsible Financial Officer of the Company specifying the nature of such
Default or Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in writing
within five (5) days.
8. Promptly upon their becoming available, copies of any registration
statements and the regular, periodic and special reports which the Company shall
have filed with the SEC (or any governmental agency substituted therefor) or any
national securities exchange, including, without limitation, the Company's
annual and quarterly reports on Forms 10-K and 10-Q.
9. Promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed.
10. Upon receipt thereof, copies of any material notice or other material
communication received by the Company from the Senior Agent or any other Person
in connection with the Senior Credit Agreement or any other agreement, document
or instrument relating to Senior Indebtedness promptly after such notice or
other communication is received by the Company.
11. Such other reports and information respecting the Company's business,
financial condition or prospects as the Required Holders may, from time to time,
reasonably request.
B-2
<PAGE>
Exhibit A to Annex B
--------------------
COMPLIANCE CERTIFICATE
----------------------
TO: GENERAL ELECTRIC CAPITAL CORPORATION
RAMSAY HOLDINGS PTY. LIMITED
Reference is made to that certain Subordinated Note Purchase Agreement,
dated as of September 30, 1997 (as it may be amended, modified or supplemented
from time to time, the "Bridge Note Agreement"), among Ramsay Health Care, Inc.,
---------------------
a Delaware corporation (the "Company"), and General Electric Capital Corporation
-------
and Ramsay Holdings Pty. Limited, as Purchasers. Terms defined in Article 10
----------
and Annex C of the Bridge Note Agreement and not otherwise defined in this
-------
Compliance Certificate ("Certificate") shall have the meanings assigned to them
-----------
in the Bridge Note Agreement. This Certificate is delivered pursuant to
[paragraph 3] [paragraph 4] [CHOOSE ONE] of Annex B to the Bridge Note Agreement
-------
for the [Fiscal Quarter] [Fiscal Year] [CHOOSE ONE] ending __________ ___, ____,
and the calculations set forth herein are as of the last day of such fiscal
period (the "Calculation Date"). This Certificate is delivered with respect to
----------------
the Financial Statements delivered to Purchasers pursuant to [paragraph 2]
[paragraph 3] [CHOOSE ONE] of Annex B to the Bridge Note Agreement as at the
-------
Calculation Date, and for the period then ended (the "Financial Statements").
--------------------
The undersigned hereby certifies that he or she is the ___________ of the
Company and in such capacity is a Responsible Financial Officer of the Company
authorized and empowered to issue this Certificate for and on behalf of the
Company; that he or she has reviewed the Financial Statements delivered to
Purchasers herewith; and that he or she has made or supervised such examinations
and investigations as are reasonably necessary to determine whether the Company
is in compliance with all the terms and provisions set forth in the Bridge Note
Agreement to be observed or performed by the Company, to determine whether a
Default or Event of Default has occurred and is continuing, and to set forth
accurately the computations required to show compliance with each of the
financial covenants set forth in Annex C to the Bridge Note Agreement (the
-------
"Financial Covenants") as of the Calculation Date and for the periods indicated,
- --------------------
all as more specifically set forth below.
The undersigned hereby further certifies as follows:
1. FINANCIAL STATEMENTS; NO DEFAULT OR EVENT OF DEFAULT.
----------------------------------------------------
[FOR QUARTERLY CERTIFICATE:] The Financial Statements are complete and do
not contain any material error, misstatement or omission and present fairly in
accordance with GAAP (subject to normal year-end adjustments and the absence of
footnotes) the financial position, the results of operations and the cash flow
of the Company as at the end of the Fiscal Quarter to which such Financial
Statements relate and for the period then ended, and to the knowledge of the
B-3
<PAGE>
undersigned [there was no Default or Event of Default in existence as of such
time] [only those Defaults or Events of Default specified on Attachment 1 hereto
------------
were in existence as of such time] [CHOOSE ONE].
[FOR ANNUAL CERTIFICATE:] The Financial Statements are complete and
correct and present fairly in accordance with GAAP the financial position, the
results of operations and the changes in financial position of the Company as at
the end of such Fiscal Year and for the period then ended and [there was no
Default or Event of Default in existence as of such time] [only those Defaults
or Events of Default specified on Attachment 1 hereto were in existence as of
------------
such time] [CHOOSE ONE].
2.COMPLIANCE WITH FINANCIAL COVENANTS.
-----------------------------------
Computations showing compliance with each of the Financial Covenants set
forth in Annex C to the Bridge Note Agreement, as of the Calculation Date and
-------
for the periods indicated, are as follows:
<TABLE>
<CAPTION>
A. EBITDA (paragraph 1(a) of Annex C)
------ -------
EBITDA, determined as of the Calculation Date, for the Rolling
Four-Quarter Period specified in paragraph 1(a) of Annex C:
-------
<S> <C> <C>
1. Net Income: $_____________
2. Interest Expense: $_____________
3. Tax Expense: $_____________
4. Depreciation, amortization, etc.: $_____________
5. Extraordinary gains: $(____________)
6. Non-cash portion of extraordinary losses $_____________
7. Losses from asset sales: $_____________
8. Gains from asset sales: $(____________)
9. Cash payments with respect to extraordinary losses
related to a prior period: $(____________)
10. Net income resulting from reversal of 6/30/97 reserves: $(____________)
11. Actual EBITDA (Item 1 plus Item 2 plus Item 3 plus
Item 4 minus Item 5 plus Item 6 plus Item 7 minus
Item 8 minus Item 9 minus Item 10): $_____________
12. Minimum EBITDA (as set forth for the Rolling Four-
Quarter Period specified in paragraph 1(a) of Annex C): $_____________
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C> <C>
B. LEVERAGE RATIO (paragraph 1(b) of Annex C)
-------------- -------
Leverage Ratio, determined as of the Calculation Date, for the Rolling
Four-Quarter Period specified in paragraph 1(b) of Annex C:
-------
1. Funded Debt: $_____________
2. EBITDA (Item A11 above): $_____________
3. Actual Ratio (Item 1 divided by Item 2): ________:1.00
4. Maximum Ratio (as set forth for the applicable Rolling
Four-Quarter Period in paragraph 1(b) of Annex C): ________:1.00
C. FIXED CHARGE COVERAGE RATIO
---------------------------
(paragraph 1(c) of Annex C)
Fixed Charge Coverage Ratio, determined as of the Calculation Date,
for the Rolling Four-Quarter Period specified in paragraph 1(c) of
Annex C:
-------
1. EBITDA (Item A11 above): $_____________
2. Capital Expenditures: (____________)
3. Cash Tax Expense: (____________)
4. Certain Cash Payments: (____________)
5. Numerator (Item 1 minus Item 2 minus
Item 3 minus Item 4): _____________
6. Interest Expense: _____________
7. Principal Amortization: _____________
8. Earn-out Payments: =============
9. Denominator (Item 6 plus Item 7 plus Item 8): $____________
10. Actual Ratio (Item 5 divided by Item 9): :1.00
11. Minimum Ratio (as set forth for the applicable Rolling
Four-Quarter Period in paragraph 1(c) of Annex C): 1.10:1.00
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C> <C>
D. INTEREST COVERAGE RATIO (paragraph 1(d) of Annex C)
----------------------- -------
Interest Coverage Ratio, determined as of the Calculation Date, for
the Rolling Four-Quarter Period specified in paragraph 1(d) of
Annex C:
1. EBITDA (Item A11 above): $_____________
2. Capital Expenditures: $(____________)
3. Numerator (Item 1 minus Item 2): $_____________
4. Interest Expense: $_____________
5. Actual Ratio (Item 3 divided by Item 4): ________:1.00
6. Minimum Ratio (as set forth for the applicable Rolling Four-
Quarter Period in paragraph 1(d) of Annex C): 1.50:1.00
E. TANGIBLE NET WORTH (paragraph 1(e) of Annex C)
------------------ -------
Tangible Net Worth, determined as of the Calculation Date:
1. Shareholders' equity: $_____________
2. Intangible assets: $(____________)
3. Actual Tangible Net Worth (Item 1 minus Item 2): $_____________
4. Base Amount: $ 25,000,000
5. Cumulative positive Net Income after June 30, 1997: $_____________
6. Multiplier: x 50% = $_____________
7. Minimum Tangible Net Worth (Item 4 plus Item 6): $_____________
F. CAPITAL EXPENDITURES (paragraph 1(f) of Annex C):
-------------------- --------
Capital Expenditures for Fiscal Year to Date: $_____________
Maximum Permitted Capital Expenditures for such Fiscal Year: $_____________
G. INVESTMENTS (Section 6.03)
-----------
Aggregate Practice Guarantees: $_____________
Maximum Permitted Amount: $ 1,000,000
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C> <C>
Aggregate amount paid to purchase minority Stock interests: $_____________
Maximum Permitted Amount: $ 1,000,000
</TABLE>
3. MATERIAL SUBSIDIARIES.
----------------------
Attached hereto is a schedule setting forth the names and jurisdictions of
incorporation of each Material Subsidiary as of the Calculation Date.
4. NO MATERIAL ADVERSE EVENT.
-------------------------
To the best of my knowledge, [EXCEPT AS DESCRIBED IN ATTACHMENT 2 OR IN AN
------------
EARLIER COMPLIANCE CERTIFICATE,] no Material Adverse Event with respect to the
Company or its Subsidiaries taken as a whole has occurred since the date of the
last audited Financial Statements delivered pursuant to Annex B to the Bridge
-------
Note Credit Agreement.
IN WITNESS WHEREOF, the undersigned, in his or her capacity as a
Responsible Financial Officer, has executed and delivered this Compliance
Certificate and made the certifications contained herein.
Dated: this ____ day of ____________, ______
_________________________________
Name:
Title:
B-7
<PAGE>
Annex C to Subordinated
Note Purchase Agreement
-----------------------
FINANCIAL COVENANTS
-------------------
1. Financial Covenants. The Company shall not breach or fail to comply
-------------------
with any of the following financial covenants:
(a) The Company shall maintain, as of the end of each Rolling Four-Quarter
Period, commencing with the Rolling Four-Quarter Period ending December 31,
1997, EBITDA of not less than $11,000,000.
(b) The Company shall maintain, as of the end of each Rolling Four-
Quarter Period set forth below, a Leverage Ratio of not more than the ratio set
forth below for the Rolling Four-Quarter Period corresponding thereto:
Rolling Four-Quarter
--------------------
Period Ending Ratio
------------- -----
12/31/97 - 3/31/99 5.00:1.00
6/30/99 - 9/30/00 4.50:1.00
Each Rolling-Four Quarter Period thereafter 4.00:1.00
(c) The Company shall maintain, as of the end of each Rolling Four-Quarter
Period, commencing with the Rolling Four-Quarter Period ending December 31,
1997, a Fixed Charge Coverage Ratio of not less than 1.10:1.00.
(d) The Company shall maintain, as of the end of each Rolling Four-Quarter
Period, commencing with the Rolling Four-Quarter Period ending December 31,
1997, an Interest Coverage Ratio of not less than 1.50:1.00.
(e) The Company shall maintain, as of the last day of each Fiscal Quarter,
commencing December 31, 1997, a Tangible Net Worth of not less than an amount
equal to the sum of (i) $25,000,000 plus, (ii) fifty percent (50%) of the
----
Company's cumulative positive Net Income for each Fiscal Quarter ended
subsequent to June 30, 1997, through and including the Fiscal Quarter then ended
(but without reduction for negative Net Income).
(f) The Company shall not make Capital Expenditures in excess of $5,000,000
in the aggregate during its Fiscal Year ending June 30, 1998, and $6,000,000 in
the aggregate during any Fiscal Year thereafter.
C-1
<PAGE>
2. Transitional Rules; Pro Forma Adjustments.
-----------------------------------------
(a) Transitional Rules. Notwithstanding anything to the contrary set forth
------------------
herein, in calculating the Company's compliance with the financial covenants set
forth in paragraphs 1(c) and (d) above for the Rolling Four-Quarter Periods
ending December 31, 1997, March 31, 1998 and June 30, 1998, the "Rolling Four-
Quarter Period" ending December 31, 1997 shall mean the Fiscal Quarter then
ended; the "Rolling Four-Quarter Period" ending March 31, 1998 shall mean the
two Fiscal Quarters then ended; and the "Rolling Four-Quarter Period" ending
June 30, 1998 shall mean the three Fiscal Quarters then ended.
(b) Pro Forma Adjustments. In calculating the Company's compliance with
---------------------
the financial covenants set forth in paragraphs 1(a), (b), (c) and (d) above,
the following adjustments shall be made on a pro forma basis to reflect the
---------
effect of Acquisitions occurring after the Closing Date and during the relevant
Rolling Four-Quarter Period:
(i) For the purposes of paragraphs 1(a), (b), (c) and (d),
EBITDA shall be adjusted on a pro forma basis to include the actual
historical EBITDA of such acquired entity for such period (as defined in
this Annex C, but determined for such entity) , as if such entity had
-------
been acquired on the first day of such period, to eliminate, as of the
first day of such period, any Indebtedness refinanced in such
Acquisition and to include, as of the first day of such period, any
Indebtedness incurred in connection with such Acquisition (including any
portion thereof incurred to fund such refinancing);
(ii) For the purposes of paragraph 1(b), Funded Debt shall be
adjusted on a pro forma basis to reflect, as of the first day of such
---------
period, any Funded Debt incurred, assumed or refinanced in connection
with such Acquisition; and
(iii) For the purposes of paragraphs 1(c) and (d), Capital
Expenditures, Fixed Charges, Interest Expense and Tax Expense shall be
adjusted on a pro forma basis to include the actual Capital
---------
Expenditures, Fixed Charges, Interest Expense and Tax Expense of such
acquired entity for such period, as if such entity had been acquired on
the first day of such period, including, any interest attributable to
any Indebtedness incurred in connection with such Acquisition, but
excluding any Interest Expense or other Fixed Charges attributable to
any Indebtedness refinanced in such Acquisition.
3. Definitions and Rules of Construction.
-------------------------------------
(a) Defined Terms. Capitalized terms used in this Annex C and not defined
------------- -------
in Article 10 of this Agreement shall have the following respective meanings:
----------
"Capital Expenditures" shall mean, with respect to any fiscal period
--------------------
of the Company, all of the Company's consolidated expenditures during such
period for any fixed assets or improvements, or for replacements, substitutions
or additions thereto, that have a useful life of more
C-2
<PAGE>
than one year and that are required to be capitalized under GAAP, and, in any
event, shall include Capital Lease Obligations and all asset purchases secured
by purchase money security interests.
"Capital Lease" shall mean any lease of any property (whether real,
-------------
personal or mixed) by any Person as lessee that, in accordance with GAAP, either
would be required to be classified and accounted for as a capital lease on a
consolidated balance sheet of such Person or otherwise be disclosed as such in a
note to such balance sheet.
"Capital Lease Obligation" shall mean, as of any date, the amount of
------------------------
the obligation of the lessee under a Capital Lease that, in accordance with
GAAP, would appear on a consolidated balance sheet of such lessee in respect of
such Capital Lease or otherwise be disclosed as such in a note to such balance
sheet.
"EBITDA" shall mean, with respect to any fiscal period of the Company,
------
(i) Net Income for such period, plus (ii) Interest Expense for such period, plus
---- ----
(iii) Tax Expense for such period, plus (iv) to the extent deducted in
----
determining Net Income, the Company's depreciation, amortization and other
similar non-cash charges for such period, minus (v) to the extent included in
-----
determining Net Income, the Company's extraordinary gains for such period, plus
----
(vi) to the extent included in determining Net Income, the non-cash portion of
any of the Company's extraordinary losses for such period, plus, (vii) any
----
losses from asset sales for such period, minus (viii) any gains from asset sales
-----
for such period, all determined in accordance with GAAP on a consolidated basis,
minus (ix) any cash payments made with respect to extraordinary losses related
- -----
to a prior period, minus (x) to the extent included in determining Net Income,
-----
any consolidated net income derived from the reversal of a reserve reflected in
the 1997 Audited Financial Statements for which there was not a corresponding
cash payment.
"Fixed Charge Coverage Ratio" shall mean, with respect to any fiscal
---------------------------
period of the Company, the ratio of (a) the sum of (i) EBITDA for such period,
minus (ii) Capital Expenditures during such period, minus (iii) that portion of
- ----- -----
Tax Expense paid in cash during such period, minus (iv) any payment made in cash
-----
for which the offsetting entry on Borrower's Financial Statements is a debit to
a reserve reflected in the 1997 Audited Financial Statements, rather than an
expense or reduction of revenues on Borrower's income statement, to (b) Fixed
Charges for such period.
"Fixed Charges" shall mean, with respect to any fiscal period of the
-------------
Company, the sum of (i) Interest Expense for such period, plus (ii) regularly
----
scheduled payments of principal paid on Funded Debt during such period.
"Funded Debt" shall mean all of the Company's consolidated
-----------
Indebtedness which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from or is directly or
indirectly renewable or extendible at its option under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one year from the date of creation thereof, including in
each instance current maturities of long-term debt (and the current portion of
long-term debt in the last year of its term), revolving credit and short-term
debt extendible beyond one year at the option of the debtor, and shall also
include, without limitation,
C-3
<PAGE>
(i) Indebtedness arising under or in connection with any interest rate swap
agreement or arrangements, (ii) the Obligations, and (iii) Subordinated
Indebtedness.
"GAAP" shall mean generally accepted accounting principles in the
----
United States as in effect from time to time, consistently applied.
"Interest Coverage Ratio" shall mean, with respect to any fiscal
-----------------------
period of the Company, the ratio of (a) the sum of (i) EBITDA for such period,
minus (ii) Capital Expenditures during such period, to (b) Interest Expense for
- -----
such period.
"Interest Expense" shall mean, with respect to any fiscal period of
----------------
the Company, the Company's consolidated interest expense paid in cash for such
period, including the interest component of any Capital Lease Obligation, but
excluding the Life Companies Prepayment Premium to the extent otherwise included
in Interest Expense.
"Leverage Ratio" shall mean, with respect to any fiscal period of the
--------------
Company, the ratio of (a) Funded Debt as of the last day of such period to (b)
EBITDA for such period.
"Net Income" shall mean, with respect to any fiscal period of the
----------
Company, the Company's consolidated net income (or loss) from continuing
operations for such period.
"Rolling Four-Quarter Period" shall mean, as of the end of any Fiscal
---------------------------
Quarter of the Company, the immediately preceding four Fiscal Quarters (except
as set forth in paragraph 2(a) above), including the Fiscal Quarter then ending.
"Tangible Net Worth" shall mean, as of any date, (a) the Company's
------------------
consolidated shareholders' equity, minus (b) the Company's consolidated
-----
intangible assets, including, without limitation, the following:
(i) any surplus resulting from the write-up of assets
subsequent to the Audit Date;
(ii) goodwill, including any amounts (however designated on
the balance sheet) representing the cost of acquisitions of Subsidiaries
in excess of underlying tangible assets;
(iii) patents, trademarks, copyrights, etc.; and
(iv) deferred charges (including, but not limited to,
unamortized debt discount and expense, organization expenses and
experimental and development expenses, but excluding prepaid expenses).
"Tax Expense" shall mean, with respect to any fiscal period of the
-----------
Company, the Company's consolidated provision for income taxes for such period.
C-4
<PAGE>
4. Rules of Construction. Any accounting term used in this Annex C or
--------------------- -------
elsewhere in this Agreement shall have, unless otherwise specifically provided,
the meaning customarily given such term in accordance with GAAP, and all
financial computations shall be computed, unless otherwise specifically
provided, on a consolidated basis in accordance with GAAP consistently applied.
That certain items or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing. In
the event that any "Accounting Changes" (as defined below) occur and such
changes result in a change in the calculation of the financial covenants,
standards or terms used in this Annex C or elsewhere in this Agreement, then the
-------
Company and the Holders agree to enter into negotiations in order to amend such
provisions of this Agreement, subject to the approval of the Required Holders,
so as equitably to reflect such Accounting Changes with the desired result that
the criteria for evaluating the Company's financial condition shall be the same
after giving effect to such Accounting Changes as if such Accounting Changes had
not been made. "Accounting Changes" means (i) changes in accounting principles
------------------
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (d) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. and (ii)
changes in accounting principles concurred in by the Company's independent
public accountants. In the event that the Company and the Required Holders
shall have agreed upon any such required amendment, then, after such amendment
has been evidenced in writing and the underlying Accounting Change with respect
thereto has been implemented, any reference to GAAP contained in this Annex C or
-------
elsewhere in this Agreement shall, only to the extent of such Accounting Change,
refer to GAAP, consistently applied after giving effect to the implementation of
such Accounting Change. If the Company and the Required Holders cannot agree
upon any required amendment within thirty (30) days following the date of
implementation of any Accounting Change, then all financial statements delivered
in accordance with Annex B to this Agreement and all calculations of financial
-------
covenants and other standards and terms in accordance with this Annex C shall be
-------
prepared, delivered and made without regard to the underlying Accounting Change.
C-5
<PAGE>
Schedule 5.03 to Subordinated
Note Purchase Agreement
-----------------------
FINANCIAL STATEMENTS
--------------------
1. Historical Financial Statements. Copies of the consolidated balance
-------------------------------
sheet of the Company and its Subsidiaries as of June 30, 1997 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the Fiscal Year then ended, accompanied by the audit report thereon of Ernst &
Young LLP have been furnished by the Company to each Purchaser prior to the date
of this Agreement. Such consolidated financial statements have been prepared in
conformity with GAAP and present fairly in all material respects the
consolidated financial position of the Company as at the date thereof, and the
consolidated results of operations and cash flows of the Company for the Fiscal
Year then ended.
1
<PAGE>
Exhibit A to Subordinated
Note Purchase Agreement
-----------------------
[Form of Series A Bridge Note]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. NO TRANSFER, SALE
---
OR OTHER DISPOSITION OF THIS NOTE MAY BE MADE UNLESS SUCH SALE OR TRANSFER IS IN
ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT, AS AT THAT TIME
AMENDED, OR IN CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR 144A UNDER SUCH
ACT OR UNLESS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT IS AVAILABLE WITH RESPECT THERETO.
THIS NOTE IS SUBORDINATED PURSUANT TO, AND SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN, ARTICLE 9 OF THAT CERTAIN SUBORDINATED NOTE PURCHASE AGREEMENT,
DATED AS OF SEPTEMBER 30, 1997, AMONG RAMSAY HEALTH CARE, INC., GENERAL ELECTRIC
CAPITAL CORPORATION AND PAUL RAMSAY HOSPITALS PTY. LIMITED, AS AMENDED OR
MODIFIED FROM TIME TO TIME (THE "BRIDGE NOTE PURCHASE AGREEMENT").
------------------------------
INCREASING RATE SENIOR
SUBORDINATED BRIDGE NOTE DUE SEPTEMBER 30, 2005
SERIES A
$___________ __________, ____
FOR VALUE RECEIVED, the undersigned, RAMSAY HEALTH CARE, INC., a Delaware
corporation (the "Company"), hereby promises to pay to _______________________,
-------
a __________ corporation or its registered assigns (the "Holder"), the principal
------
amount of _____________ DOLLARS ($____________) on or before September 30, 2005,
together with interest at the rates per annum, and on the dates, set forth in
the Bridge Note Purchase Agreement. All payments of principal, interest and
other amounts with respect to this Note shall be payable in lawful currency of
the United States of America and in immediately available funds in accordance
with Section 2.05 of the Bridge Note Purchase Agreement.
This Note is one of the Series A Bridge Notes referred to in the Bridge
Note Purchase Agreement. Capitalized terms used in this Note are defined in the
Bridge Note Purchase Agreement, unless otherwise expressly stated herein. This
Note is entitled to the benefits of the Bridge Note Purchase Agreement and is
subject to all of the agreements, terms and conditions contained therein,
Exh. A-2
<PAGE>
including, without limitation, the terms of Section 2.04 thereof relating to
certain mandatory prepayments, all of which are incorporated herein by this
reference. This Note may not be prepaid, in whole or in part, except in
accordance with the terms and conditions set forth in the Bridge Note Purchase
Agreement.
As provided in Section 2.01(b) of the Bridge Note Purchase Agreement, (a)
upon the occurrence of an Event of Default under Section 8.01(g), (h) or (i) of
the Bridge Note Purchase Agreement, this Note, and all amounts payable hereunder
in accordance with the terms of the Bridge Note Purchase Agreement, shall
immediately become due and payable, without notice of any kind, and (b) upon the
occurrence of any other Event of Default under the Bridge Note Purchase
Agreement, this Note, and all amounts payable hereunder in accordance with the
terms of the Bridge Note Purchase Agreement, shall, at the option of the holder,
immediately become due and payable, without notice of any kind except as
specifically provided in the Bridge Note Purchase Agreement.
This Note is a registered Note and, as provided in the Bridge Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder hereof or such holder's attorney duly authorized in writing, a
new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of transfer,
the Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and the Company shall not be affected by any notice to the contrary. Reference
is hereby made to Section 1.04 of the Bridge Note Purchase Agreement for a
description of certain restrictions on the transfer of or sale of a
participation interest in this Note.
THIS NOTE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THAT STATE.
The Company expressly waives any presentment, demand, protest, notice of
default, notice of intention to accelerate, notice of acceleration or notice of
any other kind.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by its duly authorized officer as of the day and year first above written.
RAMSAY HEALTH CARE, INC.
By:________________________________
Name:
Title:
Exh. A-3
<PAGE>
Exhibit B to Subordinated
Note Purchase Agreement
-----------------------
[Form of Series B Bridge Note]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. NO TRANSFER, SALE
---
OR OTHER DISPOSITION OF THIS NOTE MAY BE MADE UNLESS SUCH SALE OR TRANSFER IS
IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT, AS AT THAT TIME
AMENDED, OR IN CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR 144A UNDER SUCH
ACT OR UNLESS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT IS AVAILABLE WITH RESPECT THERETO.
THIS NOTE IS SUBORDINATED PURSUANT TO, AND SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN, ARTICLE 9 OF THAT CERTAIN SUBORDINATED NOTE PURCHASE AGREEMENT,
DATED AS OF SEPTEMBER 30, 1997, AMONG RAMSAY HEALTH CARE, INC., GENERAL ELECTRIC
CAPITAL CORPORATION AND PAUL RAMSAY HOSPITALS PTY. LIMITED, AS AMENDED OR
MODIFIED FROM TIME TO TIME (THE "BRIDGE NOTE PURCHASE AGREEMENT").
------------------------------
INCREASING RATE SENIOR
SUBORDINATED BRIDGE NOTE DUE SEPTEMBER 30, 2005
SERIES B
$___________ __________, ____
FOR VALUE RECEIVED, the undersigned, RAMSAY HEALTH CARE, INC., a Delaware
corporation (the "Company"), hereby promises to pay to _______________________,
-------
a __________ corporation or its registered assigns (the "Holder"), the principal
------
amount of _____________ DOLLARS ($____________) on or before September 30, 2005,
together with interest at the rates per annum and on the dates set forth in the
Bridge Note Purchase Agreement. All payments of principal, interest and other
amounts with respect to this Note shall be payable in lawful currency of the
United States of America and in immediately available funds in accordance with
Section 2.05 of the Bridge Note Purchase Agreement.
This Note is one of the Series B Bridge Notes referred to in the Bridge Note
Purchase Agreement. Capitalized terms used in this Note are defined in the
Bridge Note Purchase Agreement, unless otherwise expressly stated herein. This
Note is entitled to the benefits of the Bridge Note
Exh. B-1
<PAGE>
Purchase Agreement and is subject to all of the agreements, terms and conditions
contained therein, including, without limitation, the terms of Section 2.04
thereof relating to certain mandatory prepayments, all of which are incorporated
herein by this reference. This Note may not be prepaid, in whole or in part,
except in accordance with the terms and conditions set forth in the Bridge Note
Purchase Agreement.
As provided in Section 2.01(b) of the Bridge Note Purchase Agreement, (a) upon
the occurrence of an Event of Default under Section 8.01(g), (h) or (i) of the
Bridge Note Purchase Agreement, this Note, and all amounts payable hereunder in
accordance with the terms of the Bridge Note Purchase Agreement, shall
immediately become due and payable, without notice of any kind, and (b) upon the
occurrence of any other Event of Default under the Bridge Note Purchase
Agreement, this Note, and all amounts payable hereunder in accordance with the
terms of the Bridge Note Purchase Agreement, shall, at the option of the holder,
immediately become due and payable, without notice of any kind except as
specifically provided in the Bridge Note Purchase Agreement.
This Note is a registered Note and, as provided in the Bridge Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder hereof or such holder's attorney duly authorized in writing, a
new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of transfer,
the Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes,
and the Company shall not be affected by any notice to the contrary. Reference
is hereby made to Section 1.04 of the Bridge Note Purchase Agreement for a
description of certain restrictions on the transfer of or sale of a
participation interest in this Note.
THIS NOTE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THAT STATE.
The Company expressly waives any presentment, demand, protest, notice of
default, notice of intention to accelerate, notice of acceleration or notice of
any other kind.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name
by its duly authorized officer as of the day and year first above written.
RAMSAY HEALTH CARE, INC.
By:________________________________
Name:
Title:
Exh. B-2
<PAGE>
EXHIBIT 10.108
Exhibit B to Preferred
Stock Purchase Agreement
------------------------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
---------
September 30, 1997, by and between RAMSAY HEALTH CARE, INC., a Delaware
corporation (the "Company"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New
-------
York corporation ("Purchaser").
---------
RECITALS
--------
A. The Company and Purchaser have entered into a Preferred Stock Purchase
Agreement of even date herewith (the "Preferred Stock Purchase Agreement"),
----------------------------------
pursuant to which the Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from the Company, 100,000 shares of Class B
Preferred Stock, Series 1997, $1.00 par value per share, of the Company (the
"Series 1997 Preferred Stock");
- ----------------------------
B. The Series 1997 Preferred Stock is convertible into shares of common stock,
$0.01 par value per share, of the Company ("Common Stock") upon the exercise of
------------
certain conversion rights set forth in the Certificate of Designations
authorizing and designating the Series 1997 Preferred Stock (the "Certificate of
--------------
Designations"); and
- ------------
C. In order to induce Purchaser to enter into the Preferred Stock Purchase
Agreement and to purchase the Series 1997 Preferred Stock, the Company has
agreed to provide registration rights with respect to any shares of Common Stock
issued upon the exercise of such conversion rights;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and intending to be legally bound, the parties hereto
agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the
-----------
Preferred Stock Purchase Agreement are used herein as therein defined, and the
following shall have (unless otherwise provided elsewhere in this Agreement) the
following respective meanings (such meanings being equally applicable to both
the singular and plural form of the terms defined):
"Affiliate" shall mean, with respect to any Person: (a) each Person that,
---------
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the capital stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by or is under common control with such
Person, and (c)
<PAGE>
each of such Person's executive officers and directors. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Registration Rights Agreement, including all
---------
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day
------------
on which banks are required or permitted to be closed in the State of New York
or a day on which Purchaser is closed for business.
"Commission" shall mean the Securities and Exchange Commission or any other
----------
federal agency then administering the Securities Act, the Exchange Act and other
federal securities laws.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
----
any successor corporation thereto.
"Person" shall mean any individual, sole proprietorship, partnership,
------
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).
"Registrable Securities" shall mean the Common Stock issued upon the
----------------------
exercise by a holder of Series 1997 Preferred Stock of the conversion rights
with respect thereto set forth in the Certificate of Designations.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
2. Required Registration. After receipt of a written request from holders of
---------------------
Registrable Securities representing at least an aggregate of 33% of the total of
all Registrable Securities then outstanding, requesting that the Company effect
the registration of Registrable Securities under the Securities Act and
specifying the intended method or methods of disposition thereof, the Company
shall promptly notify all holders of Registrable Securities in writing of the
receipt of such request and
2
<PAGE>
each such holder may elect (by written notice sent to the Company within ten
Business Days from the date of such holder's receipt of the aforementioned
Company's notice) to have Registrable Securities held by such holder included in
such registration thereof pursuant to this Section 2. Thereupon the Company
---------
shall, as expeditiously as is possible, use its best efforts to effect the
registration under the Securities Act of all shares of Registrable Securities
which the Company has been so requested to register by such holders for sale,
all to the extent required to permit the disposition (in accordance with the
intended method or methods thereof, as aforesaid) of the Registrable Securities
so registered; provided, however, that (i) the Company shall not be required to
-------- -------
effect more than one registration of any Registrable Securities pursuant to this
Section 2, (ii) in the event that the Board of Directors of the Company
- ---------
determines in good faith that the registration of Registrable Securities would
require the disclosure of material nonpublic information and that disclosure of
such material nonpublic information would not be in the best interests of the
Company and its stockholders, then, upon notice to the holders of the
determination that has been made hereunder, the Company shall not be required to
file a registration statement until the earlier of the second day after the
condition described above has ceased to exist and the 60th day following receipt
by the Company of the notice from the holders requesting registration under this
Section 2, and (iii) nothing in this Agreement shall require the Company to
- ---------
effect an underwritten public offering of the Registrable Securities.
Notwithstanding anything to the contrary contained herein, the obligation of the
Company under this Section 2 shall be satisfied only when a Registration
---------
Statement covering all shares of Registrable Securities specified in notices
received as aforesaid, for sale in accordance with the method of disposition
specified by the requesting holders, shall have become effective and remained
effective for the period set forth in Section 4(a). The Company will not effect
------------
any other registration of its Common Stock for its own account or (other than a
Registration Statement on Form S-4 or S-8 or any successor form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to employees of the Company pursuant to any employee benefit
plan, respectively) for the account of any holder who is an Affiliate of the
Company, from the date of receipt of a notice from requesting holders pursuant
to this Section 2 until the end of the period described in Section 4(a).
--------- ------------
3. Incidental Registration. If the Company at any time proposes to file on
-----------------------
its behalf and/or on behalf of any of its security holders (the "Demanding
---------
Security Holders") a Registration Statement under the Securities Act on any form
- ----------------
(other than a Registration Statement on Form S-4 or S-8 or any successor form
for securities to be offered in a transaction of the type referred to in Rule
145 under the Securities Act or to employees of the Company pursuant to any
employee benefit plan, respectively) for the general registration of securities
to be sold for cash with respect to its Common Stock or any other class of
equity security (as defined in Section 3(a)(11) of the Exchange Act) of the
Company, it will give written notice to all holders of Registrable Securities at
least 20 days before the initial filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of disposition of
the securities proposed to be registered by the Company. The notice shall offer
to include in such filing the aggregate number of shares of Registrable
Securities as such holders may request.
Each holder of any such Registrable Securities desiring to have Registrable
Securities registered under this Section 3 shall advise the Company in writing
---------
within 15 days after the date of
3
<PAGE>
receipt of such offer from the Company, setting forth the amount of such
Registrable Securities for which registration is requested. The Company shall
thereupon include in such filing the number of shares of Registrable Securities
for which registration is so requested, subject to the next sentence, and shall
use its best efforts to effect registration under the Securities Act of such
shares. If the managing underwriter of a proposed underwritten public offering
shall advise the Company in writing that the distribution of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company or such Demanding Security Holder
would materially and adversely affect the distribution of such securities by the
Company or such Demanding Security Holder, then the Company shall include
securities in such registration in the following order of priority (A) first, up
to the full number of securities proposed to be offered by the Company or
proposed to be offered by the holders of the Life Company Warrants pursuant to
the demand registration rights set forth in Section 11.3 of such Warrants; (B)
second, up to the full number of securities proposed to be offered by the
holders of the Registrable Securities and any other Demanding Security Holders
who are not Affiliates of the Company (and if such full number may not be
included, then on a pro rata basis in proportion to the respective number of
--------
securities proposed to be offered by such persons); and (C) third, up to the
full number of securities proposed to be offered by any Demanding Security
Holders who are Affiliates of the Company. Except as otherwise provided in
Section 5, all expenses of such registration shall be borne by the Company.
- ---------
4. Registration Procedures. If the Company is required by the provisions of
-----------------------
Section 2 or 3 to use its best efforts to effect the registration of any
- --------- -
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement with
respect to such securities and use its best efforts to cause such Registration
Statement to become and remain effective for a period of time required for the
disposition of such securities by the holders thereof; provided that such period
of time shall not exceed 180 days;
(b) prepare and file with the Commission such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in a public
offering or the expiration of 180 days and promptly notify each holder for whom
such Registrable Securities are covered by such Registration Statement, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make, in light of the
circumstances under which they were made, the statements therein not misleading,
and at the request of any such holder promptly prepare and furnish to such
holder a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary
4
<PAGE>
to make, in light of the circumstances under which they were made, the
statements therein not misleading;
(c) furnish to such selling security holders such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, as such selling security
holders may reasonably request in order to facilitate the public sale or other
sale or transfer of such securities;
(d) use its best efforts to register or qualify the securities covered by
such Registration Statement under such other securities or blue sky laws of such
jurisdictions within the United States and Puerto Rico as each holder of such
securities shall reasonably request (provided, however, the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any jurisdiction in which it is not then qualified or to file any general
consent to service or process), and do such other reasonable acts and things as
may be required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration Statement;
(e) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on a securities exchange or the NASD automated
quotation system and, if listed on the NASD automated quotation system, use its
best efforts to secure designation of all such Registrable Securities covered by
such registration statement as a NASDAQ national market system security or,
failing that, to secure NASDAQ authorization for such Registrable Securities;
(f) furnish, at the request of any holder requesting registration of
Registrable Securities pursuant to Section 2, on the date that such shares of
---------
Registrable Securities are delivered to any underwriters upon the closing of the
related public offering or, if such Registrable Securities are not being sold
through underwriters, on the date that the Registration Statement with respect
to such shares of Registrable Securities becomes effective, (1) an opinion,
dated such date, of the independent counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through underwriters, then to the
holders making such request, stating that such Registration Statement has become
effective under the Securities Act and (i) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (ii) the Registration Statement, the
related prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except that such
counsel need express no opinion as to financial statements or other financial or
statistical data contained therein), and to the effect that, on the basis of its
involvement in the preparation of the Registration Statement, such counsel does
not believe that either the Registration Statement or the prospectus, or any
amendment or supplement thereto (other than financial statements, as to which
such counsel need make no statement) contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make
5
<PAGE>
the statements therein, in light of the circumstances in which made, not
misleading and (iii) as to such other matters and effects as may reasonably be
requested by counsel for the underwriter, or by the holder requesting
registration or its counsel; and (2) a letter dated such date, from the
independent accountants of the Company, addressed to the underwriters, if any,
and if such Registrable Securities are not being sold through underwriters, then
to the holder making such request and, if such accountants decline to deliver
such letter to such holder, then to the Company stating that they are
independent accountants within the meaning of the Securities Act and that the
financial statements of the Company included in the Registration Statement or
the prospectus, or any amendment or supplement thereto, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act. Such letter from the independent accountants shall additionally cover
such other financial matters (including information as to the period ending not
more than 5 Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the holders of
Registrable Securities being so registered may reasonably request; and
(g) enter into customary agreements (including an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such Registrable Securities; and as
shall be required in connection with the action taken by the Company.
Each holder of the Registrable Securities agrees that, upon receipt of a
written notice from the Company that describes the happening of any event as a
result of which the prospectus included in the registration statement for the
Registrable Securities, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, it will forthwith discontinue its
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading and, if
so requested by the Company in writing, will deliver to the Company (at the
Company's expense) all copies then in their possession, other than permanent
file copies, of the prospectus relating to such Registrable Securities.
5. Expenses. All expenses incurred in complying with this Agreement,
--------
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for the Company, the reasonable fees and expenses of
one counsel for all of the sellers of Registerable Securities (selected by those
holding a majority of the shares being registered), expenses of any special
audits incident to any such registration and expenses (including reasonable
attorneys' fees) of complying with the securities or blue sky laws of any
jurisdictions pursuant to Section 4(d), shall be paid by the Company, except
------------
that
6
<PAGE>
(a) all such expenses in connection with any amendment or supplement to the
Registration Statement or prospectus filed more than 6 months after the
effective date of such Registration Statement because any holder of Registrable
Securities has not effected the disposition of the securities requested to be
registered shall be paid by such holder; and
(b) the Company shall not be liable for any fees, discounts or commissions
to any underwriter or any fees or disbursements of counsel for any underwriter
in respect of the securities sold by such holder of Registrable Securities.
6. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any Registrable Securities under
the Securities Act pursuant to this Agreement, the Company will indemnify and
hold harmless the holder of such Registrable Securities, such holder's directors
and officers, and each underwriter who participated in the offering of such
Registrable Securities and each other person, if any, who controls such holder
or such participating person within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several (including
reasonable attorneys' fees and expenses), to which such holder or any such
director or officer or participating person or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) an untrue statement or an alleged untrue statement of any material fact
contained in any Registration Statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii) an
omission or an alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse such holder or such director, officer or participating person or
controlling person for any reasonable legal or other out-of-pocket expenses
reasonably incurred in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such holder expressly for use therein or (in the case of an
underwritten offering pursuant to Section 2) so furnished for such purposes by
---------
any underwriter ; and provided further, however, that the Company shall not be
liable with respect to any preliminary prospectus to any person from whom the
person asserting any such loss, claim, limit, damage or liability purchased
shares which are the subject thereof if such person did not receive a copy of
the final prospectus (or the final prospectus as supplemented) at or prior to
the confirmation of the sale of such shares to such person in any case where
such delivery is required by the Securities Act and (a) the defect in such
preliminary prospectus was cured by the final prospectus (or the final
prospectus as supplemented) and (b) such person had previously been furnished by
or on behalf of the Company (prior to the date of mailing by the underwriter of
the applicable confirmation) with a sufficient number of copies of the
prospectus as so amended or supplemented. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
holder or
7
<PAGE>
such director, officer or participating Person or controlling Person, and shall
survive the transfer of such securities by such holder.
(b) In the event of any registration of any Registrable Securities under
the Securities Act pursuant to this Agreement, each seller of any Registrable
Securities will furnish to the Company in writing such information as the
Company reasonably requests in connection with the registration of such
Registratable Securities, including any such information as the Commission shall
request, and each such Seller shall, severally and not jointly, will indemnify
and hold harmless the Company, its directors, each officer who signs the
Registration Statement and each other person, if any, who controls the Company
within the meaning of the Securities Act against any losses, claims, damages or
liabilities to which the Company or any such director or officer or any such
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
statement or the prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any preliminary prospectus, the Registration Statement or
the prospectus or any such amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by such holder
of Registrable Securities expressly for use therein; provided, however, that the
-------- -------
liability of each holder hereunder shall be limited to the proceeds received by
such holder from the sale of Registrable Securities covered by such Registration
Statement.
(c) Promptly after receipt by an indemnified party under subsections (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such subsection other than to the extent such delay
or failure so to notify has had an adverse effect on the indemnifying party. In
case any such action shall be brought against any indemnified party, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation.
(d) If the indemnification provided for in this Section 6 from the
---------
indemnifying party is unavailable to hold harmless an indemnified party
hereunder in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein and with respect to which such
8
<PAGE>
party would otherwise be entitled to indemnify by virtue thereof, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the holders of Registrable Securities on the
other. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative faults of the Company on the one hand and the holders of
Registrable Securities on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above shall be deemed to include any
reasonable legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were determined by pro rata
------------ --------
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this subsection (d), no holder of Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the proceeds received by such holder from the sale of Registrable
Securities covered by such Registration Statement exceeds the amount of any
damages which such holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement of omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7. Certain Limitations on Registration Rights. Notwithstanding the other
------------------------------------------
provisions of this Agreement, the Company shall not be obligated to register the
Registrable Securities of any holder if, in the opinion of counsel to the
Company reasonably satisfactory to the holder and its counsel (or, if the holder
has engaged an investment banking firm, to such investment banking firm and its
counsel), the sale or other disposition of such holder's Registrable Securities,
in the manner proposed by such holder (or by such investment banking firm),
other than in an underwritten offering, may be effected without registering such
Registrable Securities under the Securities Act.
8. Selection of Managing Underwriters. In the event that the Company
----------------------------------
determines to effect an underwritten offering, the managing underwriter or
underwriters for any offering of Registrable Securities to be registered
pursuant to Section 2 shall be selected by the Company,
---------
9
<PAGE>
provided that such selections shall be reasonably acceptable to the holders of a
majority of the shares being so registered (other than any shares being
registered pursuant to Section 3).
---------
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company will not hereafter enter into
--------------------------
any agreement with respect to its securities which grants registration rights to
any Person inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement (it being agreed that any such rights shall be
considered inconsistent with the rights granted to such holders unless expressly
subordinated to the rights of the holders of the Registrable Securities set
forth in Sections 2 and 3 hereof). The Company represents and warrants that it
---------- -
has not previously entered into any agreement with respect to any of its
securities granting any registration rights to any Person, other than (i) the
registration rights granted hereunder and (ii) the registration rights granted
under (A) Registration Rights Agreement dated as of October 25, 1994 by and
among the Company and Paul Ramsay Holdings Pty. Ltd., (B) the Stockholder's
Agreement dated as of June 30, 1994, between FPM Behavioral Health, Inc. and
Phoenix South Community Mental Health Center, Inc., (C) the Warrant to purchase
Common Stock issued by the Company to Monumental Life Insurance Company, dated
July 31, 1991, and (D) the Warrant to purchase Common Stock issued by the
Company to Aetna Life Insurance Company dated April 30, 1990 (the Warrants in
clause (C) and (D), collectively, the "Life Company Warrants") (and the Company
---------------------
hereby represents and warrants that the rights granted under those agreements
are not inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement).
(b) Remedies. Each holder of Registrable Securities, in addition to being
--------
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate. The Company further agrees
that, if the Company fails to comply with any provision of this Agreement, the
Company shall pay to the holders of Registrable Securities affected thereby such
amounts as shall be sufficient to cover any reasonable out-of-pocket costs and
expenses, including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by such holders in enforcing any of
their rights or remedies hereunder.
(c) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departure from the provisions hereof may not be given
unless the Company has obtained the written consent of holders of at least a
majority of each class of the Registrable Securities then outstanding.
(d) Notice Generally. Any notice, demand, request, consent, approval,
----------------
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Agreement shall be sufficiently given or made if in
writing and either delivered in person with receipt acknowledged, delivered by
reputable overnight courier, telecopied and confirmed separately in
10
<PAGE>
writing by a copy mailed as follows or sent by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
(i) If to the Company at:
Ramsay Health Care, Inc.
Columbus Center
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attn: President
Telecopier No.: (305) 569-4647
With a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attn: Bradley P. Cost, Esq.
Telecopier No.: (212) 682-0200
(ii) If to Purchaser at:
General Electric Capital Corporation
3379 Peachtree Road, N.E.
Suite 560
Atlanta, Georgia 30339
Attn: Cheryl P. Boyd
Telecopier No.: (404) 266-3438
With copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06902
Attn: Region Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
and
11
<PAGE>
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: John Hays Mershon, Esq.
Telecopier No.: (404) 572-5100
(iii) If to any other holder of Registrable Securities at its
last known address appearing on the books of the Company maintained for such
purpose;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, on the date of delivery by reputable
overnight courier service, on the date of telecopier transmission or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
approval, declaration, delivery or other communication to the person designated
above to receive a copy shall in no way adversely affect the effectiveness of
such notice, demand, request, approval, declaration, delivery or other
communication.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto
including any Person to whom shares of Series 1997 Preferred Stock or
Registrable Securities are transferred in accordance with the provisions of the
Preferred Stock Purchase Agreement.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
-------------
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT
STATE.
(h) Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(i) Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
12
<PAGE>
IN WITNESS WHEREOF, the Company and Purchaser have executed this Agreement
as of the date first above written.
RAMSAY HEALTH CARE, INC.
By:_______________________________
Remberto G. Cibran
President
GENERAL ELECTRIC CAPITAL
CORPORATION
By:_______________________________
Cheryl P. Boyd
Authorized Signatory
13
<PAGE>
EXHIBIT 10.109
RELEASE OF COLLATERAL, TERMINATION
AND CASH COLLATERAL AGREEMENT
This RELEASE OF COLLATERAL, TERMINATION AND CASH COLLATERAL AGREEMENT dated as
of September 24, 1997 (this "Agreement") by and 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 (collectively, the "Original Guarantors") and the entities listed on
Schedule A hereto as Guarantors (collectively, the "Guarantors" and with the
Original Guarantors, the Company and the Borrowers, the "Obligors"), 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 (in such capacity, the "Agent") as
provided in the Credit Agreement (as defined below). Capitalized terms used and
not defined herein have the meaning given to them in the Credit Agreement.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrowers, the Original Guarantors, the Lenders, the Agent, and
the Issuing Bank are parties to a Credit Agreement dated as of May 15, 1993, as
amended by a Consent and Amendment dated as of April 12, 1995, a Second
Amendment dated as of September 15, 1995, a Third Amendment dated as of August
15, 1996, a Waiver to Credit Agreement dated as of September 30, 1996 (as
amended, the "Waiver"), a Fourth Amendment to Credit Agreement, First Amendment
to Waiver, Consent to Merger and Extension Agreement dated as of May 15, 1997
(as amended, the "Fourth Amendment") and a Fifth Amendment to Credit Agreement,
Amendment to Fourth Amendment and Amendment to Waiver dated as of June 4, 1997
(the "Fifth Amendment")(as amended, supplemented and modified from time to time,
the "Credit Agreement");
<PAGE>
WHEREAS, pursuant to the terms of the Credit Agreement, the Issuing Bank has
issued, and has outstanding, a Letter of Credit for the account of each of
Carolina, Gulf Coast and Greenbrier (collectively, the "Existing Letters of
Credit") as follows:
Account Letter of Credit Principal Interest
L.C. No. Party Amount Component Component
- ---------- ---------- ---------------- ---------- -----------
51917 Carolina $4,191,666.67 $4,000,000 $191,666.67
51918 Gulf Coast $3,555,833.33 $3,400,000 $155,833.33
51914 Greenbrier $5,134,791.67 $4,900,000 $234,791.67
WHEREAS, as of the date hereof, the aggregate Letter of Credit Amount equals
$12,882,291.67 (the "Letter of Credit Amount");
WHEREAS, in accordance with the terms of the Fourth Amendment, on or about
September 2, 1997, the Houma Trustee drew on the Letter of Credit issued for the
account of Houma, such Letter of Credit was terminated and the Houma Term Note
(as such term is defined in the Fourth Amendment) was executed by Houma and
delivered to the Agent;
WHEREAS, $3,400,000 plus accrued interest thereon is outstanding under the
Houma Term Note;
WHEREAS, the Obligors have advised the Agent that they have obtained financing
from another lender or group of lenders (the "New Lenders") and, as a condition
to such financing, the Agent must release the Liens granted to it under the
Security Documents and the Obligors must be released from certain of their
obligations under the Credit Documents;
WHEREAS, the Agent, the Issuing Bank and the Lenders have agreed, on the terms
and conditions set forth herein, to terminate and release the Liens granted to
them pursuant to the Security Documents and to release the Obligors from certain
of their obligations under the Credit Documents; and
WHEREAS, the Existing Letters of Credit will remain outstanding after the date
hereof on the condition that they are cash collateralized in accordance with the
terms of this Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby
agree as follows:
-2-
<PAGE>
1. Conditions Precedent to Effectiveness of this Agreement. As conditions
-------------------------------------------------------
precedent to the effectiveness of this Agreement, the Agent shall have received
the following:
(a) This Agreement duly executed by each of the Obligors and the
Lenders;
(b) Cash Collateral (as defined below) in the amount of $12,882,291.67
deposited in the Cash Collateral Account (as defined below) and to be held in
accordance with the terms of this Agreement;
(c) Payment by wire transfer in immediately available funds of all
amounts outstanding under the Houma Term Note, including accrued interest
thereon;
(d) Payment of all reasonable costs and expenses (including legal fees)
of the Agent and the Issuing Bank incurred prior to the date of this Agreement
in connection with the administration of the Credit Documents, preservation of
the rights of the Agent, the Lenders and the Issuing Bank thereunder and the
preparation, execution and delivery of this Agreement;
(e) Evidence satisfactory to it that (i) a notice of optional
redemption of the Greenbrier Bonds on November 3, 1997 has been sent to the
Greenbrier Trustee, (ii) a notice of optional redemption of the Gulf Coast Bonds
on November 3, 1997 has been sent to the Gulf Coast Trustee, and (iii) a notice
of optional redemption of the Carolina Bonds on December 1, 1997 has been sent
to the Carolina Trustee;
(f) Financing statements (Form UCC-1), duly executed and in appropriate
form to be filed under the Uniform Commercial Code of all jurisdictions that the
Agent may deem necessary or desirable to perfect and protect the Liens and
security interests created hereby, describing the Collateral in the exact manner
set forth in the form of UCC-1 financing statements attached hereto as Exhibit
A; and
(g) An opinion of Haythe & Curley, New York, New York, counsel to the
Obligors, in form and substance satisfactory to the Agent, addressed to the
Agent, the Issuing Bank and each of the Lenders and covering such matters as the
Agent may require.
2. Termination of Security Documents; Release of Liens and Release of Certain
--------------------------------------------------------------------------
of the Obligors' Obligations Under the Credit Documents. Subject to the
- -------------------------------------------------------
satisfaction of the conditions precedent in Section 1:
(a) The Agent, the Lenders, and the Issuing Bank hereby release the
Obligors from their obligations under, and
-3-
<PAGE>
terminate the Guarantees executed by the Guarantors from time to time (other
than the Guarantee made by Paul J. Ramsay and Paul Ramsay Holdings Pty. Ltd (the
"Ramsay Guarantors") in favor of the Agent, dated as of June 4, 1997 (the
"Ramsay Guarantee")), the Mortgages, the Security Agreements, the Stock Pledge
Agreement, each other Credit Document and any other instruments or agreements
delivered to the Agent or any Lender from time to time (other than the Credit
Agreement and each of the Credit Documents set forth in the first WHEREAS clause
hereof) including, without limitation, the Guarantor Security Agreement dated as
of August 15, 1997 made by certain Subsidiaries of the Company and delivered to
the Agent, the Security Agreement dated as of December 4, 1996 made by H.C.
Partnership, HSA Hill Crest Corporation and H.C. Corporation and delivered to
the Agent, the Mortgage dated as of December 4, 1996 from H.C. Partnership to
the Agent, and the Stock Pledge Agreement of Subsidiaries of Ramsay Health Care,
Inc. dated as of August 15, 1997 made by certain Subsidiaries of the Company and
delivered to the Agent to secure the obligations of one or more of the Obligors
under the Credit Agreement, the Notes or the Guarantees. Except as set forth in
Section 7, nothing herein shall be deemed to release or terminate the Ramsay
Guarantee or the obligations of the Ramsay Guarantors under the Ramsay Guarantee
to the Agent, the Issuing Bank and the Lenders.
(b) The Agent, the Lenders, and the Issuing Bank hereby:
(i) release the Obligors from their obligations under (A) Sections
2.03, 2.04, 2.05, 4.03, 4.04, 4.05, 5.01, 5.02, 5.03 and Article
VII of the Credit Agreement; (B) Section 3(a), (c), (d), (g),
(h), (i), (j) and (k) of the Waiver; (C) Section 8(a), (c) and
(d) of the Fourth Amendment; and (D) Sections 4, 6 (a), (b) and
(d) of the Fifth Amendment;
(ii) agree that a breach by any of the Obligors of any of the
representations or warranties set forth in Section 6.02 through
and including Section 6.05 and Sections 6.07 through and
including 6.28 of the Credit Agreement shall not constitute an
Event of Default; and
(iii) agree that the failure of any of the Obligors to comply with any
of the terms or conditions set forth in subsections (c), (d)(as
to covenants set forth in Article VII and not listed in
subsection (c) of Section 8.01), (i), (j), (k) (1), (m), (n),
(o), (p), (q) or (r) of Section 8.01 of the Credit Agreement
shall not constitute an Event of Default.
-4-
<PAGE>
(c) Each and every Lien granted to the Agent, the Lenders and the
Issuing Bank under the Security Documents (other than the Liens granted under
this Agreement) shall be deemed terminated and all of the collateral granted to
the Agent, the Lenders and the Issuing Bank under the Security Documents shall
be deemed assigned, transferred and delivered to the appropriate Obligor,
without recourse and without representation or warranty.
(d) From time to time, upon reasonable request by the Obligors, the
Agent and each of the Lenders shall, without further consideration other than
reimbursement for any reasonable and necessary costs and expenses, execute,
deliver and acknowledge all such further documents, agreements, certificates and
instruments and do such further acts (together with all such acts regarding such
further documents, "Further Acts") as the Obligors may reasonably require to
more effectively evidence or effectuate the transactions contemplated by this
Agreement, unless such requested Further Act (i) would expose the Agent, the
Issuing Bank or the Lenders or any of their respective officers, directors,
employees, affiliates, representatives and agents to personal liability, (ii)
would be contrary to applicable law or (iii) adversely affect, in the Agent's
discretion, the ability of the Obligors to repay the Obligations (as defined
below).
3. Obligor's Repayment Obligation. Subject to Section 8 hereof, whether or
------------------------------
not there shall have been a drawing under any of the Existing Letters of Credit,
the Obligors agree that they shall remain jointly and severally obligated to the
Issuing Bank, the Agent and the Lenders for all amounts due pursuant to this
Agreement, the Credit Agreement, the Waiver and the Fourth Amendment (as amended
and restated pursuant to Section 1(c) of the Fifth Amendment) with respect to
the Existing Letters of Credit.
4. Pledge and Grant of Security Interest. As collateral security for the
-------------------------------------
Obligations, each Obligor hereby pledges and assigns to the Agent, for the
benefit of the Issuing Bank and the Lenders, a continuing possessory lien and
enforceable perfected security interest in all of such Obligor's right, title
and interest in and to the Cash Collateral Account (as hereinafter defined)
together with all deposits made from time to time therein and all investments
from time to time therein (including, without limitation, Two Yankee
Certificates of Deposit in the name of the Company with maturities of November
3, 1997 and December 1, 1997, respectively) and all cash and non-cash proceeds
thereof, from the date of the establishment of the Cash Collateral Account until
the termination thereof pursuant to the terms hereof, and related investments
(including cash and non-cash proceeds thereof)(collectively, the "Collateral").
As used herein, "Obligations" means (i) all obligations of the Obligors with
respect to the Existing Letters of Credit (including, without limitation, the
Obligors'
-5-
<PAGE>
reimbursement obligations under this Agreement and the Credit Agreement and the
continuing obligation of the Obligors to pay the fees owing pursuant to the
Waiver, the Fourth Amendment and the Credit Agreement); (ii) any and all sums
incurred or advanced by the Issuing Bank, the Agent and the Lenders (A) in
connection with the negotiation, preparation, execution and delivery of any
Credit Document, including, without limitation, this Agreement, and any
documents related thereto and (B) to collect or enforce any obligations, or
liabilities of the Obligors referred to in clause (i) above, including but not
limited to the reasonable expense of retaking, holding, preparing for sale,
selling or otherwise disposing of or realizing on the Collateral, or of any
exercise by the Issuing Bank, the Agent and the Lenders of their rights
hereunder or under the Credit Agreement, any other Credit Document or applicable
law, together with reasonable attorneys' fees and court costs; and (iii) any
amount owed by the Obligors under Section 13 of this Agreement.
5. Establishment of Cash Collateral Account. The Agent will establish an
----------------------------------------
account in the name of the Company for purposes of this Agreement (the "Cash
Collateral Account"). On the date hereof, the Company shall deposit or cause to
be deposited in the Cash Collateral Account out of the proceeds of the advances
being made by the New Lenders an amount equal to the Letter of Credit Amount
($12,882,291.67)(the "Cash Collateral"). Subject to the provisions of this
Agreement, the Cash Collateral Account shall be under the sole dominion and
control of the Agent and the Agent shall have the sole right to make withdrawals
from the Cash Collateral Account to repay Obligations and during a continuance
of an Event of Default to exercise all rights with respect to the Collateral
from time to time therein. All Collateral delivered to, or held by, or on
behalf of, and not released by, the Agent pursuant to the terms hereof shall be
held in the Cash Collateral Account in accordance with the provisions hereof.
6. Investment of Funds Deposited in the Cash Collateral Account. So long as
------------------------------------------------------------
any amounts remain in the Cash Collateral Account and so long as the Agent, the
Issuing Bank and the Lenders are not owed any amounts with respect to the
Existing Letters of Credit, the Agent shall invest the funds on deposit in the
Cash Collateral Account in (x) Two Yankee Certificates of Deposit in the name of
the Company with maturities of November 3, 1997 and December 1, 1997,
respectively or (y) such other investments in Cash Equivalents as may be
requested by the Obligors and are acceptable to the Agent in its sole
discretion. All investments made pursuant to this Section 6 (and any
instruments evidencing same), and all proceeds thereof, shall be held in the
Cash Collateral Account as part of the Collateral. Any such investments shall
be made in the name of the Company. Any risk of loss in respect of investments
made pursuant to this Section 6 shall be the responsibility of the Obligors.
-6-
<PAGE>
7. Withdrawals From the Cash Collateral Account; Termination of Ramsay
-------------------------------------------------------------------
Guarantee and Credit Agreement.
- ------------------------------
(a) Collateral may not be withdrawn by any of the Obligors from the
Cash Collateral Account. The Agent shall be under no obligation to turn over any
of the Collateral to any Obligor unless and until each of the Existing Letters
of Credit is no longer outstanding and the Agent has received in full and in
immediately available funds all amounts drawn under the Existing Letters of
Credit and all outstanding fees (subject to Section 7(b)), costs and expenses
(including reasonable attorneys' fees) relating thereto owing by the Obligors to
the Lenders through the first date that all Existing Letters of Credit are no
longer outstanding (the "Final Payment"). Upon the Final Payment (but no later
than three Business Days thereafter), (i) the Agent agrees to repay to the
Company all amounts, if any, that remain in the Cash Collateral Account and (ii)
the Credit Agreement, each of the Credit Documents set forth in the first
WHEREAS clause hereof and the Ramsay Guarantee shall be deemed terminated and
all of the Obligors and each of the Ramsay Guarantors shall be deemed released
from their respective obligations under the Credit Agreement and the Ramsay
Guarantee, respectively, other than obligations which by their express terms
survive the termination of such agreements.
(b) So long as the Obligors shall have complied with all of the terms
and conditions hereof, including, without limitation, Section 10(c), and no
Event of Default shall have occurred and be continuing, the Agent shall not
apply amounts in the Cash Collateral Account for the payment of Letter of Credit
fees payable by the Obligors from and after November 15, 1997 (hereinafter
referred to as the "Conditional Fee Waiver"). The Conditional Fee Waiver shall
be of no force and effect if at any time prior to the Final Payment any of the
Obligors shall not have complied with the terms and conditions hereof,
including, without limitation, Section 10(c), or an Event of Default shall have
occurred and be continuing. The Conditional Fee Waiver is limited to the terms
of the first sentence of this Section 7(b) and shall not be deemed to create any
obligations for the Agent or limit the rights of the Agent, the Issuing Bank and
each of the Lenders under this Agreement, the Credit Agreement, the Ramsay
Guarantee, any other Credit Document or under applicable law.
8. Drawings Under the Existing Letters of Credit. Upon a drawing under any
---------------------------------------------
of the Existing Letters of Credit, the Agent shall without notice, demand or any
other action of any type, immediately apply amounts in the Cash Collateral
Account to repay the Issuing Bank, the Agent and the Lenders for the amount of
such drawing and for any interest, fees (subject to Section 7(b)), expenses or
any other amount otherwise owing by the Obligors to the Issuing Bank, the Agent
and the Lenders in
-7-
<PAGE>
connection with such Existing Letter of Credit in accordance with the provisions
of any of the Credit Documents, including, without limitation, the Credit
Agreement, the Waiver and the Fourth Amendment.
9. Representations and Warranties. Each of the Obligors hereby represents
------------------------------
and warrants as of the date hereof that:
(a) The representations and warranties in the Credit Agreement (other
than those set forth in Section 6.02 through and including 6.05 and Sections
6.07 through and including 6.28), are true and correct on and as of the date of
execution and delivery by the Obligors of this Agreement, except to the extent
that such representations and warranties expressly relate to an earlier date.
After giving effect to this Agreement, no Default or Event of Default has
occurred and is continuing on the date of execution and delivery by the Obligors
of this Agreement.
(b) This Agreement 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 Agreement.
(d) The aggregate Letter of Credit Amount is $12,882,291.67. The
Obligors have no setoff, counterclaim, claim or defense against the Agent, the
Issuing Bank or the Lenders with respect to the Obligors' obligations under the
Credit Agreement or any other Credit Document.
(e) The provisions of this Agreement are effective to create in favor
of the Agent for the benefit of the Issuing Bank and each of the Lenders a
legal, valid and enforceable Lien in the Collateral and the Liens granted herein
shall constitute perfected Liens and shall at all times be the first and only
Liens on the Collateral.
(f) Each of the Obligors is and, after giving effect to this Agreement,
will be solvent (which for purposes of this Agreement shall mean the total fair
market value of its properties exceeds the total amount of its debts as they
mature) and will not have unreasonably small capital to conduct its business.
-8-
<PAGE>
10. Obligors' Agreements. In consideration of the Lenders' release of their
--------------------
Liens (other than the Liens created hereby) and the Lenders' agreement to
terminate the Guarantees (other than the Ramsay Guarantee) Security Documents
and the provisions of the Credit Documents specified in Section 2(b), the
Obligors agree as follows:
(a) They shall comply with all of the terms and conditions of this
Agreement, the Credit Agreement and each other Credit Document (all as modified
by this Agreement).
(b) They shall jointly and severally pay all reasonable costs and
expenses (including attorneys' fees) of the Agent and the Issuing Bank incurred
in connection with this Agreement, the Credit Agreement or any other Credit
Document.
(c) They shall cause each of the Greenbrier Bonds and the Gulf Coast
Bonds to be redeemed, in whole, on November 3, 1997 and the Carolina Bonds on
December 1, 1997, and immediately following such redemptions with the proceeds
of draws on the respective Existing Letters of Credit, the Greenbrier Letter of
Credit, the Gulf Coast Letter of Credit and the Carolina Letter of Credit shall
be terminated.
(d) They will comply with all of their repurchase covenants and
agreements under the Bond Documents and not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of any interest in the Collateral or (ii)
create or suffer to exist any Lien upon or with respect to any Collateral except
for the Liens created hereby or (iii) allow any judgment to be entered or allow
any litigation, claim or governmental proceeding to exist if such judgment,
pending litigation, claim or governmental proceeding could, in the aggregate,
materially impair the ability of the Obligors to perform their obligations under
this Agreement or the Agent's ability to enforce the Obligations or realize upon
the Collateral.
(e) They will not consent to or enter into any amendment or
modification of or supplement to the Bond Documents.
(f) They will, at any time and from time to time, at their expense,
promptly execute and deliver all further agreements, instruments and other
documents and take all further action that may be necessary or that the Agent
may reasonably request to perfect and protect the security interest purported to
be created hereby or otherwise to enable the Agent to exercise and enforce its
rights and remedies hereunder within three Business Days after any such request
by the Agent or such earlier date as may be required by law or necessary to
preserve or protect the Liens in the Collateral granted pursuant to this
Agreement.
-9-
<PAGE>
11. Events of Default; Remedies.
---------------------------
(a) The failure of any Obligor to perform or comply with any covenant,
agreement or other provision of this Agreement, including, without limitation,
the Obligors' agreements set forth in Section 10, shall constitute an Event of
Default under the Credit Agreement.
(b) Upon the occurrence and during the continuance of an Event of
Default, the Agent may (i) exercise all of its rights and remedies under the
Credit Agreement, as amended hereby, including, without limitation, sending a
notice to the Greenbrier Trustee, the Gulf Coast Trustee or the Carolina Trustee
that such Event of Default has occurred and that the respective Existing Letter
of Credit will terminate three Business Days after receipt of such notice; (ii)
exercise all of the rights and remedies of a secured party under the Uniform
Commercial Code then in effect in the State of New York with respect to the
Collateral; (iii) withdraw, without notice, demand or any other action of any
type, any Collateral from the Cash Collateral Account for the purpose of
repaying any Obligation; and (iv) without notice, except as specified below,
sell or liquidate any or all of the non-cash Collateral in one or more parcels
at any public or private sale, at any exchange, broker's board or at any of the
Agent's offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as the Agent in its sole
discretion may deem commercially reasonable. The Obligors agree that, to the
extent notice of sale shall be required by law, at least ten days' notice to the
Obligors of the time and place of any public sale or the time after which any
private sale or other disposition is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Agent may adjourn any public
or private sale from time to time (by announcement, in the case of any public
sale, at the time and place fixed therefor), and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(c) Whether or not an Event of Default has occurred, if the Collateral
is insufficient to pay all amounts to which the Agent, the Issuing Bank and the
Lenders are entitled, the Obligors shall be liable for the deficiency, together
with interest thereon and subject to Section 8 hereof shall forthwith pay to the
Agent such amounts in immediately available funds.
12. Responsibility of the Agent. Other than the exercise of reasonable care
---------------------------
to assure the safe custody of the Collateral while held hereunder, the Agent
shall have no duty or liability to preserve rights pertaining thereto and shall
be relieved of all responsibility for the Collateral
-10-
<PAGE>
upon surrendering it or tendering surrender of it to the Obligors. The Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property.
Without limiting the generality of the foregoing, neither the Agent nor any of
its directors, officers, agents or employees shall be liable (i) for any failure
to invest or reinvest any Cash Collateral or for any losses incurred by reason
of any investments made by the Agent pursuant to Section 6 hereof and (ii) for
any action taken or omitted to be taken by the Agent (x) in good faith in
accordance with the advice of counsel with respect to any question as to the
construction of any provision hereof or any action to be taken by the Agent
hereunder or (y) in accordance with any instructions or other notice which the
Agent believes in good faith to be properly given by the Obligors hereunder. It
is expressly understood and agreed that the obligations of the Agent as holder
of the Collateral and interests therein and with respect to the disposition
thereof, and otherwise under this Agreement, are only those expressly set forth
in this Agreement.
13. Indemnity. The Obligors, jointly and severally, agree to indemnify and
---------
hold harmless the Agent, the Issuing Bank and the Lenders and their respective
officers, directors, employees, affiliates, representatives and agents
(collectively, the "Indemnified Parties") from and against any and all claims,
demands, losses, judgments and liabilities (including liabilities for penalties)
of whatsoever kind or nature (the "Indemnified Liabilities"), and to reimburse
all such persons for all costs and expenses, including reasonable attorneys'
fees (the "Indemnified Costs"), growing out of or resulting from this Agreement,
the Credit Agreement or any of the other Credit Documents or the exercise by the
Agent, the Issuing Bank or the Lenders of any right or remedy granted to them
hereunder or thereunder. The Obligors shall not be required to indemnify any
Indemnified Party in respect of Indemnified Liabilities or Indemnified Costs
arising solely by reason of the gross negligence or willful misconduct of such
Indemnified Party. In no event shall any Indemnified Party be liable, in the
absence of gross negligence or willful misconduct on its part, for any matter or
thing in connection with this Agreement or the Credit Agreement other than to
account for monies actually received by it in accordance with the terms hereof
and other than as expressly specified in this Agreement.
14. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY 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.
-11-
<PAGE>
15. Miscellaneous. This Agreement shall be binding upon the successors and
-------------
assigns of each Obligor and shall inure to the benefit of and be enforceable by
the Agent, the Issuing Bank and the Lenders and their respective successors and
assigns and each of the Guarantors. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall constitute one instrument. This Agreement shall become effective on the
date on which each of the parties hereto shall have executed and delivered to
the Agent (including by way of telecopier) a counterpart hereof (whether the
same or different counterparts). In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto. This Agreement shall be deemed a "Credit
Document" as defined in the Credit Agreement. This Agreement is a complete
memorandum of the Agreement of the Obligors, the Agent, the Issuing Bank and the
Lenders and supersedes all prior discussions and drafts relating to the subject
matter hereof.
16. JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
----------
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
17. Waiver; Amendment. None of the terms and conditions of this Agreement
-----------------
may be changed, waived, modified or varied in any manner whatsoever unless in
writing duly executed by each of the Obligors, the Agent, the Issuing Bank and
each of the Lenders.
18. Release. Each of the Obligors hereby releases, remixes, acquits and
-------
forever discharges the Issuing Bank, the Agent and the Lenders and their
respective employees, agents, representatives, consultants, attorneys,
fiduciaries, officers, directors, partners, predecessors, successors and
assigns, subsidiary corporations, parent corporations and related corporate
divisions (all of the foregoing hereinafter called the "Released Parties"), from
any and all actions and causes of action, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and every
character, known or unknown, direct and/or indirect, at law or in equity, of
whatsoever kind or nature, whether heretofore or hereafter arising, for or
because of any matter or things done, omitted or suffered to be done by any of
the Released Parties prior to and including the date of execution hereof, and in
any way directly or indirectly arising out of or in any way connected to this
Agreement, the Credit Agreement or any of the Credit Documents (all of the
foregoing hereinafter called the "Released Matters"). The Obligors acknowledge
that the agreements in this paragraph are intended to be in full satisfaction of
all or any
-12-
<PAGE>
alleged injuries or damages arising in connection with the Released Matters. The
Obligors represent and warrant to the Released Parties that none of them has
purported to transfer, assign, pledge or otherwise convey any of its right,
title or interest in any Released Matter to any other person or entity and that
the foregoing constitutes a full and complete release of all Released Matters.
19. Effect on Credit Documents. The execution, delivery and effectiveness of
--------------------------
this Agreement shall not, except as expressly provided herein, amend, waive or
modify any of the terms and provisions of the Credit Agreement, the Ramsay
Guarantee and the other Credit Documents not terminated hereby and each such
Credit Document and, subject to Section 7, the terms thereof, as amended hereby,
shall remain in full force and effect and are hereby ratified and confirmed.
-13-
<PAGE>
IN WITNESS WHEREOF, the Obligors, the Agent, the Issuing Bank and the Lenders
have caused this Agreement to be executed by their elected officers duly
authorized as of the date first above written.
RAMSAY HEALTH CARE, INC., CAROLINA TREATMENT CENTER, INC.,
a Delaware corporation a South Carolina corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
ARIZONA PSYCHIATRIC AFFILIATES, INC., FLORIDA PSYCHIATRIC ASSOCIATES, INC.,
a Delaware corporation a Florida corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
ATLANTIC TREATMENT CENTER, INC., FLORIDA PSYCHIATRIC MANAGEMENT, INC.,
a Florida corporation a Florida corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
BETHANY PSYCHIATRIC HOSPITAL, INC., FPM BEHAVIORAL HEALTH, INC.,
an Oklahoma corporation a Delaware corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
<PAGE>
FPMBH CLINICAL SERVICES, INC., FPM OF LOUISIANA, INC.,
a Delaware corporation a Delaware corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
FPMBH OF ARIZONA, INC., FPM OF OHIO, INC.,
a Delaware corporation a Delaware corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
FPMBH OF TEXAS, INC., FPM OF WEST VIRGINIA, INC.,
a Delaware corporation a Delaware corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
FPM/HAWAII, INC., FPM/SOUTHEAST, INC.,
a Delaware corporation a Delaware corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
FPM MANAGEMENT, INC., GREAT PLAINS HOSPITAL, INC.,
a Florida corporation a Missouri corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
<PAGE>
GREENBRIER HOSPITAL, INC., HOUMA PSYCHIATRIC HOSPITAL, INC.,
a Louisiana corporation a Louisiana corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
GULF COAST TREATMENT CENTER, INC., HSA HILL CREST CORPORATION,
a Florida corporation an Alabama corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
H.C. CORPORATION, HSA LYNNHAVEN, INC.,
an Alabama corporation a Florida corporation
By:___________________________ By:___________________________
Name: Name:
Title: Title:
H.C. PARTNERSHIP, a general HSA OF OKLAHOMA, INC.,
partnership organized and existing an Oklahoma corporation
under the laws of Alabama
By:___________________________
By: H.C. Corporation, Name:
its General Partner Title:
By:___________________________
Name: INTEGRATED BEHAVORIAL SERVICES, INC.,
Title: a Delaware corporation
HEALTH GROUP OF LAS CRUCES, INC., By:___________________________
a Tennessee corporation Name:
Title:
By:___________________________
Name:
Title:
<PAGE>
MANHATTAN PSYCHIATRIC HOSPITAL, INC., RAMSAY MANAGEMENT SERVICES OF WEST
a Kansas corporation VIRGINIA, INC.,
a West Virginia corporation
By:___________________________
Name: By:___________________________
Title: Name:
Title:
PSYCHOPTIONS, INC.,
a Delaware corporation RAMSAY NEVADA, INC.,
a Delaware corporation
By:___________________________
Name: By:___________________________
Title: Name:
Title:
RAMSAY CHICAGO, INC.,
a Delaware corporation RAMSAY NEW ORLEANS, INC.,
a Delaware corporation
By:___________________________
Name: By:___________________________
Title: Name:
Title:
RAMSAY LOUISIANA, INC.,
a Delaware corporation RAMSAY NURSING HOME SERVICES, INC.,
a Delaware corporation
By:___________________________
Name: By:___________________________
Title: Name:
Title:
RAMSAY MANAGED CARE, INC.,
a Delaware corporation RAMSAY RESEARCH AND EDUCATION
INSTITUTE, INC.,
a Delaware corporation
By:___________________________
Name:
Title: By:___________________________
Name:
Title:
<PAGE>
RHCI CONCORD, INC.,
a Delaware corporation
By:___________________________
Name:
Title:
RHCI SAN ANTONIO, INC.,
a Delaware corporation
By:___________________________
Name:
Title:
THE HAVEN HOSPITAL, INC.,
a Delaware corporation
By:___________________________
Name:
Title:
<PAGE>
LENDERS:
- --------
SOCIETE GENERALE, NEW YORK BRANCH,
as Lender, Issuing Bank and Agent
By:___________________________
Name:
Title:
FIRST UNION BANK OF NORTH CAROLINA,
as Lender
By:___________________________
Name:
Title:
HIBERNIA NATIONAL BANK,
as Lender
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A
ARIZONA PSYCHIATRIC AFFILIATES, INC.
BETHANY PSYCHIATRIC HOSPITAL, INC.
FLORIDA PSYCHIATRIC ASSOCIATES, INC.
FLORIDA PSYCHIATRIC MANAGEMENT, INC.
FPM BEHAVIORAL HEALTH, INC.
FPMBH CLINICAL SERVICES, INC.
FPMBH OF ARIZONA, INC.
FPMBH OF TEXAS, INC.
FPM/HAWAII, INC.
FPM MANAGEMENT, INC.
FPM OF LOUISIANA, INC.
FPM OF OHIO, INC.
FPM OF WEST VIRGINIA, INC.
FPM/SOUTHEAST, INC.
H.C. CORPORATION
H.C. PARTNERSHIP
HEALTH GROUP OF LAS CRUCES, INC.
HSA HILL CREST CORPORATION
HSA LYNNHAVEN, INC.
INTEGRATED BEHAVORIAL SERVICES, INC.
MANHATTAN PSYCHIATRIC HOSPITAL, INC.
PSYCHOPTIONS, INC.
RAMSAY CHICAGO, INC.
RAMSAY LOUISIANA, INC.
RAMSAY MANAGED CARE, INC.
RAMSAY MANAGEMENT SERVICES OF WEST VIRGINIA, INC.
RAMSAY NEVADA, INC.
RAMSAY NEW ORLEANS, INC.
RAMSAY NURSING HOME SERVICES, INC.
RAMSAY RESEARCH AND EDUCATION INSTITUTE, INC.
RHCI CONCORD, INC.
RHCI SAN ANTONIO, INC.
<PAGE>
EXHIBIT 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
PRIMARY
Weighted averages:
Common shares outstanding......................... 8,403,000 7,929,000 7,743,000
Class B Convertible Preferred
Stock, Series C................................. 1,425,000 - - -* - - -*
Class B Convertible Preferred
Stock, Series 1996.............................. 55,000 n/a n/a
Net effect of dilutive stock options and warrants-
modified treasury stock method.............................. 548,000 - - -* - - -*
----------- ------------ ------------
Total............................................. 10,431,000 7,929,000 7,743,000
=========== ============ ============
Income (loss) before extraordinary item...................... $ 3,278,000 $(16,481,000) $(17,045,000)
Extraordinary item........................................... - - - - - - (257,000)
----------- ------------ ------------
Net income (loss)............................................ 3,278,000 (16,481,000) (17,302,000)
Adjustment to net income for debt reduction (modified
treasury stock method)...................................... 120,000 - - - - - -
----------- ------------ ------------
Adjusted net income (loss)................................... $ 3,398,000 $(16,481,000) $(17,302,000)
=========== ============ ============
Per share amounts:
Income (loss) before extraordinary item.................... $ 0.33 $ (2.12) $ (2.25)
Extraordinary item......................................... - - - - - - (0.03)
----------- ------------ ------------
Net income (loss).......................................... $ 0.33 $ (2.12) $ (2.28)
=========== ============ ============
</TABLE>
* Common stock equivalents not considered given loss reported for the year.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Americare of Galax, Inc., a Virginia corporation
Atlantic Treatment Center, Inc., a Florida corporation
Bethany Psychiatric Hospital, Inc., an Oklahoma corporation
Bountiful Psychiatric Hospital, Inc., a Utah corporation
Carolina Treatment Center, Inc., a South Carolina
corporation
Cumberland Mental Health, Inc., a North Carolina corporation
East Carolina Psychiatric Services Corporation,
a North Carolina corporation
Flagstaff Psychiatric Hospital, Inc., an Arizona corporation
Great Plains Hospital, Inc., a Missouri corporation
Greenbrier Hospital, Inc., a Louisiana corporation
Gulf Coast Treatment Center, Inc., a Florida corporation
(the Company owns 96% of the capital stock of this
corporation)
Havenwyck Hospital, Inc., a Michigan corporation
H.C. Corporation, an Alabama corporation
H.C. Partnership, an Alabama general partnership
(HSA Hill Crest Corporation and H.C. Corporation each
own a 50% partnership interest)
Health Group of Las Cruces, Inc., a Tennessee corporation
Houma Psychiatric Hospital, Inc., a Louisiana corporation
HSA Hill Crest Corporation, an Alabama corporation
HSA Lynnhaven, Inc., a Florida corporation
<PAGE>
2
HSA Medical Offices of Mesa, Inc., an Arizona corporation
HSA of Oklahoma, Inc., an Oklahoma corporation
Integrated Behavorial Services, Inc., a Delaware corporation
Manhattan Psychiatric Hospital, Inc., a Kansas corporation
Mesa Psychiatric Hospital, Inc., an Arizona corporation
Michigan Psychiatric Services, Inc., a Michigan corporation
Psychiatric Institute of West Virginia, Inc.,
a Virginia corporation
PsychOptions, Inc., a Delaware corporation
Ramsay Acquisition Corp., a Delaware corporation
Ramsay Chicago, Inc., a Delaware corporation
Ramsay Correctional Services, Inc., a Delaware corporation
Ramsay Louisiana, Inc., a Delaware corporation
Ramsay Managed Care, Inc., a Delaware corporation
Ramsay Management Services of West Virginia, Inc.,
a West Virginia corporation
Ramsay Nevada, Inc., a Delaware corporation
Ramsay New Orleans, Inc., a Delaware corporation
Ramsay Nursing Home Services, Inc., a Delaware corporation
Ramsay Research and Education Institute, Inc.,
a Delaware corporation
Ramsay Youth Services, Inc., a Delaware corporation
RHCI Concord, Inc., a Delaware corporation
RHCI San Antonio, Inc., a Delaware corporation
<PAGE>
3
The Haven Hospital, Inc., a Delaware corporation
Arizona Psychiatric Affiliates, Inc., a Delaware corporation
Florida Psychiatric Associates, Inc., a Florida corporation
Florida Psychiatric Management, Inc., a Florida corporation
FPM Behavioral Health, Inc., a Delaware corporation
FPM Management, Inc., a Florida corporation
FPM of Louisiana, Inc., a Delaware corporation
FPM of Ohio, Inc., a Delaware corporation
FPM of Utah, Inc., a Delaware corporation
FPM of West Virginia, Inc., a Delaware corporation
FPM/Hawaii, Inc., a Delaware corporation
FPM/Southeast, Inc., a Delaware corporation
FPMBH of Arizona, Inc., a Delaware corporation
FPMBH Clinical Services, Inc., a Delaware corporation
FPMBH of Texas, Inc., a Delaware corporation
Utah Psychiatric Affiliates, Inc., a Delaware corporation
Transitional Care Ventures, Inc., a Delaware
corporation (the Company owns 60% of the capital
stock of this corporation)
Transitional Care Ventures (Arizona), Inc., a Delaware
corporation
Transitional Care Ventures (Florida), Inc., a Delaware
corporation
Transitional Care Ventures (North Texas), Inc., a
Delaware corporation
<PAGE>
4
Transitional Care Ventures (South Carolina), Inc., a
Delaware corporation
Transitional Care Ventures (Texas), Inc., a Delaware
corporation
FPM Behavioral Health of Ohio, Ltd., an Ohio limited
liability company (FPM of Ohio, Inc. owns 51% of the
Membership Interest in this LLC)
Meadowlake/Western Alliance LLC, an Oklahoma limited
liability company (HSA of Oklahoma, Inc. owns 50% of
the Membership Interest in this LLC)
U.B.H. Holdings, L.L.C., a Florida limited liability
company (FPM Behavioral Health, Inc. owns 50% of the
Membership Interest in this LLC)
University Behavioral Health at The University of
South Florida, Ltd., a Florida limited partnership
(FPM Behavioral Health, Inc. holds a 49.5% interest
in this limited partnership and U.B.H. Holdings,
L.L.C. holds a 1% interest and is the General Partner
of this limited partnership)
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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 September 18, 1997 (except for Note 5, the
first and fourth paragraphs of Note 7 and the third paragraph of Note 12, as to
which the date is September 30, 1997) 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, 1997.
ERNST & YOUNG LLP
Miami, Florida
October 13, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000773136
<NAME> RAMSAY HEALTH CARE, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 1,723,000
<SECURITIES> 0
<RECEIVABLES> 30,188,000
<ALLOWANCES> 4,386,000
<INVENTORY> 0
<CURRENT-ASSETS> 38,016,000
<PP&E> 98,509,000
<DEPRECIATION> 32,527,000
<TOTAL-ASSETS> 141,189,000
<CURRENT-LIABILITIES> 28,056,000
<BONDS> 47,254,000
0
3,625,000
<COMMON> 112,000
<OTHER-SE> 55,445,000
<TOTAL-LIABILITY-AND-EQUITY> 141,189,000
<SALES> 0
<TOTAL-REVENUES> 136,719,000
<CGS> 0
<TOTAL-COSTS> 114,612,000
<OTHER-EXPENSES> 5,473,000
<LOSS-PROVISION> 5,688,000
<INTEREST-EXPENSE> 5,942,000
<INCOME-PRETAX> 5,004,000
<INCOME-TAX> 1,726,000
<INCOME-CONTINUING> 3,278,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,278,000
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
