PSYCHIATRIC SOLUTIONS

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o


(1)	Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f)(2) under the Securities Act of 1933 (the “Securities Act”).

(2)	The Additional Registrants, each a wholly owned subsidiary of Psychiatric Solutions, Inc., will guarantee the payment of the 10 5/8% Senior Subordinated Notes due 2013. Pursuant to Rule 457(n) under the Securities Act, no filing fee is required.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


(1)	The address of each of these additional registrant’s principal executive office is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067. Their telephone number is (615) 312-5700.

The information in this prospectus is not complete and may be changed. We may not sell or offer these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.


	•	Expires at 5:00 p.m., New York City time, on , 2003, unless extended.

	•	The only conditions to completing the exchange offer are that the exchange offer not violate applicable law or applicable interpretations of the staff of the Securities and Exchange Commission and no injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed with the exchange offer.

	•	All old notes that are validly tendered and not validly withdrawn will be exchanged.

	•	Tenders of old notes may be withdrawn at any time prior to the expiration of the exchange offer.

	•	The terms of the registered notes to be issued in the exchange offer are substantially identical to the old notes that we issued on June 30, 2003, except for certain transfer restrictions, registration rights and liquidated damages provisions relating to the old notes that will not apply to the registered notes.

	•	We will not receive any cash proceeds from the exchange offer.

	•	The old notes are, and the registered notes will be, fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by substantially all of our operating subsidiaries.

Consider carefully the “Risk Factors” beginning on page 20 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Neither the fact that a registration statement or an application for a license has been filed under RSA 421-B with the State of New Hampshire nor the fact that a security is effectively registered or a person is licensed in the State of New Hampshire constitutes a finding by the Secretary of State of New Hampshire that any document filed under RSA 421-B is true, complete and not misleading. Neither any such fact nor the fact that an exception or exemption is available for a security or a transaction means the Secretary of State has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction. It is unlawful to make or cause to be made, to any prospective purchaser, customer or client, any representation inconsistent with the provisions of this paragraph.

This prospectus incorporates business and financial information about us that is not included in or delivered with the prospectus and this information is available without charge to holders upon written or oral request to Brent Turner, Vice President, Treasurer and Investor Relations, Psychiatric Solutions, Inc., 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, telephone number (615) 312-5700. In order to obtain timely delivery, holders must request the information no later than five business days before the expiration date of the exchange offer.

This prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information and, in particular, appear under the headings “Summary,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” When used in this prospectus, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that our expectations, beliefs and projections will be realized.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in this prospectus, including under the heading “Risk Factors.”

In addition, future trends for pricing, margins, revenue and profitability remain difficult to predict in the industries that we serve. There may also be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this prospectus and are expressly qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws.

The following summary highlights information about us and the offering of the registered notes contained elsewhere in this prospectus. It is not complete and may not contain all of the information that may be important to you in making a decision to exchange your old notes for the registered notes. For a more complete understanding of us and the exchange offering, we urge you to read this entire prospectus carefully, including the “Risk Factors” section, the consolidated financial statements and the notes to those statements and the documents to which we have referred you. Throughout this prospectus (except in the “Description of the Registered Notes” section or unless the context otherwise requires), when we refer to “Psychiatric Solutions,” “us,” “we” or “our,” we are describing Psychiatric Solutions, Inc. together with its subsidiaries and other operations after giving pro forma effect to our acquisitions of The Brown Schools and Ramsay. When we refer to “Ramsay,” we are describing Ramsay Youth Services, Inc. and its subsidiaries and other operations. When we refer to “The Brown Schools,” we are describing the six facilities that we acquired from The Brown Schools, Inc. in April 2003.

On June 30, 2003, we issued in a private placement $150.0 million in aggregate principal amount of our 10 5/8% Senior Subordinated Notes due 2013, which we refer to as the “old notes.” We refer to this private placement as the “original note offering.” We entered into a registration rights agreement with the initial purchasers of the notes in which we agreed to deliver to you this prospectus. You are entitled to exchange your old notes in the exchange offer for registered notes with substantially identical terms. Unless you are a broker-dealer or unable to participate in the exchange offer, we believe that the notes to be issued in the exchange offer may be resold by you without compliance with the registration and prospectus delivery requirements of the Securities Act of 1933. You should read the discussions under the headings “The Exchange Offer” and “Description of the Registered Notes” for further information regarding the registered notes.

We are a leading provider of inpatient behavioral health care services in the United States. Through our inpatient division, we operate 22 owned or leased behavioral health care facilities with approximately 2,800 beds in 12 states and manage 10 behavioral health care facilities for government agencies. In addition, through our unit management division, we manage 48 behavioral health care units for third parties. We believe that our singular focus on the provision of behavioral health care services allows us to operate more efficiently and provide higher quality care than our competitors. We primarily operate in underserved urban markets with limited competition and favorable demographic trends. Our business is characterized by diversified sources of revenue, stable cash flows and low capital expenditure requirements. For the year ended December 31, 2002, we generated revenue and adjusted EBITDA of $364.2 million and $41.9 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 includes expected pro forma savings of (a) $3.4 million representing the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental costs to manage the business and (b) $3.0 million representing the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition of Ramsay.

Our inpatient behavioral health care facilities accounted for approximately 88% of our revenue for the year ended December 31, 2002. These facilities offer a range of inpatient behavioral health care services. We offer these services through a combination of acute behavioral hospitals and residential treatment centers. Our acute behavioral hospitals provide the most intensive level of care, including 24-hour skilled nursing observation and care, daily interventions and oversight by a psychiatrist and intensive, highly coordinated treatment by a physician-led team of mental health professionals. Our residential treatment centers, or RTCs, offer longer term treatment programs primarily for children and adolescents with long-standing behavioral

Our unit management business accounted for approximately 12% of our revenue for the year ended December 31, 2002. This portion of our business involves the development, organization and management of behavioral health care programs within general acute care hospitals. We provide our customers with a variety of management options, including (1) clinical and management infrastructure, (2) personnel recruitment, staff orientation and supervision, (3) corporate consultation and (4) performance improvement plans. Our broad range of services can be customized into individual programs that meet specific facility and community requirements. We are dedicated to providing quality programs with integrity, innovation and flexibility.

An estimated 22% of the U.S. adult population and 10% of U.S. children and adolescents suffer from a diagnosable mental disorder in a given year. Based on the 2002 U.S. census, these figures translate to approximately 50 million Americans. In addition, four of the ten leading causes of disability in the United States are mental disorders. According to a May 2001 report by the National Institute of Mental Health, the treatment of mental health disorders accounted for approximately 7% of total U.S. health care expenditures, or $100 billion, in 2001. We estimate that the market for inpatient behavioral health care services represents 10% of total expenditures to treat mental health disorders, or approximately $10 billion.

The behavioral health care industry is extremely fragmented with only a few large national providers. During the 1990s, the behavioral health care industry experienced a significant contraction following a long period of growth. Between 1990 and 1999, nearly 300 inpatient behavioral health care facilities, accounting for over 40% of available beds, were closed. The reduction was largely driven by third party payors who decreased reimbursement, implemented more stringent admission criteria and decreased the authorized length of stay. We believe this reduced capacity has resulted in an underserved patient population.

Reduced capacity, coupled with mental health parity legislation providing for greater access to mental health services, has resulted in favorable industry fundamentals. Behavioral health care providers have enjoyed significant improvement in reimbursement rates, increased admissions and stabilized lengths of stay. According to the National Association of Psychiatric Health Systems, payments for the inpatient care of behavioral health and addictive disorders have increased nationwide. Average inpatient net revenue in 2001 increased 9.6% to $556 per day from the prior year. Inpatient admissions increased 11.4% in 2001 to an average of 2,345 per facility while average occupancy rates increased from 69.2% in 2000 to 74.1% in 2001. Following a rapid decrease during the early 1990s, inpatient average length of stay stabilized between 9 and 10 days from 1997 to 2001. The average RTC net revenue per patient day in 2001 was $318. RTC admissions rose 27.9% in 2001 while total patient days increased 33.8%. Occupancy rates in freestanding RTCs were 85.2% in 2001 while average length of stay was approximately 285 days. These favorable trends have resulted in high demand for behavioral health care services.

We believe the following competitive strengths contribute to our strong market share in each of our markets and will enable us to continue to improve our profitability and cash flow:


	•	*Singular focus on behavioral health care* — We focus exclusively on the provision of behavioral health care services. We believe this allows us to operate more efficiently and provide higher quality care than our competitors. In addition, we believe our focus and reputation have helped us to develop important relationships and extensive referral networks within our markets and to attract and retain qualified behavioral health care professionals.

	•	*Strong and sustainable market position* — Our facilities have an established presence in each of our markets, and we believe that the majority of our owned, leased and managed facilities have the leading market share in their respective service areas. Our relationships and referral networks would be


		difficult, timely and expensive for new competitors to replicate. In addition, many of the states in which we operate require a certificate of need to open a behavioral health care facility, which may be difficult to obtain and may further preclude new market participants.

	•	*Diversified payor mix and revenue base* — As we have grown our business, we have focused on diversifying our sources of revenue. For the year ended December 31, 2002, we received 39% of our revenue from Medicaid, 26% from multiple commercial payors, 22% from various state and local government payors and 13% from Medicare. As we receive Medicaid payments from more than 35 states, we are not significantly affected by changes in reimbursement policies in any one state. For the year ended December 31, 2002, no single facility represented more than 8% of our revenue.

	•	*Significant free cash flow and minimal capital requirements* — We consistently generate significant free cash flow due to the profitable operation of our business, our low capital expenditure requirements and through the active management of our working capital. As the behavioral health care business does not require the procurement and replacement of expensive medical equipment, our capital expenditure requirements are less than that of other facility-based health care providers. Historically, our capital expenditures have amounted to less than 2% of our revenue. We actively control our working capital through the centralized monitoring of accounts receivable collections.

	•	*Demonstrated ability to integrate acquisitions* — We have successfully integrated the five facilities we acquired in 2001 and 2002 as well as the six facilities we acquired in 2003 in connection with our acquisition of The Brown Schools. We attribute part of our success in integrating these facilities to our rigorous due diligence review of targeted facilities prior to completing any acquisition. We also have a comprehensive post-acquisition strategic plan to facilitate the integration of acquired facilities that includes improving facility operations, recruiting psychiatrists and expanding the breadth of services offered by the facilities.

	•	*Experienced management team —* Our senior management team has an average of 20 years of experience in the health care industry. Joey A. Jacobs, our Chairman, President and Chief Executive Officer, has over 28 years experience in various capacities in the health care industry. Jack R. Salberg, our Chief Operating Officer, has more than 29 years of operational experience in both profit and non-profit health care sectors. Our senior management operates as a cohesive, complementary group and has extensive operating knowledge of our industry and understanding of the regulatory environment in which we operate. Our senior managers employ conservative fiscal policies and have a successful track record in both operating our core business and integrating acquired assets.

Our strategy is to establish a network of behavioral health care facilities in targeted markets throughout the United States. The principal elements of our business strategy are to:


	•	*Successfully integrate acquisitions —* Our near term focus is on the integration of the Ramsay facilities. We initially are operating the Ramsay facilities as a separate unit within our inpatient behavioral health care division. We have retained experienced managers to operate the Ramsay facilities, and these individuals are continuing to operate their respective facilities with minimal changes to overall corporate philosophy.

	•	*Focus on operations —* Our management team has extensive experience in the operation of multi-facility health care services companies. In our inpatient behavioral health care division, we intend to focus on improving our profitability by optimizing staffing ratios, controlling contract labor costs and reducing supply costs through group purchasing. In addition, we plan to focus on improving same- facility revenue growth by increasing admissions through new behavioral health care programs, employing intensive marketing and community education efforts and recruiting additional psychiatrists.

	•	*Selectively target future acquisitions —* We plan to selectively pursue the acquisition of additional inpatient behavioral health care facilities. We have a disciplined acquisition strategy that is based on


		defined acquisition criteria. We believe that there are a number of acquisition candidates available at attractive valuations, and we have a number of potential acquisitions that are in the early stages of development and negotiation.

	•	*Develop unit management opportunities —* We believe that substantial opportunities exist to provide additional behavioral health care contract management services to acute care hospitals in the United States. Acute care hospitals are increasingly outsourcing key clinical departments to independent management companies because they lack the expertise to (1) manage and operate specialized clinical programs, (2) assess the programs for effectiveness and results, (3) market and develop programs, (4) design and operate programs that satisfy specialized regulatory, licensing, accreditation and reimbursement requirements and (5) meet increasing regulatory requirement demands.

In April 2003, we consummated the acquisition of six inpatient behavioral health care facilities from The Brown Schools for $63.0 million in cash. The six facilities, which have an aggregate of 879 licensed beds, are located in Austin, San Antonio and San Marcos, Texas; Charlottesville, Virginia; Colorado Springs, Colorado; and Tulsa, Oklahoma. The Brown Schools facilities offer a full continuum of care for troubled adolescents and adults. We financed the acquisition of The Brown Schools with proceeds from the issuance of $12.5 million of our series A convertible preferred stock and an increase in funding under our existing credit facility. For the year ended December 31, 2002, these facilities produced combined revenue and adjusted EBITDA of $78.0 million and $7.2 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 does not include expected pro forma savings of $3.4 million representing the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental costs to manage the business.

On June 30, 2003, we consummated the acquisition of Ramsay, a public company that traded on the Nasdaq SmallCap Market under the symbol “RYOU,” for approximately $84.0 million, consisting of $58.0 million in cash, or $5.00 per share, $19.0 million in net assumed debt that was repaid in connection with the acquisition and $7.0 million in fees and expenses. We financed the acquisition of Ramsay with proceeds from the original note offering and an additional $12.5 million private placement of our series A preferred stock. The 11 owned or leased inpatient behavioral health care facilities we acquired from Ramsay, which have an aggregate of 1,250 beds, are primarily located in the South and Southeastern regions of the United States. In the acquisition, we also assumed 10 contracts to manage behavioral health care facilities for government agencies in Florida, Georgia and Puerto Rico. For the year ended December 31, 2002, Ramsay generated revenue and adjusted EBITDA of $145.2 million and $12.0 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 does not include expected pro forma savings of $3.0 million representing the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition of Ramsay.

The Brown Schools and Ramsay are both leading high quality providers of behavioral health care treatment programs that are primarily focused on children and adolescents. The Brown Schools and Ramsay operate acute behavioral hospitals and RTCs through a network of owned, leased or state-owned facilities. Both businesses have a national presence and referral base, have strong relationships with payors and have demonstrated favorable operating and financial results. Our business has historically provided acute behavioral health care services to adults. The acquisitions of The Brown Schools and Ramsay broaden our core behavioral health care business.

The proceeds of the original note offering, together with the proceeds of an additional $12.5 million private placement of our series A convertible preferred stock, were used to finance the acquisition of Ramsay, to repay certain of our existing debt and all of the existing debt of Ramsay, and to pay related fees and

expenses. In connection with the original note offering, we amended and restated our existing credit facility. Our amended and restated credit facility is comprised of a $17.0 million senior secured term note and a $50.0 million senior secured revolver, which remains undrawn. We refer in this prospectus to the original note offering, the private placement of the additional $12.5 million of our series A convertible preferred stock and the amendment and restatement of our existing credit facility as the “Financing Transactions.”

Psychiatric Solutions is a Delaware corporation. Our principal executive office is located at 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, and our telephone number is (615) 312-5700. Our website can be found at www.psysolutions.com. Information on our website is not deemed to be part of this prospectus.


		with the registration and prospectus delivery provisions of the Securities Act if:

		• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act;

		• you are acquiring the registered notes in the ordinary course of your business;

		• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person or entity to participate in, a distribution of the registered notes; and

		• you deliver a prospectus, as required by law, in connection with any resale of those registered notes, see “Plan of Distribution,” if you are a broker-dealer that receives registered notes for your own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities.

		If you are an affiliate of ours, or are engaging in or intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the registered notes, then:

		• you may not rely on the applicable interpretations of the staff of the SEC;

		• you will not be permitted to tender old notes in the exchange offer; and

		• you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the old notes.

		Each participating broker-dealer that receives registered notes for its own account under the exchange offer in exchange for old notes that were acquired by the broker-dealer as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the registered notes. See “Plan of Distribution.”

		Any broker-dealer that acquired old notes directly from us may not rely on the applicable interpretations of the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act (including being named as a selling securityholder) in connection with any resales of the old notes or the registered notes.

Acceptance of Old Notes and Delivery of Registered Notes:		We will accept for exchange any and all old notes that are validly tendered in the exchange offer and not withdrawn before the offer expires. The registered notes will be delivered promptly following the exchange offer.

Withdrawal Rights:		You may withdraw your tender of old notes at any time before the exchange offer expires.

Conditions of the Exchange Offer:		The exchange offer is subject to certain customary conditions, which we may waive. Please see “The Exchange Offer —


		Conditions to the Exchange Offer” for more information regarding the conditions to the exchange offer.

Consequences of Failure to Exchange Old Notes:		If you are eligible to participate in the exchange offer and you do not tender your old notes, then you will continue to hold your old notes and you will be subject to all the limitations and restrictions on transfer applicable to such old notes. Generally, untendered old notes will remain restricted securities and may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the old notes under the Securities Act. The trading market for the old notes could be adversely affected if some but not all of the old notes are tendered and accepted in the exchange offer.

Federal Income Tax Consequences:		The exchange of an old note for a registered note in the exchange offer will not be a taxable event for United States federal income tax purposes. Consequently, you will not recognize any gain or loss upon receipt of the registered notes. See “Federal Income Tax Considerations” for a more detailed description of the tax consequences of the exchange.

Use of Proceeds:		Neither we nor any subsidiary guarantor will receive any proceeds from the issuance of registered notes pursuant to the exchange offer.

Accounting Treatment:		You will not recognize any gain or loss on the exchange of old notes for registered notes. See “The Exchange Offer — Accounting Treatment.”

Exchange Agent:		Wachovia Bank, National Association, is the exchange agent. See “The Exchange Offer — Exchange Agent.”

The registered notes will evidence the same debt as the old notes and will be governed by the same indenture under which the old notes were issued. The summary below describes the principal terms of the registered notes. The “Description of the Registered Notes” section of this prospectus contains a more detailed description of the terms and conditions of the registered notes.


		$8.0 million and stockholders’ equity of $2.8 million. Each of the subsidiary guarantors will guarantee our amended and restated credit facility on a senior secured basis.

Ranking:		The old notes and guarantees are, and the registered notes and guarantees will be, unsecured and:

		• subordinate in right of payment to all existing and future senior indebtedness of PSI and the subsidiary guarantors;

		• equal in right of payment to future senior subordinated indebtedness of PSI and the subsidiary guarantors; and

		• senior in right of payment to future subordinated indebtedness of PSI and the subsidiary guarantors.

		As of March 31, 2003, after giving pro forma effect to the acquisitions of The Brown Schools and Ramsay and the Financing Transactions:

		• PSI would have had outstanding senior indebtedness of $22.0 million;

		• the subsidiary guarantors would have guaranteed senior indebtedness of $17.0 million, which would have consisted of guarantees of PSI’s term borrowings under the amended and restated credit facility; and

		• the non-guarantor subsidiaries would have had $4.9 million of liabilities outstanding, excluding intercompany liabilities.

Optional Redemption:		On or after June 15, 2008, PSI may redeem some or all of the notes at any time, and from time to time, at the redemption prices described in the section “Description of the Notes — Optional Redemption.”

		Before June 15, 2006, PSI may redeem up to 35% of the aggregate principal amount of the notes issued under the indenture with the net cash proceeds of certain equity offerings, provided that at least 65% of the original aggregate principal amount of the notes remains outstanding after the redemption.

Mandatory Redemption:		If PSI sells certain assets or experiences specific kinds of changes of control, PSI must offer to repurchase the notes at the prices, plus accrued and unpaid interest and additional interest, if any, to the date of redemption, listed in the section “Description of the Registered Notes — Repurchase at the Option of Holders.”

Change of Control:		Upon specified change of control events, unless we have exercised our option to redeem all of the notes as described above, each holder of a note will have the right to require us to repurchase all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase.

For a discussion of certain risks that should be considered in connection with an investment in the notes, see “Risk Factors.”

The following table sets forth a summary of unaudited pro forma condensed combined financial and operating data for Psychiatric Solutions, Ramsay and The Brown Schools as a combined company, giving effect to the acquisitions of Ramsay and The Brown Schools and the Financing Transactions as if they had occurred on the dates indicated and after giving effect to certain pro forma adjustments described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The pro forma condensed combined balance sheet data as of March 31, 2003 have been derived from Psychiatric Solutions’, Ramsay’s, and The Brown Schools’ historical balance sheets, adjusted to give effect to these acquisitions and the Financing Transactions, as well as the acquisition of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and the merger with PMR Corporation, or PMR, as if they occurred on March 31, 2003. The pro forma condensed combined income statement data for the three months ended March 31, 2003 and 2002 and the year ended December 31, 2002 give effect to these acquisitions and the Financing Transactions, as well as our acquisition of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and our merger with PMR as if they occurred at the beginning of these respective periods.

The adjustments necessary to fairly present the unaudited pro forma condensed combined financial data have been made based on available information and in the opinion of management are reasonable. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma condensed combined financial data. The pro forma adjustments are preliminary and revisions to the preliminary purchase price allocations and financing of the transactions may have a significant impact on the pro forma adjustments. A final valuation of net assets acquired associated with the Ramsay acquisition cannot be made prior to the completion of this prospectus. A final determination of these fair values will be conducted by Psychiatric Solutions’ independent valuation specialists. The consideration of this valuation will most likely result in a change in the value assigned to the fixed and intangible assets acquired of Ramsay.

The unaudited pro forma condensed combined financial and operating data is for comparative purposes only and does not purport to represent what our financial position or results of operations would actually have been had the events noted above in fact occurred on the assumed dates or to project our financial position or results of operations for any future date or future period. The unaudited pro forma condensed combined financial and operating data are only a summary and should be read in conjunction with the “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.


(1)	Other operating expenses include operating expenses, professional fees and rent expense. Rent expense was $1,747, $1,447 and $6,354 for the three months ended March 31, 2003 and 2002 and the year ended December 31, 2002, respectively.

(2)	Provision for doubtful accounts of $1,879 for the three months ended March 31, 2002 was offset by the collection of previously reserved accounts receivable relating to closed outpatient programs and a change in the estimate on the collectability of certain other receivables at PMR.

(3)	Other expenses include (a) for the three months ended March 31, 2003, expense of $960 to revalue put warrants, income of $461 to release reserves on stockholder notes and a loss of $458 related to a sale of land; (b) for the three months ended March 31, 2002, asset impairment charges incurred at Ramsay of $125 and $18 of recoveries from the sale of previously written down assets at PMR; and (c) for the year ended December 31, 2002, asset impairment charges incurred at Ramsay of $125, $18 of recoveries from the sale of previously written down assets at PMR, $1,900 of employee severance and termination costs associated with the winding up of PMR and $457 of other various gains associated with PMR.

(4)	Adjusted EBITDA is defined as net income before income taxes, interest expense (net of interest income), depreciation, amortization, and other items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income. While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States, management understands that adjusted EBITDA is a commonly used analytical indicator of performance within the health care industry and also serves as a measure of leverage capacity and debt service ability. In addition, we use adjusted EBITDA as the measure of operating profitability of its segments and their components. Adjusted EBITDA, as presented, may not be comparable to the same or similarly titled measures of


	other companies. The following are the components of adjusted EBITDA for the three months ended March 31, 2003 and 2002 and the year ended December 31, 2002:

The following table sets forth summary historical financial and operating data of Psychiatric Solutions for, or as of the end of, the twelve months ended March 31, 2003, each of the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000. The summary historical financial data as of and for each of the years ended December 31, 2002, 2001 and 2000 were derived from the audited consolidated financial statements of Psychiatric Solutions contained elsewhere in this prospectus. The summary historical financial data as of and for the three months ended March 31, 2003 and 2002 were derived from the unaudited condensed consolidated financial statements of Psychiatric Solutions contained elsewhere in this prospectus. These unaudited condensed consolidated financial statements include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. The summary historical financial data for the twelve months ended March 31, 2003 were derived from the audited and unaudited financial statements of Psychiatric Solutions. You should read this table in conjunction with Psychiatric Solutions’ consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Psychiatric Solutions” contained elsewhere in this prospectus.


(1)	Salaries, wages and employee benefits expense includes: (a) for the three months ended March 31, 2003, expense of $5 for options granted in 2002 with exercise prices below market value; (b) for the three months ended March 31, 2002, expense of $109 for options granted in 2002 with exercise prices below market value; and (c) for the year ended December 31, 2002, expense of $118 for options granted in 2002 with exercise prices below market value.

(2)	Other operating expenses include other operating expenses, professional fees, supplies expense and rent expense less other expenses. Rent expense was $928, $248, $190, $870, $328 and $376 for the twelve months ended March 31, 2003, the three months ended March 31, 2003 and 2002, and each of the years ended December 31, 2002, 2001 and 2000, respectively.

(3)	Other expenses include: (a) for the three months ended March 31, 2003, expense of $960 to revalue put warrants and income of $461 to release reserves on stockholder notes; (b) for the year ended December 31, 2002, expense of $92 for additional reserves on stockholder notes, a gain of $34 on the disposal of assets and a loss of $86 from the retirement of debt; and (c) for the year ended December 31, 2001, loss from retirement of debt of $1,237 previously reported as an extraordinary item.

(4)	Adjusted EBITDA is defined as net income (loss) before discontinued operations, interest expense (net of interest income), income taxes, depreciation, amortization, stock compensation and other items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income (loss). While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States, management understands that adjusted EBITDA is a commonly used analytical indicator within the health care industry and also serves as a measure of leverage capacity and debt service ability. In addition, we use adjusted EBITDA as the measure of operating profitability of its segments and their components. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. The following are the components of adjusted EBITDA for the twelve months ended March 31, 2003, the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000:

(5)

Because we used a portion of the net proceeds from the Financing Transactions to repay a portion of the Company’s existing debt, we are required to present pro forma ratios of earnings to fixed charges. The pro forma ratios of earnings to fixed charges were 1.22 times and 1.61 times for the three months ended March 31, 2003 and the year ended December 31, 2002, respectively. Our earnings were insufficient to cover our fixed charges by $0.5 million for the year ended December 31, 2000.

The following table sets forth summary historical financial and operating data of Ramsay for, or as of the end of, the twelve months ended March 31, 2003, each of the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000. The summary historical financial data as of and for each of the years ended December 31, 2002, 2001 and 2000 were derived from the audited consolidated financial statements of Ramsay contained elsewhere in this prospectus. The summary historical financial data as of and for the three months ended March 31, 2003 and 2002 were derived from the unaudited condensed consolidated financial statements of Ramsay contained elsewhere in this prospectus. These unaudited condensed consolidated financial statements include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. The summary historical financial data for the twelve months ended March 31, 2003 were derived from the unaudited financial statements of Ramsay. You should read this table in conjunction with Ramsay’s consolidated financial statements and notes thereto contained elsewhere in this prospectus.


(1)	Other operating expenses include rent expense which was $4,434, $1,234, $963, $4,163, $3,916 and $3,256 for the twelve months ended March 31, 2003, the three months ended March 31, 2003 and 2002, and each of the years ended December 31, 2002, 2001 and 2000, respectively.

(2)	Other expenses of $125 for the three months ended March 31, 2002 and the year ended December 31, 2002 relate to asset impairment charges. Other expenses for the year ended December 31, 2001 include $124 in asset impairment charges and a $130 loss on sale of assets. Other expenses for the year ended December 31, 2000 related to a loss on sale of assets of $705.

(3)	Adjusted EBITDA is defined as net income before income taxes, interest expense (net of interest income), depreciation, amortization, and other non-recurring items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income. While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States of America, management understands that adjusted EBITDA is a commonly used analytical indicator within the health care industry and also serves as a measure of leverage capacity and debt service ability. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. The following are the components of adjusted EBITDA for the twelve months ended March 31, 2003, each of the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000:

The following table sets forth summary historical financial and operating data of The Brown Schools for, or as of the end of, the twelve months ended March 31, 2003, the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000. The summary historical financial data as of and for each of the years ended December 31, 2002, 2001 and 2000 were derived from the audited consolidated financial statements of The Brown Schools contained elsewhere in this prospectus. The summary historical financial data as of and for the three months ended March 31, 2003 and 2002 were derived from the unaudited condensed consolidated financial statements of The Brown Schools contained elsewhere in this prospectus. These unaudited condensed consolidated financial statements include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. The summary historical financial data for the twelve months ended March 31, 2003 were derived from the audited and unaudited financial statements of The Brown Schools. You should read this table in conjunction with The Brown Schools’ consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — The Brown Schools” contained elsewhere in this prospectus.


(1)	Other operating expenses include rent expense which was $1,034, $265, $236, $1,005, $962 and $718 for the twelve months ended March 31, 2003, the three months ended March 31, 2003 and 2002, and each of the years ended December 31, 2002, 2001 and 2000, respectively.

(2)	Other expenses for each of the periods indicated relate to losses on sales of assets.

(3)	Adjusted EBITDA is defined as net income (loss) before income taxes, interest expense (net of interest income), depreciation, amortization, and other non-recurring items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income (loss). While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States, management understands that adjusted EBITDA is a commonly used analytical indicator within the health care industry and also serves as a measure of leverage capacity and debt service ability. In addition, we use adjusted EBITDA as the measure of operating profitability of its segments and their components. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. The following are the components of adjusted EBITDA for the twelve months ended March 31, 2003, each of the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000:

You should consider carefully each of the following risks and all other information contained and incorporated by reference in this prospectus before deciding to invest in the notes.

A portion of our revenue is derived from the Medicare and Medicaid programs and from various state and local payors. In recent years, federal and state governments have made significant changes in these programs. These changes have, in certain instances, decreased the amount of money we receive for our services. Future federal and state legislation may further reduce the payments received for our services or increase the timing of reimbursement payments to us.

Insurance and managed care companies and other third parties from whom we receive payment may attempt to control health care costs by requiring that facilities discount their services in exchange for exclusive or preferred participation in their benefit plans, which may reduce the payments we receive for our services.

Our acquisitions of The Brown Schools and Ramsay have significantly increased the size and geographic scope of our operations. Our ability to integrate the Ramsay facilities with our existing business will be critical to the future success of our business. This integration is subject to numerous conditions beyond our control, including the possibility of negative reactions by existing customers or employees or adverse general and regional economic conditions, general negative industry trends and competition.

We also may be unable to achieve the anticipated benefits from the acquisitions of The Brown Schools and Ramsay. If we are unable to realize these anticipated benefits due to our inability to address the challenges of integrating these businesses or for any other reason, it could have a material adverse effect on our business and financial and operating results.

The successful integration of Ramsay will require us to, among other things, retain key employees from Ramsay who may decide not to work for us. Our future performance will depend, in part, on our ability to successfully integrate these new employees into our company. Our failure to successfully integrate these new employees could disrupt our ongoing business.

We expect our capital needs over the next several years, primarily to fund acquisitions, will exceed cash generated from operations. We plan to incur indebtedness and to issue additional debt or equity securities from time to time in order to fund these needs. Our level of indebtedness at any time may restrict our ability to borrow additional funds. In addition, we may not receive additional financing on satisfactory terms if at all. If we are unable to borrow additional funds or to obtain adequate financing on reasonable terms, we may be unable to consummate acquisitions.

Competition among hospitals and other health care providers in the United States has intensified in recent years due to cost containment pressures, changing technology, changes in government regulation and reimbursement, changes in practice patterns (such as shifting from inpatient to outpatient treatments), the impact of managed care organizations and other factors. An important part of our business strategy is the

acquisition of facilities in growing urban markets. Some facilities and health care providers that compete with us have greater financial resources and a larger, more experienced development staff focused on identifying and completing acquisitions. Any or all of these factors may impede our business strategy.

All of the states in which we operate require hospitals and most health care facilities to maintain a license. In addition, some states require prior approval for the purchase, construction and expansion of health care facilities, based upon a state’s determination of need for additional or expanded health care facilities or services. Such determinations, embodied in certificates of need issued by governmental agencies with jurisdiction over health care facilities, may be required for capital expenditures exceeding a prescribed amount, changes in bed capacity or services and other matters. Nine states in which we currently own or lease inpatient behavioral health care facilities, Alabama, Florida, Georgia, Illinois, Michigan, Missouri, Oklahoma, North Carolina and Virginia, have certificate of need laws. The failure to obtain any required certificate of need or the failure to maintain a required license could impair our ability to operate or expand operations in any state.

Participants in the health care industry are required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things:


	•	billing for services;

	•	relationships with physicians and other referral sources;

	•	adequacy of medical care;

	•	quality of medical equipment and services;

	•	qualifications of medical and support personnel;

	•	confidentiality, maintenance and security issues associated with health-related information and medical records;

	•	licensure;

	•	hospital rate or budget review;

	•	operating policies and procedures; and

	•	addition of facilities and services.

Among these laws are the Anti-kickback Statute, the Stark Law and the Health Insurance Portability and Accountability Act of 1996, or HIPAA. These laws impact the relationships that we may have with physicians and other referral sources. The Office of Inspector General of the Department of Health and Human Services, or the OIG, has enacted safe harbor regulations that outline practices that are deemed protected from prosecution under the Anti-kickback Statute. Our current financial relationships with physicians and other referral sources may not qualify for safe harbor protection under the Anti-kickback Statute. Failure to meet a safe harbor does not mean that the arrangement automatically violates the Anti-kickback Statute, but may subject the arrangement to greater scrutiny. Further, we cannot guarantee that practices that are outside of a safe harbor will not be found to violate the Anti-kickback Statute.

In order to comply with the Stark Law, our financial relationships with physicians and their immediate family members must meet an exception. We attempt to structure our relationships to meet an exception to the Stark Law, but the regulations implementing the exceptions, some of which are still under review, are detailed and complex, and we cannot guarantee that every relationship fully complies with the Stark Law.

HIPAA required the Department of Health and Human Services to issue regulations requiring hospitals and other providers to implement measures to ensure the privacy and security of patients’ medical records and use of uniform data standards for the exchange of information between the hospitals and health plans including claims and payment transactions. The privacy standard became effective April 14, 2003. Full compliance with the privacy standard was required by April 14, 2003. We have met the April 14, 2003 privacy standard compliance deadline, but compliance will be an ongoing process. The transaction standard and the security standard became effective on October 16, 2000 and February 20, 2003, respectively. Full compliance with the transaction standard and security standard is required by October 16, 2003 and April 20, 2005, respectively. We are in the process of complying with the transaction standard and security standard. We may incur additional expenses in order to comply with these standards. We cannot predict the full extent of our costs for implementing all of the requirements at this stage.

If we fail to comply with the Anti-kickback Statute, the Stark Law, HIPAA or other applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties (including the loss of our licenses to operate one or more facilities), and the exclusion of one or more of our facilities from participation in the Medicare, Medicaid and other federal and state health care programs.

Because many of these laws and regulations are relatively new, we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. In the future, different interpretations or enforcement of these laws and regulations could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses. A determination that we have violated these laws, or the public announcement that we are being investigated for possible violations of these laws, could have a material adverse effect on our business, financial condition, results of operations or prospects and our business reputation could suffer significantly. In addition, we are unable to predict whether other legislation or regulations at the federal or state level will be adopted, what form such legislation or regulation will take or their impact.

Both federal and state government agencies as well as private payors have increased and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of health care organizations. These investigations relate to a wide variety of topics, including:


	•	cost reporting and billing practices;

	•	quality of care;

	•	financial relationships with referral sources;

	•	medical necessity of services provided; and

	•	treatment of indigent patients.

The Office of the Inspector General, or OIG, and the U.S. Department of Justice have, from time to time, undertaken national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Moreover, health care providers are subject to civil and criminal false claims laws, including the federal False Claims Act, which allows private parties to bring whistleblower lawsuits against private companies doing business with or receiving reimbursement under federal government programs. Some states have adopted similar state whistleblower and false claims provisions. Publicity associated with the substantial amounts paid by other health care providers to settle these lawsuits may encourage our current and former employees and other health care providers to bring whistleblower lawsuits. Any investigations of us, our executives or our managers could result in significant liabilities or penalties as well as adverse publicity.

In recent years, plaintiffs have brought actions against hospitals and other health care providers, alleging malpractice, product liability or other legal theories. Many of these actions involved large claims and significant defense costs. We maintain professional malpractice liability and general liability insurance coverage of approximately $10.0 million, in excess of our $3.0 million deductible, to cover claims arising out of the operations of our owned and leased inpatient behavioral health care facilities. Some of the claims, however, could exceed the scope of the coverage in effect or coverage of particular claims could be denied. While our professional and other liability insurance has been adequate in the past to provide for liability claims, such insurance may not be available for us to maintain adequate levels of insurance in the future. Moreover, health care providers in our industry are experiencing significant increases in the premiums for malpractice insurance, and it is anticipated that such costs may continue to rise. Malpractice insurance coverage may not continue to be available at a cost allowing us to maintain adequate levels of insurance with acceptable deductible amounts.

In addition, inpatient behavioral health care facilities that we acquire may have unknown or contingent liabilities, including liabilities for failure to comply with health care laws and regulations. Although we obtain contractual indemnification from sellers covering these matters, such indemnification may be insufficient to cover material claims or liabilities for past activities of acquired hospitals.

We may be subject to liabilities from the acts, omissions and liabilities of the employees of the behavioral health care units we manage or from the actions of our employees in connection with the management of such units. Our unit management contracts generally require the acute care hospitals for which we manage units to indemnify us against certain claims and to maintain specified amounts of insurance. The hospitals, however, may not maintain such insurance and indemnification may not be available to us.

Recently, other unit management companies have been subject to complaints alleging that these companies violated laws on behalf of units they managed. In some cases, plaintiffs brought actions against the managing company instead of, or in addition to, their individually managed hospital clients for these violations. Our managed units or other third parties may not hold us harmless for any losses we incur arising out of the acts, omissions and liabilities of the employees of the units we manage. If the courts determine that we are liable for amounts exceeding the limits of any insurance coverage or for claims outside the scope of that coverage or any indemnity, or if any indemnity agreement is determined to be unenforceable, then the resulting liability could affect adversely our business, results of operations and financial condition.

As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. Private pay sources also reserve the right to conduct audits. An adverse review, audit or investigation could result in:


	•	refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from private payors;

	•	state or federal agencies imposing fines, penalties and other sanctions on us;


	•	loss of our right to participate in the Medicare or Medicaid programs or one or more private payor networks; or

	•	damages to our reputation in various markets.

Both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of health care companies. The investigations include:


	•	cost reporting and billing practices;

	•	quality of care;

	•	financial relationships with referral sources; and

	•	medical necessity of services provided.

We also are subject to potential lawsuits under a federal whistleblower statute designed to combat fraud and abuse in the health care industry. These lawsuits can involve significant monetary and award bounties to private plaintiffs who successfully bring these suits.

Our business depends upon the efforts and success of the physicians who provide health care services at our facilities and the strength of the relationships with these physicians.

Our business could be adversely affected if a significant number of physicians or a group of physicians:


	•	terminate their relationship with, or reduce their use of, the facilities;

	•	fail to maintain acceptable quality of care or to otherwise adhere to professional standards;

	•	suffer damage to their reputation; or

	•	exit the market entirely.

We are highly dependent on our senior management team, which has many years of experience addressing the broad range of concerns and issues relevant to our business. We have entered into employment agreements with Joey A. Jacobs, our Chairman, President and Chief Executive Officer, and Jack Salberg, our Chief Operating Officer, each of which include non-competition and non-solicitation provisions. Key man life insurance policies are not maintained on any member of senior management other than Mr. Jacobs. The loss of key management or the inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our business and financial and operating results.

The health care industry is very labor intensive and salaries and benefits are subject to inflationary pressures. Some of our inpatient behavioral health care facilities are experiencing the effects of the tight labor market, including a shortage of nurses, which has caused and may continue to cause an increase in our salaries, wages and benefits expenses in excess of the inflation rate. In order to supplement staffing levels, we periodically use temporary help from staffing agencies.

If you do not exchange your old notes for the registered notes offered in this exchange offer, then you will continue to be subject to the restrictions on the transfer of your old notes. Those transfer restrictions are described in the indenture governing the notes and in the legend contained on the old notes, and arose because we originally issued the old notes under exemptions from, and in transactions not subject to, the registration requirements of the Securities Act.

In general, you may offer or sell your old notes only if they are registered under the Securities Act and applicable state securities laws, or if they are offered and sold under an exemption from those requirements. Upon the consummation of the Exchange Offer, we do not intend to register any remaining old notes under the Securities Act.

If a large number of old notes are exchanged for registered notes in the exchange offer, then it may be more difficult for you to sell your unexchanged old notes. Additionally, if you do not exchange your old notes in the exchange offer, then you will no longer be entitled to have those notes registered under the Securities Act. See “The Exchange Offer — Consequences of Failure to Exchange Old Notes.”

As of March 31, 2003, our total consolidated indebtedness, after giving effect to the Financing Transactions and the acquisitions of The Brown Schools and Ramsay, was approximately $177.0 million. We used a portion of the net proceeds from the Financing Transactions to repay our outstanding indebtedness, except for $17.0 million of our senior secured term notes, our $4.9 million mortgage loan insured by HUD, $5.0 million of our subordinated seller notes and approximately $0.1 million of our existing capital lease obligations.


	•	making it more difficult for us to satisfy our obligations with respect to the notes;

	•	increasing our vulnerability to general adverse economic and industry conditions;

	•	requiring that a portion of our cash flow from operations be used for the payment of interest on our debt, thereby reducing our ability to use our cash flow to fund working capital, capital expenditures, acquisitions and general corporate requirements;

	•	limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions and general corporate requirements;

	•	limiting our flexibility in planning for, or reacting to, changes in our business and the health care industry; and

	•	placing us at a competitive disadvantage to our competitors that have less indebtedness.

We and our subsidiaries may be able to incur additional indebtedness in the future, including secured indebtedness. The terms of the indenture do not fully prohibit us or our subsidiaries from doing so. If new indebtedness is added to our and our subsidiaries’ current indebtedness levels, the related risks that we and they now face could intensify.

Our amended and restated credit facility and the indenture governing the notes contain, among other things, covenants that may restrict our and our subsidiary guarantors’ ability to finance future operations or


	•	incur additional indebtedness and issue preferred stock;

	•	pay dividends or make other distributions;

	•	make other restricted payments and investments;

	•	create liens;

	•	incur restrictions on our ability or the ability of our restricted subsidiaries to pay dividends or make other payments;

	•	sell assets, including capital stock of our restricted subsidiaries;

	•	merge or consolidate with other entities; and

	•	engage into transactions with affiliates.

In addition, our amended and restated credit facility requires us to maintain specified financial ratios and tests which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. Events beyond our control, including changes in general business and economic conditions, may affect our ability to meet those financial ratios and tests. We cannot assure you that we will meet those ratios and tests or that the lenders will waive any failure to meet those ratios and tests. A breach of any of these covenants would result in a default under the amended and restated credit facility and any resulting acceleration thereunder may result in a default under the indenture. If an event of default under our amended and restated credit facility occurs, the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. See “Description of Other Indebtedness and Preferred Stock” and “Description of the Registered Notes” for additional information.

Our ability to make payments on and to refinance our debt and fund planned expenditures depends on our ability to generate cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors and other factors that are beyond our control. We cannot assure you that our business will generate cash flows from operations or that future borrowings will be available to us under our amended and restated credit facility in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We cannot assure you that we will be able to refinance our borrowing arrangements or any other outstanding debt on commercially reasonable terms or at all. Refinancing our borrowing arrangements could cause us to:


	•	pay interest at a higher rate;

	•	be subject to additional or more restrictive covenants than those outlined above; and

	•	grant additional security interests in our collateral.

Our inability to generate sufficient cash flow to service our debt or refinance our indebtedness on commercially reasonable terms would have a material adverse effect on our business and results of operations.

We are a holding company with no significant operations of our own. Because our operations are conducted through our subsidiaries, we depend on dividends, loans, advances and other payments from our subsidiaries in order to allow us to satisfy our financial obligations. Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts to us, whether by dividends, loans, advances or other payments. The ability of our subsidiaries to pay dividends and make other payments to us depends on their

earnings, capital requirements and general financial conditions and is restricted by, among other things, applicable corporate and other laws and regulations as well as, in the future, agreements to which our subsidiaries may be a party. Although our subsidiary guarantors are guaranteeing the notes, each guarantee is subordinated to all senior debt of the relevant subsidiary guarantor.

Payment on the notes and guarantees will be subordinated in right of payment to all of our and the subsidiary guarantors’ current and future senior debt, including our and the subsidiary guarantors’ obligations under our amended and restated credit facility. As a result, upon any distribution to our creditors or the subsidiary guarantors’ creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or the subsidiary guarantors or our or their property, the holders of our and the subsidiary guarantors’ senior debt will be entitled to be paid in full in cash before any payment may be made on the notes or the related guarantees. We and the subsidiary guarantors may not have sufficient funds to pay all of our creditors, and holders of the notes may receive less, ratably, than the holders of our senior debt. In addition, all payments on the notes and the related guarantees will be blocked in the event of a payment default on our designated senior debt and may be blocked for up to 179 consecutive days in the event of certain defaults other than payment defaults on our designated senior debt.

As of March 31, 2003, on a pro forma basis after giving effect to the original note offering and the application of the proceeds therefrom, the notes would have been subordinated to approximately $22.0 million of senior debt. In connection with the original note offering, we amended and restated our existing credit facility. Our amended and restated credit facility is comprised of a $17.0 million senior secured term note and a $50.0 million senior secured revolver, which remains undrawn. In addition, the indenture governing the notes and our amended and restated credit facility permit us and the subsidiary guarantors, subject to specified limitations, to incur additional debt, some or all of which may be senior debt. All amounts outstanding from time to time under our amended and restated credit facility will be designated senior debt.

Our obligations under the notes are guaranteed by substantially all of our existing operating subsidiaries. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, one or more of the subsidiary guarantees could be voided, or claims against a subsidiary guarantee could be subordinated to all other debts of that subsidiary guarantor if, among other things the subsidiary guarantor, at the time it incurred the indebtedness evidenced by its subsidiary guarantee received less than reasonably equivalent value or fair consideration for the incurrence of the subsidiary guarantee; and


	•	was insolvent or rendered insolvent by reason of such incurrence; or

	•	was engaged in a business or transaction for which the subsidiary guarantor’s remaining assets constituted unreasonably small capital; or

	•	intended to incur, or believed that it would incur, debts beyond its ability to pay its debts as they mature.

In addition, any payment by that subsidiary guarantor pursuant to its subsidiary guarantee could be voided and required to be returned to the subsidiary guarantor or to a fund for the benefit of the creditors of the subsidiary guarantor.

The measure of insolvency for purposes of fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a subsidiary guarantor would be considered insolvent if:


	•	the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;


	•	the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

	•	it could not pay its debts as they become due.

We cannot be sure which standards a court would use to determine whether or not the subsidiary guarantors were solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance of the subsidiary guarantee would not be voided or the subsidiary guarantee would not be subordinated to that subsidiary guarantor’s other debt. If the subsidiary guarantees were legally challenged, any subsidiary guarantee could also be subject to the claim that the obligations of the applicable subsidiary guarantor were incurred for less than fair consideration, since the subsidiary guarantee was incurred for our benefit, and only indirectly for the benefit of the subsidiary guarantor.

A court could thus void the obligations under the subsidiary guarantee or subordinate the subsidiary guarantee to the applicable subsidiary guarantor’s other debt or take other action detrimental to holders of the notes.

If we were to experience a change of control, the indenture governing the notes will require us to offer to purchase all of the outstanding notes. Our failure to repay holders tendering notes upon a change of control will result in an event of default under the notes. The events that constitute a change of control, or an event of default, under the notes may also result in an event of default under our amended and restated credit facility, which may result in the acceleration of the indebtedness under those facilities requiring us to repay that indebtedness immediately. If a change of control were to occur, we cannot assure you that we would have sufficient funds to repay debt outstanding under our amended and restated credit facility or to purchase the notes. We expect that we would require additional financing from third parties to fund any such purchases, and we cannot assure you that we would be able to obtain financing on satisfactory terms or at all.

The notes are a new issue of securities with no established trading market. We do not intend to list the notes for trading on any stock exchange or arrange for any quotation system to quote prices for them. The initial purchasers for the old notes have informed us that they intend to make a market in the notes. However, the initial purchasers are not obligated to do so and may cease market-making activities at any time. As a result, we cannot assure you that an active trading market will develop or continue for the notes.

We sold the old notes on June 30, 2003 in transactions exempt from the registration requirements of the Securities Act. Therefore, the old notes are subject to significant restrictions on resale. In connection with the issuance of the old notes, we entered into a registration rights agreement, which required that we and the subsidiary guarantors:


	•	file with the SEC a registration statement under the Securities Act relating to the exchange offer and the issuance and delivery of the registered notes in exchange for the old notes;

	•	use our best efforts to cause the SEC to declare the exchange offer registration statement effective under the Securities Act; and

	•	use our best efforts to consummate the exchange offer not later than 30 business days following the effective date of the exchange offer registration statement.

If you participate in the exchange offer, you will, with limited exceptions, receive registered notes that are freely tradable and not subject to restrictions on transfer. You should see “The Exchange Offer — Resales of Registered Notes” for more information relating to your ability to transfer registered notes.

If you are eligible to participate in the exchange offer and do not tender your old notes, you will continue to hold the untendered old notes, which will continue to be subject to restrictions on transfer under the Securities Act.

The exchange offer is intended to satisfy our exchange offer obligations under the registration rights agreement. The above summary of the registration rights agreement is not complete and is subject to, and qualified by reference to, all the provisions of the registration rights agreement. A copy of the registration rights agreement has been filed as an exhibit to the registration statement that includes this prospectus.

We are offering to exchange $150,000,000 in aggregate principal amount of our 10 5/8% Senior Subordinated Notes due 2013 that have been registered under the Securities Act for a like aggregate principal amount of our outstanding unregistered 10 5/8% Senior Subordinated Notes due 2013.

Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept all old notes validly tendered and not withdrawn before 5:00 p.m., New York City time, on the expiration date of the exchange offer. We will issue $1,000 principal amount of registered notes in exchange for each $1,000 principal amount of outstanding old notes we accept in the exchange offer. You may tender some or all of your old notes under the exchange offer. However, the old notes are issuable in authorized denominations of $1,000 and integral multiples thereof. Accordingly, old notes may be tendered only in denominations of $1,000 and integral multiples thereof. The exchange offer is not conditioned upon any minimum amount of old notes being tendered.

The form and terms of the registered notes will be the same as the form and terms of the old notes, except that:


	•	the registered notes will be registered with the SEC and thus will not be subject to the restrictions on transfer or bear legends restricting their transfer;

	•	all of the registered notes will be represented by global notes in book-entry form unless exchanged for notes in definitive certificated form under the limited circumstances described under “Description of the Registered Notes — Book-Entry, Delivery and Form;” and

	•	the registered notes will not provide for registration rights and the payment of liquidated damages under circumstances relating to the timing of the exchange offer.

The registered notes will evidence the same debt as the old notes and will be issued under, and be entitled to the benefits of, the indenture governing the old notes.

The registered notes will accrue interest from the most recent date to which interest has been paid on the old notes or, if no interest has been paid, from the date of issuance of the old notes. Accordingly, registered holders of registered notes on the record date for the first interest payment date following the completion of the exchange offer will receive interest accrued from the most recent date to which interest has been paid on the old notes or, if no interest has been paid, from the date of issuance of the old notes. However, if that record date occurs prior to completion of the exchange offer, then the interest payable on the first interest payment date following the completion of the exchange offer will be paid to the registered holders of the old notes on that record date.

In connection with the exchange offer, you do not have any appraisal or dissenters’ rights under applicable law or the indenture. We intend to conduct the exchange offer in accordance with the registration rights agreement and the applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations of the SEC. The exchange offer is not being made to, nor will we accept tenders for exchange from, holder of the old notes in any jurisdiction in which the exchange offer or the acceptance of it would not be in compliance with the securities or blue sky laws of the jurisdiction.

We will be deemed to have accepted validly tendered old notes when we have given oral or written notice of our acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the registered notes from us.

If we do not accept any tendered old notes because of an invalid tender or for any other reason, then we will return certificates for any unaccepted old notes without expense to the tendering holder as promptly as practicable after the expiration date.

The exchange offer will expire at 5:00 p.m., New York City time, on , 2003, unless we, in our sole discretion, extend the exchange offer.

If we determine to extend the exchange offer, then we will notify the exchange agent of any extension by oral or written notice and give each registered holder notice of the extension by means of a press release or other public announcement before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

We reserve the right, in our sole discretion, to delay accepting any old notes, to extend the exchange offer or to amend or terminate the exchange offer if any of the conditions described below under “— Conditions to the Exchange Offer” have not been satisfied or waived by giving oral or written notice to the exchange agent of the delay, extension, amendment or termination. Further, we reserve the right, in our sole discretion, to amend the terms of the exchange offer in any manner. We will notify you as promptly as practicable of any extension, amendment or termination. We will also file a post-effective amendment to the registration statement of which this prospectus is a part with respect to any fundamental change in the exchange offer.

A holder who wishes to tender old notes in the exchange offer must do either of the following:


	•	properly complete, sign and date the letter of transmittal, including all other documents required by the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and deliver that letter of transmittal and other required documents to the exchange agent at the address listed below under “— Exchange Agent” on or before the expiration date; or


	•	if the old notes are tendered under the book-entry transfer procedures described below, transmit to the exchange agent an agent’s message, which agent’s message must be received by the exchange agent prior to 5:00 p.m., New York City time, on the expiration date.


	•	the exchange agent must receive certificates representing your old notes along with the letter of transmittal on or before the expiration date, or

	•	the exchange agent must receive a timely confirmation of book-entry transfer of the old notes into the exchange agent’s account at DTC under the procedure for book-entry transfers described below along with the letter of transmittal or a properly transmitted agent’s message, on or before the expiration date; or

	•	the holder must comply with the guaranteed delivery procedures described below.

The term “agent’s message” means a message, transmitted by a book-entry transfer facility to and received by the exchange agent and forming a part of the book-entry confirmation, which states that the book-entry transfer facility has received an express acknowledgement from the tendering participant stating that the participant has received and agrees to be bound by the letter of transmittal, and that we may enforce the letter of transmittal against the participant.

To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at the address set forth below under “— Exchange Agent” on or before the expiration of the exchange offer. To receive confirmation of valid tender of old notes, a holder should contact the exchange agent at the telephone number listed under “— Exchange Agent.”

Any tender of old notes that is not withdrawn prior to the expiration date will constitute a binding agreement between the tendering holder and us upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. Only a registered holder of old notes may tender the old notes in the exchange offer. If a holder completing a letter of transmittal tenders less than all of the old notes held by that holder, then that tendering holder should fill in the applicable box of the letter of transmittal. The amount of old notes delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated.

The method of delivery of old notes, the letter of transmittal and all other required documents to the exchange agent is at your election and risk. Rather than mail these items, we recommend that you use an overnight or hand delivery service. In all cases, you should allow sufficient time to assure timely delivery to the exchange agent before the expiration date. Do not send letters of transmittal or old notes to us.

Generally, an eligible institution must guarantee signatures on a letter of transmittal or a notice of withdrawal unless the old notes are tendered:


	•	by a registered holder of the old notes who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal; or

	•	for the account of an eligible institution.

If signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantee must be by a firm which is:


	•	a member of a registered national securities exchange;

	•	a member of the National Association of Securities Dealers, Inc.;

	•	a commercial bank or trust company having an office or correspondent in the United States; or

	•	another “eligible institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act.

If the letter of transmittal is signed by a person other than the registered holder of any outstanding old notes, the original notes must be endorsed or accompanied by appropriate powers of attorney. The power of

attorney must be signed by the registered holder exactly as the registered holder(s) name(s) appear(s) on the old notes and an eligible institution must guarantee the signature on the power of attorney.

If the letter of transmittal, or any old notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless waived by us, they should also submit evidence satisfactory to us of their authority to so act.

If you wish to tender old notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you should promptly instruct the registered holder to tender on your behalf. If you wish to tender on your behalf, you must, before completing the procedures for tendering old notes, either register ownership of the old notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.

We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, and acceptance of old notes tendered for exchange. Our determination will be final and binding on all parties. We reserve the absolute right to reject any and all tenders of old notes not properly tendered or old notes our acceptance of which might, in the judgment of our counsel, be unlawful. We also reserve the absolute right to waive any defects, irregularities or conditions of tender as to any particular old notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within the time period we determine. Neither we, the exchange agent nor any other person will incur any liability for failure to give you notification of defects or irregularities with respect to tenders of your old notes.


	•	any registered notes that the holder receives will be acquired in the ordinary course of its business;

	•	the holder has no arrangement or understanding with any person or entity to participate in the distribution of the registered notes;

	•	if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the registered notes;

	•	if the holder is a broker-dealer that will receive registered notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus, as required by law, in connection with any resale of those registered notes (see “Plan of Distribution”); and

	•	the holder is not our “affiliate,” as defined in Rule 405 of the Securities Act, or, if the holder is our affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act.

If any holder or any such other person is our “affiliate,” or is engaged in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of the registered notes to be acquired in the exchange offer, then that holder or any such other person:


	•	may not rely on the applicable interpretations of the staff of the SEC;

	•	is not entitled and will not be permitted to tender old notes in the exchange offer; and

	•	must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

Each broker-dealer who acquired its old notes as a result of market-making activities or other trading activities and thereafter receives registered notes issued for its own account in the exchange offer, must acknowledge that it will deliver a prospectus in connection with any resale of such registered notes issued in the exchange offer. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities

Any broker-dealer that acquired old notes directly from us may not rely on the applicable interpretations of the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act (including being named as a selling securityholder) in connection with any resales of the old notes or the registered notes.

Upon satisfaction of all conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes properly tendered and will issue the registered notes promptly after acceptance of the old notes.

For purposes of the exchange offer, we will be deemed to have accepted properly tendered old notes for exchange when we have given oral or written notice of that acceptance to the exchange agent. For each old note accepted for exchange, you will receive a new note having a principal amount equal to that of the surrendered old note.

In all cases, we will issue registered notes for old notes that we have accepted for exchange under the exchange offer only after the exchange agent timely receives:


	•	certificates for your old notes or a timely confirmation of book-entry transfer of your old notes into the exchange agent’s account at DTC; and

	•	a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message.

If we do not accept any tendered old notes for any reason set forth in the terms of the exchange offer or if you submit old notes for a greater principal amount than you desire to exchange, we will return the unaccepted or non-exchanged old notes without expense to you. In the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC under the book-entry procedures described below, we will credit the non-exchanged old notes to your account maintained with DTC.

We understand that the exchange agent will make a request within two business days after the date of this prospectus to establish accounts for the old notes at DTC for the purpose of facilitating the exchange offer, and any financial institution that is a participant in DTC’s system may make book-entry delivery of old notes by causing DTC to transfer the old notes into the exchange agent’s account at DTC in accordance with DTC’s procedures for transfer. Although delivery of old notes may be effected through book-entry transfer at DTC, the exchange agent must receive a properly completed and duly executed letter of transmittal with any required signature guarantees, or an agent’s message in lieu of a letter of transmittal, and all other required documents at its address listed below under “— Exchange Agent” on or before the expiration date, or if you comply with the guaranteed delivery procedures described below, within the time period provided under those procedures.

If you wish to tender your old notes and your old notes are not immediately available, or you cannot deliver your old notes, the letter of transmittal or any other required documents or comply with DTC’s procedures for transfer before the expiration date, then you may participate in the exchange offer if:


	•	the tender is made through an eligible institution;

	•	before the expiration date, the exchange agent receives from the eligible institution a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by us, by facsimile transmission, mail or hand delivery, containing:


	•	the name and address of the holder and the principal amount of old notes tendered;

	•	a statement that the tender is being made thereby; and

	•	a guarantee that within three New York Stock Exchange trading days after the expiration date, the certificates representing the old notes in proper form for transfer or a book-entry confirmation and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and

	•	the exchange agent receives the properly completed and executed letter of transmittal as well as certificates representing all tendered old notes in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date.

You may withdraw your tender of old notes at any time before the exchange offer expires.

For a withdrawal to be effective, the exchange agent must receive a written notice of withdrawal at its address listed below under “— Exchange Agent.” The notice of withdrawal must:


	•	specify the name of the person who tendered the old notes to be withdrawn;

	•	identify the old notes to be withdrawn, including the principal amount, or, in the case of old notes tendered by book-entry transfer, the name and number of the DTC account to be credited, and otherwise comply with the procedures of DTC; and

	•	if certificates for old notes have been transmitted, specify the name in which those old notes are registered if different from that of the withdrawing holder.

If you have delivered or otherwise identified to the exchange agent the certificates for old notes, then, before the release of these certificates, you must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with the signatures guaranteed by an eligible institution, unless the holder is an eligible institution.

We will determine in our sole discretion all questions as to the validity, form and eligibility, including time of receipt, of notices of withdrawal. Our determination will be final and binding on all parties. Any old notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer. We will return any old notes that have been tendered but that are not exchanged for any reason to the holder, without cost, as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. In the case of old notes tendered by book-entry transfer into the exchange agent’s account at DTC, the old notes will be credited to an account maintained with DTC for the old notes. You may retender properly withdrawn old notes by following one of the procedures described under “— Procedures for Tendering Old Notes” at any time on or before the expiration date.

Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or to exchange registered notes for, any old notes if in our reasonable judgement:


	•	the registered notes to be received will not be tradable by the holder, without restriction under the Securities Act and the Securities Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States;

	•	the exchange offer, or the making of any exchange by a holder of old notes, would violate any applicable law or applicable interpretation by the staff of the SEC; or

	•	any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer.

The conditions listed above are for our sole benefit and we may assert them regardless of the circumstances giving rise to any condition. Subject to applicable law, we may waive these conditions in our discretion in whole or in part at any time and from time to time. If we waive these conditions, then we intend to continue the exchange offer for at least five business days after the waiver. If we fail at any time to exercise any of the above rights, the failure will not be deemed a waiver of those rights, and those rights will be deemed ongoing rights which may be asserted at any time and from time to time.

We will not accept for exchange any old notes tendered, and will not issue registered notes in exchange for any old notes, if at that time a stop order is threatened or in effect with respect to the registration statement of which this prospectus is a part or the qualification of the indentures under the Trust Indenture Act of 1939.

Wachovia Bank, National Association, is the exchange agent for the exchange offer. You should direct any questions and requests for assistance and requests for additional copies of this prospectus, the letter of transmittal or the notice of guaranteed delivery to the exchange agent addressed as follows:


	Wachovia Bank, National Association NC 5780 2525 West End Avenue, Suite 1200 Nashville, TN 37203 Attention: Corporate Trust Administration Telecopier No.: (615) 341-3927

Delivery of the letter of transmittal to an address other than as listed above or transmission via facsimile other than as listed above will not constitute a valid delivery of the letter of transmittal.

We will pay the expenses of the exchange offer. We will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We are making the principal solicitation by mail; however, our officers and employees may make additional solicitations by facsimile transmission, e-mail, telephone or in person. You will not be charged a service fee for the exchange of your old notes, but we may require you to pay any transfer or similar government taxes in certain circumstances.

You will be obligated to pay any transfer taxes applicable to the transfer of the old notes pursuant to the exchange offer.

We will record the registered notes in our accounting records at the same carrying values as the old notes, which is the aggregate principal amount of the old notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer.

Based on interpretations of the staff of the SEC, as set forth in no-action letters to third parties, we believe that registered notes issued under the exchange offer in exchange for old notes may be offered for resale, resold and otherwise transferred by any old note holder without further registration under the


	•	the holder is not our “affiliate” within the meaning of Rule 405 under the Securities Act;

	•	the registered notes are acquired in the ordinary course of the holder’s business; and

	•	the holder does not intend to participate in a distribution of the registered notes.

Any holder who exchanges old notes in the exchange offer with the intention of participating in any manner in a distribution of the registered notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction.

This prospectus may be used for an offer to resell, resale or other transfer of registered notes. With regard to broker-dealers, only broker-dealers that acquired the old notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives registered notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the registered notes. Please see “Plan of Distribution” for more details regarding the transfer of registered notes.

Holders who desire to tender their old notes in exchange for registered notes registered under the Securities Act should allow sufficient time to ensure timely delivery. Neither we nor the exchange agent is under any duty to give notification of defects or irregularities with respect to the tenders of old notes for exchange.

Old notes that are not tendered or are tendered but not accepted will, following the consummation of the exchange offer, continue to be subject to the provisions in the indenture regarding the transfer and exchange of the old notes and the existing restrictions on transfer set forth in the legend on the old notes and in the prospectus, dated June 19, 2003, relating to the old notes. Except in limited circumstances with respect to the specific types of holders of old notes, we will have no further obligation to provide for the registration under the Securities Act of such old notes. In general, old notes, unless registered under the Securities Act, may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not anticipate that we will take any action to register the untendered old notes under the Securities Act or under any state securities laws.

Upon completion of the exchange offer, holders of the old notes will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances.

Old notes that are not exchanged in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits their holders have under the indenture relating to the old notes and the registered notes. Holders of the registered notes and any old notes that remain outstanding after consummation of the exchange offer will vote together as a single class for purposes of determining whether holders of the requisite percentage of the class have taken certain actions or exercised certain rights under the indenture.

This exchange offer is intended to satisfy our obligations under the registration rights agreement entered into in connection with the issuance of the old notes. Neither we nor any subsidiary guarantor will receive any proceeds from the issuance of the registered notes. In consideration for issuing the registered notes as contemplated by this prospectus, we will receive the old notes in like principal amount, the terms of which are identical in all material respects to the registered notes. The old notes surrendered in exchange for the registered notes will be retired and cancelled and cannot be reissued. Accordingly, the issuance of the registered notes will not result in any increase or decrease in our indebtedness.

We used the net proceeds of approximately $162.5 million from the sale of the old notes and private placement of our series A convertible preferred stock to fund the cash portion of the acquisition of Ramsay, to repay indebtedness assumed in connection with the acquisition of Ramsay, to repay indebtedness outstanding under our existing facility and to repay our senior subordinated indebtedness. We used the remainder of the net proceeds for working capital and to pay fees and expenses relating to the Financing Transactions.

The following table sets forth the cash and cash equivalents and our consolidated capitalization as of March 31, 2003 on an actual basis, as adjusted for The Brown Schools acquisition, which we consummated in April 2003, and as further adjusted to give effect to the acquisition of Ramsay and the Financing Transactions. You should read this table in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus. See “Summary — Summary Unaudited Pro Forma Condensed Combined Financial and Operating Data,” “Summary — Summary Historical Financial and Operating Data,” “Use of Proceeds,” Unaudited Pro Forma Condensed Combined Financial Information,” “Use of Proceeds,” “Selected Consolidated Historical Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Other Indebtedness and Preferred Stock.”


(1)	In connection with the original note offering, we amended and restated our existing credit facility. Our amended and restated credit facility is comprised of a $17.0 million senior secured term note and a $50.0 million senior secured revolver, which remains undrawn. We repaid approximately $23.1 million of the revolver portion and approximately $36.0 million of the senior secured term notes outstanding under our existing credit facility. Approximately $17.0 million of the senior secured term notes under our amended and restated credit facility remained outstanding at the closing of the original note offering. We intend to refinance the remaining outstanding amounts with mortgage loans insured by HUD.

(2)	The mortgage loan insured by HUD is secured by real estate located at Holly Hill Hospital in Raleigh, North Carolina. Interest accrues on the HUD loan at 5.95% and principal and interest are payable in 420 monthly installments through December 2037.

(3)	The book value of the senior subordinated notes as of March 31, 2003 was approximately $11.2 million. The difference between the book value and the amount set forth above results from the issuance of warrants with the senior subordinated notes that reduced the book value by approximately $1.8 million and the valuation of a put feature on these warrants, which increased the book value by approximately $3.0 million.

(4)	These seller notes include our 9.00% subordinated convertible notes due 2005, 9.00% subordinated promissory notes due 2002 through 2005 and 9.00% subordinated promissory notes due 2003 through 2005. In connection with the acquisition of The Brown Schools, $1.0 million of these seller notes were


	repaid. Subsequent to March 31, 2003, an additional $3.6 million of these seller notes were converted into common stock. This conversion is not reflected in the table.

(5)	On April 1, 2003, concurrently with the acquisition of The Brown Schools, we received $12.5 million from the private placement of 2,272,727 shares of our series A convertible preferred stock with affiliates of Oak Investment Partners and Salix Ventures and with the 1818 Fund. These investors purchased an additional 2,272,727 shares of our series A convertible preferred stock for $12.5 million on June 19, 2003.

The following table sets forth the unaudited pro forma condensed combined financial data for Psychiatric Solutions, Ramsay and The Brown Schools as a combined company, giving effect to the acquisitions of Ramsay and The Brown Schools and the Financing Transactions as if they had occurred on the dates indicated and after giving effect to the pro forma adjustments discussed herein. The unaudited pro forma condensed combined balance sheet as of March 31, 2003 has been derived from Psychiatric Solutions’, Ramsay’s, and The Brown Schools’ historical balance sheets, adjusted to give effect to these acquisitions and the Financing Transactions, as well as our acquisition of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and our merger with PMR as if they occurred on March 31, 2003. The pro forma condensed combined income statement for the three months ended March 31, 2003 and 2002 and the year ended December 31, 2002 give effect to the acquisitions of Ramsay and The Brown Schools and the Financing Transactions, as well as our acquisition of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and our merger with PMR as if they occurred at the beginning of the periods presented.

The unaudited pro forma condensed combined financial data is for comparative purposes only and does not purport to represent what our financial position or results of operations would actually have been had the events noted above in fact occurred on the assumed dates or to project our financial position or results of operations for any future date or future period. The unaudited pro forma condensed combined financial data should be read in conjunction with the “Selected Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.


	(1)	This column presents condensed combined balance sheet data for five of the six facilities acquired from The Brown Schools in April 2003, including The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc. This group of five facilities was audited separately from The Brown Schools of Oklahoma, Inc.

	(2)	Represents the elimination of cash and cash equivalents ($2), Medicare liabilities ($572) and bank overdrafts ($597) not acquired in connection with the acquisition of The Brown Schools.

	(3)	Represents the adjustment of the property, plant and equipment of The Brown Schools to reflect their appraised value.

	(4)	Represents adjustment to goodwill, calculated as follows:


	(5)	Represents estimated capitalized financing costs incurred in connection with the acquisition of The Brown Schools.

	(6)	Represents the incurrence of $15,171 of short-term borrowings and $36,000 of long-term debt and the issuance of $12,500 of our series A convertible preferred stock to finance the acquisition of The Brown Schools.

	(7)	Reflects the elimination of The Brown Schools’ equity accounts and existing accumulated (deficit) earnings.

	(8)	Represents adjustment to goodwill, calculated as follows:


	(9)	Represents estimated capitalized financing costs of $4,650 incurred in connection with the acquisition of Ramsay, less write-off of existing capitalized financing costs due to extinguishment of debt ($1,481) for Psychiatric Solutions and ($693) for Ramsay, less write-off of estimated capitalized financing costs incurred in connection with the acquisition of The Brown Schools ($580).


(10)	Represents (a) the incurrence of $150,000 of long-term debt, less the repayment of Ramsay’s short-term debt ($3,856) and long-term debt ($13,061) and the repayment a portion of Psychiatric Solutions’ short-term debt ($23,146) and a portion of its long-term debt ($47,225) and (b) the issuance of $12,500 of our series A convertible preferred stock, to finance the acquisition of Ramsay.

(11)	Represents a reclassification of put warrants from debt to other liabilities due to the pay off of $10,000 of related debt to The 1818 Fund. These warrants were exercised and classified as temporary equity in April 2003.

(12)	Reflects the elimination of Ramsay’s equity accounts and existing accumulated (deficit) earnings of $85,752, debt prepayment penalties of ($3,350), a write-off of capitalized finance cost of ($2,061), and a write-off of the original issue discount on debt of ($1,802) related to the pay-off of $10,000 of debt to the 1818 Fund.

[Continued from above table, first column(s) repeated]



			Ramsay and Financing
			Transactions
			Adjustments

						Pro Forma			Pro Forma
			Ramsay			Adjustments			Combined

Revenue			$	35,831		$	—		$	89,638

Expenses:
	Salaries, wages and employee benefits			22,196			(750	)(9)		50,553
	Professional fees			822			—			5,440
	Rentals and leases			963			—			1,447
	Other operating expenses(18)			7,907			—			20,818
	Provision for (recovery of) doubtful accounts			720			—			(52	)
	Depreciation and amortization			625			—			1,639
	Other expenses(5)			125			—			107

		Total expenses		33,358			(750	)		79,952
	Interest expense			(690	)		(950	)(10)		(4,928	)
	Other income- interest			—			—			—

	Earnings from continuing operations before income taxes			1,783			(200	)		4,758
	Provision for (benefit from) income taxes			214			—			181

	Net income			1,569			(200	)		4,577
	Accrued dividends on series A convertible preferred stock			—			156	(12)		312

	Net income applicable to common stockholders		$	1,569		$	(356	)	$	4,265

Other Financial Data:
	Capital expenditures		$	876		$	—		$	1,309

[Continued from above table, first column(s) repeated]



			Ramsay and Financing
			Transactions
			Adjustments

						Pro Forma			Pro Forma
			Ramsay			Adjustments			Combined

Revenue			$	145,156		$	—		$	364,225

Expenses:
	Salaries, wages and employee benefits			90,943			(3,000	)(9)		201,860
	Professional fees			4,030			—			26,464
	Rentals and leases			4,163			—			6,354
	Other operating expenses(18)			32,172			—			82,093
	Provision for (recovery of) doubtful accounts			1,867			—			5,584
	Depreciation and amortization			2,577			—			6,629
	Other expenses(5)			125			—			1,550

		Total expenses		135,877			(3,000	)		330,534
Interest expense				(2,475	)		(5,423	)(10)		(20,384	)
Other income — interest				—			—			—

Earnings from continuing operations before income taxes				6,804			(2,423)			13,307
Provision for (benefit from) income taxes				(5,864	)		—			(8,552	)

Net income				12,668			(2,423)			21,859
Accrued dividends on series A convertible preferred stock				—			637	(12)		1,274

Net income applicable to common stockholders			$	12,668		$	(3,060)		$	20,585

Other Financial Data:
	Capital expenditures		$	2,473		$	—		$	4,931


	(1)	Includes the historical results of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and PMR from the beginning of the period presented, except for capital expenditures, which are for Psychiatric Solutions only.

	(2)	This column presents five of the six facilities acquired from The Brown Schools in April 2003, including The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc. This group of five facilities was audited separately from The Brown Schools of Oklahoma, Inc.

	(3)	Represents the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental costs to manage the business.

	(4)	Reflects adjustment to depreciation and amortization resulting from changes in the valuation of The Brown Schools’ fixed assets to reflect their appraised value.

	(5)	Other expenses include (a) for the three months ended March 31, 2003, expense of $960 to revalue put warrants, income of $461 to release reserves on stockholder notes and a loss of $458 related to a sale of land; (b) for the three months ended March 31, 2002, asset impairment charges incurred at Ramsay of $125 and $18 of recoveries from the sale of previously written down assets at PMR; and (c) for the year ended December 31, 2002, asset impairment charges incurred at Ramsay of $125, $18 of recoveries from the sale of previously written down assets at PMR, $1,900 of employee severance and termination costs associated with the winding up of PMR and $457 of other various gains associated with PMR.

	(6)	Represents the elimination of historical interest expense and the recording of interest expense relating to the financing of the acquisition of The Brown Schools.

	(7)	Reflects the expected provision for income taxes resulting from the acquisition of The Brown Schools.

	(8)	Reflects pay-in-kind dividends related to the issuance of $12,500 of Psychiatric Solutions’ series A convertible preferred stock concurrently with the acquisition of The Brown Schools.

	(9)	Reflects the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition of Ramsay.


(10)	Represents the elimination of historical interest expense and the recording of interest expense relating to the financing of the acquisition of Ramsay and the Financing Transactions.

(11)	Reflects the expected provision for income taxes resulting from the acquisition of Ramsay.

(12)	Reflects pay-in-kind dividends related to the issuance of $12,500 of Psychiatric Solutions’ series A convertible preferred stock concurrently with the acquisition of Ramsay.

(13)	Reflects adjustment to depreciation and amortization resulting from changes in the valuation of Riveredge Hospital’s and PMR’s fixed assets to reflect their appraised value.

(14)	Represents the elimination of historical interest expense and the recording of interest expense relating to the financing of the acquisitions of Riveredge Hospital and PMR.

(15)	Reflects lost interest income due to the reduction in cash, cash equivalents and short-term investments balances.

(16)	Represents the elimination of a federal income tax provision as a result of the net deferred tax valuation allowance.

(17)	Reflects the reversal of accrued payouts to Riveredge Hospital option holders.

(18)	Other operating expenses are comprised of (a) for Psychiatric Solutions, other operating expenses plus supplies expense, (b) for Riveredge Hospital, other operating expenses plus supplies, contract services, insurance, utilities, real estate taxes less rentals and leases, (c) for PMR, other operating expenses plus research and development expenses, (d) for The Brown Schools, other operating expenses plus supplies and management fees, (e) for The Brown Schools of Oklahoma, other operating expenses plus supplies, purchased services and management fees and (f) for Ramsay, other operating expenses less professional fees and rentals and leases.

For the purpose of calculating the ratio of earnings to fixed charges, earnings are defined as earnings (loss) from continuing operations before income taxes plus fixed charges. Fixed charges are defined as interest expensed, plus amortized premiums, discounts and capitalized expenses related to indebtedness, plus an estimate of the interest within rental expense.


(b)	Our earnings were insufficient to cover our fixed charges by $0.5 million, $2.6 million and $2.6 million for the years ended December 31, 2000, 1999 and 1998, respectively.

The following table sets forth selected historical financial and operating data of Psychiatric Solutions for, or as of the end of, the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001, 2000, 1999 and 1998. The selected historical financial data as of and for each of the years ended December 31, 2002, 2001, 2000, 1999 and 1998 were derived from the audited consolidated financial statements of Psychiatric Solutions. The selected historical financial data as of and for each of the three months ended March 31, 2003 and 2002 were derived from the unaudited condensed consolidated financial statements of Psychiatric Solutions. These unaudited condensed consolidated financial statements include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. You should read this table in conjunction with Psychiatric Solutions’ consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Psychiatric Solutions” contained elsewhere in this prospectus.


(1)	Salaries, wages and employee benefits expense includes: (a) for the three months ended March 31, 2003, expense of $5 for options granted in 2002 with exercise prices below market value; (b) for the three months ended March 31, 2002, expense of $109 for options granted in 2002 with exercise prices below market value; and (c) for the year ended December 31, 2002, expense of $118 for options granted in 2002 with exercise prices below market value.

(2)	Other operating expenses include other operating expenses, professional fees, supplies expense and rent expense less other expenses. Rent expense was $248, $190, $870, $328, $376, $248 and $190 for the three months ended March 31, 2003 and 2002, and each of the years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively.

(3)	Other expenses include: (a) for the three months ended March 31, 2003, expense of $960 to revalue put warrants and income of $461 to release reserves on stockholder notes; (b) for the three months ended March 31, 2002, expense of $109 for options granted in 2002 with exercise prices below market; (c) for the year ended December 31, 2002, expense of $92 for additional reserves on stockholder notes, a gain of $34 on the disposal of assets and a loss of $86 from the retirement of debt; and (d) for the year ended December 31, 2001, loss from retirement of debt of $1,237 previously reported as an extraordinary item.

(4)	Adjusted EBITDA is defined as net income (loss) before discontinued operations, income taxes, interest expense (net of interest income), depreciation, amortization, stock compensation and other items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income (loss). While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States, management understands that adjusted EBITDA is a commonly used analytical indicator within the health care industry and also serves as a measure of leverage capacity and debt service ability. In addition, we use adjusted EBITDA as the measure of operating profitability of its segments and their components. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. The following are components of adjusted EBITDA for the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001, 2000, 1999 and 1998:

The following table sets forth selected historical financial and operating data of Ramsay for, or as of the end of, the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000. The selected historical financial data as of and for each of the years ended December 31, 2002, 2001 and 2000 were derived from the audited condensed consolidated financial statements of Ramsay. The selected historical financial data as of and for the three months ended March 31, 2003 and 2002 were derived from the unaudited consolidated financial statements of Ramsay. These unaudited condensed consolidated financial statements include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2003, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. You should read this table in conjunction with Ramsay’s consolidated financial statements and notes thereto contained elsewhere in this prospectus.


(1)	Other operating expenses include rent expense which was $1,234, $963, $4,163, $3,916 and $3,256 for the three months ended March 31, 2003 and 2002, and each of the years ended December 31, 2002, 2001 and 2000, respectively.

(2)	Other expenses of $125 for the three months ended March 31, 2002 and the year ended December 31, 2002 relate to asset impairment charges. Other expenses for the year ended December 31, 2001 include $124 in asset impairment charges and a $130 loss on sale of assets. Other expenses for the year ended December 31, 2000 related to a loss on sale of assets of $705.

(3)	Adjusted EBITDA is defined as net income before income taxes, interest expense (net of interest income), depreciation, amortization, and other items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income. While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States of America, management understands that adjusted EBITDA is a commonly used analytical indicator within the health care industry and also serves as a measure of leverage capacity and debt service ability. In addition, we use adjusted EBITDA as the measure of operating profitability of its segments and their components. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. The following are the components of adjusted EBITDA for each of the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000:

The following table sets forth selected historical financial and operating data of The Brown Schools for, or as of the end of, the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000. The selected historical financial data as of and for each of the years ended December 31, 2002, 2001 and 2000 were derived from the audited consolidated financial statements of The Brown Schools. The selected historical financial data as of and for the three months ended March 31, 2003 and 2002 were derived from the unaudited condensed consolidated financial statements of The Brown Schools. These unaudited condensed consolidated financial statements include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2003, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. You should read this table in conjunction with The Brown Schools’ consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — The Brown Schools” contained elsewhere in this prospectus.


(1)	Other operating expenses include rent expense which was $265, $236, $1,005, $962 and $718 for the three months ended March 31, 2003 and 2002, and each of the years ended December 31, 2002, 2001 and 2000, respectively.

(2)	Other expenses relate to losses on sales of assets.

(3)	Adjusted EBITDA is defined as net income (loss) before income taxes, interest expense (net of interest income), depreciation, amortization, and other items included in the caption above labeled “Other expenses” as more fully described in the accompanying reconciliation of adjusted EBITDA to net income (loss). While you should not consider adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States, management understands that adjusted EBITDA is a commonly used analytical indicator within the health care industry and also serves as a measure of leverage capacity and debt service ability. In addition, we use adjusted EBITDA as the measure of operating profitability of its segments and their components. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. The following are the components of adjusted EBITDA for the three months ended March 31, 2003 and 2002 and each of the years ended December 31, 2002, 2001 and 2000:

We are a leading provider of inpatient behavioral health care services in the United States. Through our inpatient division, we operate 22 owned or leased behavioral health care facilities with approximately 2,800 beds in 12 states and manage 10 behavioral health care facilities for government agencies. In addition, through our unit management division, we manage 48 behavioral health care units for third parties. We believe that our singular focus on the provision of behavioral health care services allows us to operate more efficiently and provide higher quality care than our competitors. We primarily operate in underserved urban markets with limited competition and favorable demographic trends. Our business is characterized by diversified sources of revenue, stable cash flows and low capital expenditure requirements. For the year ended December 31, 2002, we generated revenue and EBITDA of $364.2 million and $41.9 million, respectively. EBITDA for the year ended December 31, 2002 includes expected pro forma savings of a) $3.4 million representing the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental costs to manage the business and b) $3.0 million representing the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition to Ramsay.

Patient service revenue is generated by our inpatient facilities as a result of services provided to patients within the hospital setting. Patient service revenue is reported on the accrual basis in the period in which services are rendered, at established rates, regardless of whether collection in full is expected. Patient service revenue includes amounts estimated by management to be reimbursable by Medicare and Medicaid under provisions of cost or prospective reimbursement formulas in effect. Amounts received are generally less than the established billing rates of the facilities and the differences are reported as deductions from patient service revenue at the time the service is rendered. For the year ended December 31, 2002 and the quarter ended March 31, 2003, patient service revenue comprised approximately 88% of total revenue.

Management fee revenue is earned by our unit management division. The unit management division receives contractually determined management fees and director fees from hospitals and clinics for providing unit management and development services. For the year ended December 31, 2002 and the quarter ended March 31, 2003, management fee revenue comprised approximately 12% of total revenue.

In April 2003, we consummated the acquisition of six inpatient behavioral health care facilities from The Brown Schools for $63.0 million in cash. The six facilities, which have an aggregate of 879 licensed beds, are located in Austin, San Antonio and San Marcos, Texas; Charlottesville, Virginia; Colorado Springs, Colorado; and Tulsa, Oklahoma. The Brown Schools facilities offer a full continuum of care for troubled adolescents and adults. We financed the acquisition of The Brown Schools with proceeds from the issuance of $12.5 million of our series A convertible preferred stock and an increase in funding under our existing credit facility. For the year ended December 31, 2002, the facilities produced combined revenue and adjusted EBITDA of $78.0 million and $7.2 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 does not include expected pro forma savings of $3.4 million representing the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental cost to manage the business.

Acquiring inpatient behavioral health care facilities is a key part of our business strategy. Because we have grown through acquisitions accounted for as purchases, it is difficult to make meaningful comparisons between our financial statements for the fiscal periods presented. At the time a facility is acquired, we implement a number of measures to lower costs and may make significant investments in the facility. Therefore, the financial performance of a newly acquired facility may adversely affect our overall performance in the short-term. The following is a discussion of results of operations of Psychiatric Solutions, The Brown Schools and Ramsay, each on a stand-alone basis.


	intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, we adopted SFAS No. 142 effective January 1, 2002. Depreciation and amortization includes amortization of goodwill of $359,000 and $276,000 for the years ended December 31, 2001 and 2000, respectively.

(2)	In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 prohibits the classification of gains or losses from debt extinguishments as extraordinary items unless the criteria outlined in Accounting Principles Board Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, are met. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. We adopted the provisions of SFAS No. 145 effective January 1, 2003 and as such have reclassified $1.2 million loss from retirement of debt for the year ended December 31, 2001 to a component of income from continuing operations. The loss had previously been reported as an extraordinary item.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenue. Revenue from continuing operations was $37.1 million for the quarter ended March 31, 2003, compared to $23.2 million for the quarter ended March 31, 2002, an increase of $13.9 million or 59.9%. Revenue from owned facilities accounted for $26.1 million of the first quarter 2003 results compared to $16.8 million of the first quarter 2002 results, an increase of $9.3 million or 55.4%. The increase in revenue from owned facilities relates primarily to revenue of $7.2 million in first quarter of 2003 at Riveredge Hospital which was acquired July 1, 2002. The remainder of the increase in revenue from owned facilities is attributable to growth at our other four owned facilities, as evidenced by same facility growth in admission and patient days of 7.0% and 7.8%, respectively. Revenue from unit management contracts accounted for $11.0 million of the first quarter 2003 results compared to $6.3 million of the first quarter 2002 results, an increase of $4.7 million or 74.6%. The increase in revenue from unit management contracts relates to the additional unit management operations acquired in our merger with PMR.

Salaries, wages and employee benefits. Salaries, wages and employee benefits expense was $17.8 million, or 47.9% of revenue, for the quarter ended March 31, 2003 compared to $13.9 million, or 59.8% of revenue, for the quarter ended March 31, 2002. Salaries, wages and employee benefits expense from owned facilities was $13.7 million in first quarter 2003, or 52.5% of first quarter 2003 revenue from owned facilities, compared to $10.1 million in first quarter 2002, or 60.1% of first quarter 2002 revenue from owned facilities. This decrease in salaries, wages and employee benefits expense as a percentage of revenue from owned facilities relates to cost containment efforts within our owned facilities. Salaries, wages and employee benefits expense from unit management contracts was $3.4 million in first quarter 2003, or 30.9% of first quarter 2003 revenue from unit management contracts, compared to $3.3 million in first quarter 2002, or 52.4% of first quarter 2002 revenue from unit management contracts. This decrease in salaries, wages and employee benefits expense as a percentage of revenue from unit management contracts relates to our acquisition from PMR of a contract to provide case management services in and around Nashville, Tennessee. All costs to provide these services are recorded in other operating expenses because the actual services provided are subcontracted. Salaries, wages and employee benefits expense for our corporate office was $674,000 for first quarter 2003 compared to $459,000 for first quarter 2002 as the result of the addition of staff necessary to manage the acquisitions during the later part of 2001 and 2002.

Professional fees. Professional fees were $4.5 million, or 12.0% of revenue, for the quarter ended March 31, 2003 compared to $3.1 million, or 13.4% of revenue, for the quarter ended March 31, 2002. Professional fees from owned facilities were $3.2 million in first quarter 2003, or 12.3% of first quarter 2003 revenue from owned facilities, compared to $2.1 million in first quarter 2002, or 12.5% of first quarter 2002 revenue from owned facilities. Professional fees from unit management contracts were $881,000 in first quarter 2003, or 8.0% of first quarter 2003 revenue from unit management contracts, compared to $893,000 in first quarter 2002, or 14.2% of first quarter 2002 revenue from unit management contracts. This decrease in professional fees from unit management contracts as a percentage of revenue from unit management

contracts relates primarily to the classification of the costs to provide case management services in and around Nashville, Tennessee as other operating expenses. Professional fees for our corporate office were $416,000 in first quarter 2003 compared to $90,000 in first quarter 2002. The increase in professional fees at our corporate office relates to accounting, legal and other services required to meet the needs of a public company and the newly integrated acquisitions.

Supplies. Supplies expense was $1.7 million, or 4.6% of revenue for the quarter ended March 31, 2003 compared to $1.1 million, or 4.7% of revenue for the quarter ended March 31, 2002. Supplies expense at owned facilities comprises the majority of our supplies expense as a whole. The overall increase was due to the acquisition of Riveredge Hospital in July 2002. Supplies necessary at owned facilities include medical, pharmaceutical and office supplies. Supplies expense for the unit management division and the corporate office consist of office supplies and are negligible to supplies expense overall.

Provision for bad debts. The provision for bad debts was $1.3 million, or 3.6% of revenue for the quarter ended March 31, 2003 compared to $715,000, or 3.1% of revenue for the quarter ended March 31, 2002. The provision for bad debts at owned facilities was $1.2 million in first quarter 2003, or 4.6% of first quarter 2003 owned facility revenue, compared to $647,000 in first quarter 2002, or 3.9% of first quarter 2002 owned facility revenue. This increase in provision for bad debts at owned facilities as a percentage of owned facility revenue relates to changes in payor mix and the impact of acquisitions. The provision for bad debts related to unit management contracts was negligible for both periods presented, as the provision represents approximately 1% of revenue from unit management contracts in first quarter 2003 and 2002.

Other operating expenses. Other operating expenses were approximately $7.4 million, or 20.0% of revenue for the quarter ended March 31, 2003, compared to $1.8 million, or 7.6% of revenue for the quarter ended March 31, 2002. Other operating expenses for owned facilities were $2.3 million in first quarter 2003, or 8.8% of first quarter 2003 owned facility revenue, compared to $1.2 million in 2002, or 7.1% of 2002 owned facility revenue. This increase in other operating expenses for owned facilities as a percentage of owned facility revenue relates primarily to increased insurance costs in 2003. Other operating expenses for unit management contracts were $4.7 million in first quarter 2003, or 42.7% of first quarter 2003 unit management revenue, compared to $387,000 in first quarter 2002, or 6.1% of first quarter 2002 unit management revenue. This increase in other operating expenses for unit management contracts as a percentage of unit management revenue is attributable to the contract to provide case management services in and around Nashville, Tennessee where actual services provided are subcontracted. Other operating expenses at our corporate office increased to $378,000 in first quarter 2003 from $148,000 in first quarter 2002 primarily due to increased insurance costs in 2003.

Depreciation and amortization. Depreciation and amortization expense was $667,000 for the quarter ended March 31, 2003 compared to $386,000 for the quarter ended March 31, 2002, an increase of $281,000 or 72.8%. This increase in depreciation and amortization expense is the result of the acquisitions of Riveredge Hospital in July 2002 and PMR in August 2002.

Other non-operating expenses. Other non-operating expenses totaled $504,000, or 1.4% of revenue for the quarter ended March 31, 2003 compared to $109,000, or less than 1.0% of revenue for the quarter ended March 31, 2002. Other non-operating expenses for all periods presented represent non-cash items. Other non-operating expenses for first quarter 2003 consisted of $960,000 in expense recorded to recognize the change in fair value of stock purchase “put” warrants (for additional information on these warrants, see “— Liquidity and Capital Resources — Historical Psychiatric Solutions”), the release of $461,000 in reserves related to our stockholder notes and $5,000 in expense related to stock options granted below market in first quarter 2002. Other non-operating expenses for first quarter 2002 relate to stock options granted below market value in first quarter 2002.

Interest expense. Interest expense remained relatively unchanged at $1.4 million for the quarters ended March 31, 2003 and 2002. During the first quarter 2002, we recorded $390,000 of interest expense related to accretion of detachable stock purchase warrants. Such warrant accretion accounted for $77,000 in the first quarter 2003.

Revenue. Revenue from continuing operations was $113.9 million for the year ended December 31, 2002 compared to $44.0 million for the year ended December 31, 2001, an increase of $69.9 million or 158.9%. Revenue from owned facilities accounted for $81.9 million of the 2002 results compared to $16.0 million of the 2001 results, an increase of $65.9 million or 411.9%. The increase in revenue from owned facilities relates to full year operations during 2002 of the four facilities purchased during the last four months of 2001 as well as the purchase of a fifth facility at the beginning of the third quarter of 2002. Revenue from unit management contracts accounted for $32.0 million of the 2002 results compared to $28.0 million of the 2001 results, an increase of $4.0 million or 14.3%. The increase in revenue from unit management contracts relates to the additional unit management operations acquired in our merger with PMR.

Salaries, wages and employee benefits. Salaries, wages and employee benefits expense was $62.3 million, or 54.7% of 2002 revenue, for the year ended December 31, 2002 compared to $26.2 million, or 59.6% of 2001 revenue, for the year ended December 31, 2001. Salaries, wages and employee benefits expense from owned facilities was $47.0 million in 2002, or 57.4% of 2002 revenue from owned facilities, compared to $9.5 million in 2001, or 59.4% of 2001 revenue from owned facilities. This decrease in salaries, wages and employee benefits expense as a percentage of revenue from owned facilities relates to cost containment efforts within our owned facilities. Salaries, wages and employee benefits expense from unit management contracts was $13.2 million in 2002, or 41.3% of 2002 revenue from unit management contracts, compared to $15.5 million in 2001, or 55.4% of 2001 revenue from unit management contracts. This decrease in salaries, wages and employee benefits expense as a percentage of revenue from unit management contracts relates to our acquisition from PMR in connection with our merger with PMR of a contract to provide case management services in the Nashville, Tennessee area. All costs to provide these services are recorded in other operating expenses because the actual services provided are subcontracted. Salaries, wages and employee benefits expense for our corporate office was $2.1 million for 2002 compared to $1.2 million for 2001 as the result of the addition of staff necessary to manage the acquisitions completed during late 2001 and 2002.

Professional fees. Professional fees were $14.4 million, or 12.6% of 2002 revenue, for the year ended December 31, 2002 compared to $7.0 million, or 16.0% of 2001 revenue, for the year ended December 31, 2001. Professional fees from owned facilities were $10.3 million in 2002, or 12.6% of 2002 revenue from owned facilities, compared to $2.6 million in 2001, or 16.3% of 2001 revenue from owned facilities. This decrease in professional fees from owned facilities as a percentage of revenue from owned facilities relates to the acquisition of new facilities that are less dependent upon professional fees for operations. Professional fees from unit management contracts were $3.5 million in 2002, or 10.9% of 2002 revenue from unit management contracts, compared to $4.1 million in 2001, or 14.6% of 2001 revenue from unit management contracts. This decrease in professional fees from unit management contracts as a percentage of revenue from unit management contracts relates to cost containment efforts within the unit management division, as well as classification of the costs to provide case management services in the Nashville, Tennessee area. Professional fees for our corporate office were approximately $500,000 in 2002 compared to approximately $300,000 in 2001. The increase in professional fees at our corporate office relate to accounting, legal, and other services required as a public company.

Supplies. Supplies expense was $5.3 million, or 4.7% of 2002 revenue, for the year ended December 31, 2002 compared to $1.2 million, or 2.8% of 2001 revenue, for the year ended December 31, 2001. Supplies expense at owned facilities comprises almost the entire amount of our supplies expense as a whole. Supplies necessary at owned facilities include medical, pharmaceutical and office supplies. The increase in supplies expense as a percentage of revenue relates to the acquisitions completed during late 2001 and 2002. Supplies expense for the unit management division and the corporate office consist of office supplies and are negligible to supplies expense overall.

Provision for bad debts. The provision for bad debts was $3.7 million, or 3.2% of 2002 revenue, for the year ended December 31, 2002 compared to $662,000, or 1.5% of 2001 revenue, for the year ended December 31, 2001. The provision for bad debts at owned facilities was $3.5 million in 2002, or 4.3% of

2002 owned hospital revenue, compared to approximately $400,000 in 2001, or 2.5% of 2001 owned hospital revenue. This increase in provision for bad debts at owned facilities as a percentage of owned facilities revenue relates to changes in payer mix and the impact of acquisitions. The provision for bad debts related to unit management contracts was approximately $200,000 in 2002, or less than 1% of 2002 revenue from unit management contracts, compared to approximately $250,000 in 2001, or less than 1% of 2001 revenue from unit management contracts.

Other operating expenses. Other operating expenses were approximately $15.9 million, or 14.0% of 2002 revenue, for the year ended December 31, 2002 compared to $3.0 million, or 6.9% of 2001 revenue, for the year ended December 31, 2001. Other operating expenses for owned facilities were $6.6 million in 2002, or 8.1% of 2002 owned facilities revenue, compared to $1.0 million in 2001, or 6.3% of 2001 owned facilities revenue. This increase in other operating expenses for owned facilities as a percentage of owned facilities revenue relates primarily to increased insurance costs in 2002. Other operating expenses for unit management contracts was $7.9 million in 2002, or 24.7% of 2002 unit management revenue, compared to $1.6 million in 2001, or 5.7% of 2001 unit management revenue. This increase in other operating expenses for unit management contracts as a percentage of unit management revenue is attributable to the contract to provide case management services in the Nashville, Tennessee area where actual services provided are subcontracted. Other operating expenses at our corporate office increased to $1.3 million in 2002 from approximately $400,000 in 2001 primarily due to increased insurance costs in 2002.

Depreciation and amortization. Depreciation and amortization expense was $1.8 million for the year ended December 31, 2002 compared to $945,000 for the year ended December 31, 2001, an increase of approximately $800,000 or 87.3%. This increase in depreciation and amortization expense is the result of full year operations in 2002 for the facilities purchased in the last four months of 2001 as well as 2002 acquisitions.

Interest expense. Interest expense was $5.6 million for the year ended December 31, 2002 compared to $2.7 million for the year ended December 31, 2001, an increase of $2.9 million or 107.4%. The increase in interest expense is due to borrowings under our existing credit facility as well as subordinated debt obtained to fund acquisitions in 2001 and 2002.

Revenue. Revenue from continuing operations was $44.0 million for the fiscal year ended December 31, 2001 compared to $23.5 million for the fiscal year ended December 31, 2000, an increase of $20.5 million or 87.2%. Hospital acquisitions during fiscal year 2001 accounted for approximately $16.0 million of the increase in revenue during the fiscal year ended December 31, 2001. Additionally, the increase reflects the fact that the operations of Sunrise Behavioral Health, Ltd. were included for all of 2001 as compared to eight months during 2000.

Salaries, wages and employee benefits. Salaries, wages and employee benefits expense was $26.2 million for the fiscal year ended December 31, 2001, compared to $15.3 million for the fiscal year ended December 31, 2000, an increase of $10.9 million or 71.2%. Of this increase, $9.5 million related to the addition of personnel stemming from the acquisitions in 2001.

Professional fees. Professional fees were $7.0 million for the fiscal year ended December 31, 2001, compared to $3.8 million for the fiscal year ended December 31, 2000, an increase of $3.2 million or 84.2%. This increase relates primarily to the acquisition of Sunrise Behavioral Health, Ltd. in May 2000.

Provision for doubtful accounts. The provision for doubtful accounts was $662,000 for the fiscal year ended December 31, 2001, compared to $467,000 for the fiscal year ended December 31, 2000, an increase of $195,000 or 41.8%. This increase is attributable to approximately $400,000 of provision for doubtful accounts related to hospital acquisitions which is offset by improved collections experience related to our management contracts. The provision for doubtful accounts as a percentage of revenue increased from 1.1% for the fiscal year ended December 31, 2000 to 1.5% for the fiscal year ended December 31, 2001.

Other operating expenses. Other operating expenses were approximately $4.3 million for the fiscal year ended December 31, 2001, compared to $2.1 million for the fiscal year ended December 31, 2000, an increase of $2.2 million or 108.5%. This increase is attributable to acquisitions during fiscal year 2001.

Depreciation and amortization. Depreciation and amortization expense was $945,000 for the fiscal year ended December 31, 2001 compared to $757,000 for the fiscal year ended December 31, 2000, an increase of $188,000 or 24.8%. This increase is attributable to acquisitions during fiscal year 2001.

Interest expense. Interest expense was $2.6 million for the fiscal year ended December 31, 2001 compared to $1.7 million for the fiscal year ended December 31, 2000, an increase of $937,000 or 54.4%. The increase in interest expense is due to borrowings under our line of credit as well as obtaining seller-financed convertible notes to fund acquisitions in 2001.

For more information about Ramsay, see “Where You Can Find More Information.”

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenue. Revenue was $18.2 million for the quarter ended March 31, 2003, compared to $19.2 million for the quarter ended March 31, 2002, a decrease of $1.0 million or 5.2%. This decrease is primarily attributable to decreased revenues at our San Antonio facility due to a drop in admissions and patient days.

Salaries, wages and employee benefits. Salaries, wages and employee benefits expense was $10.5 million, or 57.4% of revenue for the quarter ended March 31, 2003, compared to $11.0 million, or 56.9% of revenue for the quarter ended March 31, 2002. In total, salaries, wages and employee benefits decreased $0.5 million in the quarter ended March 31, 2003 as compared to the quarter ended March 31, 2002, due largely to efforts to reduce non-essential administrative staff, beginning in March 2002.

Other operating expenses. Other operating expenses were approximately $6.4 million, or 35.2% of revenue for the quarter ended March 31, 2003, compared to $6.5 million, or 34.0% of revenue for the quarter ended March 31, 2002. Other operating expenses include supplies, medical, professional and other expenses necessary to serve patients and operate facilities. Other operating expenses also include a management fee from parent of $0.9 million and $1.0 million for the quarters ended March 31, 2003 and 2002, respectively. The Brown Schools facilities are charged a management fee from parent equal to approximately 5% of net revenues to cover accounting, data processing and management and administrative services provided to the facilities by the parent.

Provision for bad debts. The provision for bad debts was relatively unchanged at $0.4 million for the quarters ended March 31, 2003 and 2002. It is the policy of The Brown Schools facilities to reserve 100% of accounts over 180 days.

Depreciation and amortization. Depreciation and amortization expense was $338,000 for the quarter ended March 31, 2003 compared to $363,000 for the quarter ended March 31, 2002, a decrease of $25,000. This decrease in depreciation and amortization expense is the result of sales of assets during the quarter ended March 31, 2003.

Interest expense. Interest costs were allocated by the parent to the facilities based on the relation of total assets of each facility to the consolidated assets of the parent. This allocation is not necessarily indicative of interest expense had the facilities been separate from the parent.

Other expenses. Other expenses totaled $458,000 for the quarter ended March 31, 2003. Other expenses for 2003 relate to losses on sale of assets during the quarter.

Revenue. Revenue was $78.0 million for the year ended December 31, 2002, compared to $78.1 million for the year ended December 31, 2001, a decrease of $0.1 million or less than 1%.

Salaries, wages and employee benefits. Salaries, wages and employee benefits expense was $42.4 million, or 54.4% of revenue for the year ended December 31, 2002, compared to $42.8 million, or 54.8% of revenue for the year ended December 31, 2001. In total, salaries, wages and employee benefits decreased $0.4 million in the year ended December 31, 2002 as compared to the year ended December 31, 2001, due largely to efforts to reduce non-essential administrative staff, beginning in March 2002.

Other operating expenses. Other operating expenses were approximately $26.5 million, or 34.0% of revenue for the year ended December 31, 2002, compared to $27.6 million, or 35.4% of revenue for the quarter ended December 31, 2001. Other operating expenses include supplies, medical professional and other expenses necessary to serve patients and operate facilities. Other operating expenses also include a management fee from parent of $3.8 million and $4.3 million for the years ended December 31, 2002 and 2001, respectively. The Brown Schools facilities are charged a management fee from parent equal to approximately 5% of net revenues to cover accounting, data processing and other management and administrative services provided to the facilities by the parent.

Provision for bad debts. The provision for bad debts was approximately $1.8 million, or 2.3% of revenue for the year ended December 31, 2002, compared to $2.1 million, or 2.7% of revenue for the year ended December 31, 2001. It was the policy of The Brown Schools facilities to reserve 100% of accounts over 180 days.

Depreciation and amortization. Depreciation and amortization expense was $1.8 million for the year ended December 31, 2002 compared to $1.7 million for the year ended December 31, 2001, an increase of $0.1 million. This increase in depreciation and amortization expense is the result of fixed asset additions at our San Marcos and The Oaks Treatment Centers in late 2001.

Other expenses. Other expenses totaled $68,000 for the year ended December 31, 2001. Other expenses for 2003 were losses on sale of assets during the year.

Revenue. Revenue was $78.1 million for the year ended December 31, 2001, compared to $67.1 million for the year ended December 31, 2000, an increase of $11.0 million or 16.4%. This increase was due in part to the opening of our facility in Virginia in 2001, which generated $3.2 million in revenues during the year. Excluding the opening of our Virginia facility, revenues increased $7.8 million or 11.6% attributable to an increase in patient days of approximately 10.5%.

Salaries, wages and employee benefits. Salaries, wages and employee benefits expense was $42.8 million, or 54.8% of revenue for the year ended December 31, 2001, compared to $37.0 million, or 55.1% of revenue for the year ended December 31, 2000. This decrease in salaries, wages and employee benefits as a percentage of revenues was the result of realizing efficiencies due to increased patient volume.

Other operating expenses. Other operating expenses were approximately $27.6 million, or 34.4% of revenue for the year ended December 31, 2001, compared to $26.9 million, or 40.1% of revenue for the quarter ended December 31, 2000. Other operating expenses include supplies, medical professional and other expenses necessary to serve patients and run facilities. The decrease in other operating expenses as a percentage of revenues was the result of realizing efficiencies due to increased patient volume. Other operating expenses also include a management fee from parent of $4.3 million and $3.4 million for the years ended December 31, 2001 and 2000, respectively. The Brown Schools facilities are charged a management

Provision for bad debts. The provision for bad debts was approximately $2.1 million, or 2.7% of revenue for the year ended December 31, 2001, compared to $1.3 million, or 1.9% of revenue for the year ended December 31, 2000. It was the policy of The Brown Schools facilities to reserve 100% of accounts over 180 days.

Depreciation and amortization. Depreciation and amortization expense was $1.7 million for the year ended December 31, 2001 compared to $1.9 million for the year ended December 31, 2000, a decrease of $0.2 million. This decrease in depreciation and amortization expense is the result of sales of assets during 2000 and 2001.

Other expenses. Other expenses totaled $68,000 for the year ended December 31, 2001, compared to $51,000 for the year ended December 31, 2000. Other expenses for 2001 and 2000 were losses on sale of assets.

We intend to fund our ongoing operations through cash generated by operations, availability under our amended and restated credit facility and existing cash and cash equivalents. Our amended and restated credit facility is comprised of a $17.0 million senior secured term note and a $50.0 million senior secured revolver, which remains undrawn. As part of the Financing Transactions, we issued $150.0 million of senior subordinated notes and amended and restated our existing credit facility. We anticipate that cash generated by operations, availability under our amended and restated credit facility and existing cash and cash equivalents will be sufficient to meet working capital requirements, service our debt and finance capital expenditures over the next twelve months.

In addition, we may acquire additional inpatient behavioral health care facilities. Management continually assesses our capital needs and will likely seek additional financing, including debt or equity, to fund potential acquisitions or for other corporate purposes. In negotiating such financing, there can be no assurance that we will be able to raise additional capital on terms satisfactory to us. Failure to obtain additional financing on reasonable terms could have a negative effect on our plans to acquire additional inpatient behavioral health care facilities.

We have performed sensitivity analysis over the near term regarding the interest rate risk described below. Based upon this sensitivity analysis, we are not exposed to material market risk from changes in interest rates. Our $50.0 million senior secured revolver under our amended and restated credit facility has a variable interest rate based upon the prime rate plus an applicable margin. A hypothetical 10% adverse change in the interest rate would not materially impact our net income at March 31, 2003 as we would not have drawn on the senior secured revolver.

As of March 31, 2003, we had working capital of $3.4 million, including cash and cash equivalents of $4.0 million, compared to working capital of $2.4 million at December 31, 2002. Working capital includes amounts due under terms of our revolving credit agreement under our existing credit facility, which totaled $7.0 million and $5.4 million at March 31, 2003 and December 31, 2002, respectively. The revolving credit agreement requires that all non-governmental cash receipts be applied to reduce the outstanding balance under the revolving line of credit agreement. Such amounts can then be re-borrowed to the extent that borrowing capacity remains under the revolving line of credit. The increase in the working capital is primarily due to

Cash used in operating activities increased from $345,000 for the three months ended March 31, 2002 to cash provided by operating activities of $1.1 million for the three months ended March 31, 2003. The increase in cash flows from operating activities was due to acquisitions in the third quarter of 2002. Cash used in investing activities increased from $272,000 for the three months ended March 31, 2002 to $808,000 for the three months ended March 31, 2003. This increase was due to purchases of certain computer equipment and software during the three months ended March 31, 2003. Cash provided by financing activities increased from $512,000 for the three months ended March 31, 2002 to $1.3 million for the three months ended March 31, 2003. This increase was due to additional principal borrowed for working capital.

In conjunction with the acquisition of Holly Hill Hospital in December 2001, we entered into a senior credit facility of $33.2 million with our senior lender, CapitalSource Finance, LLC, or CapSource. On April 1, 2003, our then-existing credit facility was expanded to approximately $81.0 million with the increase of our revolving credit facility to $28.0 million from $17.5 million and a new $36.0 million term loan. We borrowed approximately $52.2 million during April 2003, including $16.2 million under the revolving line of credit under the expanded then-existing credit facility, to partially fund our acquisition of The Brown Schools, Inc. In connection with the closing of the original note offering, our expanded then-existing credit facility was amended and restated to increase our revolving credit facility to $50.0 million from $28.0 million and refinance the $36.0 million term loan with proceeds from the original note offering. The term loan remains outstanding with a balance of $17.0 million.

Our amended and restated credit facility currently includes two lines of credit, consisting of approximately $17.0 million of non-revolving term loans and a $50.0 million revolving working capital line of credit. Both lines are secured by substantially all of our assets and the stock of our existing operating subsidiaries. The term loans accrue interest at the Citibank, N.A. prime rate plus 4.5% subject to a floor of 8.75% and are due in November 2003. The revolving line of credit accrues interest at the Citibank, N.A. prime rate plus 2% subject to a floor of 6.25% and is due in June 2006. At April 30, 2003, the interest rate under the revolving credit facility was 6.69%. Until the maturity date, we may borrow, repay and re-borrow an amount not to exceed the lesser of $50.0 million or the borrowing base (as defined in the amended and restated credit facility). As of April 30, 2003, we had approximately $3.1 million available under the revolving line of credit under our then-existing credit facility. Under the revolving line of credit, all of our collections, except for Medicare and Medicaid payments, are deposited into lockbox accounts controlled by CapSource. The funds deposited in the lockbox are applied to outstanding borrowings on a daily basis. As a result, the outstanding borrowings under the revolving line of credit are classified as short-term as of December 31, 2002 and March 31, 2003. We must pay an unused fee in the amount of 0.04% per month of the monthly unused portion of the amended and restated credit facility. Such fees were approximately $24,000 as of April 30, 2003.

Our amended and restated credit facility contains customary covenants which include: (1) a specified monthly patient census for any owned, operated or leased facilities; (2) a limitation on capital expenditures, sales of assets, mergers, changes of ownership, new principal lines of business, indebtedness, dividends and redemptions; and (3) various financial covenants. In addition, the amended and restated credit facility provides CapSource with a right of first refusal to provide additional debt financing to us. As of April 30, 2003, we were in compliance with all then-existing applicable debt covenant requirements. If we violate one or more of these covenants, amounts outstanding under the amended and restated credit facility could become immediately payable and additional borrowings could be restricted. As of April 30, 2003, approximately $24.9 million was outstanding under the revolver portion of our then-existing credit facility.

In connection with the acquisition of Sunrise Behavioral Health, Ltd., a manager of inpatient behavioral health care units in acute care hospitals, in May 2000, we issued subordinated convertible notes in the amount of $3.6 million. These convertible notes are due May 1, 2005 and accrue interest at 9% per annum. The

In 2001, we issued promissory notes totaling $4.5 million in connection with its acquisitions of three facilities. One note in the amount of $2.5 million accrued interest at 9% per annum and matured on June 30, 2002. We paid this note in full with a portion of the proceeds of our subordinated debt offering described below. The remaining $2.0 million note accrues interest at 9% per annum and is due June 30, 2005. In connection with the purchase of facilities from The Brown Schools in April 2003, $1.0 million of the $2.0 million note was repaid. Among other customary covenants, both notes contain cross default covenants triggered by a default of any other indebtedness of at least $1.0 million. We were in compliance with these covenants as of March 31, 2003.

On June 28, 2002, we entered into a securities purchase agreement with The 1818 Fund to issue up to $20.0 million of senior subordinated notes with detachable nominal warrants. On June 28, 2002, a total of $10.0 million of the senior subordinated notes were issued. Approximately $7.5 million of the proceeds were used to fund a portion of the acquisition of Riveredge Hospital and approximately $2.5 million of the proceeds were used to reduce current indebtedness. The notes had a term of seven years and bore interest at 12% annually, payable quarterly. The notes provided for a prepayment penalty of 6%, 3% or 1% if the notes were prepaid prior to the first anniversary, second anniversary and third anniversary of the closing date, respectively. We redeemed these notes in full with proceeds raised from the Financing Transactions and, consequently, no longer have the right to borrow money from The 1818 Fund under the senior subordinated notes.

In connection with the issuance of the senior subordinated notes to The 1818 Fund, we issued detachable stock purchase warrants for the purchase of 372,412 shares of our stock at an exercise price of $.01 per share. As of the date of issuance, our shares were valued at $5.43 per share such that the fair value of the warrants totaled approximately $2.0 million. Under Accounting Principles Board Opinion No. 14, we were required to allocate a portion of the cash proceeds received from the notes to the stock purchase warrants with the offset recorded as a note discount and then amortized to the face value of the notes over the life of the notes. Under EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” we were required to reclassify the amount initially recognized as capital in excess of par value to a long term liability and to recognize changes in fair value as a component of operations. For each $1 increase in stock price, we will be required to record expense of approximately $372,000. For the three months ended March 31, 2003, we recorded non-cash expense related to the warrants of $960,000. The stock purchase warrants contain provisions that allow the issuer to “put” their warrants, or stock after exercise, back to us at fair market value for cash or for the deliverance of shares. The put price under the agreement would approximate $3.0 million or require the deliverance of 371,947 shares as of March 31, 2003.

On May 16, 2003, The 1818 Fund exercised its stock purchase warrant to purchase 372,412 shares of our common stock. Deducting the exercise price of $0.01 per share based on the closing price of our common stock on May 15, 2003, The 1818 Fund received 372,039 shares of our common stock from the exercise. In addition, the 1818 Fund provided us with a written consent to waive the ability to require that we repurchase the warrants for cash effective April 1, 2003. As such, we will no longer be required to record non-cash expense for increases in the fair market value of our common stock. The 1818 Fund still has the right to require that we repurchase the 372,039 shares of our common stock received upon the exercise of the stock purchase warrant.

On November 25, 2002, we entered into a mortgage loan agreement to borrow $4.9 million, which was insured by HUD and secured by real estate located at Holly Hill Hospital in Raleigh, North Carolina. Interest accrues on the HUD loan at 5.95% and principal and interest are payable in 420 monthly installments through December 2037. We used proceeds from the loan to replace $4.4 million of our senior term loan with CapSource, pay certain refinancing costs, and fund required escrow amounts for future improvements to the property.

On April 1, 2003, concurrently with the acquisition of The Brown Schools, we received $12.5 million from the private placement of 2,272,727 shares of series A convertible preferred stock with affiliates of Oak Investment Partners and Salix Ventures and with The 1818 Fund. The investors are previous investors in our company, with Oak Investment Partners and Salix Ventures (or related entities) being among our co-founders. Representatives of Salix Ventures and Brown Brothers Harriman & Co. currently serve on our Board of Directors, and a representative of Oak Investment Partners joined the Board in connection with the private placement. The proceeds were used to purchase six facilities from The Brown Schools. These investors purchased an additional 2,272,727 shares of our series A convertible preferred stock for $12.5 million on June 19, 2003. Each share of series A convertible preferred stock is convertible into one share of our common stock. The impact of the series A convertible preferred stock on diluted earnings per share will be calculated using the if-converted method.

The following table sets forth our contractual obligations as of March 31, 2003:

The carrying value of our total long-term debt, including current maturities, of $46.2 million and $43.8 million at March 31, 2003 and December 31, 2002, respectively, approximated fair value. We had $24.0 million of variable rate debt outstanding at March 31, 2003. At the March 31, 2003 borrowing level, a hypothetical 10% adverse change in interest rates, would decrease net income and cash flows by $221,000.

Although inflation has not had a material impact on our results of operations, the health care industry is very labor intensive and salaries and benefits are subject to inflationary pressures as are rising supply costs which tend to escalate as vendors pass on the rising costs through price increases. Some of our owned, leased and managed inpatient behavioral health care facilities we operate are experiencing the effects of the tight labor market, including a shortage of nurses, which has caused and may continue to cause an increase in its salaries, wages and benefits expense in excess of the inflation rate. Although we cannot predict our ability to cover future cost increases, management believes that through adherence to cost containment policies, labor management and reasonable price increases, the effects of inflation on future operating margins should be manageable. Our ability to pass on increased costs associated with providing health care to Medicare and Medicaid patients is limited due to various federal, state and local laws which have been enacted that, in certain cases, limit our ability to increase prices. In addition, as a result of increasing regulatory and competitive pressures and a continuing industry wide shift of patients into managed care plans, our ability to maintain margins through price increases to non-Medicare patients is limited.

The behavioral health care health care industry is typically not directly impacted by periods of recession, erosions of consumer confidence or other general economic trends as most health care services are not considered a component of discretionary spending. However, our facilities may be indirectly negatively impacted to the extent such economic conditions result in decreased reimbursements by federal or state governments or managed care payors. We are not aware of any economic trends that would prevent us from being able to remain in compliance with all of our debt covenants and to meet all required obligations and commitments in the near future.

For information regarding our market risk, see “— Liquidity and Capital Resources.”

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses included in the financial statements. Estimates are based on historical experience and other information currently available, the results of which form the basis of such estimates. While we believe our estimation processes are reasonable, actual results could differ from those estimates. The following represent the estimates considered most critical to our operating performance and involve the most subjective and complex assumptions and assessments.

Our ability to collect outstanding patient receivables from third party payors and receivables due under our management contracts is critical to our operating performance and cash flows.

The primary collection risk with regard to patient receivables lies with uninsured patient accounts or patient accounts for which primary insurance has paid but the portion owed by the patient remains outstanding. We estimate the allowance for doubtful accounts primarily based upon the age of the accounts since patient discharge date. We continually monitor our accounts receivable balances and utilize cash collection data to support our estimates of the provision for doubtful accounts. Significant changes in payor mix or business office operations could have a significant impact on our results of operations and cash flows.

The primary collection risk with regard to receivables due under management contracts is attributable to contractual disputes. We estimate the allowance for doubtful accounts for these receivables based primarily upon the specific identification of potential collection issues. As with our patient receivables, we continually monitor our accounts receivable balances and utilize cash collection data to support our estimates of the provision for doubtful accounts.

The Medicare regulations and various managed care contracts are often complex and may include multiple reimbursement mechanisms for different types of services provided in our facilities and cost settlement provisions requiring complex calculations and assumptions subject to interpretation. We estimate the allowance for contractual discounts on a payor-specific basis given our interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from our estimates. Additionally, updated regulations and contract renegotiations occur frequently necessitating continual review and assessment of the estimation process by our management.

We are subject to medical malpractice and other lawsuits due to the nature of the services we provide. For the years ended December 31, 2000 and 2001, and through December 5, 2002, we have obtained professional and general liability insurance for claims in excess of $100,000, up to a maximum of $1.0 million per occurrence and $3.0 million aggregate, with an additional $5.0 million in excess coverage. On December 6, 2002, the deductible on individual malpractice claims was raised to $3.0 million and the insured limit to $10.0 million to mitigate the increases in the cost of professional and general liability insurance and to increase coverage for additional exposures due to acquisitions. The reserve for professional and general liability risks is based on historical claims, demographic factors, industry trends, severity factors, and other actuarial assumptions calculated by an independent third party. This estimate is discounted to its present value using a 5% discount rate. This estimated accrual for professional and general liabilities could be

significantly affected should current and future occurrences differ from historical claim trends and expectations. We have established a captive insurance company to manage this additional self-insured retention. While claims are monitored closely when estimating professional and general liability accruals, the complexity of the claims and wide range of potential outcomes often hampers timely adjustments to the assumptions used in these estimates. The reserve for professional and general liability was $1.1 million as of March 31, 2003, with approximately $750,000 relating to previous years.

As part of our process for preparing our consolidated financial statements, our management is required to compute income taxes in each of the jurisdictions in which we operate. This process involves estimating the current tax benefit or expense of future deductible and taxable temporary differences. The future deductible and taxable temporary differences are recorded as deferred tax assets and liabilities which are components of our balance sheet. Management then assesses the realizability of the deferred tax assets based on reversals of deferred tax liabilities and, if necessary, estimates of future taxable income. If management determines that some or all of a deferred tax asset will more likely than not be realized, then a valuation allowance is recorded against the deferred tax asset. Management must also assess the impact of acquisitions on the realization of deferred tax assets subject to a valuation allowance to determine if all or a portion of the valuation allowance will be offset by reversing taxable differences or future taxable income of the acquired entity. To the extent the valuation allowance can be reversed due to the estimated future taxable income of an acquired entity, then our valuation allowance is reduced accordingly as an adjustment to purchase price.

We are a leading provider of inpatient behavioral health care services in the United States. Through our inpatient division, we operate 22 owned or leased behavioral health care facilities with approximately 2,800 beds in 12 states and manage 10 behavioral health care facilities for government agencies. In addition, through our unit management division, we manage 48 behavioral health care units for third parties. We believe that our singular focus on the provision of behavioral health care services allows us to operate more efficiently and provide higher quality care than our competitors. We primarily operate in underserved urban markets with limited competition and favorable demographic trends. Our business is characterized by diversified sources of revenue, stable cash flows and low capital expenditure requirements. For the year ended December 31, 2002, we generated revenue and adjusted EBITDA of $364.2 million and $41.9 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 includes expected pro forma savings of a) $3.4 million representing the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental costs to manage the business and b) $3.0 million representing the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition to Ramsay.

We believe the following competitive strengths contribute to our strong market share in each of our markets and will enable us to continue to improve our profitability and cash flow:


	•	*Singular focus on behavioral health care* — We focus exclusively on the provision of behavioral health care services. We believe this allows us to operate more efficiently and provide higher quality care than our competitors. In addition, we believe our focus and reputation have helped us to develop important relationships and extensive referral networks within our markets and to attract and retain qualified behavioral health care professionals.

	•	*Strong and sustainable market position* — Our facilities have an established presence in each of our markets, and we believe that the majority of our owned, leased and managed facilities have the leading market share in their respective service areas. Our relationships and referral networks would be difficult, timely and expensive for new competitors to replicate. In addition, many of the states in which we operate require a certificate of need to open a behavioral health care facility, which may be difficult to obtain and may further preclude new market participants.

	•	*Diversified payor mix and revenue base* — As we have grown our business, we have focused on diversifying our sources of revenue. For the year ended December 31, 2002, we received 39% of our revenue from Medicaid, 26% from multiple commercial payors, 22% from various state and local government payors and 13% from Medicare. As we receive Medicaid payments from more than 35 states, we are not significantly affected by changes in reimbursement policies in any one state. For the year ended December 31, 2002, no single facility represented more than 8% of our revenue.

	•	*Significant free cash flow and minimal capital requirements* — We consistently generate significant free cash flow due to the profitable operation of our business, our low capital expenditure requirements and through the active management of our working capital. As the behavioral health care business does not require the procurement and replacement of expensive medical equipment, our capital expenditure requirements are less than that of other facility-based health care providers. Historically, our capital expenditures have amounted to less than 2% of our revenue. We actively control our working capital through the centralized monitoring of accounts receivable collections.

	•	*Demonstrated ability to integrate acquisitions* — We have successfully integrated the five facilities we acquired in 2001 and 2002 as well as the six facilities we acquired in 2003 in connection with our acquisition of The Brown Schools. We attribute part of our success in integrating these facilities to our rigorous due diligence review of targeted facilities prior to completing any acquisition. We also have a comprehensive post-acquisition strategic plan to facilitate the integration of acquired facilities that includes improving facility operations, recruiting psychiatrists and expanding the breadth of services offered by the facilities.

	•	*Experienced management team —* Our senior management team has an average of 20 years of experience in the health care industry. Joey A. Jacobs, our Chairman, President and Chief Executive


		Officer, has over 28 years experience in various capacities in the health care industry. Jack R. Salberg, our Chief Operating Officer, has more than 29 years of operational experience in both profit and non-profit health care sectors. Our senior management operates as a cohesive, complementary group and has extensive operating knowledge of our industry and understanding of the regulatory environment in which we operate. Our senior managers employ conservative fiscal policies and have a successful track record in both operating our core business and integrating acquired assets.

Our strategy is to establish a network of behavioral health care facilities in targeted markets throughout the United States. The principal elements of our business strategy are to:


	•	*Successfully integrate acquisitions —* Our near term focus is on the integration of the Ramsay facilities. We initially are operating the Ramsay facilities as a separate unit within our inpatient behavioral health care division. We have retained experienced managers to operate the Ramsay facilities, and these individuals are continuing to operate their respective facilities with minimal changes to overall corporate philosophy.

	•	*Focus on operations —* Our management team has extensive experience in the operation of multi-facility health care services companies. In our inpatient behavioral health care division, we intend to focus on improving our profitability by optimizing staffing ratios, controlling contract labor costs and reducing supply costs through group purchasing. In addition, we plan to focus on improving same- facility revenue growth by increasing admissions through new behavioral health care programs, employing intensive marketing and community education efforts and recruiting additional psychiatrists.

	•	*Selectively target future acquisitions —* We plan to selectively pursue the acquisition of additional inpatient behavioral health care facilities. We have a disciplined acquisition strategy that is based on defined acquisition criteria. We believe that there are a number of acquisition candidates available at attractive valuations, and we have a number of potential acquisitions that are in the early stages of development and negotiation.

	•	*Develop unit management opportunities —* We believe that substantial opportunities exist to provide additional behavioral health care contract management services to acute care hospitals in the United States. Acute care hospitals are increasingly outsourcing key clinical departments to independent management companies because they lack the expertise to (1) manage and operate specialized clinical programs, (2) assess the programs for effectiveness and results, (3) market and develop programs, (4) design and operate programs that satisfy specialized regulatory, licensing, accreditation and reimbursement requirements and (5) meet increasing regulatory requirement demands.

Prior to the acquisition of Ramsay, we operated two reportable segments: (1) the operation of inpatient behavioral health care facilities and (2) the management of behavioral health care units for third party acute care hospitals. With the acquisition of Ramsay, we also lease certain inpatient behavioral health care facilities and manage certain other facilities for government agencies. As a result of this acquisition, we are reconsidering the presentation of our reportable segments. For the purposes of this prospectus, we have reflected these managed and leased facilities within our inpatient behavioral health care facilities division.

Our inpatient division operates 22 owned or leased inpatient behavioral health care facilities and manages 10 behavioral health care facilities for government agencies. These facilities offer a range of inpatient behavioral health care services. Our facilities work closely with mental health professionals, non-psychiatric physicians, emergency rooms and community agencies that interact with individuals who may need treatment for mental illness or substance abuse. We offer our services through a combination of acute

behavioral hospitals and residential treatment centers. Acute inpatient hospitalization is the most intensive level of care offered and typically involves 24-hour skilled nursing observation and care, daily interventions and oversight by a psychiatrist and intensive, highly coordinated treatment by a physician-led team of mental health professionals. Our residential treatment centers, or RTCs, are longer term treatment programs for children and adolescents with long-standing behavioral health problems. Our RTCs typically provide physician-led, multi-disciplinary programs that address the overall medical, psychiatric, social and academic needs of the child or adolescent.

We are a leading provider of inpatient behavioral services for a population of male and female children, adolescents, and adults. We offer a wide variety of services throughout our network of inpatient behavioral health care facilities. Our facilities provide multiple levels of care, including:


•	chemical dependency;

•	eating disorders;

•	dual diagnosis;

•	detoxification;

•	therapeutic foster care;

•	rapid adoption services;

•	attention deficit/hyperactivity disorders;

•	partial hospitalization/intensive outpatient;

•	reactive attachment disorder;

•	developmentally delayed vocational training;

•	rehabilitation care;

•	neurological disorders;

•	independent living skills; and

•	day treatment schools.

Our facilities’ programs have been adapted to the requests of various sources to provide services to patients with multiple issues and specialized needs. Our success rate with these difficult to treat cases has expanded our network of referrals. The services are specialized depending on the age and need of the patient.


	•	bipolar disorder;

	•	depression;

	•	impulse disorders; and

	•	oppositional defiance.

We manage 10 inpatient behavioral health care facilities for government agencies located in Florida, Georgia and Puerto Rico. In general, our contracts to manage these facilities have an initial term of one to five years. Most of these contracts may be extended for up to three successive one-year periods at the discretion of the government agency. Payment under the contracts is contingent on the annual appropriation of funds by the respective state legislature. Most contracts allow us to terminate the agreement without cause upon 90 days notice and the government agency may terminate without cause upon 30 days notice or upon the occurrence of certain material events, including our failure to meet certain performance standards for a specified period of time, bankruptcy or default under the contract.

Our unit management division develops, organizes and manages behavioral health care programs within general third party acute care hospitals. We manage 48 behavioral health units, including a contract to provide mental health case management services to approximately 4,300 children and adults with serious mental illness in the Nashville, Tennessee area.

Our broad range of services can be customized into individual programs that meet specific facility and community requirements. Our unit management division is dedicated to providing high quality programs with integrity, innovation and sufficient flexibility to develop individual programs that meet specific facility and community requirements. The increased demand for better quality, lower costs and simplified systems places

additional burdens on management teams and clinical departments within hospitals. As a result, many general acute care hospitals are increasing efficiency by outsourcing key clinical departments and functions to independent contract managers that can provide focused expertise.


	•	clinical and management infrastructure;

	•	personnel recruitment, staff orientation and supervision;

	•	corporate consultation; and

	•	performance improvement plans.

We and the client hospital determine the programs and services to be offered by the hospital. Each contract is tailored to address the differing needs of the client hospital and its community. Under the contracts, the hospital is the actual provider of the mental health services and utilizes its own facilities (including beds for inpatient programs), support services (such as billing, dietary and housekeeping), and generally its own nursing staff in connection with the operation of its programs.


	•	a behavioral health care director who provides administrative management services and professional direction in all behavioral health care matters relating to patients admitted to the unit, and determines if patients meet the clinical criteria for admission to the unit;

	•	a medical director who provides direction in all non-behavioral health care phases of patient care and provides physician coverage, including medical care for patients who do not have a primary physician relationship; and

	•	a program manager, who maintains a direct reporting relationship to the chief executive officer of the client hospital with respect to the day-to-day operations of the unit. In addition, the program manager generally:


	•	provides administrative and training services;

	•	assists with the administrative and clinical criteria for admission to the unit;

	•	determines whether a patient meets the administrative criteria for admission;

	•	advises client hospital with respect to issues relating to compliance with licensing, certification, accreditation and survey requirements;

	•	establishes performance improvement standards in conjunction with the client hospital that are consistent with the hospital’s standards; and

	•	completes, in conjunction with the hospital, annual performance evaluations of all unit patient care staff.

While each of the management contracts is tailored to the specific needs of the client hospital, in general the contracts have an initial term of two to five years and are extended for successive one year periods unless terminated by either party. The contracts contain termination provisions that allow either party to terminate upon certain material events, including the failure to cure a breach or default under the contract, bankruptcy and the failure to maintain required licensure. While turnover of contracts is expected, we expect the number of contracts to remain relatively stable. Substantially all of the management contracts contain non-compete and confidentiality provisions. In addition, the management contracts typically prohibit the client hospital from soliciting our employees during the term of the contract and for a specified period thereafter.

At March 31, 2003, we managed 48 behavioral health care units for acute care hospitals located in 14 states as shown below:

The inpatient behavioral health care facility industry and the behavioral health care unit management industry are both highly competitive and highly fragmented. The industry is subject to continual changes in the method in which services are provided and the types of companies providing such services. We compete with several national competitors and many regional and local competitors, some of which have greater resources than us. In addition, some of our competitors are owned by governmental agencies and supported by tax revenue, and others are owned by nonprofit corporations and may be supported to a large extent by endowments and charitable contributions. Such support is not available to our facilities.

Our largest competitors in the inpatient behavioral health care and behavioral health care unit management industry are:


	•	Horizon Health Corporation (NasdaqNM: HORC), which reports to operate 109 behavioral health care unit management contracts, 30 rehabilitation unit contracts and employee assistance programs covering 2.9 million lives;

	•	Universal Health Services (NYSE: UHS), which reports to operate 39 behavioral health care facilities and 34 acute care facilities; and

	•	Ardent Health Services, which reports to operate approximately 20 behavioral health care facilities, six medical/surgical hospitals and one rehabilitation hospital.

In addition, our owned, leased and managed inpatient behavioral health care facilities and managed behavioral health care units compete for patients with other providers of mental health care services, including other inpatient behavioral health care facilities, general acute care hospitals, independent psychiatrists and psychologists. We also compete with hospitals, nursing homes, clinics, physicians’ offices and contract nursing companies for the services of registered nurses.


	•	On June 30, 2003, we consummated the acquisition of Ramsay, a public company that traded on the Nasdaq SmallCap Market under the symbol “RYOU.” We financed the acquisition of Ramsay with proceeds from the original note offering and an additional $12.5 million private placement of our


		series A preferred stock. The purchase price was approximately $84.0 million, consisting of $58.0 million in cash, or $5.00 per share, $19.0 million in net assumed debt that was repaid in connection with the acquisition and $7.0 million in fees and expenses. The 11 owned or leased inpatient behavioral health care facilities we acquired from Ramsay, which have an aggregate of 1,250 beds, are primarily located in the South and Southeastern regions of the United States. In the acquisition, we also assumed 10 contracts to manage behavioral health care facilities for government agencies in Florida, Georgia and Puerto Rico. For the year ended December 31, 2002, Ramsay generated revenue and adjusted EBITDA of $145.2 million and $12.0 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 does not include expected pro forma savings of $3.0 million representing the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition to Ramsay.

	•	In April 2003, we consummated the acquisition of six inpatient behavioral health care facilities from The Brown Schools for $63.0 million in cash. The six facilities, which have an aggregate of 879 licensed beds, are located in Austin, San Antonio and San Marcos, Texas; Charlottesville, Virginia; Colorado Springs, Colorado; and Tulsa, Oklahoma. The Brown Schools facilities offer a full continuum of care for troubled adolescents and adults. We financed the acquisition of The Brown Schools with proceeds from the issuance of our series A convertible preferred stock and an increase in funding under our existing credit facility. For the year ended December 31, 2002, the facilities produced combined revenue and adjusted EBITDA of $78.0 million and $7.2 million, respectively. Adjusted EBITDA for the year ended December 31, 2002 does not include expected pro forma savings of $3.4 million representing the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions’ expected incremental cost to manage the business.

	•	On August 5, 2002, PMR Acquisition Corporation, a newly formed, wholly-owned subsidiary of PMR, merged with and into Psychiatric Solutions, Inc., whose name, subsequent to the merger, was changed to Psychiatric Solutions Hospitals, Inc. (“PSH”). The surviving corporation in the merger was PSH, which became a wholly-owned subsidiary of PMR, a publicly traded company. In connection with the merger, PMR changed its name to Psychiatric Solutions, Inc. and, effective August 6, 2002, the shares of Psychiatric Solutions, Inc., formerly known as PMR Corporation, were approved for listing on the Nasdaq National Market under the ticker symbol “PSYS.”

Because the former PSH stockholders own a majority of the surviving corporation’s outstanding common stock, the acquisition was a “reverse acquisition” and PSH was the acquiring company for accounting purposes. Psychiatric Solutions’ condensed consolidated financial statements located in this prospectus relate to PSH only prior to August 5, 2002, and to the merged company on and subsequent to August 5, 2002. Historical financial information relating to PMR immediately prior to the merger can be found in PMR’s quarterly report on Form 10-Q for the quarter ended July 31, 2002, as filed with the Securities and Exchange Commission on September 16, 2002.


	•	On July 1, 2002, we acquired all of the capital stock of Aeries Healthcare Corporation and its wholly owned subsidiary, Aeries Healthcare of Illinois, Inc., d/b/a Riveredge Hospital, for $16.8 million, net of approximately $4.3 million of assumed liabilities, prior to certain adjustments. Aeries Healthcare of Illinois owns the assets and operations of Riveredge Hospital located near Chicago, Illinois. The acquisition was financed in part through an amendment to our existing credit facility.

	•	On December 1, 2001, we acquired the assets of Holly Hill Hospital in Raleigh, North Carolina for approximately $7.6 million, net of approximately $758,000 of assumed liabilities, which was financed through our existing credit facility.

	•	On November 1, 2001, we acquired the assets of Texas NeuroRehab Hospital in Austin, Texas for approximately $7.6 million, net of approximately $800,000 of assumed liabilities, which was financed through a seller-financed subordinated convertible note and additional long-term borrowings.


	•	On September 1, 2001, we acquired the assets of Cypress Creek Hospital and West Oaks Hospital in Houston, Texas for approximately $12.1 million, net of approximately $2.1 million of assumed liabilities. The acquisition was financed through a seller-financed subordinated convertible note as well as other long-term borrowings.

At March 31, 2003, we operated 22 owned or leased inpatient behavioral health care facilities with 2,812 beds in 12 states. The following table sets forth the name, location, number of beds and the acquisition date for each of our owned and leased inpatient behavioral health care facilities.


(1)	Acquisition dates of April 2003 indicate facilities acquired in connection with The Brown Schools acquisition. Acquisition dates of June 2003 indicate facilities acquired in connection with the acquisition of Ramsay.

We, as a participant in the health care industry, are affected by the numerous laws and regulations that govern the operations of our facilities and programs at the federal, state and local levels. These laws and regulations include, but are not necessarily limited to, matters such as certificate of need, licensure, accreditation, government health care program participation requirements, reimbursement for patient services, quality of patient care and Medicare and Medicaid fraud and abuse compliance. Changes in these laws and regulations, such as reimbursement policies of Medicare and Medicaid programs, budget cuts or other legislative, regulatory or judicial actions could have an unforeseen material adverse effect on our financial position, results of operations and cash flows.

For the year ended December 31, 2002, our owned and leased facilities derived approximately 13% of their revenue from Medicare. As behavioral health care facilities, they are exempt from the inpatient services prospective payment system (“PPS”) applicable to general acute care hospitals. Medicare pays for inpatient behavioral health care services on the basis of actual cost subject to a per discharge ceiling, and subject to a deductible and coinsurance of 20% of the provider’s charges. Medicare makes interim payments to the provider based on an estimate of the provider’s cost, and then makes a final settlement based on an annual cost report filed by the provider. Capital related costs are not included, but are reimbursed separately at a rate of 85% of allowable costs.

With respect to revenue derived from behavioral health care unit management services, we bill our fees to the provider as a purchased management, administrative and consultative support service. Substantially all of the patients admitted to these programs are eligible for Medicare coverage. As a result, the providers rely upon payment from Medicare for the services. Many of the patients are also eligible for Medicaid payments. To the extent that a hospital deems revenue for a program we manage to be inadequate, it may seek to terminate its contract with us or not renew the contract. Similarly, we may not necessarily solicit new unit management contracts if prospective customers do not believe that such programs will generate sufficient revenue.

In the mid-1980s, changes in reimbursement rates and procedures included the creation of PPS, which uses predetermined reimbursement rates for diagnosis related groups (“DRGs”). Consistent with reimbursement trends for other segments of the health care services industry, Medicare is expected to shift to PPS for inpatient behavioral health care hospitals in the next few years. The PPS reimbursement system involves a determination by the federal government of an average, or fair price, for a fixed unit of health care services, adjusted for regional differences in cost.

Mental health services provided by acute care hospitals which qualify for a PPS exemption are deemed to be Distinct Part Units (“DPUs”) and are not included in the DRG system. Services provided by DPUs are reimbursed on an actual cost basis, subject to certain limitations. The mental health programs we manage that are eligible for reimbursement by the Medicare program currently meet the applicable requirements for designation as DPUs and are exempt from the DRG system.

Partial hospitalization is an intensive outpatient program of behavioral health care services provided to patients in place of inpatient care. In an August 1, 2000 rule, a new Medicare per diem payment methodology was established for partial hospitalization programs. In a November 1, 2002 rule, it was announced that Medicare would pay a per diem rate of $256.96, of which $51.39 is the beneficiary’s co-insurance, for partial hospitalization assuming that the services meet Medicare’s coverage requirement. This amount is adjusted up or down for differences in wages from area to area. Medicare pays this amount regardless of whether it is more or less than a hospital’s actual costs, although there is a three-year transition period during which hospitals whose aggregate costs for Medicare outpatients exceed the Medicare rates will receive some additional Medicare payments, but not up to the level of full costs. The Medicare rates for outpatient services should be updated annually, but in the past when Medicare has adjusted other rates similar to its new rates for hospital outpatient services, the updates have often been increases in amounts that were less than the increase in the “hospital market basket,” i.e., the increase in costs of items and services purchased by hospitals. In some instances, Medicare has reduced rates in the updating process.

Although Medicare uses a cost-based reimbursement formula for behavioral health care hospital inpatient services, and has established a rate for partial hospitalization services of $256.96 per day, Medicare will not pay these full amounts to a hospital. It will deduct from that rate an amount for patient “coinsurance,” or the amount that the patient is expected to pay. Many patients are unable to pay the coinsurance amount. Even if these patients are also covered by Medicaid, some states’ Medicaid programs will not pay the Medicare coinsurance amount. As a result, the Medicare coinsurance amount will go uncollected by the provider except to the extent that the provider is partially reimbursed that amount as a Medicare “bad debt” as described in the following paragraph.

To the extent that neither a Medicare patient nor any secondary payor for that patient pays the Medicare coinsurance amount after a reasonable collection effort or the patient’s indigence is documented, the provider is entitled to be paid 70% of this “bad debt” by Medicare. However, there are instances when Medicare denies reimbursement for all or part of claimed bad debts for coinsurance on Medicare patients on grounds that the provider did not engage in a reasonable collection effort or that the provider failed to maintain adequate documentation of its collection effort or of the patient’s indigence.

The services we provide through behavioral health care unit management contracts have historically been covered by Medicare, as if provided by the host provider on the basis that the site where the services were furnished was a “provider-based” site. Historically, there were no specific Medicare rules governing what constituted provider-based status. In April 2000, CMS adopted new rules requiring a CMS determination that a facility has provider based status before a provider can bill Medicare for the services rendered at the facility. The new rules have been construed by CMS to apply to inpatient mental health units, and therefore they impact our behavioral health care unit management operations.

As a result of the Benefits Improvement and Protection Act of 2000, facilities treated as provider-based as of October 1, 2000 were treated as provider-based until October 1, 2002, the effective date of the April 2000 final regulation. In addition, the April 2000 final regulation specifies instances when there may be retrospective recoveries of amounts previously paid if Medicare determines that a site was not “provider-based”. The regulation also places significant restrictions on which personnel can be management employees if the provider based facility is operated under a management contract.

On August 1, 2002, CMS published changes to the provider-based rules. One of the most significant changes is that facilities treated as provider-based as of October 1, 2000 have until the first day of the provider’s next cost report period that is on or after July 1, 2003 to comply with the new provider-based rules. For all other entities, the changes to the provider-based rules became effective on October 1, 2002. In the final rule, CMS now distinguishes between on and off-campus provider-based entities by establishing separate requirements that are dependent on the location of the provider-based entity. The final rule provides relief from the management contract restrictions for on-campus entities. Under the current regulation, an off-campus entity that is operated pursuant to a management contract is not in compliance with the provider-based criteria if any of its non-management employees are employed by the manager, or if its administrative functions are not integrated with those of the main provider. The final rule eliminated all management contract restrictions for on-campus entities. The final rule provided significantly less relief for provider-based entities located off the campus of the main provider. The final rule also specifies that in addition to possible recoupment of amounts previously paid for providers who bill inappropriately for services of a provider-based entity, future payments may be adjusted to approximate the amounts that would be paid for the same services furnished by an owned, leased or managed facility.

We believe the sites we presently manage are provider-based within the meaning of the final regulation, and we expect that our provider customers will obtain, or have obtained, determinations of such provider-based status from Medicare. However, it is possible that such sites will not obtain approval as provider-based sites or will lose such approval in the future. In such instances, there may be a loss of Medicare coverage for services furnished at that site and there may be a retrospective recovery by Medicare. It is also possible that the provider based rules could result in termination or non-renewal of management contracts if a provider does not obtain a determination of provider-based status of an inpatient unit operated under a management contract.

For the year ended December 31, 2002, our owned and leased facilities derived approximately 39% of their revenue from Medicaid. We cannot predict the extent or scope of changes that may occur in the ways in which state Medicaid programs contract for and deliver services to Medicaid recipients. All Medicaid funding is generally conditioned upon financial appropriations to state Medicaid agencies by the state legislatures and there are political pressures on such legislatures in terms of controlling and reducing such appropriations.

Some states may adopt substantial health care reform measures which could modify the manner in which all health services are delivered and reimbursed, especially with respect to Medicaid recipients and other individuals funded by public resources. Many states have enacted or are considering enacting measures designed to reduce their Medicaid expenditures and change private health care insurance. Most states have applied for and been granted federal waivers from current Medicaid regulations to allow them to serve some or all of their Medicaid participants through managed care providers. The reduction in other public resources could have an impact on the delivery of services to Medicaid recipients. Any significant changes in Medicaid funding, the structure of a particular state’s Medicaid program, the contracting process or reimbursement levels could have a material adverse impact on us.

Our facilities are reimbursed for certain behavioral health care services by health maintenance organizations and commercial insurance companies on either a fee-for-service basis or under contractual arrangements which may include reimbursement on per-diem or a per-diagnosis basis.

These carriers reimburse the facilities or us directly for charges at rates and limits specified in their contracts or policies. Patients generally remain responsible for any amounts not covered under their insurance policies.

All facilities participating in the Medicare program, whether paid on a reasonable cost basis or under PPS, are required to meet certain financial reporting requirements. Federal regulations require submission of annual cost reports covering medical costs and expenses associated with the services provided by each hospital to Medicare beneficiaries. Annual cost reports required under the Medicare and Medicaid programs are subject to routine audits, which may result in adjustments to the amounts ultimately determined to be due to us under these reimbursement programs. These audits often require several years to reach the final determination of amounts earned under the programs. Nonetheless, once the Medicare fiscal intermediaries have issued a final Notice of Program Reimbursement (NPR) after audit, any disallowances of claimed costs are due and payable within 30 days of receipt of the NPR. Providers have rights to appeal, and it is common to contest issues raised in audits of prior years’ cost reports.

Healthcare facilities are subject to federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, fire prevention, rate-setting and compliance with building codes and environmental protection laws. Facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. Management believes that all of the facilities owned and operated by us are properly licensed under applicable state laws. All of the facilities owned and operated by us are certified under Medicare and Medicaid programs and all are accredited by the JCAHO, the effect of which is to permit the facilities to participate in the Medicare and Medicaid programs. Should any facility lose its accreditation by JCAHO, or otherwise lose its certification under the Medicare and/or Medicaid program, the facility would be unable to receive reimbursement from the Medicare and Medicaid programs. If a provider contracting with us were excluded from any federal health care programs, no services furnished by that provider would be covered by any federal health care program. If we were excluded from federal health care programs, our owned facilities would not be eligible for reimbursement by any federal health care program. In addition, providers would as a practical matter, cease contracting for our behavioral health care unit management services because they could not be reimbursed for any management fee amounts they paid to us. Management believes that the facilities we own and operate are in substantial compliance with current applicable federal,

state, local and independent review body regulations and standards. The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified, it may be necessary for us to effect changes in our facilities, equipment, personnel and services. Additionally, certain of the personnel working at facilities owned and operated by us are subject to state laws and regulations governing their particular area of professional practice. We assist our client hospitals in obtaining required approvals for new programs. Some approval processes may lengthen the time required for programs to begin operations.

The construction or expansion of health care facilities, the acquisition of existing facilities, the transfer or change of ownership and the addition of new beds or services may be subject to review by and prior approval of state regulatory agencies under a CON program. Such laws generally require the reviewing state agency to determine the public need for additional or expanded health care facilities and services. Failure to obtain necessary state approval can result in the inability to expand facilities, add services, complete an acquisition or change ownership. Further, violation of such laws may result in the imposition of civil sanctions or revocation of a facility’s license.

Participation in any federal health care program, including the Medicare and Medicaid programs, is heavily regulated by federal statute and regulation. If a hospital fails to substantially comply with the numerous conditions of participation in the Medicare and Medicaid programs or performs certain prohibited acts, such hospital’s participation in the federal health care programs may be terminated, or civil or criminal penalties may be imposed under certain provisions of the Social Security Act or both. For example, the Social Security Act prohibits providers and others from soliciting, receiving, offering or paying, directly or indirectly, any remuneration intended to induce referrals or patients to receive goods or services covered by a federal health care program (the “Anti-kickback Statute”). In addition to felony criminal penalties (fines and imprisonment), the Social Security Act establishes civil monetary penalties and the sanction of excluding violators from participation in the federal health care programs.

The Anti-kickback Statute has been interpreted broadly by federal regulators and certain courts to prohibit the intentional payment of anything of value if even one purpose of the payment is to influence the referral of Medicare or Medicaid business. Therefore, many commonplace commercial arrangements between hospitals and physicians could be considered by the government to violate the Anti-kickback Statute.

As authorized by Congress, the OIG has published final safe harbor regulations that outline categories of activities that are deemed protected from prosecution under the Anti-kickback Statute. Currently, there are safe harbors for various activities, including, but not limited to: investment interest, space rental, equipment rental, practitioner recruitment, personal services and management contracts, sale of practice, discounts, employees, investments in group practices, and ambulatory surgery centers. The fact that conduct or a business arrangement does not fall within a safe harbor does not automatically render the conduct or business arrangement unlawful under the Anti-kickback Statute. The conduct and business arrangements, however, do risk increased scrutiny by government enforcement authorities.

We have a variety of financial relationships with physicians who refer patients to our owned facilities, as well as at mental health programs and facilities we manage. We have contracts with physicians to serve as medical directors at our owned facilities, as well as at mental health programs and facilities we manage. Some of the arrangements with physicians do not meet requirements for safe harbor protection. It cannot be assured that regulatory authorities that enforce the Anti-kickback Statute will not determine that any of these arrangements violate the Anti-kickback Statute or other federal or state law. This determination could expose us to the risk of criminal penalties, civil monetary penalties and exclusion from participation in Medicare, Medicaid of other federal health care programs.

The OIG issues advisory opinions to outside parties regarding the interpretation and applicability of the Anti-kickback Statute and other OIG health care fraud and abuse sanctions. An OIG advisory opinion only applies to the people or entities which requested it. However, advisory opinions are published and made

On April 3, 2003, the OIG issued Advisory opinion No. 03-8 regarding an arrangement whereby a company would develop and manage distinct part inpatient rehabilitation units located within general acute care hospitals in exchange for a management fee calculated on a per patient per day basis. The OIG found that the proposed arrangement could potentially generate prohibited remuneration under the Anti-kickback Statute and that the OIG could potentially impose administrative sanctions on the company. The OIG noted that any definitive conclusion regarding the existence of an anti-kickback violation would require a determination of the parties’ intent, which is beyond the scope of the advisory opinion process.

The OIG’s analysis noted that the proposed arrangement did not qualify for the safe harbor for personal services and management contracts because the aggregate compensation paid by the hospital to the management company was not set in advance. The OIG noted that “per patient,” “per click,” “per order,” and similar payment arrangements with parties in a position, either directly or indirectly, to refer or recommend an item or service payable by a federal health care program are disfavored under the Anti-kickback Statute. The principal concern is that such arrangements promote overutilization and unnecessarily lengthy stays. Other items of concern to the OIG included that the unit was under the medical direction of a physician in a position to generate referrals to the unit, the management company performed community outreach including marketing, and the fee arrangement could be deemed a success fee. While the proposed arrangement had certain features that would appear to reduce the risk, the OIG could not conclude that the residual risk was sufficiently low to grant protection prospectively.

We provide services to acute care facilities through behavioral health care management contracts and are compensated, in part, on a per discharge basis. We have not requested an advisory opinion from the OIG with respect to our management contracts. We believe that we are in compliance with the Anti-kickback Statute, despite the fact that our management contracts do not qualify for the safe harbor for personal services and management contracts because the aggregate compensation paid by our client hospitals is not set in advance. There can be no assurances that our contracts will not be reviewed and challenged by the OIG or other regulatory authorities empowered to do so.

The Social Security Act also includes a provision commonly known as the “Stark Law.” This law prohibits physicians from referring Medicare and Medicaid patients to entities with which they or any of their immediate family members have a financial relationship if these entities provide certain designated health services that are reimbursable by Medicare, including inpatient and outpatient hospital services. Sanctions for violating the Stark Law include denial of payment, refunding amounts received for prohibited services, civil monetary penalties of up to $15,000 per prohibited service provided, and exclusion from the Medicare and Medicaid programs. The statute also provides for a penalty of up to $100,000 for a circumvention scheme. There are exceptions to the self-referral prohibition for many customary financial arrangements between physicians and providers, including employment contracts, leases and recruitment agreements.

On January 4, 2001, CMS issued final regulations, subject to comment, intended to clarify parts of the Stark Law and some of the exceptions to it. These regulations are considered the first phase of a two-phase process, with the remaining regulations to be published at an unknown future date. The phase one regulations generally became effective January 4, 2002. However, CMS has delayed until January 7, 2004 the effective date of a portion of the phase one regulations related to whether percentage-based compensation is deemed to be “set in advance” for purposes of exceptions to the Stark Law. We cannot predict the final form these regulations will take or the effect that the final regulations will have on its operations.

Many states in which we operate also have laws that prohibit payments to physicians for patient referrals similar to the Anti-kickback Statute and self-referral legislation similar to the Stark Law. The scope of these state laws is broad, since they can often apply regardless of the source of payment for care, and little

HIPAA broadened the scope of certain fraud and abuse laws by adding several criminal provisions for health care fraud offenses that apply to all health benefit programs. HIPAA also created new enforcement mechanisms to combat fraud and abuse, including the Medicare Integrity Program and an incentive program under which individuals can receive up to $1,000 for providing information on Medicare fraud and abuse that leads to the recovery of at least $100 of Medicare funds. In addition, federal enforcement officials now have the ability to exclude from Medicare and Medicaid any investors, officers and managing employees associated with business entities that have committed health care fraud, even if the officer or managing employee had no knowledge of the fraud. HIPAA was followed by BBA-97, which created additional fraud and abuse provisions, including civil penalties for contracting with an individual or entity that the provider knows or should know is excluded from a federal health care program.

The Social Security Act also imposes criminal and civil penalties for making false claims and statements to Medicare and Medicaid. False claims include, but are not limited to, billing for services not rendered or for misrepresenting actual services rendered in order to obtain higher reimbursement, billing for unnecessary goods and services, and cost report fraud. Criminal and civil penalties may be imposed for a number of other prohibited activities, including failure to return known overpayments, certain gainsharing arrangements, and offering remuneration to influence a Medicare or Medicaid beneficiary’s selection of a health care provider. Like the Anti-kickback Statute, these provisions are very broad. Careful and accurate coding of claims for reimbursement, including preparing cost reports, must be performed to avoid liability.

A factor affecting the health care industry today is the use of the Federal False Claims Act and, in particular, actions brought by individuals on the government’s behalf under the False Claims Act’s “qui tam,” or whistleblower, provisions. Whistleblower provisions allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the federal government.

When a defendant is determined by a court of law to be liable under the False Claims Act, the defendant may be required to pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. There are many potential bases for liability under the False Claims Act. Liability often arises when an entity knowingly submits a false claim for reimbursement to the federal government. The False Claims Act defines the term “knowingly” broadly. Thus, although simple negligence will not give rise to liability under the False Claims Act, submitting a claim with reckless disregard to its truth or falsity constitutes “knowing” submission under the False Claims Act and, therefore, will qualify for liability.

In some cases, whistleblowers and the federal government have taken the position that providers who allegedly have violated other statutes, such as the Anti-kickback Statute and the Stark Law, have thereby submitted false claims under the False Claims Act. A number of states have adopted their own whistleblower provisions whereby a private party may file a civil lawsuit on behalf of the state in state court. From time to time, companies in the health care industry, including our company, may be subject to actions under the False Claims Act.

Most of our activities require us to receive or use confidential medical information about individual patients. Federal and some state legislation restrict the use and disclosure of confidential medical information and the fact of treatment. There are specific requirements permitting disclosure, but inadequate or incorrect disclosure, even if inadvertent or negligent, can trigger substantial criminal and other penalties.

The Administrative Simplification Provisions of HIPAA require the use of uniform electronic data transmission standards for health care claims and payment transactions submitted or received electronically. These provisions are intended to encourage electronic commerce in the health care industry. On August 17, 2000, HHS published final regulations establishing electronic data transmission standards that all health care providers must use when submitting or receiving certain health care transactions electronically. Compliance with these regulations is required by October 16, 2002. However, the Administrative Simplification Compliance Act extended the compliance date until October 16, 2003 for entities that file a plan with HHS that demonstrates how they intend to comply with the regulations by the extended deadline. We have filed such plans and received extensions accordingly.

The Administrative Simplification Provisions also require HHS to adopt standards to protect the security and privacy of health-related information. HHS proposed regulations containing security standards on August 12, 1998. On February 20, 2003, the final security rule was announced along with modifications to the HIPAA electronic data transactions and code set standards. The security rule requires health care providers to implement organizational, physical and technical practices to protect the security of electronically maintained or transmitted health-related information. In addition, HHS released final regulations containing privacy standards in December 2000. These privacy regulations became effective in April 2001, but compliance with these regulations was not required until April 2003. The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information, whether communicated electronically, on paper or orally. The regulations also provide patients with significant new rights related to understanding and controlling how their health information is used or disclosed. The security regulations and the privacy regulations could impose significant costs on our facilities in order to comply with these standards. The costs of conforming our systems to provide the privacy, security and transaction standard conformance required by HIPAA may require substantial cost investment in software, computers, policies and procedures, employee training and other goods and services. Until the standards are implemented in final form, we cannot know the full extent of these costs for implementing the requirements the regulations impose.

Violations of the Administrative Simplification Provisions could result in civil penalties of up to $25,000 per type of violation in each calendar year and criminal penalties of up to $250,000 per violation. In addition, there are numerous legislative and regulatory initiatives at the federal and state levels addressing patient privacy concerns. Facilities will continue to remain subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under the Administrative Simplification Provisions. These statutes vary and could impose additional penalties.

Some states have laws that prohibit corporations and other entities from employing physicians and practicing medicine for a profit or that prohibit certain direct and indirect payments or fee-splitting arrangements between health care providers that are designed to induce or encourage the referral of patients to, or the recommendation of, particular providers for medical products and services. Possible sanctions for violation of these restrictions include loss of license and civil and criminal penalties. In addition, agreements between a corporation and a physician may be considered void and unenforceable. These statutes vary from state to state, are often vague and have seldom been interpreted by the courts or regulatory agencies. Although we exercise care to structure our arrangements with health care providers to comply with the relevant state law, there can be no assurance that government officials charged with responsibility for enforcing these laws will not assert that we, or certain transactions in which we are involved, are in violation of such laws, or that such laws ultimately will be interpreted by the courts in a manner consistent with our interpretation.

Significant media and public attention has focused in recent years on the hospital industry. Because the law in this area is complex and constantly evolving, ongoing or future governmental investigations or litigation may result in interpretations that are inconsistent with industry practices, including our practices. It

is possible that governmental entities could initiate investigations or litigation in the future at facilities owned or managed by us and that such matters could result in significant penalties as well as adverse publicity. It is also possible that our executives and mangers could be included in governmental investigations or litigation or named as defendants in private litigation.

Health care, as one of the largest industries in the United States, continues to attract much legislative interest and public attention. In recent years, various legislative proposals have been introduced or proposed in Congress and in some state legislatures that would effect major changes in the health care system, either nationally or at the state level. Proposals that have been considered include cost controls on hospitals, insurance market reforms to increase the availability of group health insurance to small businesses, patients’ bill of rights and requirements that all businesses offer health insurance coverage to their employees. The cost of certain proposals would be funded in significant part by reductions in payments by government programs, including Medicare and Medicaid, to health care providers such as hospitals. There can be no assurance that future health care legislation or other changes in the administration or interpretation of governmental health care programs will not have a material adverse effect on our business, financial condition or results of operations.

As is typical in the health care industry, we are subject to claims and legal actions by patients in the ordinary course of business. To cover these claims, we maintain professional malpractice liability insurance and general liability insurance in amounts we believe to be sufficient for our operations, although it is possible that some claims may exceed the scope of the coverage in effect. At various times in the past, the cost of malpractice insurance and other liability insurance has risen significantly. Therefore, there can be no assurance that such insurance will continue to be available at reasonable prices which would allow us to maintain adequate levels of coverage.

Many states have enacted or are considering enacting laws affecting the conversion or sale of not-for-profit hospitals. These laws, in general, include provisions relating to attorney general approval, advance notification and community involvement. In addition, state attorneys general in states without specific conversion legislation may exercise authority over these transactions based upon existing law. In many states there has been an increased interest in the oversight of not-for-profit conversions. The adoption of conversion legislation and the increased review of not-for-profit hospital conversions may limit our ability to grow through acquisitions of not-for-profit hospitals.

We are committed to ethical business practices and to operating in accordance with all applicable laws and regulations. Our Corporate Compliance Program was established to ensure that all employees have a solid framework for business, legal, ethical, and employment practices. Our Compliance Program establishes mechanisms to aid in the identification and correction of any actual or perceived violations of any of our policies or procedures or any other applicable rules and regulations. Employee training is a key component of the Corporate Compliance Program. All employees receive training during orientation and annually thereafter. With the advent of the HIPAA regulations, our goal is to have all employees trained prior to regulatory deadlines. Subsequent to the initial HIPAA training of all employees, this component will be merged into the annual compliance training. In addition, we require our executive management to sign and adopt a strict Code of Ethics.

In recent years, participants in the mental health care industry have become subject to an increasing number of lawsuits that allege malpractice or other related legal theories. These lawsuits often involve large claims and significant defense costs. We have obtained professional and general liability insurance for claims in excess of $100,000, up to a maximum of $1.0 million per occurrence and $3.0 million aggregate, with an additional $5.0 million in excess coverage. In December 2002, our deductible on individual malpractice claims was raised to $3.0 million and the insured limit to $10.0 million to mitigate the increases in the cost of professional and general liability insurance and to increase coverage for additional exposures due to acquisitions. The reserve for professional and general liability risks is based on historical claims, demographic factors, industry trends, severity factors, and other actuarial assumptions calculated by an independent third party. This estimate is discounted to its present value using a 5% discount rate. This estimated accrual for professional and general liabilities could be significantly affected should current and future occurrences differ from historical claim trends and expectations. We have established a captive insurance company to manage this additional self-insured retention. While claims are monitored closely when estimating professional and general liability accruals, the complexity of the claims and wide range of potential outcomes often hampers timely adjustments to the assumptions used in these estimates. We believe that our insurance coverage conforms to industry standards. There are no assurances, however, that our insurance will cover all claims (e.g., claims for punitive damages), or that claims in excess of our insurance coverage will not arise. A successful lawsuit against us that is not covered by, or is in excess of, our insurance coverage may have a material adverse effect on our business, financial condition and results of operations.

We are subject to various claims and legal actions which arise in the ordinary course of business. In our opinion, we are not currently a party to any proceeding which would have a material adverse effect on our financial condition or results of operations.

On a historical basis not giving effect to the acquisitions of The Brown Schools and Ramsay, as of March 31, 2003, we employed approximately 1,888 employees, of whom approximately 1,400 are full-time employees. Approximately 1,128 employees staff the owned and leased inpatient behavioral health care facilities, approximately 250 employees staff the management contracts and approximately 22 are in corporate management including finance, accounting, development, utilization review, training and education, information systems, member services, and human resources. None of our employees is subject to a collective bargaining agreement and we believe that our employee relations are good.

The following table sets forth information with respect to our executive officers and directors as of July 29, 2003:

Joey A. Jacobs is our Chairman and Chief Executive Officer and one of our directors. He has served as our President and Chief Executive Officer since our co-founding in April 1997. Prior to founding us, Mr. Jacobs served for 21 years in various capacities with Hospital Corporation of America (“HCA,” also formerly known as Columbia and Columbia/ HCA), most recently as President of the Tennessee Division. Mr. Jacobs’ background at HCA also includes serving as President of HCA’s Central Group, Vice President of the Western Group, Assistant Vice President of the Central Group and Assistant Vice President of the Salt Lake City Division.

Steven T. Davidson has served as our Chief Development Officer since joining us in August 1997. Prior to joining us, Mr. Davidson served as the Director of Development at HCA from 1991 until 1997. Mr. Davidson also served as a Senior Audit Supervisor and Hospital Controller during his term at HCA, which began in 1983, where he supervised audits of hospitals and other corporate functions. Prior to joining HCA, Mr. Davidson was employed by Ernst & Young LLP as a Senior Auditor. Mr. Davidson is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. Davidson has over 20 years of experience in the health care industry.

Jack R. Salberg has been our Chief Operating Officer since May 2000. Prior to joining us, Mr. Salberg served as President and Chief Executive Officer of Sunrise Health Care from 1996 to 2000. Prior to that, Mr. Salberg served for 10 years in various capacities with American Healthcorp, most recently as Senior Vice President with specific responsibilities for multi-facility contract management. Mr. Salberg also spent three years as head of Health Group, Inc.’s behavioral health care division. In addition, Mr. Salberg was employed for four years with Humana Corporation as a hospital executive director and seven years with Arden Hill Hospital, an independent hospital, as its associate executive director. Mr. Salberg has more than 29 years of operational experience in the for-profit and non-profit health care sectors.

Jack E. Polson has served as our Chief Accounting Officer since August 2002. Prior to being appointed Chief Accounting Officer, Mr. Polson served as our Controller since June 1997. From June 1995 until joining us, Mr. Polson served as Controller for Columbia HealthCare Network, a risk-bearing physician health organization. From May 1992 until June 1995, Mr. Polson served as an internal audit supervisor for HCA.

Brent Turner joined us in February 2003 as our Vice President, Treasurer and Investor Relations. Prior to joining us, Mr. Turner served as Executive Vice President and Chief Financial Officer of Educational Services

of America, a privately-held owner and operator of schools for children with learning disabilities, since April 2002. From November 2001 until March 2002, Mr. Turner served as Senior Vice President of Business Development for The Brown Schools, a provider of educational and therapeutic services for at-risk youth. From 1996 until January 2001, Mr. Turner was affiliated with Corrections Corporation of America, an owner and operator of private prisons, serving as Treasurer from 1998 to 2001.

Mark P. Clein has been a member of our board of directors since 2002. Mr. Clein has been a Partner at LCI Partners, a consulting and investment firm, since January 2003. Prior to that, he was the Executive Vice President and Chief Financial Officer of US Bioservices Corporation, a pharmacy company, from May 2002 to January 2003. In addition, Mr. Clein was the Chief Executive Officer of PMR Corporation from May 1999 to May 2002 and the Executive Vice President and Chief Financial Officer of PMR Corporation from May 1996 to May 1999.

Joseph P. Donlan has been a member of our board of directors since June 2002. Mr. Donlan is the Managing Director of Brown Brothers Harriman & Co., a private banking firm, and co–manager of its 1818 Mezzanine Fund, L.P. and 1818 Mezzanine Fund II, L.P., private equity funds. Currently, he is a member of the board of directors of American Tire Distributors, Inc. and several private companies.

Richard D. Gore has been a member of our board of directors since May 2003. Mr. Gore is the Co-Chief Executive Officer and President of Attentus Healthcare, a non-urban hospital management company that he co-founded in 2002. Mr. Gore also co-founded Province Healthcare Company, a health care services company, in 1996. He served as Executive Vice President of Province Healthcare Company from April 1996 through December 1999 and Chief Financial Officer of Province Healthcare Company from April 1996 until August 2001. In addition, he was the Vice Chairman of the Board of Province Healthcare Company from December 1999 until August 2001.

Christopher Grant, Jr. has been a member of our board of directors since our formation in 1997. Mr. Grant is the President of Salix Management Corporation, the manager of venture capital partnerships Salix Ventures, L.P., Salix Ventures II, L.P. and Salix Affiliates II, L.P. Mr. Grant co-founded Salix Ventures in 1997. Prior to founding Salix Ventures, he had managed CGJR Health Care Services Group, a Nashville-based health care venture fund, since May 1995.

David S. Heer has been a member of our board of directors since November 1999. Mr. Heer is a Managing Director of Acacia Venture Partners, a venture capital firm. Mr. Heer joined Acacia Venture Partners at its inception in 1995 and has been a Managing Director since that time.

Ann H. Lamont has been a member of our board of directors since March 2003. Ms. Lamont has been with Oak Investment Partners since 1982 and became a General Partner in 1986. Prior to joining Oak Investment Partners, Ms. Lamont was a research associate with Hambrecht & Quist.

Edward K. Wissing has been a member of our board of directors since 1997. Mr. Wissing has been the Chairman of the Board of Pediatric Services of America, Inc., a home health care company, since December 2002, and a director since 2001. Prior to that, he was the President, Chief Executive Officer and a director of American HomePatient, Inc., a national provider of home health care products and services, from May 1984 until May 1998. Currently, he is a member of the board of directors of CareCentric, Inc.

The following table sets forth information with respect to ownership of our common stock as of May 30, 2003, by:


	•	each person known by us to be the beneficial owner of more than 5% of our common stock;

	•	each of our directors;

	•	certain of our current and former executive officers and certain former executive officers of PMR Corporation; and

	•	all of our directors and executive officers as a group.

To our knowledge, unless otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned. We are unaware of any person, other than those listed below, who beneficially owns more than 5% of the outstanding shares of common stock. All computations are based on 8,648,588 shares of common stock outstanding on May 30, 2003.


	(1)	Under SEC rules, the number of shares shown as beneficially owned includes shares of common stock subject to options that currently are exercisable or will be exercisable within 60 days of May 30, 2003. Shares of common stock subject to options that are currently exercisable or will be exercisable within 60 days of May 30, 2003 are considered to be outstanding for the purpose of computing the percentage of the shares held by a holder, but are not considered to be outstanding for computing the percentage held by others.

	(2)	Includes options to purchase 71,050 shares. Also includes 4,321 shares owned by Scott D. Jacobs, Mr. Jacobs’ son. Mr. Jacobs disclaims beneficial ownership of the shares held by Scott D. Jacobs.

	(3)	Includes options to purchase 21,298 shares.

	(4)	Includes options to purchase 22,622 shares.

	(5)	Includes options to purchase 7,339 shares.

	(6)	Includes options to purchase 2,200 shares. Mr. Grant is the board designee for the CGJR Group and is the president of CGJR Capital Management, Inc., which is the general partner of each of the three


		entities in the CGJR Group. As such, Mr. Grant is deemed to beneficially own the shares owned by the CGJR Group. Mr. Grant disclaims such beneficial ownership. The CGJR Group consists of (1) CGJR Health Care Services Private Equities, L.P. which owns 93,803 shares, (2) CGJR II, L.P. which owns 45,939 shares and (3) CGJR/ MF III, L.P. which owns 25,889 shares. Mr. Grant and CGJR Capital Management, Inc. directly own 1,653 and 1,652 shares of our common stock, respectively.

	(7)	Includes options to purchase 9,865 shares.

	(8)	Includes options to purchase 2,200 shares. Mr. Heer is the board designee of Acacia Venture Partners, L.P. and is a general partner of the general partner of both Acacia Venture Partners, L.P., which owns 1,572,905 shares, and South Pointe Venture Partners, L.P., which owns 68,764 shares. As such, Mr. Heer is deemed to beneficially own the shares owned by such entities. Mr. Heer disclaims such beneficial ownership. The address for Acacia Venture Partners is 101 California Street, Suite 3160, San Francisco, California 94111.

	(9)	Includes options to purchase 2,200 shares. Mr. Donlan is the board designee and a co-manager of the 1818 Fund. As such, Mr. Donlan is deemed to beneficially own the shares owned by this entity. Mr. Donlan disclaims beneficial ownership of such shares. On May 16, 2003, the 1818 Fund exercised its stock purchase warrant to purchase 372,412 shares of our common stock. Deducting the exercise price of $0.01 per share based on the closing price of our common stock on May 15, 2003, the 1818 Fund received 372,039 shares of our common stock from the exercise. In addition, the 1818 Fund waived, effective April 1, 2003, its ability to require that we repurchase its stock purchase warrant to purchase 372,412 shares of our common stock. The 1818 Fund still has the right to require that we repurchase the 372,039 shares of our common stock received upon the exercise of the stock purchase warrant.


(10)	Ms. Lamont is the board designee of Oak Investment Partners VII, L.P., which owns 1,632,776 shares, Oak VII Affiliates Fund Limited Partnership, which owns 40,996 shares, and Oak Investment Partners VI, Limited Partnership, which owns 472 shares. Ms. Lamont disclaims such beneficial ownership. The address for Oak Investment Partners is One Gorham Island, Westport, Connecticut 06880.

(11)	Includes options to purchase 1,000 shares.

(12)	Includes options to purchase 152,885 shares. Also includes 16,221 shares held in trusts over which Mr. Clein has sole voting power and sole investment power.

(13)	Includes options to purchase 8,334 shares. Includes 3,025 shares held by Mr. Tepper, 285,388 shares owned by Mr. Tepper as Trustee FBO Tepper Family Trust and 5,000 shares held by Mr. Tepper and Ms. Tepper as Trustees FBO The Tepper 1996 Charitable Remainder Trust UA DTD 11/19/96.

(14)	Includes options to purchase 53,920 shares.

(15)	Includes options to purchase 293,659 shares.

In connection with our merger with PMR described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Acquisitions,” in exchange for each outstanding share of common stock, series A preferred stock and series B preferred stock in PSH, holders of PSH common stock, series A preferred stock and series B preferred stock received 0.115125, 0.246951 and 0.312864 shares, respectively, of newly-issued shares of our common stock. Options to acquire PSH common stock were converted into options to purchase shares of our common stock based on the common stock exchange ratio used in the PMR Merger. Existing warrants of PSH were either cancelled or converted into warrants to purchase our common stock, such conversion being based on the applicable exchange ratio. After giving effect to the exercise of all outstanding options and warrants following our merger with PMR, the former PSH stockholders received approximately 72% of our common stock, thereby effecting a change of control.

Grant of Options and Stock Awards to Certain Directors and Executive Officers

Our directors and members of management have been granted options to purchase our common stock pursuant to our Equity Incentive Plan and our Outside Directors’ Non-Qualified Stock Option Plan (the “Outside Directors Plan”).

In January 2000, PMR loaned Mark P. Clein, one of our directors and the former Chief Executive Officer of PMR, $467,500 pursuant to promissory notes for the purchase of stock in connection with the exercise of stock options (the “Stock Notes”).The Stock Notes, due December 31, 2004, bear interest at the rate of 6.21% per annum and are with recourse in addition to being secured by stock under pledge agreements. PMR also received promissory notes from Mr. Clein for up to $257,208 for tax liabilities related to the purchase of such stock (the “Tax Notes”). The Tax Notes, due December 31, 2004, bear interest at the rate of 6.21% and are secured by stock pledges, but are otherwise without recourse. In May 2002, the Stock Notes and the Tax Notes were amended to include a provision that allows the principal and interest on the notes to be paid, at anytime prior to December 31, 2003, through the delivery to us of common stock valued at the higher of (1) $7.92 or (2) the average closing sales prices of the common stock for the five trading days prior to the delivery of such stock. The amendments also eliminated the provision in each Note which required any dividends received with respect to shares being purchased with the proceeds of such Note to be immediately applied toward the payment of amounts outstanding under such note. As of February 28, 2003, Mr. Clein owed $55,000 under the Stock Notes and $257,208 under the Tax Notes.

Pursuant to the provisions of the PMR 1997 Equity Incentive Plan, as amended (the “PMR Equity Plan”), upon a change in control of PMR, all of the options granted pursuant to such plan became fully vested and immediately exercisable. For purposes of the PMR Equity Plan, the PMR Merger constituted a change in control. As of March 25, 2003, Mr. Clein held vested options to purchase an aggregate of 84,018 shares of our common stock, subject to our Equity Incentive Plan.

Pursuant to the provisions of the PMR Outside Directors’ Non-Qualified Stock Option Plan of 1992 (the “PMR Directors Plan”), in the event of a change in control, all of the options granted pursuant to such plan became fully vested and immediately exercisable. For purposes of the PMR Directors Plan, the PMR Merger constituted a change in control. As of March 25, 2003, Charles C. McGettigan, one of our former directors and a former director of PMR, held vested options to purchase an aggregate of 26,833 shares of our common stock, subject to our Outside Directors Plan.

In connection with the closing of our merger with PMR, PMR’s board of directors extended the option exercise period for all options to purchase the common stock held by Mr. Clein to a period that is three years from May 10, 2002, the date of Mr. Clein’s termination of employment with PMR.

PMR and each of Mr. Clein and Fred D. Furman, former President and General Counsel of PMR, entered into agreements dated August 25, 1999, providing for, among other things, the employment of such officer until August 30, 2000. On August 30, 2000 and 2001, the terms of the agreements were automatically extended for additional one year terms. In connection with our merger with PMR, Mr. Furman entered into an amendment to his employment agreement with PMR, effective as of May 1, 2002. Pursuant to the amendment, if Mr. Furman’s employment with PMR was terminated by PMR or Mr. Furman in contemplation of, upon or within 180 days following our merger with PMR, then Mr. Furman was entitled to a lump-sum cash severance payment by PMR on the date of such termination equal to three times Mr. Furman’s annual base salary plus three times his average annual bonus.

In connection with our merger with PMR, Mr. Clein entered into a consulting agreement with PMR pursuant to which Mr. Clein terminated his employment with PMR, effective May 10, 2002, and waived any and all rights to cash severance payments pursuant to his employment agreement. Pursuant to the consulting agreement, Mr. Clein also provided management and strategic consulting to PMR until the closing of the PMR Merger for two lump-sum cash payments of $120,000 each, one of which was paid upon the execution of the consulting agreement and the other of which was paid upon the closing of our merger with PMR. The consulting agreement with Mr. Clein further provided for the extension of the exercise period of all PMR stock options held by Mr. Clein to a date that was 90 days following the earlier of the closing of the PMR Merger or May 10, 2003.

PMR entered into an agreement with McGettigan, Wick & Co., Inc. on February 8, 2001 to provide financial services to the management and board of directors of PMR in connection with potential strategic alternatives for PMR. PMR paid McGettigan, Wick & Co. a $30,000 retainer fee and agreed to reimburse all reasonable out-of-pocket expenses incurred by McGettigan, Wick & Co. In addition, upon the closing of the PMR Merger, PMR paid McGettigan, Wick & Co. an advisory fee equal to $270,000 in cash. Mr. McGettigan is a founder, owner and managing director of McGettigan, Wick & Co.

Joey A. Jacobs, our Chairman, President and Chief Executive Officer, serves as a member of the Board of Directors of Stones River Hospital, a hospital in which we manage a unit pursuant to a management agreement. The term of the third amendment to the management agreement is two years and automatically renews for one year terms unless terminated by either party. Total revenue from this management agreement was $808,000 for the year ended December 31, 2002. We believe the terms of the management agreement are consistent with management agreements negotiated at arms-length.

Jack R. Salberg, our Chief Operating Officer, served as a minority owner and member of the board of directors of the entity which owned Riveredge Hospital prior to its acquisition by us during 2002. Mr. Salberg disclosed his interest to the Board of Directors and was not directly involved in the negotiations to acquire the hospital. We believe that the purchase price for the Riveredge acquisition constituted its best estimate of fair value. All terms were negotiated on an arms-length basis.

Edward K. Wissing, a director of our company, occasionally provides advisory and consulting services to Brentwood Capital Advisors, our financial advisor. Mr. Wissing is also party to a consulting arrangement with Brentwood Capital pursuant to which he provides certain consulting services through May 2003. According to the terms of his consulting agreement, Mr. Wissing was paid a fixed consulting fee of $5,000 per month from August 2002 through May 2003.

Joseph P. Donlan, a director of our company, is the co-manager of The 1818 Fund, which is managed by Brown Brothers Harriman & Co. (“Brown Brothers”). Mr. Donlan is a managing director of Brown Brothers. On June 28, 2002, we entered into a securities purchase agreement with The 1818 Fund to issue up to $20.0 million of senior subordinated notes with detachable warrants. At the closing on June 28, 2002, a total of $10.0 million of the senior subordinated notes were issued. The notes have a term of seven years and bear interest at 12% annually, payable quarterly. We issued detachable stock purchase warrants to The 1818 Fund for the purchase of 372,412 shares of common stock at an exercise price of $.01 per share. On May 16, 2003, The 1818 Fund exercised its stock purchase warrant to purchase 372,412 shares of our common stock. Deducting the exercise price of $0.01 per share based on the closing price of our common stock on May 15, 2003, The 1818 Fund received 372,039 shares of our common stock from the exercise. In addition, The 1818 Fund waived, effective April 1, 2003, its ability to require that we repurchase its stock purchase warrant to purchase 372,412 shares of our common stock. As such, we will no longer be required to record non-cash expense for increases in the fair market value of our common stock with respect to the warrants granted to The 1818 Fund. The 1818 Fund still has the right to require that we repurchase the 372,039 shares of our common stock received upon the exercise of the stock purchase warrant.

On April 1, 2003, concurrently with the acquisition of The Brown Schools, we received $12.5 million from the private placement of 2,272,727 shares of series A convertible preferred stock with affiliates of Oak Investment Partners and Salix Ventures and with The 1818 Fund. The investors are previous investors in our company, with Oak Investment Partners and Salix Ventures (or related entities) being among our co-founders. Representatives of Salix Ventures and Brown Brothers Harriman & Co. currently serve on our Board of Directors, and a representative of Oak Investment Partners joined the Board in connection with the private placement. The proceeds were used to purchase six facilities from The Brown Schools, Inc. These investors agreed to the private placement of an additional 2,272,727 shares of our series A convertible preferred stock for $12.5 million, which closed on June 19, 2003. Each share of series A convertible preferred stock is convertible into one share of our common stock. The impact of the series A convertible preferred stock on diluted earnings per share will be calculated using the if-converted method.

On July 31, 2002, Acacia exercised warrants to purchase 118,623 shares of our common stock. The exercise price for these shares was $.032 per share.

On October 12, 2000, we entered into unsecured bridge loans with each of Acacia Venture Partners, L.P. and South Point Venture Partners, L.P. (collectively, “Acacia”) and Oak Investment Partners IV and Affiliates, L.P. (collectively, “Oak”), pursuant to which we borrowed $408,494 from each of Acacia and Oak (the “Bridge Loans”). The Bridge Loans bore interest at 10%, payable monthly. The proceeds were used to fund short-term working capital requirements. On April 30, 2002, we repaid each of the Bridge Loans, together with accrued interest in the amount of $64,111 for each Bridge Loan. Ann H. Lamont, a director of our company, is a general partner of Oak. Davis S. Heer, a director of our company, is the general partner of Acacia Management, L.P., the general partner of Acacia.

In conjunction with the acquisition of Holly Hill Hospital in December 2001, we entered into a senior credit facility of $33.2 million with CapitalSource Finance, LLC, or CapSource. On April 1, 2003, our then-existing credit facility was amended and restated and expanded to approximately $81.0 million with the increase of our revolving credit facility to $28.0 million from $17.5 million and a new $36.0 million term loan. We borrowed approximately $52.2 million during April 2003, including $16.2 million under the revolving line of credit under the expanded then-existing credit facility, to partially fund our acquisition of The Brown Schools in April 2003. In connection with the closing of the original note offering, our expanded then-existing credit facility was amended and restated to increase our revolving credit facility to $50.0 million from $28.0 million and refinance the $36.0 million term loan with proceeds from the original note offering. The term loan remains outstanding with a balance of $17.0 million.

As of April 30, 2003, approximately $24.9 million was outstanding under the revolver portion of our expanded then-existing credit facility. As of April 30, 2003, we had approximately $3.1 million available under the revolving line of credit under our expanded then-existing credit facility. Under the revolving line of credit, all of our collections, except for Medicare and Medicaid payments, are deposited into lockbox accounts controlled by the lender. The funds deposited in the lockbox are applied to outstanding borrowings with the lender on a daily basis. As a result, the outstanding borrowings under the revolving line of credit are classified as short-term as of December 31, 2002 and March 31, 2003. We must pay an unused fee in the amount of 0.4% per year of the revolving line of credit less the average outstanding loan balance. Such fees were approximately $24,237 as of April 30, 2003. In addition, we must pay a collateral management fee of 0.125% per month on the outstanding balance of the revolving credit facility.

Our amended and restated credit facility contains customary covenants which include: (1) a specified monthly patient census for any owned, operated or leased facilities; (2) a limitation on capital expenditures, sales of assets, mergers, changes of ownership, new principal lines of business, indebtedness, dividends and redemptions; and (3) various financial covenants. In addition, the amended and restated credit facility provides CapSource with a right of first refusal to provide additional debt financing to us, which CapSource waived in connection with the original note offering and the amendment and restatement of the then-existing credit facility. As of April 30, 2003, we were in compliance with all applicable then-existing debt covenant requirements. If we violate one or more of these covenants, amounts outstanding under the amended and restated credit facility could become immediately payable and additional borrowings could be restricted.

Our amended and restated credit facility currently includes two tranches: approximately $17.0 million of senior secured term loans and a $50.0 million revolver. Both tranches are secured by substantially all of our assets and the stock of our existing operating subsidiaries. The term loans accrue interest at the Citibank, N.A. prime rate plus 4.50% subject to a floor of 8.75% and are due in November 2003. The revolving line of credit accrues interest at the Citibank, N.A. prime rate plus 2.0% subject to a floor of 6.25%, and is due in June 2006. At April 30, 2003, the interest rate under the revolving credit facility was 6.69%.

On November 25, 2002, we entered into a mortgage loan agreement to borrow $4.9 million, which is insured by HUD and secured by real estate located at Holly Hill Hospital in Raleigh, North Carolina. Interest accrues on the HUD loan at 5.95% and principal and interest are payable in 420 monthly installments of $27,935 through December 2037. We used proceeds from the loan to replace $4.4 million of our senior term loan with CapSource, pay certain refinancing costs and fund required escrow amounts for future improvements to the property.

On June 28, 2002, we entered into a securities purchase agreement with The 1818 Fund to issue up to $20.0 million of senior subordinated notes with detachable nominal warrants. At the closing on June 28, 2002, a total of $10.0 million of the senior subordinated notes were issued. Approximately $7.5 million of the proceeds were used to fund a portion of the acquisition of Riveredge Hospital, and approximately $2.5 million of the proceeds were used to reduce current indebtedness. The notes had a term of seven years and bore interest at 12.00% annually, payable quarterly. The notes provided for a prepayment penalty of 6%, 3% or 1% if the notes were prepaid prior to the first anniversary, second anniversary and third anniversary of the closing date, respectively. We redeemed these notes in full with proceeds raised from the Financing Transactions and, consequently, no longer have the right to borrow money from The 1818 Fund under the senior subordinated notes.

In connection with the issuance of the senior subordinated notes, we issued detachable stock purchase warrants for the purchase of 372,412 shares of our stock at an exercise price of $.01 per share. As of the date of issuance, our shares were valued at $5.43 per share such that the fair value of the warrants totaled approximately $2.0 million. Under Accounting Principles Board Opinion No. 14, we were required to allocate a portion of the cash proceeds received from the notes to the stock purchase warrants with the offset recorded as a note discount and then amortized to the face value of the notes over the life of the notes. Under EITF 00-19, we were required to reclassify the amount initially recognized as capital in excess of par value to a long term liability and changes in fair value recorded to operations. For each $1 increase in stock price, we will be required to record non-cash expense of approximately $372,000. For the three months ended March 31, 2003, we recorded non cash expense related to the warrants of $960,000. The stock purchase warrants contain provisions that allow the issuer to “put” their warrants, or stock after exercise, back to us at fair market value for cash or for the deliverance of shares. The put price under the agreement would approximate $3.0 million or require the deliverance of 371,947 shares as of March 31, 2003.

On May 16, 2003, The 1818 Fund exercised its stock purchase warrant to purchase 372,412 shares of our common stock. After deducting the exercise price of $0.01 per share based on the closing price of our common stock on May 15, 2003, The 1818 Fund received 372,039 shares of our common stock from the exercise. In addition, The 1818 Fund waived, effective April 1, 2003, its ability to require that we repurchase its stock purchase warrant to purchase 372,412 shares of our common stock. As such, we will no longer be required to record non-cash expense for increases in the fair market value of our common stock. The 1818 Fund still has the right to require that we repurchase the 372,039 shares of our common stock received upon the exercise of the stock purchase warrant.

In connection with the acquisition of Sunrise Behavioral Health, Ltd., a manager of inpatient behavioral health care units in acute care hospitals, in May 2000, we issued subordinated convertible notes in the amount of $3.6 million. These convertible notes were due May 1, 2005 and accrued interest at 9.00% per annum. These senior convertible notes were converted to common stock in April and May of 2003.

In 2001, we also issued subordinated promissory notes totaling $4.5 million in connection with our acquisitions of three facilities. One note in the amount of $2.5 million accrued interest at 9.00% per annum and matured on June 30, 2002. We paid this note in full with a portion of the proceeds of our subordinated debt offering described below. The remaining $2.0 million subordinated note accrues interest at 9.00% per annum and is due June 30, 2005. In connection with the purchase of facilities from The Brown Schools in April 2003, $1.0 million of the $2.0 million note was repaid. Among other customary covenants, both notes contain cross default covenants triggered by a default of any other indebtedness of at least $1.0 million. We were in compliance with these covenants as of March 31, 2003.

On February 4, 2003, our shareholders authorized the issuance of 4,545,454 shares of series A convertible preferred stock. On April 1, 2003, concurrently with the acquisition of The Brown Schools, we

received $12.5 million from the private placement of 2,272,727 shares of the series A convertible preferred stock with affiliates of Oak Investment Partners and Salix Ventures and with The 1818 Fund. These investors purchased an additional 2,272,727 shares of our series A convertible preferred stock for $12.5 million on June 19, 2003.

Dividends. Holders of the series A convertible preferred stock will be entitled to receive pay-in-kind dividends, compounded quarterly, equal to 5% per share of the original share price through the second anniversary of the first funding date on March 31, 2003 (the “First Funding Date”). Thereafter, holders of series A convertible preferred stock will be entitled to receive pay-in-kind dividends, compounded quarterly, equal to 7% per share of the original share price. Upon the voluntary or involuntary liquidation, dissolution or winding up of Psychiatric Solutions, all accrued and unpaid dividends, if any, on shares of series A convertible preferred stock will be paid in cash.

Liquidation and Change of Control. In the event of liquidation, dissolution or winding up of our affairs, holders of the series A convertible preferred stock would be entitled to receive, out of any assets legally available, the liquidation preference on such shares and the series A convertible preferred stock will rank senior to all shares of common stock outstanding. Upon a change of control of PSI, we are required to redeem the series A convertible preferred stock at a price of $5.50 per share (subject to customary adjustments for stock splits and similar transactions), plus accrued and unpaid dividends.

Voting Rights. Each holder of the series A convertible preferred stock is entitled to one vote per share. Except as provided by law or by the express terms of the series A convertible preferred stock, holders of the series A convertible preferred stock will vote together with holders of the common stock as a single class. In addition to voting rights required by Delaware law, approval from a majority of the holders of the issued and outstanding series A convertible preferred stock, voting as a single class, will be required for us to:


	•	amend, add or repeal any provision of our charter or bylaws if such action would adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the series A convertible preferred stock or otherwise adversely affect the holders of series A convertible preferred stock as a class;

	•	offer, sell, designate, authorize or issue shares of any class or series of stock having any preference or priority as to dividends or redemption rights, liquidation preferences, conversion rights or voting rights, superior to or on a parity with any preference or priority of the series A convertible preferred stock;

	•	authorize or issue any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of our stock having any preference or priority as to dividends or redemption rights, liquidation preferences, conversion rights or voting rights, superior to or on a parity with any preference or priority of the series A convertible preferred stock;

	•	reclassify any shares of our capital stock into shares having any preference or priority as to dividends or redemption rights, liquidation preferences, conversion rights, or voting rights, superior to or on a parity with any preference or priority of the series A convertible preferred stock;

	•	increase the number of authorized shares of series A convertible preferred stock or, except at a funding date pursuant to the purchase agreement relating to the series A convertible preferred stock, issue any shares of series A convertible preferred stock; or

	•	pay or declare any dividend, whether in cash or property, or make any other distribution on, our common stock or other equity securities (including other preferred stock) other than the payments due under a contingent value rights agreement dated August 2, 2002 and other outstanding rights.

Conversion. The holder will have the right to convert, in whole or in part, each of its shares at any time. The series A convertible preferred stock will automatically be converted into shares of common stock if at any time after the 18-month anniversary of the First Funding Date, the common stock price on the Nasdaq National Market (computed on a volume-weighted average basis) exceeds $15.00 per share (as adjusted) for thirty consecutive trading days. Except in the event of a change in control or the dissolution or winding up of

Anti-Dilution Protection. For twelve months following the First Funding Date, the conversion price for each share of series A convertible preferred stock will be subject to full ratchet anti-dilution adjustment in the event that we issue additional shares at or below the then applicable conversion price for such shares. The anti-dilution provisions are subject to certain specified exclusions including issuances to employees pursuant to plans approved by our Board. After twelve months following the First Funding Date, the conversion price for each share will be subject to anti-dilution protection based on the weighted average purchase price of our outstanding stock.

Board Members. Following the First Funding Date, holders of the series A convertible preferred stock were entitled to nominate and elect two members of our Board. In connection with the private placement, representatives of Salix Ventures and Brown Brothers Harriman & Co. currently serve on our Board of Directors, and a representative of Oak Investment Partners joined the Board.

You can find the definitions of certain terms used in this description under the subheading “Certain Definitions.” In this description, the word “PSI” refers only to Psychiatric Solutions, Inc. and not to any of its subsidiaries.

PSI will issue the registered notes under an indenture among itself, the Guarantors and Wachovia Bank, National Association, as trustee, under which we issued the old notes. We refer to the old notes and the registered notes collectively as the “notes.” The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939.

The following description is a summary of the material provisions of the indenture governing the notes. It does not restate the agreement in its entirety. We urge you to read the indenture because it, and not this description, define your rights as holders of the notes. Copies of the indenture are available as set forth below under “— Additional Information.” Certain defined terms used in this description but not defined below under “— Certain Definitions” have the meanings assigned to them in the indenture.

The registered holder of a note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture.


	•	are general unsecured obligations of PSI;

	•	are senior in right of payment to all existing and future Subordinated Obligations of PSI;

	•	are subordinated in right of payment to all existing and future Senior Debt of PSI;

	•	are pari passu in right of payment with any future senior subordinated Indebtedness of PSI; and

	•	are fully and unconditionally guaranteed by the Guarantors.


	•	is a general unsecured obligation of the Guarantor;

	•	is senior in right of payment to all existing and future Subordinated Obligations of that Guarantor;

	•	is subordinated in right of payment to all existing and future Senior Debt of that Guarantor; and

	•	is pari passu in right of payment with any future senior subordinated Indebtedness of that Guarantor.

As of March 31, 2003, after giving pro forma effect to the Ramsay Acquisition, the Brown Schools Acquisition and the Financing Transactions, PSI would have had total Senior Debt of approximately $22.0 million and the Guarantors would have guaranteed Senior Debt of $17.0 million. As indicated above and as discussed in detail below under the caption “— Subordination,” payments on the notes and under the Subsidiary Guarantees are subordinated to the prior payment in full of Senior Debt and any guarantees of Senior Debt, respectively. The indenture permits us and the Guarantors to incur additional Senior Debt.

Not all of our subsidiaries guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor subsidiaries, the non-guarantor subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. In 2002, the non-guarantor subsidiaries generated revenue of $118,000 and a net loss of $40,000 and, as of March 31, 2003, had total assets of $8.0 million and stockholders’ equity of $2.8 million. See note 17 to our audited

consolidated financial statements and note 10 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus for more detail about the division of our consolidated revenues and assets between our guarantor and non-guarantor subsidiaries.

As of June 30, 2003, all of our direct and indirect subsidiaries are “Restricted Subsidiaries.” However, under the circumstances described below under the subheading “— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,” we are permitted to designate certain of our subsidiaries as “Unrestricted Subsidiaries.” Our Unrestricted Subsidiaries are not subject to many of the restrictive covenants in the indenture and do not guarantee the notes.

Subject to compliance with the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock” below, PSI may issue additional notes under the indenture from time to time. The notes and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions, and offers to purchase. PSI will issue notes in denominations of $1,000 and integral multiples of $1,000.

Interest on the notes accrues at the rate of 10 5/8% per annum and is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2003. PSI will make each interest payment to the holders of record on the immediately preceding June 1 and December 1.

Interest on the notes accrues from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.

If a holder owning more than $1.0 million principal amount of the notes has given wire transfer instructions to PSI, PSI will pay all principal, interest and premium and Additional Interest, if any, on that holder’s notes in accordance with those instructions. All other payments on notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless PSI elects to make interest payments by check mailed to the holders at their address set forth in the register of holders.

The trustee will initially act as paying agent and registrar. PSI may change the paying agent or registrar without prior notice to the holders of the notes, and PSI or any of its Subsidiaries may act as paying agent or registrar.

A holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a holder to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders are required to pay all taxes due on transfer. PSI is not required to transfer or exchange any note selected for redemption. Also, PSI is not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed.

The notes are guaranteed by (1) each current and future Restricted Subsidiary that is either formed under the laws of the United States or any state of the United States or the District of Columbia and (a) in which PSI has made an Investment of at least $0.1 million or (b) that incurs, guarantees or otherwise provides direct credit support for any Indebtedness, and (2) any other Restricted Subsidiary that guarantees or otherwise

provides direct credit support for Indebtedness of PSI or any of PSI’s domestic subsidiaries; provided, however, that the HUD Financing Subsidiaries do not guarantee the notes. These Subsidiary Guarantees are joint and several obligations of the Guarantors. Each Subsidiary Guarantee is subordinated to the prior payment in full of all Senior Debt of that Guarantor. The obligations of each Guarantor under its Subsidiary Guarantee are limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See “Risk Factors — A subsidiary guarantee could be voided or subordinated because of federal bankruptcy law or comparable state law provisions.”

A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than PSI or another Guarantor, unless:


	(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and

	(2) either:


	(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under the indenture, its Subsidiary Guarantee and the registration rights agreement pursuant to a supplemental indenture satisfactory to the trustee; or

	(b) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the indenture.

The Subsidiary Guarantee of a Guarantor will be released and such Guarantor will be relieved of its obligations under the Subsidiary Guarantee:


	(1) solely as to the purchaser in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of PSI, if the sale or other disposition complies with the provisions described under the caption “— Repurchase at the Option of Holders — Asset Sales” below;

	(2) in connection with any sale of all of the Capital Stock of a Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of PSI, if the sale complies with provisions described under the caption “— Repurchase at the Option of Holders — Asset Sales” below; or

	(3) if PSI designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture.

The payment of principal, interest and premium and Additional Interest, if any, on the notes is subordinated to the prior payment in full in cash of all Senior Debt of PSI or the relevant Guarantor, as the case may be, including Senior Debt incurred after June 30, 2003.

The holders of Senior Debt will be entitled to receive payment in full in cash of all Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before the holders of notes will be entitled to receive any payment with respect to the notes (except that holders of notes may receive and retain Permitted Junior Securities and payments made from the trust described under “— Legal Defeasance and Covenant Defeasance”), in the event of any distribution to creditors of PSI or the relevant Guarantor:


	(1) in a liquidation or dissolution of PSI or the relevant Guarantor;

	(2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to PSI or the relevant Guarantor or its respective property;

	(3) in an assignment for the benefit of creditors; or


	(4) in any marshaling of PSI’s or the relevant Guarantor’s assets and liabilities.

PSI also may not make any payment in respect of the notes (except in Permitted Junior Securities or from the trust described under “— Legal Defeasance and Covenant Defeasance”) if:


	(1) a payment default on Designated Senior Debt occurs and is continuing beyond any applicable grace period; or

	(2) any other default occurs and is continuing on any series of Designated Senior Debt that permits holders of that series of Designated Senior Debt to accelerate its maturity and the trustee receives a notice of such default (a “Payment Blockage Notice”) from PSI or (a) with respect to Designated Senior Debt arising under the Credit Agreement, from the agent for the lenders thereunder, or (b) with respect to any other Designated Senior Debt, from the holders of any such Designated Senior Debt.


	(1) in the case of a payment default, upon the earlier of the date on which such default is cured or waived or such Designated Senior Debt has been discharged or paid in full; and

	(2) in the case of a nonpayment default, upon the earliest of (a) the date on which such nonpayment default is cured or waived, (b) 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated, (c) the date on which such payment blockage period shall have been terminated by written notice to the trustee by the party initiating such payment blockage period or (d) the date on which such Designated Senior Debt has been discharged or paid in full.


	(1) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice; and

	(2) all scheduled payments of principal, interest and premium and Additional Interest, if any, on the notes that have come due have been paid in full in cash.

No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the trustee will be, or can be made, the basis for a subsequent Payment Blockage Notice unless such default has been cured or waived for a period of not less than 90 days.

If the trustee or any holder of the notes receives a payment in respect of the notes (except in Permitted Junior Securities or from the trust described under “— Legal Defeasance and Covenant Defeasance”) when:


	(1) the payment is prohibited by these subordination provisions; and

	(2) the trustee or the holder has actual knowledge that the payment is prohibited;

the trustee or the holder, as the case may be, will hold the payment in trust for the benefit of the holders of Senior Debt. Upon the proper written request of the holders of Senior Debt, the trustee or the holder, as the case may be, will deliver the amounts in trust to the holders of Senior Debt or their proper representative.

PSI or the trustee must promptly notify holders of Senior Debt if payment of the notes is accelerated because of an Event of Default.

The Subsidiary Guarantee of each Guarantor is subordinated to Senior Debt of such Guarantor to the same extent and in the same manner as the notes are subordinated to Senior Debt of PSI. Payments under the Subsidiary Guarantee of each Guarantor is subordinated to the prior payment in full in cash of all Indebtedness under the Credit Agreement and all other Senior Debt of such Guarantor, including Senior Debt incurred after June 30, 2003, on the same basis as provided above with respect to the subordination of payments on the notes by PSI to the prior payment in full of Senior Debt of PSI.

As a result of the subordination provisions described above, in the event of a bankruptcy, liquidation or reorganization of PSI, holders of notes may recover less ratably than creditors of PSI or the Guarantors who

At any time before June 15, 2006, PSI may on one or more occasions redeem up to 35% of the aggregate principal amount of notes (including additional notes) issued under the indenture at a redemption price of 110.625% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of any Equity Offering of common stock of PSI; provided, however, that:


	(1) at least 65% of the original aggregate principal amount of notes issued under the indenture remains outstanding immediately after the occurrence of such redemption (excluding notes held by PSI and its Subsidiaries); and

	(2) the redemption occurs within 90 days of the date of the closing of such Equity Offering.

Except pursuant to the preceding paragraph, the notes are not redeemable at PSI’s option prior to June 15, 2008.

On or after June 15, 2008, PSI may redeem all or a part of the notes at any time, and from time to time, upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

If less than all of the notes are to be redeemed at any time, the trustee will select notes for redemption as follows:


	(1) if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or

	(2) if the notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate.

No notes of $1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional.

If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of notes upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of them called for redemption.

PSI is not required to make mandatory redemption or sinking fund payments with respect to the notes.

If a Change of Control occurs, each holder of notes will have the right to require PSI to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that holder’s notes pursuant to a Change of Control offer on the terms set forth in the indenture. In the Change of Control offer, PSI will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the notes repurchased, to the date of purchase. Within ten days following any Change of Control, PSI will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the Change of Control payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date of such Change of Control, pursuant to the procedures required by the indenture and described in such notice. PSI will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the notes pursuant to a Change of Control offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture, PSI will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the indenture by virtue of such compliance.


	(1) accept for payment all notes or portions of notes properly tendered and not withdrawn pursuant to the Change of Control offer;

	(2) deposit with the paying agent an amount equal to the Change of Control payment in respect of all notes or portions of notes properly tendered; and

	(3) deliver or cause to be delivered to the trustee the notes properly accepted together with an officers’ certificate stating the aggregate principal amount of notes or portions of notes being purchased by PSI.

The paying agent will promptly mail to each holder of notes properly tendered the Change of Control payment for such notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each new note will be in a principal amount of $1,000 or an integral multiple of $1,000.

Prior to complying with any of the provisions of this “Change of Control” covenant, but in any event within 90 days following a Change of Control, PSI will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of notes required by this covenant. PSI will publicly announce the results of the Change of Control offer on or as soon as practicable after the Change of Control payment date.

The provisions described above that require PSI to make a Change of Control offer following a Change of Control will be applicable whether or not any other provisions of the indenture are applicable to the Change of Control event. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the holders of the notes to require that PSI repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction.

PSI will not be required to make a Change of Control offer upon a Change of Control if a third party makes the Change of Control offer in the manner, at the times and otherwise in compliance with the

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of PSI and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of notes to require PSI to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of PSI and its Subsidiaries taken as a whole to another Person or group may be uncertain.

PSI will not, and will not permit any Restricted Subsidiary to, consummate an Asset Sale unless:


	(1) PSI (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an officers’ certificate delivered to the trustee) of the assets sold, leased, transferred, conveyed or otherwise disposed of or Equity Interests of any Restricted Subsidiary issued, sold, transferred, conveyed or otherwise disposed of;

	(2) at least 75% of the consideration received in the Asset Sale by PSI or such Restricted Subsidiary is in the form of cash. For purposes of this clause (2), each of the following will be deemed to be cash:


	(a) any liabilities, as shown on PSI’s or such Restricted Subsidiary’s most recent balance sheet, of PSI or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases PSI or such Restricted Subsidiary from further liability;

	(b) any securities, notes or other obligations received by PSI or any such Restricted Subsidiary from such transferee that are converted by PSI or such Restricted Subsidiary into cash within 90 days, to the extent of the cash received in that conversion; and

	(c) with respect to any sale of Capital Stock of a Restricted Subsidiary to one or more Qualified Physicians, promissory notes or similar obligations from such physicians or health care professionals; provided that the aggregate amount of such promissory notes or other similar obligations held by PSI and its Restricted Subsidiaries shall not exceed $2.5 million outstanding at any one time; and


	(3) PSI delivers an officers’ certificate to the trustee certifying that such Asset Sale complies with the foregoing clauses (1) and (2).

Within 365 days after the receipt of any Net Proceeds from an Asset Sale, PSI may apply those Net Proceeds at its option:


	(1) to repay Senior Debt (other than Indebtedness owed to PSI, any Guarantor or any Affiliate of PSI) and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;

	(2) to acquire all or substantially all of the assets of, or all of the Voting Stock of, another Person engaged in a Permitted Business; or

	(3) to acquire other long-term assets or property that are used in a Permitted Business.

Pending the final application of any Net Proceeds, PSI may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $7.5 million, PSI will make an Asset Sale Offer to all holders of notes to purchase the maximum principal amount of notes and, if PSI is required to do so under the terms of any other Indebtedness that is pari passu with the notes, such other Indebtedness on a pro rata basis with the notes, that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of the purchase of all properly tendered and not withdrawn notes pursuant to an Asset Sale Offer, PSI may use such remaining Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee will select the notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

PSI will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture, PSI will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such conflict.

The agreements governing PSI’s outstanding Senior Debt currently prohibit PSI from purchasing any notes, and also provide that certain change of control or asset sale events with respect to PSI would constitute a default under these agreements. Any future credit agreements or other agreements relating to Senior Debt to which PSI becomes a party may contain similar restrictions and provisions. In the event a Change of Control or Asset Sale occurs at a time when PSI is prohibited from purchasing notes, PSI could seek the consent of its senior lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If PSI does not obtain such a consent or repay such borrowings, PSI will remain prohibited from purchasing notes. In such case, PSI’s failure to purchase tendered notes would constitute an Event of Default under the indenture which would, in turn, constitute a default under such Senior Debt. In such circumstances, the subordination provisions in the indenture would likely restrict payments to the holders of notes.

PSI will not, and will not permit any Restricted Subsidiary to, directly or indirectly:


	(1) declare or pay any dividend or make any other payment or distribution (A) on account of PSI’s or any Restricted Subsidiary’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving PSI or any Restricted Subsidiary) or (B) to the direct or indirect holders of PSI’s or any Restricted Subsidiary’s Equity Interests in their capacity as such (other than dividends or distributions (i) payable in Equity Interests (other than Disqualified Stock) of PSI or (ii) to PSI or a wholly owned Restricted Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis);

	(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving PSI) any Equity Interests of PSI;

	(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligations, except a payment of interest or principal at the Stated Maturity thereof; or

	(4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “Restricted Payments”),


	(a) no Default or Event of Default has occurred and is continuing; and

	(b) PSI would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the most recently ended four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Stock;” and

	(c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by PSI and the Restricted Subsidiaries after the date of the indenture (excluding Restricted Payments permitted by clauses (2), (3) and (4) of the next succeeding paragraph), is less than the sum, without duplication, of:


	(I) 50% of the Consolidated Net Income of PSI for the period (taken as one accounting period) from the beginning of the first fiscal quarter after which the notes are first issued to the end of PSI’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

	(II) 100% of the aggregate net cash proceeds received by PSI since the date of the indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of PSI (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of PSI, in either case, that have been converted into or exchanged for such Equity Interests of PSI (other than Equity Interests or Disqualified Stock or debt securities) sold to a Subsidiary of PSI), plus

	(III) to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash proceeds with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus

	(IV) in case, after the date hereof, any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary under the terms of the indenture or has been merged, consolidated or amalgamated with or into, or transfers or conveys assets to, or is liquidated into PSI or a Restricted Subsidiary, an amount equal to the lesser of (1) the net book value at the date of the redesignation, combination or transfer of the aggregate Investments made by PSI and the Restricted Subsidiaries in the Unrestricted Subsidiary (or of the assets transferred or conveyed, as applicable), and (2) the fair market value of the Investments owned by PSI and the Restricted Subsidiaries in such Unrestricted Subsidiary at the time of the redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable).

So long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit:


	(1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of the indenture;

	(2) the redemption, repurchase, retirement, defeasance or other acquisition of any Subordinated Obligations of PSI or any Guarantor or of any Equity Interests of PSI in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of PSI) of, Equity Interests of PSI (other than Disqualified Stock); provided, however, that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (c)(II) of the preceding paragraph;

	(3) the redemption, repurchase, defeasance or other acquisition of any Subordinated Obligations of PSI or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing


	Indebtedness; provided, however, that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (c)(II) of the preceding paragraph;

	(4) the redemption, repurchase or other acquisition or retirement for value of any Equity Interests of PSI or any Restricted Subsidiary of PSI (a) held by any member of PSI’s (or any Restricted Subsidiary’s) management pursuant to any management equity subscription plan or agreement, stock option or stock purchase plan or agreement or employee benefit plan as may be adopted by PSI from time to time or pursuant to any agreement with any director or officer in existence on the date of the indenture or (b) from an employee of PSI upon the termination of such employee’s employment with PSI; provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests in reliance on this clause (4) may not exceed $3.0 million in any twelve-month period;

	(5) repurchases, acquisitions or retirements of Capital Stock of PSI deemed to occur upon the exercise of stock options or similar rights under employee benefit plans of PSI or its Subsidiaries if such Capital Stock represents all or a portion of the exercise price thereof;

	(6) the repurchase or retirement of common stock of PSI purchased by The 1818 Mezzanine Fund II, L.P. pursuant to the Securities Purchase Agreement, whether held by The 1818 Mezzanine Fund II, L.P. or its transferees; provided, however, that notwithstanding that a Default or Event of Default shall have occurred and be continuing, PSI will be permitted to issue the Put Price Notes in satisfaction of its obligations under the Securities Purchase Agreement;

	(7) the repurchase or retirement of common stock of PSI held by CapSource pursuant to the terms of the CapSource Warrant;

	(8) the payment of pay-in-kind dividends on the Series A Preferred Stock in accordance with their terms as in effect on the date of the indenture; and

	(9) other Restricted Payments in an aggregate amount since the issue date not to exceed $10.0 million.

The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the assets, property or securities proposed to be transferred or issued by PSI or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined by the Board of Directors whose resolution with respect thereto will be delivered to the trustee. The Board of Directors’ determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $7.5 million. Not later than the date of making any Restricted Payment, PSI will deliver to the trustee an officers’ certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this “Restricted Payments” covenant were computed, together with a copy of any fairness opinion or appraisal required by the indenture. If PSI or a Restricted Subsidiary makes a Restricted Payment which at the time of the making of such Restricted Payment would in the good faith determination of PSI be permitted under the provisions of the Indenture, such Restricted Payment shall be deemed to have been made in compliance with the Indenture notwithstanding any subsequent adjustments made in good faith to PSI financial statements affecting Consolidated Net Income of PSI for any period.

PSI will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and PSI will not issue any Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of preferred stock (including Disqualified Stock) other than to PSI; provided, however, that PSI may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, any of PSI’s Restricted Subsidiaries that are Guarantors may incur Indebtedness (including Acquired Indebtedness) and the HUD Financing Subsidiaries may incur HUD

Financing, if the Fixed Charge Coverage Ratio for PSI’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00 to 1 for the period from the Issue Date through June 30, 2006 and 2.25 to 1 thereafter, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.

The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):


	(1) the incurrence by PSI or any Guarantor of additional Indebtedness and letters of credit under one or more Credit Facilities and Guarantees thereof by the Guarantors; provided that the aggregate principal amount of all Indebtedness and letters of credit of PSI and the Guarantors incurred pursuant to this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of PSI and the Guarantors thereunder) does not exceed the greater of (A) $85.0 million or (B) 85% of the net book value of receivables and 65% of the net book value of real property (other than real property pledged in connection with any HUD Financing) of PSI and the Restricted Subsidiaries on a consolidated basis at the time the Indebtedness is incurred, as determined in accordance with GAAP, less the aggregate amount of Net Proceeds from an Asset Sale applied by PSI and its Subsidiaries to repay Indebtedness thereunder, pursuant to the provisions described under the caption “— Repurchase at the Option of Holders — Asset Sales;”

	(2) the incurrence by PSI and the Restricted Subsidiaries of the Existing Indebtedness;

	(3) the incurrence by PSI and the Guarantors of Indebtedness represented by the old notes (and the related exchange notes to be issued pursuant to the Registration Rights Agreement) and the incurrence by the Guarantors of the Subsidiary Guarantees of those notes;

	(4) the incurrence by PSI or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of PSI or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4), not to exceed $15.0 million at any time outstanding;

	(5) the incurrence by PSI or any Restricted Subsidiary of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, defease, renew, refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was incurred under the first paragraph of this covenant or clauses (2), (3), (6) or (10) of this paragraph;

	(6) the incurrence by PSI or any Restricted Subsidiary of intercompany Indebtedness between or among PSI and any Restricted Subsidiary; provided, however, that:


	(a) if PSI or a Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the notes or the Subsidiary Guarantees, as the case may be; and

	(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than PSI or a Restricted Subsidiary and (ii) any subsequent sale or other transfer of any such Indebtedness to a Person that is not either PSI or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by PSI or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);


	(7) the incurrence of any Physician Support Obligations by PSI or any Restricted Subsidiary;


	(8) the incurrence of Indebtedness of PSI or any Restricted Subsidiary consisting of guarantees, indemnities, holdbacks or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including without limitation, shares of Capital Stock of Restricted Subsidiaries or contingent payment obligations incurred in connection with the acquisition of assets which are contingent on the performance of the assets acquired, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such assets or shares of Capital Stock of such Restricted Subsidiary for the purpose of financing such acquisition;

	(9) the incurrence if Indebtedness of PSI or any Restricted Subsidiary represented by (a) letters of credit for the account of PSI or any Restricted Subsidiary or (b) other obligations to reimburse third parties pursuant to any surety bond or other similar arrangements, which letters of credit or other obligations, as the case may be, are intended to provide security for workers’ compensation claims, payment obligations in connection with sales tax and insurance or other similar requirements in the ordinary course of business;

	(10) the incurrence by PSI or any Restricted Subsidiary of Hedging Obligations that are incurred in the normal course of business and consistent with past business practices for the purpose of fixing or hedging currency or interest rate risk (including with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding in connection with the conduct of their respective businesses) and not for speculative purposes;

	(11) the Guarantee by PSI or any of the Guarantors of Indebtedness of PSI or a Restricted Subsidiary that was permitted to be incurred by another provision of this covenant;

	(12) the incurrence by PSI’s Unrestricted Subsidiaries of Non-recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of PSI that was not permitted by this clause (12);

	(13) the incurrence of the Put Price Notes or the CapSource Put Indebtedness; and

	(14) the incurrence by PSI or any Guarantor of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (14), not to exceed $15.0 million.

For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above or is entitled to be incurred pursuant to the first paragraph of this covenant, in each case, as of the date of incurrence thereof, PSI shall, in its sole discretion, classify (or later reclassify in whole or in part, in its sole discretion) such item of Indebtedness in any manner that complies with this covenant and such Indebtedness will be treated as having been incurred pursuant to such clauses or the first paragraph hereof, as the case may be, designated by PSI. Indebtedness under Credit Facilities outstanding on the date on which the notes are first issued and authenticated under the indenture will be deemed to have been incurred on such date in reliance of the exception provided by clause (1) of the definition of Permitted Debt. Accrual of interest or dividends, the accretion of accreted value or liquidation preference and the payment of interest or dividends in the form of additional Indebtedness or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant.

PSI will not, and will not permit any Restricted Subsidiary to, create, incur or assume any consensual Liens of any kind against or upon any of their respective properties or assets, or any proceeds, income or profit therefrom that secure Senior Subordinated Indebtedness or Subordinated Obligations, provided that:


	(1) in the case of Liens securing Subordinated Obligations, the notes are secured by a Lien on such property, assets, proceeds, income or profit that is senior in priority to such Liens; and


	(2) in the case of Liens securing Senior Subordinated Indebtedness, the notes are equally and ratably secured by a Lien on such property, assets, proceeds, income or profit.

PSI (a) will not, and will not permit any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than to PSI or to any Restricted Subsidiary), unless:


	(1) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Restricted Subsidiary, and

	(2) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the provisions described under “— Repurchase at the Option of Holders — Asset Sales” above;

provided, however, that this clause (a) will not apply to any pledge of Capital Stock of any Restricted Subsidiary securing any Permitted Debt or any exercise of remedies in connection therewith; provided that the Lien securing such Permitted Debt is not prohibited by the provisions of the covenant described above under the caption “— Liens;”

(b) will not permit any Restricted Subsidiary to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors’ qualifying shares) to any Person other than PSI or any Restricted Subsidiary.

provided, however, that clauses (a) and (b) shall not prohibit any issuance, sale or other disposition of Common Stock of a Restricted Subsidiary to one or more Qualified Physicians if, immediately after giving effect thereto, such Restricted Subsidiary would remain a Restricted Subsidiary and PSI will, directly or indirectly, retain at least 80% of the Capital Stock of such Restricted Subsidiary, and the Net Proceeds from such issuance, sale or other disposition are applied in accordance with the provisions described under “— Repurchase at the Option of Holders — Asset Sales” above.

PSI will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:


	(a) pay dividends or make any other distributions on its Capital Stock to PSI or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to PSI or any Restricted Subsidiary;

	(b) make loans or advances to PSI or any Restricted Subsidiary; or

	(c) transfer any of its properties or assets to PSI or any Restricted Subsidiary.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:


	(1) agreements governing Existing Indebtedness, Credit Facilities (including the Credit Agreement) and other agreements relating to the Financing Transactions as in effect on the date of the indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on June 30, 2003;

	(2) agreements governing the Series A Preferred Stock as in effect on June 30, 2003;

	(3) the indenture, the notes and the Subsidiary Guarantees;


	(4) the Securities Purchase Agreement;

	(5) agreements related to HUD Financing and any amendments of those agreements;

	(6) applicable law;

	(7) any instrument governing Indebtedness or Capital Stock of a Person acquired by PSI or any Restricted Subsidiary as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;

	(8) customary non-assignment provisions in leases and other contracts entered into in the ordinary course of business and consistent with industry practices;

	(9) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (c) of the first paragraph of this covenant;

	(10) any agreement for the sale or other disposition of a Restricted Subsidiary or the assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition or the sale or other disposition of its assets;

	(11) Permitted Refinancing Indebtedness; provided, however, that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

	(12) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of the covenant described above under the caption “— Liens” that limit the right of the debtor to dispose of the assets subject to such Liens; and

	(13) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business.

Neither PSI nor any Guarantor may, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not PSI or such Guarantor, as the case may be, is the surviving corporation) or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of PSI or any Guarantor, in one or more related transactions, to another Person; unless:


	(a) PSI or such Guarantor, as the case may be, is the surviving corporation; or

	(b) the Person formed by or surviving any such consolidation or merger (if other than PSI or such Guarantor, as the case may be) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia;


	(2) the Person formed by or surviving any such consolidation or merger (if other than PSI or such Guarantor, as the case may be) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of PSI or such Guarantor, as the case may be, under the notes and the indenture pursuant to agreements reasonably satisfactory to the trustee;

	(3) immediately after such transaction no Default or Event of Default exists; and

	(4) except with respect to a consolidation or merger of PSI with or into a Guarantor, or a Guarantor with or into another Guarantor, PSI or such Guarantor, as the case may be, or the Person formed by or surviving any such consolidation or merger (if other than PSI or such Guarantor), or to which such sale,

assignment, transfer, conveyance or other disposition has been made will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under the caption “— Incurrence of Indebtedness and Issuance of Preferred Stock” above.

Notwithstanding the preceding clause (4), any Restricted Subsidiary of PSI may consolidate with, merge into or transfer all or part of its properties and assets to PSI or a Guarantor, and notwithstanding the preceding clause (2), any Guarantor may transfer real property that is the subject of a HUD Financing to a HUD Financing Subsidiary in connection with a HUD Financing permitted to be incurred pursuant to the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Stock.”

In addition, PSI may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.

Except as described with respect to the release of Subsidiary Guarantees of Guarantors under the caption “Subsidiary Guarantees” above, the entity formed by or surviving any consolidation or merger (if other than PSI or a Guarantor) will succeed to, and be substituted for, and may exercise every right and power of, such Guarantor under the indenture.

The Board of Directors of PSI may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by PSI and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption “— Restricted Payments” or Permitted Investments, as determined by PSI. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.

PSI will not, and will not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an “Affiliate Transaction”), unless:


	(1) the Affiliate Transaction is (a) evidenced in writing if it involves transactions of $1.0 million or more and (b) is on terms that are no less favorable to PSI or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by PSI or such Restricted Subsidiary with an unrelated Person; and

	(2) PSI delivers to the trustee:


	(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.5 million, a resolution of the Board of Directors set forth in an officers’ certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

	(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the PSI or such Restricted Subsidiary from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:


	(1) transactions between or among PSI and/or any Restricted Subsidiary;

	(2) sales of Equity Interests (other than Disqualified Stock) to Affiliates of PSI;

	(3) reasonable and customary directors’ fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of PSI or a Restricted Subsidiary entered into in the ordinary course of business;

	(4) any transactions made in compliance with the covenant described above under the caption “— Restricted Payments;”

	(5) transactions pursuant to the Securities Purchase Agreement;

	(6) loans and advances to non-executive officers and employees of PSI or any Restricted Subsidiary in the ordinary course of business in accordance with the past practices of PSI or any Restricted Subsidiary; and

	(7) any agreement as in effect as of June 30, 2003 or any amendment thereto so long as any such amendment is not more disadvantageous to the holders in any material respect than the original agreement as in effect on June 30, 2003.

If PSI or any Restricted Subsidiary acquires or creates another Subsidiary after June 30, 2003 that (1) is formed under the laws of the United States or any state of the United States or the District of Columbia and in which PSI or any Restricted Subsidiary has made an Investment of at least $0.1 million or (2) incurs, guarantees or otherwise provides direct credit support for any Indebtedness of PSI or any of PSI’s domestic subsidiaries, then that newly acquired or created Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an opinion of counsel satisfactory to the trustee within 10 business days of the date on which it was acquired or created; provided, however, that the foregoing shall not apply to (i) HUD Financing Subsidiaries and (ii) Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with the indenture. The Subsidiary Guarantee of any such newly acquired or created Subsidiary that becomes a Guarantor will be subordinated to all Indebtedness under the Credit Agreement and all other Senior Debt of such Guarantor to the same extent as the notes are subordinated to the Senior Debt of PSI.

PSI will not incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of PSI and senior in any respect in right of payment to the notes; provided, however, that no Indebtedness of PSI will be deemed to be contractually subordinated in right of payment solely by virtue of being unsecured. No Guarantor will incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor’s Subsidiary Guarantee; provided, however, that no Indebtedness of a Guarantor will be deemed to be contractually subordinated in right of payment solely by virtue of being unsecured.

PSI will not, and will not permit any Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to PSI and its Subsidiaries taken as a whole.

PSI will not, and will not permit any Restricted Subsidiary to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of notes for or as an inducement to any consent,

waiver or amendment of any of the terms or provisions of the indenture or the notes unless such consideration is offered to be paid and is paid to all holders of the notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Whether or not required by the Commission, so long as any notes are outstanding, PSI will furnish to the holders of notes, within the time periods specified in the Commission’s rules and regulations:


	(1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if PSI were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by PSI’s certified independent accountants; and

	(2) all current reports that would be required to be filed with the Commission on Form 8-K if PSI were required to file such reports.

If PSI has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and if PSI or any of its Restricted Subsidiaries has made an Investment of at least $0.1 million in such Unrestricted Subsidiary, in Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of PSI and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of PSI.

In addition, following the consummation of the exchange offer contemplated by the registration rights agreement, whether or not required by the Commission, PSI will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission’s rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, PSI and the Guarantors have agreed that, for so long as any notes remain outstanding, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.


	(1) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the notes (whether or not prohibited by the subordination provisions of the indenture);

	(2) default in payment when due of the principal of or premium, if any, on the notes (whether or not prohibited by the subordination provisions of the indenture);

	(3) failure by PSI or any Restricted Subsidiary to comply with the provisions described under the captions “— Certain Covenants — Restricted Payments,” “—Incurrence of Indebtedness and Issuance of Preferred Stock” or “— Merger, Consolidation or Sale of Assets;”

	(4) failure by PSI or any Restricted Subsidiary for 30 days after notice to comply with the provisions described under the captions “Repurchase at the Option of Holders — Asset Sales” or “Repurchase at the Option of Holders — Change of Control;”

	(5) failure by PSI or any Restricted Subsidiary for 60 days after notice to comply with any of its other agreements in the indenture or the notes;

	(6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by PSI or any Restricted


	Subsidiary (or the payment of which is guaranteed by PSI or any Restricted Subsidiary) whether such Indebtedness or Guarantee now exists, or is created after June 30, 2003, if that default:


	(a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or

	(b) results in the acceleration of such Indebtedness prior to its express maturity,


	and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more;


	(7) failure by PSI or any Restricted Subsidiary to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

	(8) except as permitted by the indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and

	(9) certain events of bankruptcy or insolvency described in the indenture with respect to PSI or any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary.

In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to PSI, any Subsidiary that would constitute a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately.

Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the notes notice of any continuing Default or Event of Default if it determines that withholding notes is in their interest, except a Default or Event of Default relating to the payment of principal or interest or Additional Interest.

The holders of at least a majority in aggregate principal amount of the notes then outstanding by notice to the trustee may on behalf of the holders of all of the notes waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest or Additional Interest on, or the principal of, the notes.

In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of PSI with the intention of avoiding payment of the premium that PSI would have had to pay if PSI then had elected to redeem the notes pursuant to the optional redemption provisions of the indenture, an equivalent premium will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the notes. If an Event of Default occurs prior to June 15, 2008, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of PSI with the intention of avoiding the prohibition on redemption of the notes prior to June 15, 2008, then the premium specified in the indenture will also become immediately due and payable to the extent permitted by law upon the acceleration of the notes.

PSI is required to deliver to the trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any Default or Event of Default, PSI is required to deliver to the trustee a statement specifying such Default or Event of Default.

No director, officer, employee, incorporator or stockholder of PSI or any Guarantor, as such, will have any liability for any obligations of PSI or the Guarantors under the notes, the indenture, the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.

PSI may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding notes and all obligations of the Guarantors discharged with respect to their Subsidiary Guarantees (“Legal Defeasance”) except for:


	(1) the rights of holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on such notes when such payments are due from the trust referred to below;

	(2) PSI’s obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust;

	(3) the rights, powers, trusts, duties and immunities of the trustee, and PSI’s and the Guarantors’ obligations in connection therewith; and

	(4) the Legal Defeasance provisions of the indenture.

In addition, PSI may, at its option and at any time, elect to have the obligations of PSI and the Guarantors released with respect to certain covenants that are described in the indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under “— Events of Default and Remedies” will no longer constitute an Event of Default with respect to the notes.


	(1) PSI must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on the outstanding notes on the stated maturity or on the applicable redemption date, as the case may be, and PSI must specify whether the notes are being defeased to maturity or to a particular redemption date;

	(2) in the case of Legal Defeasance, PSI has delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) PSI has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

	(3) in the case of Covenant Defeasance, PSI has delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;


	(4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);

	(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the indenture) to which PSI or any of its Subsidiaries is a party or by which PSI or any of its Subsidiaries is bound;

	(6) PSI must deliver to the trustee an officers’ certificate stating that the deposit was not made by PSI with the intent of preferring the holders of notes over the other creditors of PSI with the intent of defeating, hindering, delaying or defrauding creditors of PSI or others; and

	(7) PSI must deliver to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Except as provided in the next two succeeding paragraphs, the indenture or the notes may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes), and any existing default or compliance with any provision of the indenture or the notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes).

Without the consent of each holder affected, an amendment or waiver may not (with respect to any notes held by a non-consenting holder):


	(1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver;

	(2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption or repurchase of the notes relating to the covenant (and applicable definitions) described under the caption “— Repurchase at the Option of Holders — Change of Control” above;

	(3) reduce the rate of or change the time for payment of interest on any note;

	(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the notes and a waiver of the payment default that resulted from such acceleration);

	(5) make any note payable in money other than that stated in the notes;

	(6) make any change in the provisions (including applicable definitions) of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on the notes;

	(7) waive a redemption or repurchase payment with respect to any note (including a payment required by the provisions described under the caption “— Repurchase at the Option of Holders” above);

	(8) make any change in any Subsidiary Guarantees that would adversely affect the holders of the notes or release any Guarantor from any of its obligations under its Subsidiary Guarantee or the indenture, except in accordance with the terms of the indenture;

	(9) make any change to the subordination provisions of the indenture (including applicable definitions) that would adversely affect the holders of the notes; or

	(10) make any change in the preceding amendment and waiver provisions.

Under the Credit Agreement, any amendment to the provisions of the indenture relating to the subordination or legal or covenant defeasance provisions will require the consent of the lenders under the Credit Agreement or the agent therefor, acting on their behalf.

Notwithstanding the preceding, without the consent of any holder of notes, PSI, the Guarantors and the trustee may amend or supplement the indenture or the notes:


	(1) to cure any ambiguity, defect or inconsistency;

	(2) to provide for uncertificated notes in addition to or in place of certificated notes;

	(3) to provide for the assumption of PSI’s obligations to holders of notes in the case of a merger or consolidation or sale of all or substantially all of PSI’s assets;

	(4) to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder;

	(5) to provide for or confirm the issuance of additional notes otherwise permitted to be incurred by the indenture; or

	(6) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act.

The indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when:


	(a) all notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust and thereafter repaid to PSI, have been delivered to the trustee for cancellation; or

	(b) all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year, and PSI has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination of cash in U.S. dollars and non-callable U.S. Government Securities, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the notes not delivered to the trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption;


	(2) no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which PSI or any Guarantor is a party or by which PSI or any Guarantor is bound;

	(3) PSI has paid or caused to be paid all sums payable by it under the indenture; and

	(4) PSI has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or the redemption date, as the case may be.

In addition, PSI must deliver an officers’ certificate and an opinion of counsel to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

If the trustee becomes a creditor of PSI or any Guarantor, the indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest, it must (i) eliminate such conflict within 90 days, (ii) apply to the Commission for permission to continue or (iii) resign.

The holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless such holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense.

Anyone who receives this prospectus may obtain a copy of the indenture and registration rights agreement without charge by writing to Psychiatric Solutions, Inc., 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, Attention: Chief Accounting Officer.

Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.


	(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and

	(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Asset Sale” means the sale, lease, transfer, conveyance or other disposition of any assets or rights, other than sales, leases, transfers, conveyances or other dispositions of inventory in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of PSI and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption “— Repurchase at the Option of Holders — Change of Control” and/or the provisions described above under the caption “— Certain Covenants — Merger, Consolidation or Sale of Assets” and not by the provisions described under the caption “— Repurchase at the Option of Holders — Asset Sales.”

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:


	(1) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million;


	(2) a sale, lease, transfer, conveyance or other disposition of assets between or among PSI and its Restricted Subsidiaries;

	(3) an issuance of Equity Interests by a Restricted Subsidiary to PSI or to another Restricted Subsidiary;

	(4) a sale, lease, transfer, conveyance or other disposition effected in compliance with the provisions described under the caption “— Merger, Consolidation or Sale of Assets;”

	(5) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption “— Certain Covenants — Restricted Payments;”

	(6) a transfer or property or assets that are obsolete, damaged or worn out equipment and that are no longer useful in the conduct of PSI or its Subsidiaries’ business and that is disposed of in the ordinary course of business; and

	(7) a Permitted Asset Swap.

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.


	(1) with respect to a corporation, the board of directors of the corporation;

	(2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and

	(3) with respect to any other Person, the board or committee of such Person serving a similar function.

“Brown Schools Acquisition” means the acquisition of six behavioral health care facilities from The Brown Schools, Inc. pursuant to the Asset Purchase Agreement by and between The Brown Schools, Inc. and Psychiatric Solutions, Inc. dated February 13, 2003.

“Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.


	(1) in the case of a corporation, corporate stock;

	(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

	(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

	(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“CapSource Warrant” means the Common Stock Purchase Warrant of PSI dated August 5, 2002 in favor of CapitalSource Holdings, LLC or its registered assigns.

“CapSource Put Indebtedness” means Indebtedness of PSI incurred as a result of the failure of PSI to pay the redemption price (together with accrued interest) in the event PSI fails to purchase the CapSource Warrant in certain circumstances involving the acceleration or prepayment of the Credit Agreement, an initial public offering, or certain mergers, sales or changes of control involving PSI.


	(1) United States dollars;

	(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition;

	(3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better;

	(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

	(5) commercial paper rated at least A-1 by Standard & Poor’s Rating Services, or at least P-1 by Moody’s Investors Service, Inc., and in each case maturing within six months after the date of acquisition; and

	(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.


	(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of PSI and its Restricted Subsidiaries, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act);

	(2) the adoption of a plan relating to the liquidation or dissolution of PSI;

	(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as defined above), other than the Permitted Group, becomes the Beneficial Owner, directly or indirectly, of more than 30% of the Voting Stock of PSI, measured by voting power rather than number of shares;

	(4) the consummation by PSI of any “going private” transaction that would constitute a “Rule 13e-3 transaction” as defined in the Exchange Act;

	(5) the first day on which a majority of the members of the Board of Directors of PSI are not Continuing Directors; or

	(6) PSI consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, PSI, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of PSI or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of PSI outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the


	surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance).

“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:


	(1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus

	(2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

	(3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

	(4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for expenses to be paid in cash in any future period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus

	(5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business,

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:


	(1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;

	(2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders;

	(3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition will be excluded; and

	(4) the cumulative effect of a change in accounting principles will be excluded.

“Consolidated Net Tangible Assets” means, as of any date of determination, the sum of the amounts that would appear on a consolidated balance sheet of PSI and its consolidated Restricted Subsidiaries as the total assets (less accumulated depreciation and amortization, allowances for doubtful receivables, other

applicable reserves and other properly deductible items) of PSI and its Restricted Subsidiaries, after giving effect to purchase accounting, and after deducting therefrom consolidated current liabilities and, to the extent otherwise included, the amounts of (without duplication):


	(1) the excess of cost over fair market value of assets or businesses acquired;

	(2) any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of PSI immediately preceding the date of issuance of the notes as a result of a change in the method of valuation in accordance with GAAP;

	(3) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;

	(4) minority interests in consolidated subsidiaries held by Persons other than PSI or any Restricted Subsidiary;

	(5) treasury stock;

	(6) cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and

	(7) Investments in and assets of Unrestricted Subsidiaries.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of PSI who:


	(1) was a member of such Board of Directors on the date of the indenture; or

	(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Credit Agreement” means the Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of June 30, 2003, by and among PSI, the Guarantors party thereto, CapitalSource Finance, LLC and the lenders from time to time party thereto, providing for up to $50.0 million of revolving credit borrowings and $17.0 million of term borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, restated, modified, renewed, refunded, replaced or refinanced (in whole or in part) from time to time, whether or not with the same lenders or agent.

“Credit Facilities” means, one or more debt facilities or agreements (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced (including any agreement to extend the maturity thereof and adding additional borrowers or guarantors) in whole or in part from time to time under the same or any other agent, lender or group of lenders and including increasing the amount of available borrowings thereunder; provided that such increase is permitted by the “— Incurrence of Indebtedness and Issuance of Preferred Stock” covenant above.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Designated Senior Debt” means (i) any Indebtedness outstanding under the Credit Agreement and (ii) any other Senior Debt permitted hereunder the principal amount of which is $25.0 million or more and that has been designated by PSI as “Designated Senior Debt.”

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require PSI to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that PSI may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption “— Certain Covenants — Restricted Payments.”

“Domestic Subsidiary” means any Restricted Subsidiary of PSI that was formed under the laws of the United States or any state or territory of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of PSI.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Equity Offering” means any private or public sale of common stock of PSI.

“Existing Indebtedness” means Indebtedness existing on June 30, 2003 (other than Indebtedness under the indenture governing the notes and the Credit Agreement).

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:


	(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations;

	(2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

	(3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

	(4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of PSI (other than Disqualified Stock) or to PSI or a Restricted Subsidiary of PSI, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP.

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of

Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.


	(1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect (calculated in accordance with Regulation S-X) as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period will be calculated without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income;

	(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP (other than the treatment of the termination and expiration of management contracts which shall be governed by Accounting Principles Board Opinion No. 30 as in effect before the adoption of FAS 144), and operations or businesses disposed of prior to the Calculation Date, will be excluded; and

	(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP (other than the treatment of the termination and expiration of management contracts which shall be governed by Accounting Principles Board Opinion No. 30 as in effect before the adoption of FAS 144), and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on June 30, 2003.

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.


	(1) PSI’s Domestic Subsidiaries (other than the HUD Financing Subsidiaries and PSI Surety, Inc.); and

	(2) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the indenture;

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:


	(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and

	(2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates.

“HUD Financing” means Indebtedness of HUD Financing Subsidiaries in an aggregate principal amount at any time outstanding not to exceed the greater of $22.0 million or 12.5% of Consolidated Net Tangible Assets, that is insured by the Federal Housing Administration, an organizational unit of the United States Department of Housing and Urban Development.

“HUD Financing Subsidiaries” means any Domestic Subsidiary formed solely for the purpose of holding assets pledged as security in connection with any HUD Financing, including Holly Hill Real Estate,

LLC, PSI Cedar Springs Hospital Real Estate, Inc., Psychiatric Solutions of Oklahoma Real Estate, Inc., Neuro Rehab Real Estate, L.P., Texas Laurel Ridge Hospital Real Estate L.P., Texas Oaks Psychiatric Hospital Real Estate, L.P., Texas San Marcos Treatment Center Real Estate, L.P., Cypress Creek Real Estate, L.P., West Oaks Real Estate, L.P. and Riveredge Real Estate, Inc.; provided that the designation of a Domestic Subsidiary as a HUD Financing Subsidiary shall be evidenced by an Officers’ Certificate stating that such Domestic Subsidiary shall be designated as a HUD Financing Subsidiary and certifying that the sole purpose of such HUD Financing Subsidiary shall be to hold assets pledged as security in connection with HUD Financing and that the incurrence of the HUD Financing complies with the provisions of the covenant described above under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock.”

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:


	(1) in respect of borrowed money;

	(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

	(3) in respect of banker’s acceptances;

	(4) representing Capital Lease Obligations;

	(5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

	(6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person.


	(a) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and

	(b) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances, fees and compensation paid to officers, directors and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If PSI or any Subsidiary of PSI sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of PSI such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of PSI, PSI will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption “— Certain Covenants — Restricted Payments.” The acquisition by PSI or any Subsidiary of PSI of a Person that holds an Investment in a third Person will be deemed to be an Investment by PSI or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption “— Certain Covenants — Restricted Payments.”

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:


	(1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

	(2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

“Net Proceeds” means the aggregate cash proceeds received by PSI or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.


	(1) as to which neither PSI nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;

	(2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time of both any holder of any other Indebtedness (other than the Notes) of PSI or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and

	(3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of PSI or any of its Restricted Subsidiaries.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Permitted Asset Swap” means sales, transfers or other dispositions of assets, including all of the outstanding Capital Stock of a Restricted Subsidiary, for consideration at least equal to the fair market value of the assets sold or disposed of, but only if the consideration received consists of Capital Stock of a Person that becomes a Restricted Subsidiary engaged in, or property or assets (other than cash, except to the extent used as a bona fide means of equalizing the value of the property or assets involved in the swap transaction) of a nature or type or that are used in, a business having property or assets of a nature or type, or engaged in a business similar or related to the nature or type of the property and assets of, or business of, PSI and the Restricted Subsidiaries existing on the date of such sale or other disposition.

“Permitted Business” means the lines of business conducted by PSI and its Restricted Subsidiaries on the date hereof and the businesses reasonably related thereto, including the ownership, operation and/or management of a hospital, outpatient clinic or other facility or business that is used or useful in or related to

the provision of health care services in connection with the ownership, operation and/or management of such hospital or outpatient clinic or ancillary to the provision health care services or information or the investment in or management, lease or operation of a hospital or outpatient clinic.

“Permitted Group” means Acacia Venture Partners, L.P. and Oak Investment Partners, together with their respective Affiliates.


	(1) any Investment in PSI or a Restricted Subsidiary;

	(2) any Investment in Cash Equivalents;

	(3) any Investment by PSI or any Restricted Subsidiary in a Person, if as a result of such Investment:


	(a) such Person becomes a Restricted Subsidiary; or

	(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, PSI or a Subsidiary;


	(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales;”

	(5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of PSI;

	(6) any Investments received in compromise of obligations of such persons incurred in the ordinary course of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer;

	(7) Hedging Obligations;

	(8) Investments the payment for which is Capital Stock (other than Disqualified Stock) of PSI;

	(9) Physician Support Obligations;

	(10) Investments in prepaid expenses, negotiable instruments held for collection, utility and workers compensation, performance and similar deposits made in the ordinary course of business;

	(11) Investments existing on the date of the indenture; and

	(12) other Investments in any Person having an aggregate fair market value (measured on the date each such investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (12) that are at the time outstanding, not to exceed $10.0 million.


	(1) Equity Interests in PSI or any Guarantor; or

	(2) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the notes and the Subsidiary Guarantees are subordinated to Senior Debt under the indenture.

“Permitted Refinancing Indebtedness” means any Indebtedness of PSI or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew,


	(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith);

	(2) in the case of Indebtedness other than Senior Debt, such Permitted Refinancing Indebtedness has a final maturity date the same as or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

	(3) if Subordinated Obligations are being extended, refinanced, renewed, replaced, defeased or refunded, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Subordinated Obligations being extended, refinanced, renewed, replaced, defeased or refunded; and

	(4) such Indebtedness is incurred either by PSI or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Physician Support Obligation” means a loan to or on behalf of, or a guarantee of indebtedness of a Qualified Physician made or given by PSI or any of its Subsidiaries, (a) in the ordinary course of its business, and (b) pursuant to a written agreement having a period not to exceed five years; provided, however, that any such guarantee of Indebtedness of a Qualified Physician shall be expressly subordinated in right of payment to the notes or the Subsidiary Guarantees, as the case may be.

“Put Price Notes” means those certain Put Price Notes contemplated by the Securities Purchase Agreement.

“Qualified Physicians” means one or more physicians or health care professionals providing service to patients in a health care facility owned, operated or managed by PSI or any of its Restricted Subsidiaries.

“Ramsay Acquisition” means the acquisition of all of the outstanding capital stock of Ramsay Youth Services, Inc. pursuant to the Agreement and Plan of Merger between Ramsay Youth Services, Inc., Psychiatric Solutions, Inc. and PSI Acquisition Sub, Inc. dated as of April 8, 2003.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

“Securities Purchase Agreement” means the Securities Purchase Agreement dated as of June 28, 2002 between PSI and The 1818 Mezzanine Fund II, L.P., as amended through June 30, 2003.


	(1) all Indebtedness of PSI or any Guarantor outstanding under Credit Facilities and all Hedging Obligations with respect thereto;

	(2) all Indebtedness of PSI or any Guarantor outstanding under HUD Financing;

	(3) any other Indebtedness of PSI or any Guarantor permitted to be incurred under the terms of the indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the notes or any Subsidiary Guarantee;


	(4) all Obligations with respect to the items listed in the preceding clauses (1), (2) and (3); and

	(5) the CapSource Put Indebtedness.

Notwithstanding anything to the contrary in the preceding, Senior Debt will not include:


	(a) any liability for federal, state, local or other taxes owed or owing by PSI;

	(b) any Indebtedness of PSI to any of its Subsidiaries or other Affiliates;

	(c) any trade payables; or

	(d) the portion of any Indebtedness that is incurred in violation of the indenture.

“Senior Subordinated Indebtedness” means (i) with respect to PSI, the notes and any other Indebtedness of PSI that specifically provides that such Indebtedness is to have the same rank as the notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of PSI which is not Senior Debt and (ii) with respect to any Guarantor, the Subsidiary Guarantees and any other Indebtedness of such Guarantor that specifically provides that such Indebtedness is to have the same rank as the Subsidiary Guarantees in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Guarantor which is not Senior Debt, and (iii) the Put Price Notes.

“Series A Preferred Stock” means the Series A Convertible Preferred Stock of PSI issued pursuant to a Certificate of Designation filed with the Secretary of State of Delaware on March 24, 2003.

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date of the indenture.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subordinated Obligations” means any Indebtedness of PSI (whether outstanding on the date hereof or thereafter incurred) that is subordinate or junior in right of payment to the notes pursuant to a written agreement to that effect.


	(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

	(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“Subsidiary Guarantee” means the Guarantee of the notes by each of the Guarantors pursuant to the indenture and in the form of the Guarantee endorsed on the form of note attached as Exhibit A to the indenture and any additional Guarantee of the notes to be executed by any Subsidiary of PSI pursuant to the covenant described above under the caption “— Additional Subsidiary Guarantees.”

“Unrestricted Subsidiary” means any Subsidiary of PSI or any successor to any of them) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:


	(1) has no Indebtedness other than Non-Recourse Debt;

	(2) is not party to any agreement, contract, arrangement or understanding with PSI or any Restricted Subsidiary of PSI unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to PSI or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of PSI;

	(3) is a Person with respect to which neither PSI nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results;

	(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of PSI or any of its Restricted Subsidiaries; and

	(5) has at least one director on its Board of Directors that is not a director or executive officer of PSI or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of PSI or any of its Restricted Subsidiaries.

Any designation of a Subsidiary of PSI as an Unrestricted Subsidiary will be evidenced to the trustee by filing with the trustee a certified copy of the Board Resolution giving effect to such designation and an officers’ certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption “— Certain Covenants — Restricted Payments.” If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of PSI as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock,” PSI will be in default of such covenant. The Board of Directors of PSI may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of PSI of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Stock,” calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:


	(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

	(2) the then outstanding principal amount of such Indebtedness.

The certificates representing the registered notes will be issued in fully registered form, without coupons. Except as described in the next paragraph, the registered notes will be deposited with, or on behalf of, DTC,

and registered in the name of Cede & Co., as DTC’s nominee, in the form of a global note. Holders of the registered notes will own book-entry interests in the global note evidenced by records maintained by DTC.

Book-entry interests may be exchanged for certificated notes of like tenor and equal aggregate principal amount, if


	•	DTC notifies us that it is unwilling or unable to continue as depositary or we determine that DTC is unable to continue as depositary and we fail to appoint a successor depositary within 90 days;

	•	we provide for the exchange pursuant to the terms of the indenture, or

	•	we determine that the book-entry interests will not longer be represented by global notes and we execute and deliver to the trustee instructions to that effect.

As of the date of this prospectus, no certificated notes are issued and outstanding.

The following is a summary of the material U.S. federal income tax considerations relating to the exchange of old notes for registered notes in the exchange offer. It does not contain a complete analysis of all the potential tax considerations relating thereto. This summary is limited to holders of old notes who hold the old notes as “capital assets” (in general, assets held for investment). Special situations, such as the following, are not addressed:


	•	tax consequences to holders who may be subject to special tax treatment, such as tax-exempt entities, dealers in securities or currencies, financial institutions, insurance companies, regulated investment companies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings or corporations that accumulate earnings to avoid U.S. federal income tax;

	•	tax consequences to persons holding notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle or other risk reduction transaction;

	•	tax consequence to holders whose “functional Currency” is not the U.S. dollar;

	•	tax consequences to persons who hold notes through a partnership or similar pass-through entity;

	•	tax consequences to holder who have ceased to the United States citizens or to be taxed as resident aliens;

	•	alternative minimum tax consequences, if any; or

	•	any state, local or foreign tax consequences;

The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, existing and proposed Treasury regulation promulgated thereunder, and rulings, judicial decisions and administrative interpretations thereunder, as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below.

The exchange of your old notes for registered notes in the exchange offer will not constitute an exchange for federal income tax purposes. Accordingly, the exchange offer should have no federal income tax consequences to you if you exchange your old notes for registered notes. For example, there should be no change in your tax basis and your holding period should carry over to the registered notes and should be the same as those applicable to your old notes.

The preceding discussion of federal income tax considerations is for general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to particular tax consequences to it of exchanging old notes for registered notes, including the applicability and effect of any state, local or foreign tax laws, and of any proposed changes in applicable law.

Each broker-dealer that receives registered notes in the exchange offer for its own account must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the notes. We reserve the right in our sole discretion to purchase or make offers for, or to offer registered notes for, any old notes that remain outstanding subsequent to the expiration of the exchange offer pursuant to this prospectus or otherwise and, to the extent permitted by applicable law, purchase old notes in the open market, in privately negotiated transactions or otherwise. This prospectus, as it may be amended or supplemented from time to time, may be used by all persons subject to the prospectus delivery requirements of the Securities Act, including broker-dealers in connection with resales of registered notes received in the exchange offer, where the notes were acquired as a result of market-making activities or other trading activities and may be used by us to purchase any notes outstanding after expiration of the exchange offer. We have agreed that, for a period of 180 days after the expiration of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with such a resale.

We will not receive any proceeds from any sale of registered notes by broker-dealers. Notes received by broker-dealers in the exchange offer for their own account may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the registered notes or a combination of those methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. Such a resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from such a broker-dealer and/or the purchasers of any of the registered notes. Any broker-dealer that resells registered notes that were received by it in the exchange offer for its own account and any broker or dealer that participates in a distribution of the notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on such a resale of the notes and any commissions received by those persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the expiration of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer, including the reasonable fees and expenses of counsel to the initial purchasers of the old notes, other than commissions or concessions of any brokers or dealers, and will indemnify holders of the notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act.

Waller Lansden Dortch & Davis, PLLC has passed upon the validity of the registered notes on behalf of the issuer.

The consolidated financial statements of Psychiatric Solutions, Inc. and the combined financial statements of The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc., and The Oaks Psychiatric Hospital, Inc., as of December 31, 2002 and 2001, and for each of the years in the three year period ended December 31, 2002, appearing in this prospectus, have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein, and included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

The combined financial statements of Cypress Creek Hospital, Inc., West Oaks Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc. for each of the years in the period ended December 31, 2000,

1999 and 1998 appearing in Psychiatric Solutions, Inc.’s Amendment No. 1 to its Registration Statement on Form S-4 (No. 333-90372) have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of PMR Corporation as of April 30, 2002 and 2001, and for each of the years in the three year period ended April 30, 2002 appearing in Psychiatric Solutions, Inc.’s Amendment No. 1 to its Registration Statement on Form S-4 (No. 333-90372) have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The financial statements of Holly Hill/Charter Behavioral Health System, L.L.C. for the years ended September 30, 2001 and 2000 appearing in Psychiatric Solutions, Inc.’s Amendment No. 1 to its Registration Statement on Form S-4 (No. 333-90372) have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Ramsay Youth Services, Inc. as of December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002 included in this prospectus and the consolidated financial statements from which the Selected Financial Data included in this prospectus have been derived have been audited by Deloitte & Touche LLP, independent auditors, as stated in their independent auditors’ report appearing herein (which report expresses an unqualified opinion and includes an explanatory paragraph referring to Ramsay Youth Services, Inc. changing its method of accounting for goodwill and other intangible assets by adopting certain provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002) and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements of The Brown Schools of Oklahoma, Inc. and subsidiary included in this prospectus have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their report and are included herein in reliance upon such report given upon authority of said firm as experts in auditing and accounting.

The consolidated financial statements of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) as of December 31, 2001 and 2000 and for the year ended December 31, 2001 and the ten month period ended December 31, 2000, appearing in Psychiatric Solutions, Inc.’s Amendment No. 1 to its Registration Statement on S-4 (No. 333-90372) have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their report dated February 14, 2002, except for notes 9c and 10 which are as of July 1, 2002, and incorporated herein by reference and are included in reliance upon such report given upon authority of said firm as experts in auditing and accounting.

We file annual, quarterly and current reports and other information with the SEC. You may read and copy any document we file at the SEC’s public reference rooms at 450 Fifth Street, N.W., Washington, D.C. and at regional offices in New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public at the SEC’s web site at http://www.sec.gov.

We make available free of charge through our website, which you can find at www.psysolutions.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Ramsay previously filed its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. Ramsay’s SEC filings are available to the public over the Internet at the SEC’s website and at the SEC’s public reference room referenced above.

We make no representation or warranty about the accuracy or completeness of the business and financial information of Ramsay contained in this prospectus.

The SEC allows us to “incorporate by reference” the information we file with the SEC, which means:


	•	incorporated documents are considered part of the prospectus;

	•	we can disclose important information to you by referring you to those documents; and

	•	information that we file later with the SEC automatically will update and supersede information contained in the prospectus.

We are incorporating by reference the following documents, which we have previously filed with the SEC:

(1) Financial Statements of Cypress Creek Hospital, Inc., West Oaks Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc. for the years ended December 31, 2000, 1999 and 1998 and for the six months ended June 30, 2001 and 2000 (incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-4, filed on July 11, 2002 (Reg. No. 333-90372);

(2) Financial Statements of Holly Hill/ Charter Behavioral Health System, L.L.C. for the years ended September 30, 2001 and 2000 (incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-4, filed on July 11, 2002 (Reg. No. 333-90372);

(3) Financial Statements of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) for the year ended December 31, 2001 and the ten month period ended December 31, 2000 and as of December 31, 2001 and 2000 (incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-4, filed on July 11, 2002 (Reg. No. 333-90372);

(4) Consolidated Financial Statements of PMR Corporation for the years ended April 30, 2002, 2001 and 2000 (incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-4, filed on July 11, 2002 (Reg. No. 333-90372);

(10) our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 17, 2003; and

(11) any future filings with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is completed; provided that the prospectus will not incorporate any information we may furnish to the SEC under Item 9 or Item 12 of Form 8-K.

You can obtain copies of the documents incorporated by reference in the prospectus without charge through our website (www.psysolutions.com) as soon as reasonably practicable after we electronically file the material with, or furnish it to, the SEC, or by requesting them in writing or by telephone at the following address:


	Psychiatric Solutions, Inc.
	113 Seaboard Lane, Suite C-100
	Franklin, Tennessee 37067
	Attention: Investor Relations
	(615) 312-5700

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for audited financial statements. The condensed consolidated balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of Psychiatric Solutions, Inc. (“Psychiatric Solutions” or the “Company”) have been included. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 filed on March 27, 2003.

Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings per Share, requires dual presentation of basic and diluted earnings per share by entities with complex capital structures. Basic earnings per share include no dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the entity. The Company has calculated its earnings per share in accordance with SFAS No. 128 for all periods presented.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

Diluted earnings per share for the three months ended March 31, 2003 and 2002, do not include debt outstanding that is convertible into 422,000 and 483,000 shares, respectively, as its effect would be antidilutive.

The Company accounts for its stock option plans using the intrinsic value method in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense would be recorded on the date of

grant only if the current market price of the underlying stock exceeded the exercise price. The Company does not plan to adopt the fair-value method of accounting for stock options at the current time.

Pro forma information regarding interim net income and earnings per share is required by SFAS No. 148, and has been determined as if the Company had accounted for its employee stock options under the fair value method. The fair value of options was estimated using the Black-Scholes option pricing model.

The weighted-average fair value of options granted are presented in the following table:

Option valuation models require the input of highly subjective assumptions. 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 disclosure, the estimated fair value of the options at grant date is amortized to expense over the option’s vesting period. The Company’s pro forma information follows (in thousands, except per share amounts):

Acquiring free-standing psychiatric facilities is a key part of Psychiatric Solutions’ business strategy. Because Psychiatric Solutions has grown through mergers and acquisitions accounted for as purchases, it is difficult to make meaningful comparisons between its financial statements for the fiscal periods presented. In

addition, because Psychiatric Solutions owns a relatively small number of facilities, an individual acquisition may have a material effect on its overall operating performance. At the time a facility is acquired, Psychiatric Solutions implements a number of measures to lower costs and may make significant investments in the facility. Therefore, the financial performance of a newly acquired facility may adversely affect the Company’s overall performance in the short-term.

On July 1, 2002, Psychiatric Solutions acquired all of the capital stock of Aeries Healthcare Corporation and its wholly owned subsidiary, Aeries Healthcare of Illinois, Inc. for $16.1 million, prior to certain adjustments. Aeries Healthcare of Illinois owns the assets and operations of Riveredge Hospital located near Chicago, Illinois. The acquisition was financed in part through an amendment to Psychiatric Solutions’ 2001 Senior Credit Facility.

On August 5, 2002, PMR Acquisition Corporation, a newly formed, wholly-owned subsidiary of PMR Corporation (“PMR”), merged with and into Psychiatric Solutions, Inc., whose name, subsequent to the merger, was changed to Psychiatric Solutions Hospitals, Inc. (“PSH”). The surviving corporation in the merger was PSH, which became a wholly-owned subsidiary of PMR, a publicly traded company. In connection with the merger, PMR changed its name to Psychiatric Solutions, Inc. and, effective August 6, 2002, the shares of Psychiatric Solutions, Inc., formerly known as PMR Corporation, were approved for listing on the Nasdaq National Market under the ticker symbol “PSYS.” Because the former PSH stockholders own a majority of the surviving corporation’s outstanding common stock, the acquisition was a “reverse acquisition” and PSH was the acquiring company for accounting purposes.

As a part of the merger with PMR, the Company became the holder of promissory notes with certain shareholders of PMR and subsequently Psychiatric Solutions. A certain provision of the shareholder notes allows the shareholders to repay those notes with stock of the Company at the higher of a stated price or market value of the stock. Because the stated price was higher than the market value at December 31, 2002, the Company recorded a reserve on the promissory notes equal to the difference between the stated price and market value. Due to the increase in the market price of the Company’s common stock during the three months ended March 31, 2003, the Company released $461,000 of the reserve on the shareholder notes.

During the three months ended March 31, 2003, the Company finalized the valuation of identifiable intangible assets acquired in the merger with PMR. As a result, the Company reclassified approximately $3.7 million, the value of contracts acquired in the PMR merger, from cost in excess of net assets acquired to contracts.

In November 2001, Psychiatric Solutions entered into a senior credit facility of $33.2 million (“2001 Senior Credit Facility”). The 2001 Senior Credit Facility was amended on June 28, 2002 to provide for an additional $7.95 million pursuant to a new non-revolving term note. The 2001 Senior Credit Facility, as revised, provides for a total credit facility of $41.15 million, consisting of $23.65 million of non-revolving term loans and a $17.5 million revolving working capital line of credit. Both facilities are secured by substantially all of Psychiatric Solutions’ assets and the stock of its subsidiaries. The term loans accrue interest at the Citibank, N.A. prime rate plus 4.25% to 4.75% subject to a floor of 10%. The revolving line of credit accrues interest at the Citibank, N.A. prime rate plus 2% subject to a floor of 7.25%, and is due in November 2004. At March 31, 2003, the interest rate was 7.25%. Until the due date, Psychiatric Solutions may borrow, repay and re-borrow an amount not to exceed the lesser of $17.5 million or the borrowing base (as defined in the 2001 Senior Credit Facility). As of March 31, 2003, the Company had approximately $7.2 million available under the revolving line of credit. Under the revolving line of credit, all of Psychiatric Solutions’ collections, except for Medicare and Medicaid payments, are deposited into lockbox accounts controlled by the lender. The funds deposited in the lockbox are applied to outstanding borrowings with the lender on a daily basis. As a result, the outstanding borrowings under the revolving line of credit are

classified as short-term as of December 31, 2002 and March 31, 2003. Psychiatric Solutions must pay an unused fee in the amount of 0.05% per month of the monthly unused portion of the 2001 Senior Credit Facility. Such fees were approximately $22,000 for the three months ended March 31, 2003.

The 2001 Senior Credit Facility contains customary covenants which include: (i) a specified monthly patient census for any owned, operated or leased facilities, (ii) a limitation on capital expenditures, sales of assets, mergers, changes of ownership and management, new lines of business and dividends and (iii) various financial covenants. As of March 31, 2003, Psychiatric Solutions was in compliance with all applicable debt covenant requirements. If Psychiatric Solutions’ results of operations or cash flows decline and result in violation of one or more of these covenants, amounts outstanding under the 2001 Senior Credit Facility could become immediately payable and additional borrowings could be restricted. As of March 31, 2003, approximately $24.0 million was outstanding under the 2001 Senior Credit Facility. As discussed in Note 9, the Senior Credit Facility was amended April 1, 2003.

In connection with the acquisition of Sunrise Behavioral Health, Ltd., a manager of inpatient psychiatric units in acute care hospitals, in May 2000, Psychiatric Solutions issued subordinated convertible notes in the amount of $3.6 million. These convertible notes are due May 1, 2005 and accrue interest at 9% per annum. The principal amount of these convertible notes is convertible into shares of the Company’s common stock based on conversion prices of $8.53 to $9.59 per share.

Psychiatric Solutions also issued promissory notes totaling $4.5 million in connection with its acquisitions of three facilities. One note in the amount of $2.5 million accrued interest at 9% per annum and matured on June 30, 2002. Psychiatric Solutions paid this note in full with a portion of the proceeds of its subordinated debt offering described below. The remaining $2.0 million note accrues interest at 9% per annum and is due June 30, 2005. Among other customary covenants, both notes contain cross default covenants triggered by a default of any other indebtedness of at least $1.0 million. Psychiatric Solutions was in compliance with these covenants as of March 31, 2003. As discussed in Note 9, the Company paid down $1.0 million on its subordinated debt subsequent to March 31, 2003.

On June 28, 2002, Psychiatric Solutions entered into a securities purchase agreement with 1818 Mezzanine Fund II, L.P. (the “1818 Fund”) to issue up to $20 million of senior subordinated notes with detachable nominal warrants. At closing on June 28, 2002, a total of $10 million of the senior subordinated notes were issued. Approximately $7.5 million of the proceeds were used to fund a portion of the acquisition of Riveredge Hospital in July 2002, and approximately $2.5 million of the proceeds were used to reduce current indebtedness. The remaining $10 million of senior subordinated notes may be issued to fund additional acquisitions of free-standing psychiatric facilities and for general working capital purposes, subject generally to approval by the 1818 Fund. The notes have a term of seven years and bear interest at 12% annually, payable quarterly. The notes provide for a prepayment penalty of 6%, 3% and 1% if the notes are prepaid prior to the first anniversary, second anniversary or third anniversary of the closing date, respectively. The notes grant the holders the right to require prepayment in the event of a change of control of Psychiatric Solutions, subject to a prepayment penalty of 1% if redeemed on or before the third anniversary of the closing date. The notes also require Psychiatric Solutions to comply with financial and other covenants.

require the Company to repurchase the warrants for cash, the warrants constitute a derivative which requires changes in value of the warrants to be recorded as an increase or decrease to earnings. For each $1 increase in stock price, the Company will be required to record non-cash expense of approximately $372,500. For the three months ended March 31, 2003, the Company recorded non-cash expense related to the warrants of $960,000. The stock purchase warrants contain provisions that allow the issuer to “put” their warrants, or stock after exercise, back to the Company at fair market value for cash or for the deliverance of shares. The put price under the agreement would approximate $3 million or require the deliverance of 371,947 shares as of March 31, 2003. As discussed in Note 9, the Company and the 1818 Fund have entered into a written agreement for the 1818 Fund to exercise its stock purchase warrant to purchase 372,412 shares of the Company’s common stock.

During prior years, the Company generated net operating loss (“NOL”) carryforwards for federal and state income tax purposes. As a result of the NOL carryforwards, the Company has not recorded a provision for income tax for the period ended March 31, 2002. During the fourth quarter of 2002, the Company released its valuation allowance and recorded a corresponding income tax benefit for the twelve months ended December 31, 2002. The provision recorded for the three months ended March 31, 2003 reflects an effective tax rate of approximately 58% due to the non deductible charge related to the valuation of the put warrants discussed in Note 5.

In accordance with the criteria of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, the Company determined that, as of March 31, 2003, it operates in two reportable segments: (1) Psychiatric Unit Management, and (2) Freestanding Psychiatric Facilities. The Psychiatric Unit Management division provides psychiatric management and development services to behavioral health units in hospitals and clinics. The Freestanding Psychiatric Facilities division includes owned psychiatric facilities. As of March 31, 2003, the Company managed 48 behavioral health units and owned five psychiatric facilities in three states. Activities classified as “Other” in the following schedule relate primarily to unallocated home office items.

The following is a financial summary by business segment for the periods indicated. EBITDA represents income from continuing operations before interest expense (net of interest income), income taxes, depreciation, and amortization. EBITDA is commonly used as an analytical indicator within the health care industry and serves as a measure of leverage capacity and debt service ability. In addition, the Company uses EBITDA as the measure of operating profitability of its segments and their components. EBITDA should not be considered as a measure of financial performance under accounting principles generally accepted in the United States, and the items excluded in determining EBITDA are significant components in understanding and assessing financial performance. Because neither is a measurement determined in accordance with accounting principles generally accepted in the United States, it is susceptible to varying calculations, and as

a result our calculation of EBITDA as presented may not be comparable to EBITDA or other similarly titled measures used by other companies (in thousands):

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (“FIN 46”). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not expect this new interpretation to have a material effect on its future results of operations or financial position.

During April 2003, Psychiatric Solutions completed the purchase of six psychiatric facilities from The Brown Schools, Inc. for $63 million in cash. The six facilities which have an aggregate of 792 beds, are located in Austin, San Antonio and San Marcos, Texas; Charlottesville, Virginia; Colorado Springs, Colorado; and Tulsa, Oklahoma. For 2002, the facilities produced combined revenues of $76 million. The purchase was

financed through borrowings on the Company’s 2001 Senior Credit Facility amounting to approximately $50.5 million and $12.5 million from the private placement of series A convertible preferred stock (the “series A convertible preferred stock”).

On April 1, 2003, the Company received $12.5 million from the private placement of 2,272,727 shares of series A convertible preferred stock. The proceeds represent one half of the commitment from the investors and were used to purchase six facilities from The Brown Schools, Inc. The Company expects to receive the second half of the commitment, or $12.5 million, in exchange for another 2,272,727 shares of series A convertible preferred stock, on July 1, 2003. Each share of series A convertible preferred stock is convertible into one common share. The impact of the series A convertible preferred stock on diluted earnings per share will be calculated using the if-converted method. The Company expects to use the proceeds to fund additional acquisitions of freestanding psychiatric patient facilities.

On April 1, 2003, the Company announced the expansion of its 2001 Senior Credit Facility with its senior lender, CapitalSource Finance LLC. The aggregate 2001 Senior Credit Facility now exceeds $80 million with the increase of the revolving credit facility to $28 million from $17.5 million and through a new $36 million term loan. The Company borrowed approximately $52.2 million during April 2003, including $16.2 million under the revolving line of credit, under the expanded 2001 Senior Credit Facility to purchase six facilities from The Brown Schools, Inc. The total amount borrowed to finance the acquisition of these facilities included $1.0 million used to pay down subordinated debt and approximately $700,000 in transaction costs.

On April 9, 2003, Psychiatric Solutions announced the definitive agreement to acquire Ramsay Youth Services, Inc. (“Ramsay”) in a transaction valued at approximately $78 million, consisting of $58.1 million in cash, or $5.00 per share, for Ramsay’s common stock, and the assumption of Ramsay’s outstanding debt. Completion of the transaction, expected to occur in early July 2003, is subject to customary closing conditions, including receipt of regulatory approvals, as well as approval by Ramsay’s stockholders. Certain members of Ramsay’s Board of Directors and executive management have executed voting agreements with the Company in favor of the transaction, representing approximately 64% of Ramsay’s outstanding common stock. The Company is in the process of arranging financing for the transaction and has received a “highly confident” letter from its senior lender. The Ramsay acquisition would add 11 free-standing behavioral health facilities, representing approximately 1,240 beds. Ramsay produced revenues of $145.2 million for 2002.

The Company and the 1818 Fund have entered into a written agreement for the 1818 Fund to exercise its stock purchase warrant to purchase 372,412 shares of the Company’s common stock. In addition, the written agreement provides that, effective April 1, 2003, the 1818 Fund waived its ability to require that the Company repurchase its stock purchase warrant to purchase 372,412 shares of the Company’s common stock. As such, the Company will no longer be required to record non-cash expense for increases in the fair market value of its common stock.

The Company conducts substantially all of its business through its subsidiaries. Presented below is condensed consolidating financial information for the Company and its subsidiaries as of March 31, 2003 and for the three months then ended. The information segregates the parent company (Psychiatric Solutions, Inc.), the combined wholly owned Subsidiary Guarantors, the combined Non-Guarantors, and eliminations. All of the subsidiary guarantees are both full and unconditional and joint and several. No combining financial information has been presented for prior periods as there were no Non-Guarantor Subsidiaries prior to November 2002.

We have audited the accompanying consolidated balance sheets of Psychiatric Solutions, Inc. as of December 31, 2002 and 2001 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Psychiatric Solutions, Inc. at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for goodwill and intangible assets.

Psychiatric Solutions, Inc. (the “Company” or “PSI”) was incorporated in 1988 as a Delaware corporation with its corporate office in Franklin, Tennessee. The Company manages behavioral health units and owns psychiatric facilities.

The Company has formed two operating divisions: (1) Psychiatric Unit Management, and (2) Freestanding Specialty Hospitals. The Psychiatric Unit Management division provides psychiatric management and development services to behavioral health units in hospitals and clinics. The Freestanding Specialty Hospitals division includes owned psychiatric facilities. As of December 31, 2002, the Company managed 48 behavioral health units and owned five psychiatric facilities in three states.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.

Cash consists of demand deposits held at financial institutions. The Company places its cash in financial institutions that are federally insured and limits the amount of credit exposure with any one financial institution.

Accounts receivable vary according to the type of service being provided. Accounts receivable for the Psychiatric Unit Management division is comprised of contractually determined fees for services rendered. Such amounts are recorded net of estimated bad debts. Concentration of credit risk is limited by the number of customers.

Accounts receivable for the Freestanding Specialty Hospitals division are comprised of patient service revenue and are recorded net of contractual adjustments and estimated bad debts. Such amounts are owed by various governmental agencies, insurance companies and private patients. Medicare comprised approximately 14% and 17% of net patient receivables at December 31, 2002 and 2001, respectively. Medicaid comprised approximately 28% and 14% of net patient receivables at December 31, 2002 and 2001, respectively. Concentration of credit risk from other payers is limited by the number of patients and payers.

The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based upon differences between the financial statement carrying amounts and tax bases of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse.

Property and equipment are stated at cost and depreciated using the straight-line method over the useful lives of the assets, which range from 25 to 35 years for buildings and improvements and 2 to 7 years for

equipment. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful lives of the assets. Depreciation expense was $1,408,000 and $279,000 for the years ended December 31, 2002 and 2001, respectively.

During July 2001, the Financial Accounting Standards Board (“FASB”) issued Statements of Financial Accounting Standards No. 141, Business Combinations (“SFAS 141”) and No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). These statements made significant changes to the accounting for business combinations, goodwill, and intangible assets.

SFAS 141 eliminates the pooling of interests method of accounting for business combinations. In addition, it further clarifies the criteria for recognition of intangible assets separately from goodwill. SFAS 141 was effective for transactions completed subsequent to June 30, 2001. The application of SFAS 141 did not have a material effect on the Company’s results of operations or financial position.

Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed at least annually for impairment. The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company adopted SFAS 142 effective January 1, 2002. Pursuant to SFAS 142, the Company completed its transitional and annual impairment test of goodwill in 2002 which resulted in no goodwill impairment

A reconciliation of previously reported net income to the pro forma amounts adjusted for the exclusion of goodwill amortization follows (in thousands, except per share amounts):

The following table presents the changes in the carrying amount of goodwill for the year ended December 31, 2002 (in thousands):

Contracts represent the fair value of management contracts and service contracts purchased and are being amortized using the straight-line method over five years. The amounts reported at December 31, 2002 and 2001 are net of accumulated amortization of $927,000 and $620,000, respectively. Amortization expense

related to contracts was $307,000 and $306,000 for the years ended December 31, 2002 and 2001, respectively. Estimated amortization expense for the years ended December 31, 2003 and 2004 of contracts is $300,000.

When events, circumstances and operating results indicate that the carrying values of certain long-lived assets and the related identifiable intangible assets might be impaired, the Company prepares projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate that the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value is estimated based upon projections of discounted cash flows.

Other assets consist principally of loan costs which are deferred and amortized over the term of the related debt. The amounts reported at December 31, 2002 and 2001 are net of accumulated amortization of $484,000 and $85,000, respectively.

In January 2003, the FASB issued SFAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an Amendment of FASB Statement No. 123. SFAS 148 amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair-value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 has no material impact on the Company, as it does not plan to adopt the fair-value method of accounting for stock options at the current time. The Company has included the required disclosures below and in Note 10.

The Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations as more fully described in Note 10. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. During 2002, 2001 and 2000, the Company granted 515,000, 35,000 and 85,000 stock options, respectively. The fair value of these options was estimated using the Black-Scholes option pricing model for 2002. For 2001 and 2000, the Company used the minimum value option pricing model as its stock was not publicly traded.

The following weighted-average assumptions were used in the respective pricing models:

The weighted-average fair value of options granted are presented in the following table:

For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the option’s vesting period. The Company’s pro forma information follows (in thousands, except per share amounts):

Management of the Company has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.

The Company carries general and professional liability insurance from an unrelated commercial insurance carrier. Prior to December 6, 2002, the Company maintained a claims-made policy under which it was insured for per occurrence losses up to $6,000,000 with policy limits of $8,000,000 in the aggregate. On December 6th, 2002, the Company increased its self-insured retention from $100,000 per claim to $3 million per claim and increased its policy limit to $10 million per occurrence and in the aggregate to mitigate the increases in the cost of professional and general liability insurance and to increase coverage for additional exposures due to acquisitions. The reserve for professional and general liability risks is based on historical claims, demographic factors, industry trends, severity factors, and other actuarial assumptions calculated by an independent third party. This estimate is discounted to its present value using a 5% discount rate. This estimated accrual for professional and general liabilities could be significantly affected should current and future occurrences differ from historical claim trends and expectations. The Company has established a captive insurance company to manage this additional self-insured retention. While claims are monitored closely when estimating professional and general liability accruals, the complexity of the claims and wide range of potential outcomes often hampers timely adjustments to the assumptions used in these estimates. The reserve for professional and general liability was $743,000 as of December 31, 2002. The Company had no reserves recorded in previous years because substantially all of the risk was insured.

The Company also carries workers’ compensation insurance from an unrelated commercial insurance carrier. The Company’s experience with workers’ compensation claims has been insignificant. The Company believes that adequate provision has been made for workers compensation and professional and general liability risks.

The carrying amounts reported in the accompanying Consolidated Balance Sheets for cash, accounts receivable, and accounts payable approximate their fair value given the short-term maturity of these instruments. Based upon the borrowing rates currently available to the Company, the carrying amounts reported in the accompanying Consolidated Balance Sheets for long-term debt approximate fair value.

On August 5, 2002, pursuant to a definitive Merger Agreement dated May 6, 2002 and with respective stockholder and regulatory approvals, PMR Acquisition Corporation, a newly formed, wholly-owned subsidiary of PMR Corporation, merged with and into Psychiatric Solutions, Inc., a Delaware corporation whose name, subsequent to the merger, was changed to Psychiatric Solutions Hospitals, Inc. (“PSH”). Concurrently, the name of PMR Corporation was changed to Psychiatric Solutions, Inc. (“PSI” or the “Company”). The surviving corporation in the merger was PSH, which has become a wholly-owned subsidiary of the Company. In exchange for their outstanding shares of common stock or preferred stock in PSH, stockholders of PSH received newly-issued shares of Company common stock. Options to acquire PSH common stock were converted into options to purchase shares of Company common stock based on the common stock exchange ratio used in the merger. Warrants of PSH will enable the holders to exercise these securities into shares of Company common stock. After giving effect to the exercise of all outstanding options and warrants of PSH following the merger, the former PSH stockholders and the Company’s pre-merger stockholders received approximately 72% and 28% of the common stock of the Company, respectively. The headquarters of the combined company has been relocated to Franklin, Tennessee. In addition, effective August 6, 2002, the shares of the Company were approved for listing on the Nasdaq National Market under the ticker symbol “PSYS.” The Merger Agreement is on file with the Securities and Exchange Commission (“SEC”) as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-4 filed on June 12, 2002, as amended July 11, 2002.

In as much as the former PSH stockholders own more than half of the surviving corporation’s outstanding common stock pursuant to the merger, PSH has been treated as the acquiring company for accounting purposes. The condensed consolidated financial statements located herein relate to PSH only prior to August 5, 2002, and to the merged company on and subsequent to August 5, 2002. Historical financial information relating to PMR Corporation just prior to the merger can be found in the Company’s quarterly report on Form 10-Q for the quarter ended July 31, 2002, as filed with the SEC on September 16, 2002.

Certain reclassifications have been made to the prior year to conform with current year presentation. Specifically, PSH’s Series A Preferred Stock, Series B Preferred Stock and Common Stock were converted to post merger Common Stock on August 5, 2002 at rates pursuant to the merger agreement with PMR Corporation of 0.246951, 0.312864 and 0.115125, respectively. All periods prior to August 5, 2002 have been

retroactively restated to reflect conversion at the applicable conversion rates. The following table sets forth the effect of retroactive conversion as of December 31, 2001 (in thousands):

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), which supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS 144 removes goodwill from its scope and clarifies other implementation issues related to SFAS 121. SFAS 144 also provides a single framework for evaluating long-lived assets to be disposed of by sale. The Company does not expect SFAS 144 to have a material effect on its results of operations or financial position.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (“SFAS 145”). SFAS 145 prohibits the classification of gains or losses from debt extinguishments as extraordinary items unless the criteria outlined in APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, are met. SFAS 145 also eliminates an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. The Company intends to adopt the provisions of SFAS 145 effective January 1, 2003 and will be required to reclassify amounts previously reported as an extraordinary item to a component of income from continuing operations.

Patient service revenue is reported on the accrual basis in the period in which services are provided, at established rates, regardless of whether collection in full is expected. Net patient service revenue includes amounts estimated by management to be reimbursable by Medicare and Medicaid under provisions of cost or prospective reimbursement formulas in effect. Amounts received are generally less than the established billing rates of the facilities and the differences (contractual allowances) are reported as deductions from patient service revenue at the time the service is rendered. The effect of other arrangements for providing services at less than established rates is also reported as deductions from patient service revenue. During the year ended December 31, 2002, approximately 26% and 26% of the Company’s revenues related to patients participating in the Medicare and Medicaid programs, respectively.

The Company provides care without charge to patients who are financially unable to pay for the health care services they receive. Because the Company does not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Settlements under cost reimbursement agreements with third party payers are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. Final determination of amounts earned under the Medicare and Medicaid programs often occur in subsequent years because of audits by the programs, rights of appeal and the application of numerous technical provisions.

The Company’s revenue is particularly sensitive to regulatory and economic changes in the state of Texas. As of December 31, 2002 and 2001, the Company operated three facilities in Texas. The Company generated 50% and 34% of its revenue from its Texas operations for the years ended December 31, 2002 and 2001, respectively.

Revenue is recorded as management fee revenue for the Psychiatric Unit Management division. The Psychiatric Unit Management division receives contractually determined management fees and director fees from hospitals and clinics for providing psychiatric management and development services.

There were no individual or group of affiliated contracts in 2002 and 2001, which provided a significant concentration of management fee revenue.

Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings per Share, requires dual presentation of basic and diluted earnings per share by entities with complex capital structures. Basic earnings per share includes no dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of the entity. The Company has calculated its earnings per share in accordance with SFAS No. 128 for all periods presented.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

Diluted earnings per share for the year ended December 31, 2001, does not include debt outstanding which was convertible into 483,000 shares, as its effect would be antidilutive. Diluted earnings per share for the year ended December 31, 2000, do not include the effect of stock options, warrants or convertible debt outstanding, as the effects would be antidilutive.

Included in discontinued operations are the operating results and estimated losses on the unwind of service agreements entered into with physicians, as well as the operating results and gain on disposal for the Employee Assistance Program. As part of the Company’s Physician Practice Management Division, the Company had acquired certain net assets of psychiatric clinics, and had operated the clinics and managed the physician practices under long-term service agreements with the physicians that practiced exclusively through the clinics. The Company had not consolidated these clinics or the physician practices it managed, as it did not have operating control. Additionally, discontinued operations include the operating results and estimated losses on the closure of clinics owned by the Company. Such clinics provided group and individual therapy sessions to patients through partial hospitalization and intensive outpatient programs. The Company-owned clinics were all closed as of December 31, 2000. The Company’s Employee Assistance Programs division contracted with employers to provide confidential assistance and counseling to their employees.

The Company’s implementation of plans during 2000 to exit these lines of business resulted in an estimated loss on disposal of discontinued operations of $1,738,000 during the year ended December 31, 2000. The December 31, 2000 loss on disposal consists primarily of lease termination costs and the write down of fixed assets and other assets directly resulting from the decision to exit the Physician Practice Management line of business. The December 31, 2000 loss on disposal also includes an estimate of losses from operations associated with the physician practice service agreements of approximately $359,000 through the disposal date. Such costs are recorded within net assets of discontinued operations in the accompanying Consolidated Balance Sheet. The December 31, 2001 income (loss) on disposal consists primarily of a gain on the sale of the Employee Assistance Programs division of $1,170,000 (net of taxes of $223,000), the operations of the Employee Assistance Programs division from the measurement date through the disposal date of $246,000 and final adjustments to the Company’s 2000 loss on disposal of $84,000.

Management fee revenue earned under the service agreements and net patient service revenue earned from the Company-owned clinics totaled $9,876,000 and $12,814,000 for the years ended December 31, 2001 and 2000, respectively. Management fee revenue earned under the service agreements includes reimbursement of clinic expenses incurred on behalf of the clinic facilities. These reimbursed clinic expenses do not include the salaries and benefits of physicians and therapists who provide medical service.

During 2000, the Company acquired various entities, which provided psychiatric management and development services and employee assistance and counseling services. Certain assets of these entities were acquired in exchange for Common Stock, cash, notes payable or a combination thereof. The Company issued 130,000 shares of Common Stock in connection with these acquisitions during 2000.

The following table summarizes the allocation of the aggregate purchase price of the aforementioned acquisitions (in thousands):

During 2001, the Company acquired four free-standing psychiatric facilities, three in Texas and one in North Carolina. All of the acquisitions were accounted for by the purchase method. The aggregate purchase price of these transactions was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The consolidated financial statements include the accounts and operations of the acquired entities for periods subsequent to the respective acquisition dates. The goodwill associated with these acquisitions is deductible for federal income tax purposes.

The following table summarizes the allocation of the aggregate purchase price of the aforementioned acquisitions (in thousands):

During 2002, the Company acquired one free-standing psychiatric hospital in Illinois (Riveredge Hospital). Also during 2002, the Company merged with PMR Corporation a developer and manager of specialized mental health programs and disease management services designed to treat individuals diagnosed with a serious mental illness. The acquisition of the hospital and merger with PMR Corporation were accounted for as acquisitions by the Company using the purchase method. The aggregate purchase price of these transactions was allocated to the assets acquired and liabilities assumed based upon their respective fair values. The consolidated financial statements include the accounts and operations of the acquired entities for periods subsequent to the respective acquisition dates. As these transactions involved the acquisition of stock, the goodwill associated with these acquisitions is not deductible for federal income tax purposes. The purchase of Riveredge included an escrow arrangement whereby the Company has deposited $4.5 million of the purchase price with an escrow agent. The escrowed funds will be released to the seller upon satisfaction of certain earnings targets and indemnification by the seller of certain claims and cost report settlements. Any claims by the Company on these escrowed funds would affect the purchase price. Approximately $1.5 million of these funds were released during 2002.

The following table summarizes the allocation of the aggregate purchase price of the aforementioned acquisitions (in thousands):

The purchase price allocation for PMR is preliminary as of December 31, 2002 as the Company has not yet completed its valuation of identifiable intangible assets acquired in the merger.

The following represents the unaudited pro forma results of consolidated operations as if the aforementioned acquisitions had occurred at the beginning of the immediate preceding period, after giving effect to certain adjustments, including the depreciation and amortization of the assets acquired based upon their fair values and changes in interest expense resulting from changes in consolidated debt:

The pro forma information given does not purport to be indicative of what the Company’s results of operations would have been if the acquisitions had in fact occurred at the beginning of the periods presented, and is not intended to be a projection of the impact on future results or trends.

In conjunction with an acquisition in May 2000, the Amended Loan Agreement and the amounts outstanding thereunder were replaced with a $17,500,000 senior credit facility (2000 Senior Credit Facility). The 2000 Senior Credit Facility included two lines of credit: a $5,500,000 non-revolving term loan (2000 Term Loan) and a $12,000,000 revolving working capital line of credit (2000 Revolver). Both lines of credit were collateralized by the Company’s assets and stock of the Company’s subsidiaries.

Until the maturity date of the 2000 Revolver, the Company could borrow, repay and re-borrow an amount not to exceed the lesser of $12,000,000 or the Borrowing Base (the estimated net value of eligible accounts receivable, as defined in the 2000 Senior Credit Facility, multiplied by 85%). The 2000 Revolver was due in full at maturity in May 2005, with the exception of an Interim Availability Balance (as defined in the 2000 Senior Credit Facility) of approximately $385,000, which was paid during 2001.

Under the 2000 Revolver, all of the Company’s collections, except for Medicare and Medicaid, were deposited into lockbox accounts controlled by the lender. The funds deposited into the lockbox accounts were applied to outstanding borrowings with the lender on a daily basis.

The Company was required to pay an unused fee in the amount of .375% per year of the unused portion of the 2000 Senior Credit Facility. This fee was payable monthly in arrears on the first day of each calendar month.

In conjunction with the amendment dated August 31, 2001, the Company borrowed an additional $3,500,000 under the 2000 Term Loan and $1,500,000 under a new Term Loan B. The 2000 Term Loan was to be repaid in twenty equal quarterly installments commencing as of January 1, 2002. Prior to the amendment, the 2000 Term Loan was payable in twenty quarterly installments of $275,000 beginning on June 30, 2000. In addition to the quarterly principal payments of the 2000 Term Loan, the Company was required to make additional principal payments on the 2000 Term Loan in the amount of 30% of the Excess Cash Flow (as defined in the 2000 Senior Credit Facility) within ninety days of each fiscal year end. The

Term Loan B was to be repaid in equal monthly installments commencing as of March 1, 2002, with final payment on August 1, 2003. Interest accrued on the 2000 Revolver was payable weekly. Interest accrued on the 2000 Term Loan and Term Loan B was payable monthly.

In conjunction with an acquisition in November 2001, the 2000 Senior Credit Facility was replaced with a $33,156,305 senior credit facility (2001 Senior Credit Facility). The 2001 Senior Credit Facility includes two lines of credit: a $15,656,305 non-revolving term loan (2001 Term Loan) and a $17,500,000 revolving working capital line of credit (2001 Revolver). Both lines of credit are collateralized by the Company’s assets and stock of the Company’s subsidiaries.

Until the maturity date of the 2001 Revolver, the Company may borrow, repay and re-borrow an amount not to exceed the lesser of $17,500,000 or the Borrowing Base (the estimated net collectible value of eligible receivables, as defined in the 2001 Senior Credit Facility, multiplied by 85%). The 2001 Revolver is due in full at maturity in November 2004. The available borrowings under the 2001 Revolver were $7,135,000 at December 31, 2002. The 2001 Term Loan is due in monthly installments of principal and interest, as well as an additional principle payment equal to 50% of the Company’s excess cash flows for the year that is due within 30 days after preparation of the Company’s audited financial statements, but in no event later than 145 days after year-end. Although the 2001 Term Loan is due November 30, 2003, the terms of the agreement provide the Company with the option to extend the maturity date by two years. Management intends to either exercise the option to extend the maturity date or to refinance the amount outstanding prior to maturity. Accordingly, amounts due under the 2001 Term Loan have been included in long-term debt on the accompanying consolidated balance sheet.

Under the 2001 Revolver, all of the Company’s collections, except for Medicare and Medicaid, are deposited into lockbox accounts controlled by the lender. The funds deposited into the lockbox accounts are applied to outstanding borrowings with the lender on a daily basis. As such, the outstanding borrowings under the 2001 Revolver are classified as short term at December 31, 2002 and 2001.

The Company must pay an unused fee in the amount of 0.05% per month of the monthly unused portion of the 2001 Senior Credit Facility. This fee is payable monthly is arrears on the first day of each calendar month. Such fees were approximately $50,000 for the year ended December 31, 2002.

The 2001 Senior Credit Facility contains customary covenants which include (i) a specified monthly census required for any owned, operated or leased facilities of the Company, (ii) a limitation on capital expenditures, sales of assets, mergers, changes of ownership and management, new lines of business and dividends, and (iii) various financial covenants.

At December 31, 2002, the Company was in compliance with all applicable debt covenant requirements.

Commensurate with the refinancing of the 2000 Senior Credit Facility, the Company expensed the remaining deferred loan costs associated with this debt of $419,000 and incurred early termination penalties of $818,000, resulting in an extraordinary loss on extinguishment of debt of $1,237,000 at December 31, 2001.

On November 25, 2002, the Company entered into a mortgage loan agreement to borrow $4,928,000 from the U.S. Department of Housing and Urban Development (HUD), secured by real estate located at Holly Hill Hospital in Raleigh, NC. Interest accrues on the HUD loan at 5.95% and principal and interest are

payable in 420 monthly installments through December 2037. The Company used proceeds from the loan to repay $4,385,000 of its 2001 Term Loan, pay certain refinancing costs, and fund required escrow amounts for future improvements to the property. The carrying amount of assets held as collateral approximated $5,911,000 as of December 31, 2002.

In October 2000, the Company entered into subordinated notes totaling $1,000,000 with certain stockholders of the Company (collectively referred to as the Bridge Loan). The Bridge loan bore interest at 10% payable monthly. The proceeds were used to fund short-term working capital requirements. In April 2002, the Company refinanced the Bridge loan with funds available under its 2001 Senior Credit Facility.

As consideration for the issuance of the Bridge Loan, the Company granted warrants (“Bridge Loan Warrants”) to purchase 228,069 shares of the Company’s common stock at $0.03 per share. The carrying value of the Bridge Loan was reduced by the fair market value of the Bridge Loan Warrants issued. The carrying value of the Bridge Loan was accreted to its face value over the term of the Bridge Loan. Accretion of the Bridge Loan was $521,000, $704,000 and $166,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

In connection with an acquisition during May 2000, the Company issued subordinated convertible notes payable (Subordinated Convertible Notes). The Subordinated Convertible Notes mature and become immediately due and payable upon the earlier of (i) sale of the Company (ii) any change of control as defined in the Subordinated Convertible Notes, or (iii) the Company’s initial public offering of common stock. Interest accrues on the Subordinated Convertible Notes at 9% and is payable May 1, 2005. As of December 31, 2002 and 2001, the Company has accrued $864,000 and $540,000 of interest, respectively, which is included in other liabilities on the accompanying consolidated balance sheets.

Any time until April 30, 2004, holders of the Subordinated Convertible Notes may convert the unpaid principal balance, in increments of $1,000, into shares of the Company’s common stock based upon the following conversion prices:

In connection with an acquisition in 2000, the Company issued a promissory note payable (Subordinated Promissory Note) in the amount of $400,000 bearing interest at 9% for the year ended December 31, 2000. The Subordinated Promissory Note matures in five equal annual installments beginning April 1, 2001. Accrued interest is due and payable on the first day of each calendar quarter beginning July 1, 2000.

In connection with two acquisitions in 2001, the Company issued promissory notes (Subordinated Promissory Notes) totaling $4,500,000. A $2,500,000 Subordinated Promissory Note bore interest at 9% per annum and matured June 30, 2002, with periodic interest payments due beginning December 31, 2001. The $2,000,000 Subordinated Promissory Note bears interest at 9% per annum and matures June 30, 2005, with

periodic principal and interest payments due beginning September 30, 2002. The $2,500,000 Subordinated Promissory Note was repaid with proceeds from debt issued in July 2002.

These Subordinated Promissory Notes contain customary covenants which include a cross default covenant with the occurrence of a default of any indebtedness of at least $1,000,000 held by any creditor of the Company. As of December 31, 2002, the Company was in compliance with these covenants.

On June 28, 2002, the Company entered into a securities purchase agreement with 1818 Mezzanine Fund II, L.P. (“1818 Fund”) to issue up to $20 million of senior subordinated notes with detachable nominal warrants. At the closing on June 28, 2002, a total of $10 million of the senior subordinated notes were issued. The notes have a term of seven years and bear interest at 12% annually, payable quarterly. The notes provide for a prepayment penalty of 6%, 3% and 1% if the notes are prepaid prior to the first anniversary, second anniversary and third anniversary of the closing date, respectively. The notes grant the holders the right to require prepayment in the event of a change of control of the Company, subject to a prepayment penalty of 1% if redeemed on or before the third anniversary of the closing date. The notes also contain customary covenants which include: (i) a specified monthly patient census for any owned, operated or leased facilities, (ii) limitations on sales of assets (iii) maintenance of minimum interest coverage, leverage and fixed charge ratios.

In connection with the issuance of the senior subordinated notes, the Company issued detachable stock purchase warrants for the purchase of 372,412 shares of the Company’s stock at an exercise price of $.01 per share which provide the holder with the ability to require the Company to repurchase their warrants or stock acquired upon exercise of the warrants at fair market value for cash. The agreement provides the holder of the warrant to exercise the warrant by payment of cash or delivery of shares. The warrants are exercisable over 10 years from the effective date. The initial value of the warrants of approximately $2,000,000 is being amortized to interest expense over the term of the senior subordinated notes. As of December 31, 2002, the fair value of the warrants totaled approximately $2.0 million and are included as a component of long term debt. Because the holder of the warrants has the ability to require the Company to repurchase the warrants for cash, the warrants constitute a derivative which requires changes in value of the warrants to be recorded as an increase or decrease to earnings. For each $1 increase in stock price, the Company will be required to record non cash expense of approximately $372,500. The stock purchase warrants contain provisions that allow the issuer to “put” their warrants, or stock after exercise, back to the Company at fair market value for cash or for the deliverance of shares. The put price under the agreement would approximate $2 million or require the deliverance of 371,841 shares as of December 31, 2002.

Upon the merger with PMR Corporation on August 5, 2002, the Company’s Preferred Stock converted to post merger Common Stock at rates of 0.246951 and 0.312864 for Series A Preferred Stock and Series B Preferred Stock, respectively. All periods prior to August 5, 2002 have been retroactively restated to reflect conversion at the applicable conversion rates. The Company had outstanding 10,497,000 shares of Series A Preferred Stock and 4,975,736 shares of Series B Preferred Stock at December 31, 2001.

At December 31, 2002, future minimum lease payments under non-cancelable leases are as follows (in thousands):

Rent expense totaled $870,000 and $328,000 for December 31, 2002 and 2001, respectively.

The reconciliation of income tax computed by applying the U.S. federal statutory rate to the actual income tax (benefit) expense attributable to continuing operations is as follows (in thousands):

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising the Company’s temporary differences are as follows (in thousands):

Management has evaluated the need for a valuation allowance for deferred tax assets and believes that certain deferred tax assets will more likely than not be realized through the future reversal of existing taxable temporary differences and future earnings of the Company. In the fourth quarter of the year ending December 31, 2002, the valuation allowance was reduced by $1.3 million, resulting in a corresponding credit to deferred income tax expense. This adjustment reflected a change in circumstances which resulted in a judgment that a corresponding amount of the Company’s deferred tax assets will be realized in future years. The valuation allowance increased by approximately $2 million during the year ending December 31, 2002 as a result of the following items (in thousands):

As of December 31, 2002 the Company had federal net operating loss carryforwards of $15.7 million expiring in the years 2012 through 2022.

During 1997, the Company and its stockholders adopted the 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel (the “1997 Key Personnel Plan”). The maximum aggregate number of shares of Common Stock to be issued under the 1997 Key Personnel Plan shall not exceed 331,712. Shares issued under the 1997 Key Personnel Plan may be in the form of incentive stock options or non-qualified options to officers, employers and directors. The exercise price per share determined by the Compensation Committee of the Board of Directors (the “Committee”) generally is not less than fair market value of the Common Stock on the date of grant. Stock options shall become exercisable in whole or in part on such date or dates as determined by the Committee at the date of grant. Options granted generally vest and are exercisable ratably

by the respective grantee over a four-year period beginning on the date of grant. Each option shall generally expire 10 years from the grant date.

Upon the merger with PMR Corporation on August 5, 2002, the Company acquired PMR Corporation’s 1997 Equity Incentive Plan, as amended (the “1997 Equity Incentive Plan”). The 1997 Equity Incentive Plan provides for the granting of options to purchase up to 1,333,333 shares of common stock to eligible employees. Under the 1997 Equity Incentive Plan, options may be granted for terms of up to 10 years and are generally exercisable in cumulative annual increments of 25% each year, commencing one year after the date of grant. Option prices must equal or exceed the fair market value of the common shares on the date of grant.

Also upon the merger with PMR Corporation on August 5, 2002, the Company acquired PMR Corporation’s Outside Directors’ Non-qualified Stock Option Plan of 1992 (the “1992 Directors’ Plan”). The 1992 Directors’ Plan provides for the Company to grant each outside director options to purchase 5,000 shares of the Company’s common stock annually at the fair market value at the date of grant. As amended, options for a maximum of 341,666 shares may be granted under this plan. The options vest 33% immediately and in ratable annual increments over the three-year period following the date of grant.

During 2002, the Company recognized $118,000 compensation expense related to stock options issued to certain officers and employees with exercise prices below fair market value.

Stock option activity, including options granted for acquisitions, is as follows (number of options in thousands):

The following table summarizes information concerning outstanding and exercisable options at December 31, 2002 (number of options in thousands).

The Company adopted the Psychiatric Solutions, Inc., Retirement Savings Plan (the “Plan”). The Plan is a tax-qualified profit sharing plan with a cash or deferred arrangement whereby employees who have completed two months of service and are age 21 or older are eligible to participate. The plan allows eligible employees to make contributions of 1% to 15% of their annual compensation. The plan includes a discretionary company matching contribution not to exceed 15% of eligible employee compensation. Employer contributions vest 20% after two years of service and continue vesting at 20% per year until fully vested. At December 31, 2002 the Company has accrued an employer matching contribution of $164,000, which was paid during the first quarter of 2003. There were no employer contributions to the plan during 2001.

The Company is subject to various claims and legal actions which arise in the ordinary course of business. The Company has professional liability insurance to protect against such claims or legal actions. In the opinion of management, the ultimate resolution of such matters will be adequately covered by insurance and will not have a material adverse effect on the Company’s financial position or results of operations.

Effective January 1, 2002, and amended and restated effective August 6, 2002, the Company entered into an Amended and Restated Employment Agreement with Joey Jacobs, Chief Executive Officer. Mr. Jacobs’ agreement provides for an annual base salary and an annual cash incentive compensation award tied to objective criteria as established by the board of directors. The employment agreement has an initial term of one year and is subject to automatic annual renewals absent prior notice from either party.

Mr. Jacobs’ employment agreement provides for various payments to Mr. Jacobs upon cessation of employment, depending on the circumstances. If the Company terminates Mr. Jacobs’s employment “without cause” or if he resigns pursuant to a constructive discharge, then (i) all options scheduled to vest during the succeeding 24 month period will immediately vest, (ii) any restricted stock will immediately vest, (iii) Mr. Jacobs will receive a cash payment equal to 200% of his base salary and bonus earned during the twelve months prior to termination, and (iv) all benefits and perquisites will continue for 18 months. In the

event of a change in control, his employment agreement requires that the Company pay him 200% of his base salary and bonus earned in the twelve months prior to termination and to continue all benefits and perquisites for 18 months.

Effective October 1, 2002, the Company entered into an employment agreement with Jack Salberg, Chief Operating Officer. Mr. Salberg’s agreement provides for an annual base salary and an annual cash incentive compensation award tied to objective criteria established by the board of directors. The employment agreement had an initial term of 15 months, subject to automatic annual renewals absent prior notice from either party.

Mr. Salberg’s employment agreement provides for various payments to Mr. Salberg upon cessation of employment, depending upon the circumstances. If the Company terminates Mr. Salberg’s employment without cause or if he resigns pursuant to a constructive discharge, then (i) all options scheduled to vest during the succeeding 18 months will immediately vest, (ii) any restricted stock will immediately vest, (iii) Mr. Salberg will receive a cash payment equal to 150% of his base salary and bonus earned in 12 months prior to termination, and (iv) all benefits and perquisites will continue for 18 months. If Mr. Salberg is terminated after a change in control of the Company, his employment agreement requires the Company to pay him a cash amount equal to 150% of his base salary and bonus earned during the 12 months prior to termination and to continue all benefits and perquisites for 18 months.

The Company is currently under contract with a software provider to replace certain information systems at owned facilities. The amount committed under the contract is approximately $504,000 as of December 31, 2002.

Final determination of amounts earned under prospective payment and cost-reimbursement activities is subject to review by appropriate governmental authorities or their agents. In the opinion of the Company’s management, adequate provision has been made for any adjustments that may result from such reviews.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the Medicare and Medicaid programs.

The Company has acquired and may continue to acquire professional corporations with prior operating histories. Acquired corporations may have unknown or contingent liabilities for failure to comply with health care laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. Although the Company attempts to assure itself that no such liabilities exist and obtains indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification or, if covered, that the liability sustained will not exceed contractual limits or the financial capacity of the indemnifying party.

During 2001 and 2000, the Company leased office space from a company whose chief executive officer is Dr. Richard Treadway, the former chairman of the Company’s board of directors. The term of the lease was from May 16, 1999 to July 2002 and was terminated on December 7, 2001. Rent expense for this space

totaled $142,154 for the year ended December 31, 2001. The Company believes the terms of this lease were at fair market value.

Currently the Company leases 7,745 square feet of office space for its executive offices from a company in which Dr. Treadway is a minority investor. The lease was entered into in October 2001 and has a term of approximately six years. The annual rent under this lease is approximately $492,000. The Company believes the terms of this lease are at fair market value.

Joey Jacobs, the Company’s Chief Executive Officer, serves as a member of the board of directors of Stones River Hospital, a hospital in which the Company manages a unit pursuant to a management agreement. The term of the third amendment to the management agreement is two years, and automatically renews for one year terms unless terminated by either party. Total revenue from this management agreement was $808,000 for the year ended December 31, 2002. The Company believes the terms of the management agreement are consistent with management agreements negotiated at arms-length.

Jack Salberg, the Company’s Chief Operating Officer, served as a minority owner and member of the board of directors of the entity which owned Riveredge Hospital prior to its acquisition by the Company during 2002. Mr. Salberg disclosed his interest to the board of directors and was not directly involved in the negotiations to acquire the hospital. The Company believes that the purchase price it paid for the Riveredge acquisition constituted its best estimate of fair value. All terms were negotiated on an arms-length basis.

Edward Wissing, a director of the Company, occasionally provides advisory and consulting services during 2002 to Brentwood Capital Advisors, the Company’s financial advisor. Mr. Wissing also is a party to a consulting arrangement with Brentwood Capital pursuant to which he provides certain consulting services. According to the terms of this consulting arrangement, Mr. Wissing received a fixed consulting fee of $5,000 per month beginning in August 2002 and ending in May 2003.

Joseph P. Donlan, a director of the Company, is the co-manager of The 1818 Mezzanine Fund II, L.P. (the “1818 Fund”), which is managed by Brown Brothers Harriman & Co. (“Brown Brothers”). Mr. Donlan is a managing director of Brown Brothers. On June 28, 2002, the Company entered into a securities purchase agreement with the 1818 Fund to issue up to $20 million of senior subordinated notes with detachable warrants. At the closing on June 28, 2002, a total of $10 million of the senior subordinated notes were issued. The notes have a term of seven years and bear interest at 12% annually, payable quarterly. The Company issued detachable stock purchase warrants to the 1818 Fund for the purchase of 372,412 shares of Common Stock at an exercise price of $.01 per share. The warrants are exercisable over ten years from the effective date. As of December 31, 2002, the fair value of the warrants totaled approximately $2.0 million.

On October 12, 2000, Psychiatric Solutions entered into unsecured bridge loans with each of Acacia Venture Partners, L.P. and South Point Venture Partners, L.P. (collectively, “Acacia”) and Oak Investment Partners IV and Affiliates, L.P. (collectively, “Oak”), pursuant to which Psychiatric Solutions borrowed $408,494 from each of Acacia and Oak (the “Bridge Loans”). The Bridge Loans bore interest at 10%, payable monthly. The proceeds were used to fund short-term working capital requirements. On April 30, 2002, Psychiatric Solutions repaid each of the Bridge Loans, together with accrued interest in the amount of $64,111 for each Bridge Loan. Ann H. Lamont, a director of the Company, is a general partner of Oak. Davis S. Heer, a director of the Company, is the general partner of Acacia Management, L.P., the general partner of Acacia.

On July 31, 2002, Acacia exercised warrants to purchase 118,623 shares of Common Stock. The exercise price for these shares was $.032 per share.

The Company’s facilities and management contracts comprising the Freestanding Specialty Hospitals and Psychiatric Unit Management divisions, respectively are each similar in their activities and the economic environments in which they operate. Accordingly, the Company’s reportable operating segments consist of (1) Freestanding Specialty Hospitals and (2), Psychiatric Unit Management. Prior to the acquisitions of the Company’s facilities in the third and fourth quarters of 2001 and third quarter of 2002, management had determined that the Company did not have separately reportable segments as defined under Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information.

The following is a financial summary by business segment for the periods indicated. EBITDA represents income from continuing operations before interest expense (net of interest income), income taxes, depreciation, amortization. EBITDA is commonly used as an analytical indicator within the health care industry and serves as a measure of leverage capacity and debt service ability. EBITDA should not be considered as a measure of financial performance under accounting principles generally accepted in the United States, and the items excluded in determining EBITDA are significant components in understanding and assessing financial performance. Because neither is a measurement determined in accordance with accounting principles generally accepted in the United States, it is susceptible to varying calculations, and as a result our calculation of EBITDA as presented may not be comparable to EBITDA or other similarly titled measures used by the companies (in thousands):

A summary of activity in the Company’s allowance for bad debts follows (in thousands):

Summarized results for each quarter in the years ended December 31, 2002 and 2001 are as follows (in thousands, except per share data):

The Company conducts substantially all of its business through its subsidiaries. Presented below is condensed consolidating financial information for the Company and its subsidiaries as of December 31, 2002, and for the year then ended. The information segregates the parent company (Psychiatric Solutions, Inc.), the combined wholly owned Subsidiary Guarantors, the combined Non-Guarantors, and eliminations. All of the subsidiary guarantees are both full and unconditional and joint and several. No combining financial information has been presented for prior periods as there were no Non-Guarantor Subsidiaries prior to November 2002.

The Brown Schools Acquisition. On February 13, 2003, Psychiatric Solutions signed a definitive agreement for the purchase of six psychiatric facilities from The Brown Schools, Inc. for $63 million in cash. The six facilities, which have an aggregate of 790 beds, are located in Austin, San Antonio and San Marcos, Texas; Charlottesville, Virginia; Colorado Springs, Colorado; and Tulsa, Oklahoma. For 2002, the facilities produced combined revenues of $76 million. Psychiatric Solutions expects to consummate the transaction, which is subject to customary closing conditions, on April 1, 2003.

$25 Million Private Placement Of series A convertible preferred stock. On February 4, 2003 Psychiatric Solutions’ stockholders approved the private placement of $25 million of our Series A Convertible Preferred Stock (the “preferred stock”) with affiliates of Oak Investment Partners and Salix Ventures and with Brown Brothers Harriman & Co.’s The 1818 Mezzanine Fund II, L.P. The investors are current investors in Psychiatric Solutions, with Oak Investment Partners and Salix Ventures (or related entities) being among the co-founders of Psychiatric Solutions. Representatives of Salix Ventures and Brown Brothers Harriman currently serve on our Board of Directors. A representative of Oak Investment is expected to be named to the Company’s Board of Directors during the first quarter of 2003. We intend to use the net proceeds from the preferred stock primarily to fund acquisitions of freestanding psychiatric patient facilities. The preferred stock will be issued in two phases: One half will be issued on April 1, 2003, and one-half will be issued on July 1, 2003.

HUD Refinancing. Psychiatric Solutions is in the process of refinancing a portion of its senior credit facility with various loans guaranteed by the U.S. Department of Housing and Urban Development (HUD). These loans are expected to be in the aggregate amount of approximately $25.0 million and will be secured by real estate and other fixed assets of West Oaks Hospital, Cypress Creek Hospital, Riveredge Hospital and Texas NeuroRehab Center. This refinancing is expected to close in four installments (one per hospital). The first installment, Holly Hill Hospital, closed November 25, 2002. Management anticipates that this refinancing will result in annual interest expense savings of approximately $420,000.

Ramsay Youth Services, Inc. (the “Company”) is a provider of behavioral health care treatment programs and services focused on at-risk and special-needs youth. The Company offers a full spectrum of treatment programs and services in residential and non-residential settings. The programs and services are offered through a network of Company-owned or leased facilities (“Owned Operations”) and state or government-owned facilities (“Management Contract Operations”). The Company is headquartered in Coral Gables, Florida and has operations in Alabama, Florida, Georgia, Hawaii, Missouri, Michigan, Nevada, North Carolina, South Carolina, Texas, Utah and Puerto Rico. The Company also provides a limited range of adult behavioral health care services at certain of its locations in response to community demand.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim information are, unless otherwise discussed in this report, of a normal recurring nature and have been included. The Company’s business is seasonal in nature and subject to general economic conditions and other factors. Accordingly, operating results for the quarter ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year. The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include valuation reserves for accounts receivable, estimates of revenue to be received from government and other contract reimbursement programs, self-insurance reserves, and estimates related to allocating purchase price to assets and liabilities for prior or future acquisitions. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

At March 31, 2003, three corporate affiliates of Mr. Paul J. Ramsay, Chairman of the Board of the Company, owned an aggregate voting interest in the Company of approximately 58%, as follows: (i) Ramsay Holdings HSA Limited owned 9.7% of the outstanding Common Stock of the Company, (ii) Ramsay Holdings Pty. Ltd. owned approximately 40.1% of the outstanding Common Stock of the Company and (iii) Paul Ramsay Hospitals Pty. Limited (“Ramsay Hospitals”) owned approximately 8.1% of the outstanding Common Stock of the Company.

In September 2002, the Company entered into a lease agreement for a 110-bed facility in Macon, Georgia with a corporate affiliate of Mr. Paul J. Ramsay, Chairman of the Board of the Company and beneficial owner of approximately 61% of the outstanding Common Stock of the Company (the “Macon Lease”). The lease has a primary term of five years and two successive five-year renewal options. The lease payments are $432,000 per annum and at each renewal option is subject to adjustments based on the change in the Consumer Price Index during the preceding period. In accordance with the terms of the lease, the Company is responsible for all costs of ownership, including taxes, insurance, maintenance and repairs. In addition, the Company has the option to purchase the facility at any time for an amount equal to the

aggregate cost of the facility (as defined in the lease agreement) adjusted for the increase in the Consumer Price Index between the commencement of the lease and the purchase date.

In December 1999, the Company entered into an agreement with one of its directors to serve as a senior advisor in connection with legal issues, acquisitions, financings and other transactions involving the Company. During the quarters ended March 31, 2003 and 2002, the Company paid the director $15,000 in connection with these advisory services.

The Company’s amended senior credit facility (the “Senior Credit Facility”) consists of a term loan (the “Term Loan”) payable in monthly installments ranging from $83,000 to $302,000 with a final payment of any outstanding principal balance due on September 1, 2004 and a revolving credit facility (the “Revolver”) for an amount up to the lesser of $15,000,000 or the borrowing base of the Company’s receivables (as defined in the agreement) and an acquisition loan commitment of up to $6,000,000 (the “Acquisition Loan”).

On September 6, 2002, the Company’s senior credit facility and subordinated debt was amended to consent to a commercial lease for the Macon Facility between the Company and a corporate affiliate of Mr. Paul J. Ramsay. On March 14, 2003, the Senior Credit Facility was amended, effective December 31, 2002, to extend the maturity date to October 29, 2004.

At March 31, 2003, the Company was in compliance with all covenants stipulated in the Senior Credit Facility.

The following table sets forth the computation of basic and diluted earnings per share:

For the quarters March 31, 2003 and 2002, options and warrants totaling 552,819 and 591,781, respectively, were excluded from the above computation because their effect would be antidilutive.

The Company offers its mental health and behavioral health programs and services at its owned and leased facilities in residential and non-residential settings.

The residential setting is designed to provide a safe, secure and highly structured environment for the evaluation and development of long-term intensive treatment services. The programs focus on a cognitive behavioral model with family, group and individual counseling, social and life skills development, and educational and recreational programs. The primary focus of these services is to reshape antisocial behaviors by stressing responsibility and achievement of performance and treatment goals.

The non-residential setting is designed to meet the special needs of patients requiring a less structured environment than the residential setting, but providing the necessary level of treatment, support and assistance to transition back into society. The primary focus of this program is to provide patients, with a clinically definable emotional, psychiatric or dependency disorder, with therapeutic and intensive treatment services. Patients who are assisted through this program have either transitioned out of a residential treatment program, or do not require the intensive services of a residential treatment program.

Many of the Company’s programs are complemented with specialized educational services designed to modify behavior and assist individuals in developing their academic, social, living and vocational skills necessary to participate successfully in society.

The Company’s programs and services in its management contract operations are similar in nature to the programs and services offered by the Company at its owned or leased operations; however, the programs and services are provided at facilities owned by the contracting governmental agency. These programs and services focus on solving the specialized needs of the respective agency by providing treatment interventions, including counseling, social interests, substance abuse education and treatment, mental health services, cognitive and life skills development, accredited education and vocational skills. The Company believes that a comprehensive approach, which develops the social, educational, and vocational skills of the individual, creates responsible, contributing, pro-social individuals. This comprehensive approach is essential to achieving the program’s objective of reducing recidivism and integrating the youth into their communities as responsible and productive individuals.

The following table sets forth, for each of the periods indicated, certain information about segment results of operations and segment assets. There are no inter-segment sales or transfers. Segment profit consists of revenue less operating expenses, and does not include investment income and other, interest and other financing charges, non-recurring items and income taxes. Total assets are those assets used in the operations in each segment. Corporate assets include cash and cash equivalents, property and equipment, intangible assets and notes receivable. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

The Company has experienced delays in the collection of receivables from its contracts in Puerto Rico. As of March 31, 2003, the Company had approximately $2,000,000 in outstanding receivables due from the Commonwealth of Puerto Rico, of which $1,100,000 was over 120 days past due. Reserves against outstanding Puerto Rico receivables were $1,100,000 as of March 31, 2003. As of May 9, 2003, the Company had collected approximately $0.4 million of the March 31, 2003 outstanding receivable balance, all of which related to receivables under 120 days past due. The Company and its advisors are in active discussions with the Government of Puerto Rico with respect to the payment of the outstanding receivables. The Company believes that it has fully performed its obligations under the Puerto Rico contracts and is entitled to receive payment of these receivables in full. Although the Company has been advised by its legal counsel that the net receivables due on the Puerto Rico contracts are collectable, there can be no assurances that future transactions or events will not result in the need for additional reserves for these accounts receivable. If the Company were to record additional reserves, it would adversely affect earnings in the period in which the reserves are recorded.

The Government of Puerto Rico has informed the Company that, as a result of budgetary constraints, it will cancel various contracts with private sector providers. In connection therewith, the Company agreed with the Government of Puerto Rico to terminate its contract to provide educational services to juveniles in Puerto Rico effective August 14, 2002. On April 16, 2002, the Company and the Government of Puerto Rico agreed to the cancellation of the Company’s contract to provide a 20-bed specialized mental health treatment program for youth referred by the Mental Health and Anti-Addiction Services Administration of Puerto Rico.

In July 2001, the Financial Accounting Standard Board (“FASB”) issued Statement No. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS. This Statement requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. This Statement is required to be adopted in

fiscal years beginning after June 15, 2002. The Company did not have an impact to its results of operations from the adoption of this Statement.

In April 2002, the FASB issued Statement No. 145, RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTION. This Statement eliminates extraordinary accounting treatment for reporting gain or loss on debt extinguishment, and amends other existing authoritative pronouncements to make various technical corrections, clarifies meanings, or describes their applicability under changed conditions. The provisions of this Statement are effective for the Company with the beginning of fiscal year 2003; however, early application of the Statement is encouraged. Debt extinguishments reported as extraordinary items prior to scheduled or early adoption of this Statement would be reclassified in most cases following adoption. The Company did not have an impact to its results of operations from adopting this Statement.

In June 2002, the FASB issued Statement No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management commitment to an exit plan. Adoption of this Statement is required with the beginning of fiscal year 2003. The Company did not have an impact to its results of operations from adopting this Statement.

In November 2002, the FASB issued Financial Interpretation (FIN) No. 45, GUARANTOR’S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS. FIN No. 45 clarifies and expands on existing disclosure requirements for guarantees, including product warranties. FIN No. 45 also requires recognition of a liability at fair value of a company’s obligations under certain guarantee contracts. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions of FIN No. 45 are applied only on a prospective basis to guarantees issued after December 31, 2002, irrespective of the guarantors’ fiscal year-end. The Company did not have an impact to its results from operations from the adoption of this Statement.

In December 2002, the FASB issued Statement No. 148, ACCOUNTING FOR STOCK-BASED COMPENSATION — TRANSITION AND DISCLOSURE, an amendment of FASB Statement No. 123. This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company did not have an impact to the results of operations from the adoption of this Statement.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. FIN No. 46 provides accounting guidance for consolidation of off-balance sheet entities with certain characteristics (variable interest entities). All enterprises with variable interest in variable interest entities created after January 31, 2003, shall apply the provisions of this interpretation immediately. A public entity with variable interest in a variable interest entity created before February 1, 2003 shall apply the provisions of this interpretation no later than the first interim or annual reporting period beginning after June 15, 2003. The Company does not believe that the implementation of FIN No. 46 will have a material impact on its financial condition, results of operations or cash flows.

The Company accounts for its stock-based compensation plans under Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. The pro forma information below is

based on provisions of Statement of Financial Accounting Standard (“FAS”) No. 123, Accounting for Stock-Based Compensation, as amended by FAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure, issued in December 2002.

The Company’s options and warrants become fully vested upon a change in control of the Company. As a result of the Company’s pending merger discussed in Note 10, the pro forma information shown below assumes the options and warrants will be fully amortized to compensation expense by June 30, 2003.

During the quarter ended June 30, 2002, the Company reversed $7,390,000 of the valuation allowance placed on its deferred tax assets relating to temporary differences that will result in deductible amounts in future years and net operating loss carryforwards. Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income within the carryforward period available under tax law. The Company has reversed a portion of the valuation allowance because, based on a current review of available objective and verifiable evidence, it is management’s judgment that a portion of the tax benefits associated with the Company’s deferred tax assets will more likely than not be realized. Such evidence includes updated expectations about sufficient future years’ taxable income which reflect the continuing improvement in the Company’s operating results.

At March 31, 2003, the Company had federal net operating loss carryforwards totaling approximately $25,231,000, which expire in the years 2010 to 2018. The Company also has available alternative minimum tax credit carryforwards of approximately $1,150,000 which may be carried forward indefinitely.

The net deferred tax assets represent management’s best estimate of the tax benefits that will more likely than not be realized in future years at each reporting date. However, there can be no assurance that the Company can generate taxable income to realize the net deferred tax assets. In addition, under the Tax Reform Act of 1986, certain future changes in ownership resulting from the sale of stock may limit the amount of net operating loss carryforwards that can be utilized on an annual basis. The Company has and continues to evaluate compliance relating to the utilization of the net operating loss carryforwards, and believes it has complied in all material respects. A failure to meet the requirements could result in a loss or limitation of the utilization of carryforwards, which could have a material adverse effect on the Company’s financial position and results of operations in future periods.

Deferred taxes as of March 31, 2003 and December 31, 2002 are summarized as follows:

On April 8, 2003, the Company entered into an agreement and plan of merger (the “Agreement”) with Psychiatric Solutions, Inc. (“PSI”). Under the terms of the Agreement, PSI will pay in cash $5.00 per share of outstanding common stock, and assume the Company’s outstanding debt. The transaction is subject to customary closing conditions including receipt of regulatory approvals as well as approval by the Company’s stockholders. PSI is in the process of arranging financing for the transaction. The merger is scheduled for completion by early July 2003.

On May 1, 2003, Mr. Aaron Beam, Jr. resigned from his position as a member of the Company’s Board of Directors and as a member of the Compensation, Audit and Independent Directors Committees of the Board of Directors. In addition, on May 1, 2003, Mr. Beam agreed to the cancellation of options to purchase 13,334 shares of Ramsay Common Stock in exchange for a payment of $40,000.

We have audited the consolidated balance sheets of Ramsay Youth Services, Inc. and subsidiaries (the “Company”) as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ramsay Youth Services, Inc. and subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, in 2002, the Company changed its method of accounting for goodwill and indefinite-lived assets to conform to Statement of Financial Accounting Standards No. 142.

Ramsay Youth Services, Inc. is a provider of behavioral health care treatment programs and services focused on at-risk and special-needs youth. The Company offers a full spectrum of treatment programs and services in residential and non-residential settings. The programs and services are offered through a network of Company-owned or leased facilities (“Owned Operations”) and state or government-owned facilities (“Management Contract Operations”). The Company is headquartered in Coral Gables, Florida and has operations in Alabama, Florida, Georgia, Hawaii, Missouri, Michigan, Nevada, North Carolina, South Carolina, Texas, Utah and Puerto Rico. The Company also provides a limited range of adult behavioral health care services at certain of its locations in response to community demand.

The consolidated financial statements include the accounts of Ramsay Youth Services, Inc. and its majority-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company provides services to individuals without insurance and accepts assignments of individuals’ third party benefits without requiring collateral. Exposure to losses on receivables due from these individuals is principally dependent on each individual’s financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The mix of the receivables from residents and third-party payors was as follows:

The Company carries accounts receivables at the amount it deems to be collectable. Estimates are used in determining the Company’s allowance for doubtful accounts and are based on the Company’s historical

collection experience, current trends and credit policy. Although the Company believes its allowance is sufficient, if the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company continually evaluates the adequacy of its allowance for doubtful accounts. Recoveries are recognized in the period they are received. The ultimate amount of accounts receivable that becomes uncollectable could differ from those estimated.

As a result of budgetary constraints, on December 15, 2001 the Government of Puerto Rico cancelled the Company’s contract to provide mental health and substance abuse services. In addition, on April 16, 2002 and August 14, 2002, the Government of Puerto Rico also cancelled the Company’s contracts to provide a 20-bed specialized treatment program and an educational program to youth in Puerto Rico, respectively. Total revenues from these three contracts for the years ended December 31, 2002, 2001 and 2000 were approximately $2.0 million, $6.2 million and $5.6 million, respectively. Total operating (loss) or income from these contracts for the years ended December 31, 2002, 2001 and 2000 was approximately ($0.3 million), $0.6 million and $1.3 million, respectively. The Company’s remaining contract with the Government of Puerto Rico is for the management of the 120-bed Bayamon facility. Although the contract for the management of the Bayamon facility does not expire until April 27, 2004, there can be no assurances that the Government of Puerto Rico will not cancel the contract prior to its expiration date. If the Bayamon contract is cancelled, the Company may incur additional costs and charges associated with the early termination of the contract. Total revenues and operating income generated by the Bayamon facility contract for the year ended December 31, 2002 were approximately $5.8 million and $0.4 million, respectively.

The Company has experienced delays in the collection of receivables from certain of its contracts in Puerto Rico. During the year ended December 31, 2002, the Company collected approximately $1.4 million of past due receivables from the Government of Puerto Rico. As of December 31, 2002, the Company had approximately $2.0 million in outstanding receivables due from its contracts in Puerto Rico, of which $1.1 million was over 120 days past due. Reserves against outstanding Puerto Rico receivables were $1.1 million as of December 31, 2002. As of March 14, 2003, the Company had collected approximately $0.9 million of the December 31, 2002 outstanding receivable balance, all of which related to receivables under 120 days past due. The Company and its advisors are in active discussions with the Government of Puerto Rico with respect to the payment of the outstanding receivables. Although the Company has been advised by its legal counsel that the receivables due on the Puerto Rico contracts are collectable, there can be no assurances that the amounts will be collected.

Cash and cash equivalents include cash on hand and short-term, highly liquid, interest-bearing investments, with original maturities less than three months, consisting primarily of money market mutual funds. 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 includes cash held in escrow from the sale of certain assets (see Note 2) and cash and short term investments set aside for the payment of losses in connection with the Company’s self-insured retention for professional and general liability claims.

Cost in excess of net asset value of purchased businesses relates to certain acquisitions made by the Company (see Note 4). Prior to January 1, 2002, amounts were being amortized on a straight-line basis over

a term ranging from 3 to 40 years with a weighted average life of approximately 20 years. As the result of Statement of Financial Accounting Standards (“SFAS”) No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, a new accounting pronouncement which became effective in 2002, the Company now evaluates its intangible assets to determine whether they will continue to be amortized or will be tested annually for impairment. The Company has completed its initial test of goodwill and has classified its goodwill in accordance with the Statement’s criteria. Goodwill amortization for the Company for the years ended December 31, 2002, 2001 and 2000 was $0, $141,000 and $424,000, respectively.

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. The amount of impairment, if any, would be measured based on discounted future operating cash flows using a discount rate reflecting the Company’s average cost of funds. As of December 31, 2002 and 2001 costs in excess of net asset value of purchased businesses, net of accumulated amortization of $1,521,000, was $2,232,000.

Loan costs are deferred and amortized ratably over the life of the loan and are included in interest and other financial charges. Accumulated amortization of the Company’s loan costs as of December 31, 2002 and 2001 was $1,418,607 and $1,136,000, respectively.

Property and equipment are stated at cost less accumulated depreciation, except for assets considered to be impaired, 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.

Depreciation is computed substantially on the straight-line method for financial reporting purposes and on accelerated methods for income tax purposes. Depreciation is not recorded on assets determined to be impaired or during the period they are held for sale. The general range of estimated useful lives for financial reporting purposes is twenty to forty years for buildings and five to 10 years for equipment. For the years

ended December 31, 2002, 2001 and 2000, depreciation expense recorded on the Company’s property and equipment totaled $2,577,000, $2,300,000 and $1,945,000, respectively.

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 individuals 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 facilities. Final determination of amounts earned under contracted reimbursement programs is subject to review and audit by the appropriate agencies. Differences between amounts recorded as estimated settlements and the audited amounts are reflected as adjustments to provider based revenues in the period the final determination is made (see Note 13).

The Company records the cost of medical services when such services are provided.

The Company carries general and professional liability, comprehensive property damage, malpractice, workers’ compensation, and other insurance coverages that management considers adequate for the protection of its assets and operations.

The Company maintains self-insured retentions related to its professional and general liability and workers’ compensation insurance programs. The Company’s operations are insured for professional liability on a claims-made basis and for general liability and workers’ compensation on an occurrence basis. The Company records the liability for uninsured 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.

The Company funds the expected losses of its workers’ compensation claims through a rent-a-captive arrangement with an offshore entity wholly owned by a United States insurance carrier. The Company also maintains an aggregate stop loss policy for its workers’ compensation claims.

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. 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. Future tax benefits are required to be recognized to the extent that realization of such benefits is more likely than not. A valuation allowance is established for those benefits that do not meet the more likely than not criteria.

For all periods presented, the Company has calculated earnings per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is based on the weighted average number of shares outstanding during each period. Diluted earnings per share further assumes that, under the treasury stock method, dilutive stock options and warrants are exercised.

At December 31, 2002, the Company has eight stock-based employee compensation plans, which are described more fully in Note 11. The company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and Related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-based Compensation, to stock-based employee compensation.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. 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 actual and pro forma information follows:

The carrying amount of financial instruments including cash and cash equivalents, cash held in trust, accounts receivable from services, and accounts payable approximate fair value as of December 31, 2002 due to the short maturity of the instruments and reserves for potential losses, as applicable. The carrying amounts of long-term debt obligations issued pursuant to the Company’s senior credit facility approximate fair value because the interest rates on these instruments are subject to change with market interest rates.

In July 2001, the Financial Accounting Standard Board (“FASB”) issued Statement No. 143, Accounting for Asset Retirement Obligations. This Statement requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. This Statement is required to be adopted in fiscal years beginning after June 15, 2002. The Company does not anticipate a significant impact to the results of operations from the adoption of this Statement.

In April 2002, the FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction. This Statement eliminates extraordinary

accounting treatment for reporting gain or loss on debt extinguishment, and amends other existing authoritative pronouncements to make various technical corrections, clarifies meanings, or describes their applicability under changed conditions. The provisions of this Statement are effective for the Company with the beginning of fiscal year 2003; however, early application of the Statement is encouraged. Debt extinguishments reported as extraordinary items prior to scheduled or early adoption of this Statement would be reclassified in most cases following adoption. The Company does not anticipate a significant impact on its results of operations from adopting this Statement.

In June 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management commitment to an exit plan. Adoption of this Statement is required with the beginning of fiscal year 2003. The Company has not yet completed its evaluation of the impact of adopting this Statement.

In November 2002, the FASB issued Financial Interpretation (FIN) No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others. FIN No. 45 clarifies and expands on existing disclosure requirements for guarantees, including product warranties. FIN No. 45 also requires recognition of a liability at fair value of a company’s obligations under certain guarantee contracts. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and measurement provisions of FIN No. 45 are applied only on a prospective basis to guarantees issued after December 31, 2002, irrespective of the guarantors’ fiscal year-end. The Company does not believe that the implementation of FIN No. 45 will have a material impact on its financial condition, results of operations or cash flows.

In December 2002, the FASB issued Statement No. 148, Accounting for Stock-based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company does not anticipate a significant impact to the results of operations from the adoption of this Statement.

On June 7, 2000, the Company sold five of its contracts to manage charter schools and personal property with a book value of approximately $800,000 (including the net book value of cost in excess of net asset value of purchased businesses and other intangible assets) for $352,000, resulting in a loss of $456,000 after transaction costs. Additionally, in December 2000, the Company cancelled a long term consulting agreement with the purchaser of the aforementioned contracts and incurred $249,000 in cancellation fees effectively increasing the total loss to $705,000.

As of December 31, 2000, the assets relating to the Company’s facility in Palm Bay, Florida were reflected as assets held for sale in the accompanying balance sheets. On May 15, 2001, the Company sold the

facility for $2,300,000. Proceeds from the sale included a $500,000 cash payment at closing and a $1,800,000, 8% promissory note, due and payable on June 30, 2003. During the year ended December 31, 2001, the Company agreed to accept a discount of $130,000 for the full payment of the promissory note and accrued interest. This note is now expected to be repaid at its original maturity date of June 30, 2003 for the undiscounted amount of $1.8 million. The discount is included as a loss on sale of assets during the year ended December 31, 2001 in the accompanying financial statements. For the year ended December 31, 2001, revenues and net income before taxes from the Palm Bay facility operations were $65,000 and $40,000, respectively. Revenues and net loss before taxes for the Palm Bay facility for the year ended December 31, 2000 were $117,000 and $59,000, respectively.

In accordance with FASB No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, 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.

During the year ended December 31, 2002 and 2001, the Company closed two of its community based programs in South Carolina and recorded asset impairment charges of $125,000 and $124,000, respectively. The asset impairment charges were determined based on the differences between the carrying value of the assets and the expected net proceeds from the sale of each facility.

On August 4, 2000, the Company acquired the operating assets of Charter Behavioral Health System of Manatee Palms, L.P. (“Manatee Palms”) from Charter Behavioral Health Systems, LLC and the corresponding real estate from Crescent Real Estate Funding VII, L.P. for a cash purchase price of $7,700,000. The acquisition was accounted for under the purchase method of accounting. In connection with the acquisition, the Company recorded cost in excess of net asset value of purchased businesses of $1,892,000. Prior to FASB Statement No. 142, this amount was being amortized on a straight-line basis over a term of 20 years. The operations of Manatee Palms have been included in the Company’s consolidated statement of operations effective August 4, 2000. The Company’s Senior Credit Facility was amended on August 4, 2000 to provide for the approval of this acquisition (see Note 6).

At December 31, 2002, three corporate affiliates of Mr. Paul J. Ramsay, Chairman of the Board of the Company, owned an aggregate voting interest in the Company of approximately 58.02%, as follows: (i) Ramsay Holdings HSA Limited owned 9.75% of the outstanding Common Stock of the Company, (ii) Ramsay Holdings Pty. Ltd. owned approximately 40.13% of the outstanding Common Stock of the Company and (iii) Paul Ramsay Hospitals Pty. Limited (“Ramsay Hospitals”) owned approximately 8.08% of the outstanding Common Stock of the Company.

In September 2002, the Company entered into a lease agreement for a 110-bed facility in Macon, Georgia with a corporate affiliate of Mr. Paul J. Ramsay, Chairman of the Board of the Company and beneficial owner of approximately 59% of the outstanding Common Stock of the Company (the “Macon Lease”). The lease has a primary term of five years and two successive five year renewal options. The lease payments are $432,000 per annum and at each renewal option are subject to adjustments based on the change in the Consumer Price Index during the preceding period. In accordance with the terms of the lease, the Company is responsible for all costs of ownership, including taxes, insurance, maintenance and repairs. In addition, the Company has the option to purchase the facility at any time for an amount equal to the

aggregate cost of the facility (as defined in the lease agreement) adjusted for the increase in the Consumer Price Index between the commencement of the lease and the purchase date.

In December 1999, the Company entered into an agreement with one of its directors to serve as a senior advisor in connection with legal issues, acquisitions, financings and other transactions involving the Company. During the years ended December 31, 2002, 2001 and 2000, the Company paid the director $61,242, $66,256 and $68,783, respectively (including expense reimbursements) in connection with these advisory services.

In October 1999, the Company entered into an agreement with Excel Vocational Alternatives, Inc. (“Excel”) for the provision by Excel of consulting and advisory services in connection with the creation of a Job Corps division for the Company. An executive officer of the Company is President and has a 50% ownership interest in Excel. On June 1, 2001, the Company cancelled its agreement with Excel. During the year ended December 31, 2001 and 2000, the Company paid Excel $150,000 and $192,500, respectively, in connection with these advisory services.

The Company’s senior credit facility, as amended, (the “Senior Credit Facility”) consists of a term loan (the “Term Loan”) payable in monthly installments ranging from $83,000 to $302,000 with final payment of any outstanding principal balance due on September 1, 2004 and a revolving credit facility (the “Revolver”) for an amount up to the lesser of $15,000,000 or the borrowing base of the Company’s receivables (as defined in the agreement) and an acquisition loan commitment of up to $6,000,000 (the “Acquisition Loan”).

The Company’s Senior Credit Facility also provided for a $1,250,000 bridge loan advance under the Acquisition Loan. On August 2, 2002 the Company paid off its $1,250,000 bridge loan advance under the Acquisition Loan.

In connection with the aforementioned bridge loan advance, a corporate affiliate of Paul J. Ramsay, Chairman of the Board of the Company, entered into a Junior Subordinated Note Purchase Agreement with the Senior Credit Facility lender to participate in the Senior Credit Facility in an amount equal to the bridge loan advance.

Interest on the Term Loan and the Revolver varies, and at the option of the Company, would equal (i) a function of a base rate plus a margin ranging from 0.5% to 2.0% (4.75% at December 31, 2002), based on the Company’s ratio of total indebtedness to EBITDA or (ii) a function of the Eurodollar rate plus a margin

ranging from 2.0% to 3.5% (3.43% at December 31, 2002), based on the Company’s ratio of total indebtedness to EBITDA.

Interest on the Acquisition Loan varies, and at the option of the Company, would equal (i) a function of a base rate plus a margin ranging from 0.75% to 2.25% (5.0% at December 31, 2002), based on the Company’s ratio of total indebtedness to EBITDA or (ii) a function of the Eurodollar rate plus a margin ranging from 2.25% to 3.75% (3.68% at December 31, 2002), based on the Company’s ratio of total indebtedness to EBITDA.

Additionally, the Company is obligated to pay to the financial institution an amount equal to one half of 1% of the unused portion of the Revolver and the Acquisition Loan.

The Senior Credit Facility requires that the Company meet certain covenants, including (i) the maintenance of certain fixed charge coverage, interest coverage and leverage ratios, (ii) the maintenance of certain pro forma availability levels (as defined in the credit agreement) and (iii) a limitation on capital expenditures. The Senior Credit Facility also prohibits the payment of cash dividends to common stockholders of the Company.

On September 6, 2002, the Company’s Senior Credit Facility was amended to allow for the execution of the Macon Lease (see Note 5). On March 14, 2003, the Senior Credit Facility was amended, effective December 31, 2002, to extend the maturity date to October 30, 2004.

During the twelve months ended December 31, 2001, the Company exceeded the capital expenditure limitation in the Senior Credit Facility. On February 25, 2002, the Company’s lender agreed to amend the Senior Credit Facility, retroactive to December 31, 2001, to provide for among other items: (i) an increase in the permitted capital expenditures, (ii) a $3.0 million increase in the revolving credit loan commitment, and (iii) a $1.5 million additional advance on the term loan.

As of December 31, 2002 and 2001, the Company was in compliance with all covenants stipulated in the Senior Credit Facility.

The Company and its subsidiaries have pledged substantially all of their real property, receivables and other assets as collateral for the Senior Credit Facility.

On January 25, 2000 and June 19, 2000, the Company entered into subordinated note and warrant purchase agreements with two unrelated financial institutions for an aggregate principal amount of $5 million each (the “Subordinated Notes”). The Subordinated Notes permit each of the financial institutions to exercise, under certain conditions, up to 475,000 warrants which are convertible into the Company’s common stock. The aggregate value of the warrants at the time of issuance was $861,000. On August 17, 2001, one of the financial institutions exercised its warrant purchase agreement and converted 475,000 warrants into 294,597 shares of common stock utilizing the cashless exercise provision outlined in the warrant agreement. Borrowings under the Subordinated Notes bear interest at a rate of 12.5% per annum. The interest is payable quarterly, and the principal balance and any unpaid interest is due January 24, 2007.

In connection with the Subordinated Notes, the Company incurred loan costs of approximately $679,000. The loan costs are deferred and amortized ratably over the life of the loans. The amortization is included in interest and other financing charges in the accompanying consolidated statement of operations and the unamortized balance is included as unamortized loan costs in the accompanying consolidated balance sheet.

The aggregate scheduled maturities of long term debt outstanding during the next five years are as follows: 2003 — $3,938,000; 2004 — $4,411,000; 2005 — $25,000; 2006 — $15,000 and 2007 — $10,004,000.

On September 28, 1998, the Company sold and leased back the land, buildings and fixed equipment of its Havenwyck facility in Auburn Hills, Michigan. The lease has a term of 12 years and currently requires annual minimum lease payments of approximately $1,387,000, payable monthly. Effective April 1 of each year, the lease payments are subject to upward adjustments (not to exceed 3% annually) in the consumer price index over the preceding twelve months.

In August 1997, the Company leased its Meadowlake facility in Oklahoma to an independent health care provider (the “tenant”) for an initial term of three years, with four three-year renewal options. Lease payments total $385,000 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 for $2,500,000. The book value of the facility was $1,900,000 on December 31, 2002.

In April 1995, the Company sold and leased back the land, buildings and fixed equipment of its Mission Vista facility in San Antonio, Texas. The lease at the Mission Vista facility has a primary term of 15 years (with three successive renewal options of 5 years each) and at December 31, 2002 had aggregate annual minimum rentals of approximately $601,000, payable monthly.

Rent expense related to noncancellable operating leases amounted to $4,163,000, $3,916,000 and $3,256,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

Future minimum lease payments required under noncancellable operating leases as of December 31, 2002 are as follows: 2003 — $3,681,000; 2004 — $3,401,000; 2005 — $3,215,000; 2006 — $2,692,000, 2007 — $2,387,000 and thereafter — $4,064,000.

The Company is a provider of behavioral health care treatment programs focused on at-risk and special needs youth in residential and non-residential settings in eleven states and the Commonwealth of Puerto Rico. During the quarter ended June 30, 2001, the Company refined its segment definitions to more appropriately reflect its business operations and management responsibilities. The primary change from the segment information presented as of December 31, 2000 consists of a change in the names of the segments and the classification of certain items within the segments. Accordingly, the corresponding information for earlier periods has been reclassified to reflect the new reportable business segments, owned operations and management contract operations.

The Company offers its mental health and behavioral health programs and services at its owned and leased facilities in residential and non-residential settings.

The residential setting provides a safe, secure and highly structured environment for the evaluation and development of long-term intensive treatment services. The programs focus on a cognitive behavioral model with family, group and individual counseling, social and life skills development, and educational and recreational programs. The primary focus of these services is to reshape antisocial behaviors by stressing responsibility and achievement of performance and treatment goals.

Patients who are assisted through this program have either transitioned out of a residential treatment program, or do not require the intensive services of a residential treatment program.

The Company’s programs and services in its management contract operations are similar in nature to the programs and services offered by the Company at its owned operations; however, the programs and services are provided at facilities owned by the contracting governmental agency. These programs and services focus on solving the specialized needs of the respective agency by providing effective treatment interventions, including counseling, social interests, substance abuse education and treatment, mental health services, cognitive and life skills development, accredited education and vocational skills. The Company believes that a comprehensive approach, which develops the social, educational, and vocational skills of the individual, creates responsible, contributing, pro-social individuals. This comprehensive approach is essential to achieving the program’s objective of reducing recidivism and integrating the youth into their communities as responsible and productive individuals.

The following table sets forth, for each of the periods indicated, certain information about segment results of operations and segment assets. There are no inter-segment sales or transfers. Segment profit consists of revenue less operating expenses, exclusive of losses related to asset sales, and does not include investment income and other, interest and other financing charges, and income taxes. Total assets are those assets used in the operations in each segment. Corporate assets include cash and cash equivalents, property and equipment, intangible assets and notes receivable. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

The Company’s revenues are derived solely from within the United States and the Commonwealth of Puerto Rico.

Revenues from one payor source (Florida Department of Juvenile Justice) represented approximately $27,355,000, $22,433,000 and $14,452,000 of consolidated revenues for the years ended December 31, 2002, 2001 and 2000, respectively.

The Certificate of Incorporation of the Company, as amended, authorizes the issuance of 30,000,000 shares of Common Stock, $.01 par value, 800,000 shares of Class A Preferred Stock, $1.00 par value, and 2,000,000 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.

The Company’s Board of Directors has adopted a Stockholder 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 $72 (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 (30% 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 $.03 per right.

The following table sets forth the computation of basic and diluted earnings per share:

For the years ended December 31, 2002, 2001 and 2000, respectively, 552,819, 785,449 and 1,698,938 options and warrants were excluded from the above computation because their effect would have been antidilutive.

The Company’s Stock Option Plans provide for options to various key employees, non-employee directors, consultants and other individuals providing services to the Company, 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, (d) 33% each year beginning one year from the date of grant and (e) 25% 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 December 31, 2002 is approximately 8.0 years.

During the year ended December 31, 2002, the Company did not grant any options under the various Company stock option plans.

On April 4, 2001, the Board of Directors: (i) amended the 1999 Stock Option Plan (the “1999 Amended Plan”) and reduced the number of Common Stock shares available for issuance to 250,000 and (ii) adopted the Ramsay Youth Services, Inc. 2001 Stock Option Plan (the “2001 Plan”). Under the 2001 Plan, 1,500,000 shares of Common Stock are available for issuance of awards. Shares distributed under the 1999 Amended Plan and the 2001 Plan may be either newly issued shares or treasury shares. During the year ended December 31, 2001, the Company granted 2,375,000 options under the various Company stock option plans.

During the year ended December 31, 2000, the Company granted 50,000 options under the Ramsay Managed Care, Inc. (“RMCI”) Plan.

On August 16, 1999, the Board of Directors adopted the Ramsay Youth Services, Inc. 1999 Stock Option Plan. Under the 1999 Stock Option Plan, 1,250,000 shares of Common Stock were available for issuance of awards. During the year ended December 31, 1999, the Company granted 1,250,000 options under the 1999 Stock Option Plan and 339,000 options under various prior year plans.

On October 14, 1997, the Board of Directors adopted the Ramsay Youth Services, Inc. 1997 Long Term Incentive Plan (the “1997 Plan”). Under the 1997 Plan, 166,667 shares of Common Stock are available for issuance of awards. Shares distributed under the 1997 Plan may be either newly issued shares or treasury shares. Awards granted under the plan may be in the form of stock appreciation rights, restricted stock, performance awards and other stock-based awards. During the year ended December 31, 1999, the Company granted 91,500 options under the 1997 Plan.

In connection with a repricing opportunity authorized by the Company’s Board of Directors on November 10, 1995, approximately 500,000 options (of which 11,886 are still outstanding at December 31, 2002) were voluntarily repriced by the option holders. Under this repricing opportunity, the exercise prices of the holders’ outstanding options were reduced to $7.50 per share, the closing price for the Common Stock on the NASDAQ National Market System on November 10, 1995. The Company granted 304,087 options during fiscal year ended June 30, 1997 (including former RMCI options which became options to purchase an aggregate of 104,804 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 SmallCap Market System, equals or exceeds $21.00 per share for at least 15 trading days, which need not be consecutive. As of December 31, 2002, none of these options are exercisable.

On September 10, 1996, the Company entered into an Exchange Agreement whereby Mr. Paul J. Ramsay exchanged 158,690 options with an exercise price of $7.50 per share (pursuant to the repricing opportunity discussed above), for warrants to purchase an aggregate of 166,667 shares of Common Stock at $7.50 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 SmallCap Market System, equals or exceeds $21.00 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.

The Company has additional warrants outstanding to purchase an aggregate of 71,000 shares of the Company’s Common Stock (44,333 of which are owned by corporate affiliates of Mr. 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.

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. These warrants entitled their holders to purchase an aggregate of 67,338 shares of the Company’s Common Stock at $13.32 per share. These warrants expired on March 31, 2000.

In connection with the January 25, 2000 and June 19, 2000 subordinated note and warrant purchase agreements, the Company issued warrants to two unrelated financial institutions to each purchase up to 475,000 shares of the Company’s Common Stock at $1.50 per share. These issuances are exercisable on or before January 25, 2010 and June 19, 2010, respectively, and contain anti-dilution provisions.

On August 27, 2001, a financial institution exercised its warrant purchase agreement. The institution converted 475,000 warrants into 294,597 shares of common stock utilizing a cashless exercise provision as outlined in the agreement.

The Company has frozen its 1990 and 1991 Stock Option Plans, and authorized 132,319, 166,667, 166,667, 166,667, 250,000 and 1,500,000 shares under its 1993, 1995, 1996, 1997, 1999 Amended and 2001 Stock Option Plans, respectively. At December 31, 2002, 172,862 shares were available for issuance under these Plans.

Summarized information regarding the Company’s Stock Option Plans is as follows:

Options not exercisable until the closing price for the Common Stock as quoted on the NASDAQ SmallCap Market System equals or exceeds $21.00 per share for at least 15 trading days:

Shares of common stock reserved for future issuance at December 31, 2002 are as follows:

The following table summarizes information about options outstanding at December 31, 2002.

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. The Company did not award any employee stock options during the year ended December 31, 2002 and during the year ended December 31, 2000. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for grants in the year ended December 31, 2001.


	•	expected volatility rates of 119% for the year ended December 31, 2001

	•	risk-free interest rates of 5% for the year ended December 31, 2001

	•	expected lives of 10 years for all periods

	•	a dividend yield of zero for all periods

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. (See pro forma disclosure in Note 1)

In addition to the Employee Stock Option plans, the Company also has an Employee Stock Purchase Plan available to employees.

The Employee Stock Purchase Plan (the “ESPP”) allows all eligible employees to purchase shares of common stock on semi-annual offering dates at a price that is the lessor of 85% if the fair market value of the shares on the first day or the last day of the semi-annual period. Employee contributions were $39,000 for 2002, $44,000 for 2001 and $79,000 for 2000. Through the ESPP, the Company issued to employees 16,983 shares in 2002, 29,672 shares in 2001 and 34,989 shares in 2000. As of December 31, 2002, 18,356 shares were available for future issuance.

The following table summarizes tax effects comprising the Company’s net deferred tax assets and liabilities:

A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate follows:

Current accounting standards require that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. In addition, future tax benefits, such as net operating loss (“NOL”) carryforwards, are required to be recognized to the extent that realization of such benefits is more likely than not. A valuation allowance is established for those benefits that do not meet the more likely than not criteria. A valuation allowance of $9,230,000 and $22,720,000 has been established for the net deferred tax assets at December 31, 2002 and 2001, respectively. During the tax year ended December 31, 2002, the Company reversed a portion of the valuation allowance because, based on a current review of available objective and verifiable evidence, it is management’s judgment that a portion of the tax benefits associated with the Company’s deferred tax assets will more likely than not be realized. Such evidence includes, inter alia, updated expectations about sufficient future years’ taxable income which reflect the continuing improvement in the Company’s operating results.

At December 31, 2002, the Company had federal net operating loss carryovers of approximately $28,985,000, and alternative minimum tax credit carryovers of approximately $1,150,000 available to reduce future federal income taxes, subject to certain annual limitations. The net operating loss carryovers expire from 2010 to 2018.

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 provider based revenues in the period the final determination is made.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is in compliance with all applicable laws and regulations. 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.

The Company derived approximately 83%, 87% and 85% of its revenues from services provided to individuals covered by various federal and state governmental programs in the years ended December 31, 2002, 2001 and 2000, respectively.

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 during the years ended December 31, 2002, 2001 and 2000.

The Company is party to certain claims, suits and complaints, including those matters described below, whether arising from the acts or omissions of its employees, providers or others, which arise in the ordinary course of business. The Company has established reserves at December 31, 2002 and 2001 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.

Management has evaluated the probability surrounding a litigation claim sought by the purchaser of one of the Company’s former subsidiaries as being remote. Accordingly, in December 2000, the Company reversed its $2,500,000 litigation reserve.

Activity in the Company’s Valuation and Qualifying Accounts consists of the following:

18. 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 December 31, 2002 and 2001.

We have audited the accompanying combined balance sheets of The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc., and The Oaks Psychiatric Hospital, Inc. (collectively the “Company”) as of December 31, 2002 and 2001 and the related combined statements of operations, changes in equity of parent, and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc., and The Oaks Psychiatric Hospital, Inc. at December 31, 2002 and the combined results of their operations and their cash flows for each of the three years in the period ending December 31, 2002 and 2001 in conformity with accounting principles generally accepted in the United States.

The accompanying combined financial statements include the accounts of the following entities (collectively, the Company) which are each subsidiaries of The Brown Schools, Inc. (the Parent) which provides behavioral and psychiatric services to children, adolescents, and adults.


	•	The Brown Schools of Virginia, Inc. owns and operates a 64-bed hospital located in Charlottesville, Virginia.

	•	Cedar Springs Behavioral Health System, Inc. owns and operates a 110-bed hospital located in Colorado Springs, Colorado.

	•	Healthcare San Antonio, Inc. owns and operates a 196-bed hospital located in San Antonio, Texas.

	•	The Oaks Psychiatric Hospital, Inc. owns and operates a 118-bed hospital in Austin, Texas.

	•	The Brown Schools of San Marcos, Inc. owns and operates a 186-bed hospital in San Marcos, Texas.

Substantially all of the net assets of the Company were purchased by Psychiatric Solutions, Inc. for approximately $48 million during April 2003.

The accompanying unaudited consolidated condensed financial statements as of March 31, 2003 and for the three months ended March 31, 2002 and 2003, were prepared in accordance with accounting principles generally accepted in the United States of America and all applicable financial statement rules and regulations of the Securities and Exchange Commission pertaining to interim financial information. The interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. All adjustments which are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the interim financial statements have been included. The results of operations for the three months ended March 31, 2003 are not necessarily indicative of the results to be expected for the full year.

The Company receives payment for patient services from federal and various state governments primarily under the Medicare and Medicaid programs, health maintenance organizations, preferred provider organizations and other private insurers and directly from patients. Patient service revenue is reported on the accrual basis in the period in which services are provided, at established rates, regardless of whether collection in full is expected.

Net patient service revenue is based on established billing rates less allowances and discounts for patients covered by Medicare, Medicaid and various other discount arrangements. Payments received under these programs and arrangements, which are based on either predetermined rates or the cost of services, are generally less than the Company’s customary charges, and the differences are recorded as contractual adjustments or policy discounts at the time service is rendered.

Settlements under cost reimbursement agreements with third party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. Final determination of amounts earned under the Medicare and Medicaid programs often

occur in subsequent years because of audits by the programs, rights of appeal and the application of numerous technical provisions.

The Company is allocated interest expense based upon a percentage of the Company’s fixed assets and working capital as compared to the Parent. Interest expense totaled approximately $2,572, $3,375 and $5,629 for the years ended December 31, 2000, 2001 and 2002, respectively.

The Company is charged a management fee equal to 5% of its unaudited revenues. Management fees were $2,556, $3,034 and $2,903 for the years ended December 31, 2000, 2001 and 2002, respectively.

The Parent carries employee health and dental insurance from an unrelated commercial carrier. Premiums are allocated based on the number of enrolled employees and dependents at the individual facilities. Health and dental expenses were approximately $740, $829 and $1,270 for the years ended December 31, 2000, 2001 and 2002, respectively.

Although management considers its allocation methods to be reasonable, due to the relationship between the Company and its Parent, the terms of the allocation may not necessarily be indicative of that which would have resulted had the Company been a separate entity.

Inventories, consisting principally of supplies, are stated at the lower of cost (first-in, first-out) or market.

Property and equipment are stated at cost and depreciated using the straight-line method over the useful lives of the assets, which are assigned by the Company as follows:

Depreciation expense was approximately $1,485, $1,317 and $1,557 for the years ended December 31, 2000, 2001 and 2002, respectively.

When events, circumstances and operating results indicate the carrying values of certain long-lived assets might be impaired, the Company prepares projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate that the recorded amounts

are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value is estimated based upon projections of discounted cash flows.

The Parent, on behalf of the Company, carries general and professional liability insurance from an unrelated commercial insurance carrier, on a claims-made basis, for per occurrence losses up to $1 million in 2001 and 2002 with policy limits of $3 million in the aggregate in 2001 and 2002. The Parent also carries workers’ compensation insurance from an unrelated commercial insurance carrier. The cost of general and professional liability and workers’ compensation coverage is allocated by the Parent based upon the percentage of the number of the Company’s full time employees as compared to the consolidated total of the Parent. The cost for the years ended December 31, 2000, 2001 and 2002 was approximately $3,734, $1,384 and $1,680, respectively.

The Company maintains certain intercompany accounts with its Parent whereby the Parent funds certain operating expenses and costs, such as insurance, payroll, and employee benefits. Such costs are offset in the intercompany accounts by transfers of cash collected by the Company to the Parent. Such amounts were reflected as amounts due to Parent in the Company’s internal financial statements. As a result of the sale of the Company to an unrelated party subsequent to December 31, 2002, these amounts due to the Parent at December 31, 2001 and 2002 were not paid by the Company. Accordingly, the amounts due to Parent are reflected in the accompanying financial statements within equity of Parent. All changes in the amounts due to Parent have been reflected as contributions from or distributions to Parent.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Advertising costs are expensed as incurred. Advertising costs were $225, $273 and $188 for the years ended December 31, 2000, 2001 and 2002, respectively.

Bank Overdraft — The carrying amounts reported in the balance sheet for bank overdraft approximate fair value.

Accounts Receivable and Accounts Payable — The carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate fair value.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, (“SFAS No. 121”), and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 removes goodwill from its scope and clarifies other implementation issues related to SFAS No. 121. SFAS No. 144 also provides a single framework for evaluating long-lived assets to be disposed of by sale. The provisions of this statement were adopted effective January 1, 2002 and had no material effect on the Company’s results of operations or financial position.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (“SFAS 145”). SFAS 145 prohibits the classification of gains or losses from debt extinguishments as extraordinary items unless the criteria outlined in APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, are met. SFAS 145 also eliminates an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. The Company intends to adopt the provisions of SFAS 145 effective January 1, 2003 and does not expect this pronouncement to have a material effect on its financial position or results of operations.

The Company’s primary concentration of credit risk is patient accounts receivable, which consists of amounts owed by governmental agencies, insurance companies, and private patients. The Company manages the receivables by regularly reviewing its accounts and contracts and by providing appropriate allowances for uncollectible accounts. Various state Medicaid programs comprised approximately 70% and 59% of patient receivables at December 31, 2002 and 2001, respectively. Remaining receivables relate primarily to various commercial insurance carriers and HMO/PPO programs. Concentration of credit risk from other payers is limited by the number of patients and payors. Three of the five facilities are located in the state of Texas, making the Company somewhat reliant on various laws and economic conditions in Texas.

The Company participates in the Parent’s defined contribution retirement plan, The Brown Schools, Inc. 401(k) Plan (the “Plan”). The Plan covers substantially all employees. Retirement expense was approximately $76, $98 and $32 for the years ended December 31, 2000, 2001 and 2002, respectively. The Company makes discretionary contributions to the Plan through the Parent each year.

Final determination of amounts earned under prospective payment and cost-reimbursement activities is subject to review by appropriate governmental authorities or their agents. In the opinion of management, adequate provision has been made for any adjustments that may result from such reviews.

Healthcare San Antonio, Inc. is currently under investigation by the Department of Defense Inspector General (DODIG). On or about August 21, 2002, the Company received a subpoena from the DODIG requesting certain medical records related to Champus-Tricare reimbursement issues. The Company has complied with the subpoena and provided the requested documents. The Company is now awaiting further instruction from the government. While management believes that it has complied with all laws and regulations, it is unable to predict the outcome of the investigation. If the Company were to be subject to an unfavorable outcome to this investigation, the ultimate resolution of the investigation could have a material adverse effect on the Company’s financial position and results of operations.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing, except for the Champus-Tricare issue referred to above. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the Medicare and Medicaid programs.

The Company is subject to claims and suits arising in the ordinary course of business. Even though management is unable to predict such claims and their potential outcomes, it is management’s opinion, that the ultimate resolution of such other pending legal proceedings will not have a material effect on the Company’s financial position or results of operations.

The Company leases the facility comprising The Brown Schools of Virginia, Inc. as well as office space and certain equipment under operating agreements.

Total rent expense under operating leases was approximately $442, $709 and $708 for the years ended December 31, 2000, 2001 and 2002, respectively.

Future minimum rental commitments under noncancelable operating leases (with an initial or remaining term in excess of one year) at December 31, 2002, are as follows (in thousands):

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 assets (liabilities) are as follows (in thousands):

SFAS 109 requires the Company to record a valuation allowance when it is “more likely than not that some portion or all of the deferred tax assets will not be realized.” It further states that “forming a conclusion that a valuation allowance is not needed is difficult when there is a negative evidence such as cumulative losses in recent years.” A 100% valuation allowance has been recorded equal to the deferred tax assets after considering deferred tax assets that can be realized through offset to existing taxable temporary differences. Assuming the Company achieves sufficient profitability in future years to realize the deferred income tax assets, the valuation allowance will be reduced in future years through a credit to income tax expense. As of December 31, 2002, the valuation allowance is approximately $3,069 which represents an increase of approximately $794 from December 31, 2001.

At December 31, 2002, the Company has federal and state net operating loss carryforwards of approximately $6,820, which expire at various dates through 2022.

A reconciliation of the federal statutory tax rate to the effective tax rate is as follows (in thousands):

On April 1, 2003, Psychiatric Solutions, Inc., which manages behavioral health units and owns psychiatric facilities, purchased substantially all of the assets of the Company for $48 million.

We have audited the accompanying consolidated balance sheets of The Brown Schools of Oklahoma, Inc. and subsidiary (the Company) as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2002. 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.

As discussed in Note 5 to the consolidated financial statements, the Company is economically dependent upon certain government programs under which it derived approximately 93%, 95% and 94% of its total revenues in 2002, 2001 and 2000, respectively. Additionally, the Company was dependent on its Parent for operating and financial support during the three years ended December 31, 2002. Effective April 9, 2003, the Parent sold the Company to an unrelated entity that manages behavioral health units and owns psychiatric facilities.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill upon adoption of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets.”

The accompanying notes are an integral part of these consolidated financial statements.

Description of Organization and Basis of Presentation — The Brown Schools of Oklahoma, Inc. a Delaware corporation (“BSO” or “the Company”), was organized in 1993 as Shadow Mountain Hospital, Inc. In 1998, through amendment to its Articles of Incorporation, the Company was renamed to The Brown Schools of Oklahoma, Inc. The Company was a wholly-owned subsidiary of The Brown Schools, Inc. (the Parent) until April 9, 2003 at which date BSO, along with other healthcare facilities owned by the Parent, was sold to an unrelated entity (see Note 2). The Company provides psychiatric and other behavioral health services principally to at-risk and troubled youth in Oklahoma. Services are provided from multiple locations in Oklahoma, including the Company’s main campus in Tulsa, Oklahoma. The Parent conducts similar operations through other subsidiaries throughout the United States and Puerto Rico.

Basis of Consolidation — The accompanying consolidated financial statements include the accounts of Brown Schools of Oklahoma, Inc. and its subsidiary, Therapeutic School Services, LLC. Significant intercompany balances and transactions have been eliminated in consolidation.

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 reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.

Cash and Cash Equivalents — The Company considers cash and highly liquid investments with original maturities of less than three months to be cash and cash equivalents.

Net Patient Service Receivables and Revenues — The Company receives payment for services rendered to patients from (1) federal and state governments under Medicaid and other similar programs; (2) privately sponsored managed care and commercial insurance plans for which payment is made based on terms defined under contracts; and (3) other payers. Net patient service revenue consists of net charges for services, which are based on the Company’s established billing rates less allowances and discounts for patients covered by third-party programs, including estimated retroactive adjustments where applicable. Payments under third-party programs are based on either costs of services or predetermined rates and formulas that are generally less than the Company’s established billing rates. Patient service revenues, net of allowances and discounts, are recorded in the period in which the related services are rendered and are adjusted, as necessary, in future periods as final settlements are determined. Final determination of amounts earned under third party programs often occur in subsequent years because of audits by the programs, rights of appeal and the application of numerous technical provisions. Receivables from, or payables to, third-party payers reflect estimated settlements resulting from intermediary reviews. In the opinion of management, the allowances, discounts and liabilities to third-party payers recognized in the accompanying consolidated financial statements are adequate.

Regulations regarding reimbursements from government agencies are subject to periodic change based upon administrative, legislative and judicial actions, some of which may be retroactive. The Company currently does not anticipate any material adverse effect from such matters. Management believes its estimates of discounts, allowances and other adjustments are reasonable based on currently available information. However, due to uncertainties inherent in the estimation process and actions of government agencies regarding reimbursement, it is reasonably possible that net patient service revenues, the allowance for doubtful accounts, or estimated amounts due to third-party payers could be adjusted by a material amount in the near term.

Other Revenue — Other revenue consists primarily of school counseling and administrative fee revenue. Such other revenues are recognized in the period the services are provided.

Property and Equipment — Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:

The Company records impairments to property and equipment when it becomes probable that the carrying values of the assets will not be fully recovered over their estimated lives. Impairments are recorded to reduce the carrying value of the assets to their estimated fair values determined by the Company based on facts and circumstances in existence at the time of the determination, estimates of probable future economic conditions and other information. No impairment adjustments were required for the three years ended December 31, 2002.

Goodwill — Goodwill is the result of acquisition costs for a business purchased in 1998 that exceeded the fair value of acquired net tangible assets by $3,247,544. Prior to 2002, goodwill was amortized on a straight-line basis over 30 years. A similar intangible asset of $128,120 was, prior to 2002, amortized by the Company’s subsidiary over 15 years. The recoverability of goodwill was, prior to 2002, reviewed based primarily upon an analysis of undiscounted cash flows from the acquired businesses. Other than amortization, there were no changes in goodwill during 2000, 2001 and 2002.

Effective January 1, 2002, BSO was required to adopt SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 required that the Company’s recorded goodwill no longer be amortized, but instead be periodically reviewed for impairment. SFAS No. 142 required the Company to complete a transitional goodwill impairment test within six months from the date of adoption, and any resulting impairment loss recognized as a cumulative effect of a change in accounting principle. Management’s assessment, which was based primarily on the proceeds from sale of the Company (see Note 2), did not indicate any material impairment losses associated with the adoption of SFAS No. 142 at January 1, 2002. SFAS No. 142 requires a pro forma presentation of net income after the add-back of goodwill amortization. Such pro forma analysis for 2000, 2001 and 2002 is as follows:

The Company had no acquisitions or dispositions of businesses during 2000, 2001 and 2002.

Income Taxes — The Company is included in the consolidated tax return of its Parent and through an informal agreement with the Parent accounts for its share of consolidated tax obligations (benefits) using an “as if separate return” methodology. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to temporary differences between the tax bases and financial carrying values of the Company’s assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets for amounts that management determines are more likely than not to be realized.

Fair Value of Financial Instruments — The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable and accounts payable approximate their fair value given the short-term maturity of these instruments.

Recent Accounting Pronouncements — In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the

Impairment of Long-Lived Assets.” This statement superceded SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, (“APB No. 30”) for the disposal of a segment of a business. The Statement was required to be adopted by the Company during 2002. The adoption of SFAS No. 144 did not have a material effect on the Company’s financial statements.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS 145”). SFAS 145 prohibits the classification of gains or losses from debt extinguishments as extraordinary items unless the criteria outlined in APB No. 30, are met. SFAS 145 also eliminates an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. The Company intends to adopt the provisions of SFAS 145 effective January 1, 2003 and does not expect this pronouncement to have a material effect on its financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 replaces Emerging Issues Task Force (EITF) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity”. This standard requires recognition of costs associated with exit or disposal activities as they are incurred, rather than at the date of commitment to an exit or disposal plan. This statement is effective for exit or disposal activities that are initiated after December 31, 2002. As described in Note 7, the Company was sold subsequent to year-end. This transaction may result in a material effect on the Company’s financial statements.

In November 2002, the FASB issued FIN No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. The interpretation requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee. FIN No. 45 also requires additional disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees it has issued. The accounting requirements for the initial recognition of guarantees are applicable on a prospective basis for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for all guarantees outstanding, regardless of when they were issued or modified, during the first quarter of fiscal 2003. The adoption of FIN No. 45 did not have a material effect on the accompanying financial statements. The following is a summary of the Company’s agreements that have been determined to be within the scope of FIN No. 45.

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company believes the estimated fair value of these agreements is minimal. Accordingly, there are no liabilities recorded for these agreements as of December 31, 2002 and March 31, 2003.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51”. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The adoption of this Interpretation did not have a material effect on the Company’s financial statements.

Interim Financial Statements — The accompanying unaudited consolidated condensed financial statements as of March 31, 2003 and for the three months ended March 31, 2002 and 2003, were prepared in accordance with accounting principles generally accepted in the United States of America and all applicable financial statement rules and regulations of the Securities and Exchange Commission pertaining to interim financial information. The interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. All adjustments which are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the interim financial statements have been included. The results of operations for the three months ended March 31, 2003 are not necessarily indicative of the results to be expected for the full year.

Through April 9, 2003, the Company was dependent upon its Parent for financing and operating support. The Company had access to funds through credit arrangements obtained by its Parent. The Parent has a credit facility with multiple banks (the Bank Facility). The Bank facility bears interest at LIBOR plus 3.5% and expires on June 30, 2003. At December 31, 2002, the Parent had $46.2 million outstanding under the Bank Facility.

From December 2000 through December 2002, the Parent was not in compliance with the financial covenants under the Bank Facility. The Parent negotiated limited waivers for these violations and agreed to complete certain asset sales, the proceeds from which were used to reduce its outstanding debt. In April 2003, the Parent sold six of its healthcare facilities, including the Company, for aggregate proceeds of approximately $63 million (see Note 7). Proceeds from the sale were used by the Parent to retire all amounts outstanding under the Bank Facility.

In addition, as of December 31, 2002, the Parent had $16.1 million senior subordinated notes outstanding with a non-bank creditor (the Subordinated Notes) and $16.7 million of paid-in-kind notes (the PIK Notes) with its primary investor. The Subordinated Notes and the PIK Notes bear interest at 18% and 12% per annum, respectively.

Effectively all of the assets of the Parent and its subsidiaries are pledged as collateral under these debt agreements.

As of December 31, 1999, the Company’s additional paid-in capital of $12,406,950 represented amounts contributed by the Parent through the forgiveness and permanent investment of certain intercompany balances due from the Company. As a result of the sale of the Company to an unrelated party subsequent to December 31, 2002, certain amounts due from the Parent at December 31, 2001 and 2002 were not collected by the Company. The reduction of amounts due from Parent are reported in the accompanying financial statements as a return of capital to the Parent in the amount of $536,764 and $1,138,279 for the years ended December 31, 2001 and 2002, respectively.

During the three years ended December 31, 2002, the Parent maintained financing arrangements to provide working capital and other advances to its subsidiaries, including the Company. Interest costs were allocated to the subsidiaries based upon the relation of total assets of each subsidiary to the Parent’s consolidated total assets, rather than on the specific borrowings attributed to each subsidiary. Interest charges allocated to the Company for fiscal years 2000, 2001 and 2002 were $377,743, $439,451, and $853,375,

respectively. The terms of the allocation may not necessarily be indicative of that which would have resulted had the Company been a separate entity.

The Parent provides accounting, data processing, and other management and administrative services to its subsidiaries, including the Company. A management fee of approximately 5% of net revenues is charged to each subsidiary to cover the costs of such services. Management fees allocated to the Company for fiscal years 2000, 2001 and 2002 were $815,731, $911,941, and $887,505, respectively. Although management considers the allocation method to be reasonable, due to the relationship between the Company and its Parent, the terms of the allocation may not necessarily be indicative of that which would have resulted had the Company been a separate entity.

The Parent purchases professional and general liability insurance coverage and charged the Company $107,959, $118,210, and $185,486 for its share of such insurance cost during the years ended December 31, 2000, 2001 and 2002, respectively.

The Company is included in the consolidated tax return of its Parent and through an informal agreement with the Parent, accounts for its share of consolidated tax obligations (benefits) using an “as if separate return” methodology.

A reconciliation of income taxes computed by applying the U.S. federal statutory rate to the actual income tax expense attributable to income before provisions (benefit) for income taxes is as follows:

Deferred tax assets of the Company are primarily attributable to: (1) built-in losses that resulted from declines in depreciable property values in years prior to recapitalization and ownership change for the Parent in 1997; (2) amortization of intangible assets; and (3) available net operating loss carryforwards. The Internal Revenue code significantly limits the amount of pre-acquisition net operating losses that are available to offset future taxable income when a change of ownership occurs (see Note 7). As a result of limitations on deductibility of the built-in losses and the uncertainty surrounding the tax benefit to be realized from the operating loss carryforwards, management has established a valuation allowance against the related deferred tax assets. As of December 31, 2001 and 2002, the Company had recorded net deferred tax assets of $432,788 and $38,129, respectively. The recognition of these deferred taxes was based on management’s assessment that the realization of these deferred tax assets is more likely than not on an “as if separate return” basis.

As is typical in the at-risk youth treatment industry, the Company, the Parent and other affiliated subsidiaries are subject to claims and lawsuits arising in the ordinary course of business, including malpractice claims. In the opinion of management, the ultimate resolution of the claims will not have a material adverse effect on the business, results of operations or financial condition of the Company, the Parent or other subsidiaries as sufficient insurance coverage to mitigate risks of loss is maintained.

Final determination of amounts earned under certain government programs and privately sponsored plans is subject to review by the appropriate payor or its agents. In the opinion of management, adequate provision has been made for any adjustments that may result from such reviews.

BSO has incentive arrangements with certain of its employees. These provide for incentive bonuses of 5% to 25% of annual salary amounts if specified goals are attained. The incentive bonuses for 2000, 2001 and 2002 were approximately $25,000, $30,000 and $101,000, respectively.

As a result of the sale of the Company subsequent to December 31, 2002, bonuses payable to certain executives totaling approximately $50,000 were accrued at March 31, 2003.

The Company has various operating leases for office equipment and clinic space. At December 31, 2002, future minimum payments under noncancellable operating leases are approximately: 2003 — $199,256; 2004 — $117,224; 2005 — $52,081; 2006 — $5,566; and 2007 — $-0-.

The Company is particularly sensitive to regulatory and economic changes in the state of Oklahoma. During the three years ended December 31, 2002, substantially all of the Company’s revenues were derived from services provided and facilities operated in Oklahoma.

Approximately 94%, 95% and 93% of the Company’s net revenues for the years ended December 31, 2000, 2001 and 2002, respectively, were derived from Medicaid and other government programs. As of December 31, 2002 and 2001, substantially all of the Company’s patient accounts receivable related to services provided under these programs.

The Company participates in the Parent’s defined contribution retirement plan, The Brown Schools, Inc. 401(k) Plan (the “Plan”). The Company made discretionary contributions to the Plan of $31,941, $42,843, and $19,594 for the years ended December 31, 2000, 2001 and 2002, respectively.

On April 9, 2003, Psychiatric Solutions, Inc., a company that manages behavioral health units and owns psychiatric facilities, purchased substantially all of the assets of the Company for approximately $15,000,000.

Pursuant to the provisions of Section 145 of the Delaware General Corporation Law, Psychiatric Solutions, Inc. (the “Company”) is required to indemnify any present or former officer or director against expenses reasonably incurred by the officer or director in connection with legal proceedings in which the officer or director becomes involved by reason of being an officer or director if the officer or director is successful in the defense of such proceedings. Section 145 also provides that the Company may indemnify an officer or director in connection with a proceeding in which he or she is not successful in defending if it is determined that the officer or director acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Company or, in the case of a criminal action, if it is determined that the officer or director had no reasonable cause to believe his or her conduct was unlawful. Liabilities for which an officer or director may be indemnified include amounts paid in satisfaction of settlements, judgments, fines and other expenses incurred in connection with such proceedings. In a stockholder derivative action, no indemnification may be paid in respect of any claim, issue or matter as to which the officer or director has been adjudged to be liable to the Company (except for expenses allowed by a court).

Pursuant to the provisions of Article VII of the Company’s By-Laws, the Company is required to indemnify officers or directors to a greater extent than under the current provisions of Section 145 of the Delaware General Corporation Law. Except with respect to stockholder derivative actions, the Company’s By-Laws generally state that an officer or director will be indemnified against expenses, judgements, fines and amounts paid in settlement actually and reasonably incurred by the officer or director in connection with any threatened, pending or completed action, suit or proceeding, provided that (i) such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; and (ii) with respect to criminal actions or proceedings, such officer or director had no reasonable cause to believe his conduct was unlawful. With respect to stockholder derivative actions, the Company’s By-Laws generally state that an officer or director will be indemnified against expenses actually and reasonably incurred by the officer or director in connection with the defense or settlement of any threatened, pending or completed action or suit provided that such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification (except for indemnification allowed by a court) will be made with respect to any claim, issue or matter as to which such officer or director has been adjudged to be liable for negligence or misconduct in the performance of the officer’s or director’s duty to the Company. The Company’s By-Laws also provide that expenses for the defense of any action for which indemnification may be available will be advanced by the Company under certain circumstances.

Additionally, pursuant to the Company’s Amended and Restated Certificate of Incorporation, a director is not personally liable to the Company or any of its stockholders for monetary damages for breach of his or her fiduciary duty as a director, except for liability resulting from (i) any breach of the director’s duty of loyalty to the Company or its stockholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law; (iii) violation of Section 174 of the Delaware General Corporation Law, which generally hold directors liable for unlawful dividends, stock purchases or stock redemptions in the event of the Company’s dissolution or insolvency; or (iv) any transaction from which the director derived an improper personal benefit.

The indemnification provided by the Delaware General Corporation Law and the Company’s Restated Certificate or Incorporation and By-Laws is not exclusive of any other rights to which a director or officer of the Company may be entitled. The Company also carries directors’ and officers’ liability insurance.

The laws of the states or other jurisdictions of incorporation or organization and/or the provisions of the articles or certificates of incorporation or organization (or their equivalent) and the bylaws of substantially all of the subsidiary guarantors listed in the “Table of Additional Registrants” (the “Subsidiary Guarantors”) included in this Registration Statement provide indemnification provisions similar to those described above.

The Exchange and Registration Rights Agreement contains provisions under which the holders of the notes agree to indemnify the officers, directors and controlling persons of the Company and each of the Subsidiary Guarantors against certain liabilities, including liabilities under the Securities Act of 1933 or to contribute to payments the officers and directors may be required to make with respect to such liabilities.

(a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or Otherwise, each Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(b) Each undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request.

(c) Each undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective.


	(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


	(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

	(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

	(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;


	(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

	(4) If the Registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a) (3) of the Act need not be furnished, provided, that the Registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a) (4) and other information necessary to ensure that all other information in the prospectus is at least current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a) (3) of the Act or Rule 3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.

(e) Each of the undersigned Registrants hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13 (a) or IS(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.

Each director and/or officer of the registrant whose signature appears below hereby appoints Joey A. Jacobs, as his attorney-in-fact to sign in his name and on his behalf, in any and all capacities stated below, and to file with the Securities and Exchange Commission, and all amendments, including post-effective amendments, to this registration statement.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Franklin, State of Tennessee, on the 29th day of July, 2003.


	By:	/s/ JOEY A. JACOBS



	Name: Joey A. Jacobs


	Title:	Chairman of the Board, President and


	Chief Executive Officer


	PSYCHIATRIC SOLUTIONS HOSPITALS, INC.
	INFOSCRIBER CORPORATION
	COLLABORATIVE CARE CORPORATION
	PSYCHIATRIC SOLUTIONS OF ALABAMA, INC.
	PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC.
	PSYCHIATRIC SOLUTIONS OF FLORIDA, INC.
	PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC.
	SOLUTIONS CENTER OF LITTLE ROCK, INC.
	PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC.
	PSI COMMUNITY MENTAL HEALTH AGENCY
	MANAGEMENT, INC.
	PSYCHIATRIC MANAGEMENT RESOURCES, INC.
	PSI-EAP, INC.
	SUNSTONE BEHAVIORAL HEALTH, INC.
	THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC.
	PSI CEDAR SPRINGS HOSPITAL, INC.
	PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC.
	AERIES HEALTHCARE CORPORATION
	AERIES HEALTHCARE OF ILLINOIS, INC.
	PSI HOSPITALS, INC.
	PSYCHIATRIC PRACTICE MANAGEMENT OF
	ARKANSAS, INC.
	BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.
	EAST CAROLINA PSYCHIATRIC SERVICES
	CORPORATION
	GREAT PLAINS HOSPITAL, INC.
	GULF COAST TREATMENT CENTER, INC.
	HAVENWYCK HOSPITAL INC.
	H.C. CORPORATION
	HSA HILL CREST CORPORATION
	HSA OF OKLAHOMA, INC.
	MICHIGAN PSYCHIATRIC SERVICES, INC.
	RAMSAY MANAGED CARE, INC.
	RAMSAY TREATMENT SERVICES, INC.
	RAMSAY YOUTH SERVICES OF ALABAMA, INC.
	RAMSAY YOUTH SERVICES OF FLORIDA, INC.
	RAMSAY YOUTH SERVICES OF GEORGIA, INC.
	RAMSAY YOUTH SERVICES PUERTO RICO, INC.
	RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC.
	RHCI SAN ANTONIO, INC.


	TEXAS CYPRESS CREEK HOSPITAL, L.P.


	TEXAS WEST OAKS HOSPITAL, L.P.
	NEURO INSTITUTE OF AUSTIN, L.P.
	TEXAS LAUREL RIDGE HOSPITAL, L.P.
	TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P.
	TEXAS SAN MARCOS TREATMENT CENTER, L.P.


	†	Management contract or compensatory plan or arrangement

EX-3.4 3 g83903exv3w4.txt EX-3.4 CERTIFICATE OF INCORPORATION EXHIBIT 3.4 CERTIFICATE OF INCORPORATION OF AERIES HEALTHCARE CORPORATION This is to certify that, there is hereby organized a corporation under and by virtue of the General Corporation Law of the State of Delaware: ARTICLE I CORPORATE NAME The name of the corporation is Aeries Healthcare Corporation (the "Corporation"). ARTICLE II PURPOSE OF CORPORATION The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE III CAPITAL STOCK The total number of shares of capital stock which the Corporation shall have authority to issue is Two Thousand Five Hundred (2,500) shares of Common Stock, par value $.01 per share. ARTICLE IV REGISTERED OFFICE AND AGENT The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, and the Corporation's registered agent at such address is The Corporation Trust Company. ARTICLE V NAME AND ADDRESS OF INCORPORATOR The name and address of the incorporator of the Corporation is:

ARTICLE VI BOARD OF DIRECTORS The initial Board of Directors of the Corporation shall consist of one (1) director and the name and address of the person who is to serve as the initial director until his successor is elected and qualifies is set forth below:

The election and term of office of all directors of the Corporation subsequent to the election and term of the initial director shall be determined in accordance with the By-laws of the Corporation. ARTICLE VII ELECTION OF DIRECTORS Unless and except to the extent that the By-laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. ARTICLE VIII AMENDMENT OF BY-LAWS The Board of Directors of the Corporation shall have the power to adopt, amend or repeal the By-laws. 2 ARTICLE IX LIMITATION ON DIRECTORS' LIABILITY No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article IX shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. ARTICLE X RESERVATION OF POWER TO AMEND CERTIFICATE OF INCORPORATION The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore named, has executed, signed and acknowledged this Certificate of Incorporation this 9th day of September, 1999. WITNESS: /s/ Caroline D. Jacobsen /s/ Paul T. Colella - ------------------------------ ---------------------------- CAROLINE D. JACOBSEN PAUL T. COLELLA 3 EX-3.5 4 g83903exv3w5.txt EX-3.5 BYLAWS EXHIBIT 3.5 BY-LAWS OF AERIES HEALTHCARE CORPORATION ARTICLE I OFFICES Section 1. REGISTERED OFFICE. The registered office of Aeries Healthcare Corporation (the "Corporation") in the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware. The registered agent of the Corporation at the registered office is The Corporation Trust Company. Section 2. OTHER OFFICES. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the "Board" or "Board of Directors") may from time to time determine or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS Section 1. PLACE OF MEETING. All meetings of the stockholders for the election of directors and for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. ANNUAL MEETING. Annual meetings of stockholders shall be held in the month of May or June, on such day and at such time as the Board of Directors shall designate, at which the stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. NOTICE OF ANNUAL MEETING. Notice of the annual meeting shall be given by mailing, not more than sixty (60) days nor less than ten (10) days prior thereto, a written notice stating the time and place thereof, directed to each stockholder of record entitled to vote at the meeting at his, her or its address as the same appears upon the records of the Corporation. Section 4. LIST OF STOCKHOLDERS. At least ten (10) prior to each annual or special meeting of the stockholders, the officer who has charge of the stock ledger of the Corporation shall prepare and make a complete list of the stockholders entitled to vote at said meeting, which shall be arranged in alphabetical order and include the address of and the number of shares registered in the name of each stockholder. The list shall be produced and available for examination for a period of at least ten (10) days prior to a meeting. Further, the list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who may be present. Section 5. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, may be called by the Chairman of the Board or the President, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. Section 6. NOTICE OF SPECIAL MEETING. Written or telegraphic notice of a special meeting of stockholders, stating the time, place and object thereof, shall be given to each stockholder entitled to vote thereat, not more than sixty (60) nor less than ten (10) days before the date fixed for the meeting. Section 7. BUSINESS TRANSACTED AT A SPECIAL MEETING. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. QUORUM. Except as otherwise provided in the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), a majority of the issued and outstanding shares of the Corporation's common stock, par value $.01 per share ("Common Stock"), present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders; provided, that when a specified matter is required to be voted on by a class or series of capital stock, voting as a separate class, the holders of a majority of the issued and outstanding shares of such class or series shall constitute a quorum for the transaction of business with respect to such matter. Section 9. METHOD OF VOTING. Each holder of Common Stock shall, at every meeting of the stockholders, be entitled to one vote for each share of Common Stock held by such stockholder. Every stockholder entitled to vote at a meeting of stockholders or to express consent without a meeting may authorize another person or persons to act for him, her or it by proxy. Every proxy shall be executed in writing by the stockholder or his, her or its agent, except that a proxy may be given by a stockholder or his, her or its agent by telegram or cable or its equivalent. Unless it is coupled with an interest, a proxy shall be revocable at will. A proxy shall not be revoked by the death or incapacity of a stockholder but such proxy shall continue in force until revoked by the personal representative or guardian of the stockholder. The presence at any meeting of any stockholder who has given a proxy shall not revoke such proxy unless the stockholder shall file written notice of such revocation with the secretary of the meeting prior to the voting of such proxy. 2 A person named in a proxy as the attorney or agent of a stockholder may, if the proxy so provides, substitute another person to act in his, her or its place, including any other person named as an attorney or agent in the same proxy. The substitution shall not be effective until an instrument effecting it is filed with the Secretary of the Corporation. Section 10. ACTION BY STOCKHOLDERS WITHOUT A MEETING. Subject to the provisions of Section 228 of the Delaware General Corporation Law, whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the Delaware General Corporation Law or of the Certificate of Incorporation, the meeting and the vote of stockholders may be dispensed with and the action may be taken without a meeting upon the written consent of stockholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to be voted thereat were present and voted. Section 11. CONDUCT AT MEETINGS. At each meeting of stockholders, the Chairman of the Board of Directors or in his or her absence the President of the Corporation or in his or her absence any Vice President of the Corporation or in his or her absence a chairman chosen by the vote of a majority in interest of the stockholders present in person or represented by proxy and entitled to vote thereat, shall act as chairman. The Secretary or in his or her absence an Assistant Secretary or in the absence of the Secretary and all Assistant Secretaries a person whom the chairman of the meeting shall appoint shall act as secretary of the meeting and keep a record of the proceedings thereof. The Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations, the chairman shall have the authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry at the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The chairman shall have absolute authority over matters of procedure and there shall be no appeal from the ruling of the chairman. The chairman may rule that a resolution, nomination or motion not be submitted to the stockholders for a vote unless seconded by a stockholder or a proxy for a stockholder. The chairman may require that any person who is neither a bona fide stockholder nor a proxy for a bona fide stockholder leave the meeting, and upon the refusal of a stockholder to comply with a procedural ruling of the chairman which the chairman deems 3 necessary for the proper conduct of the meeting, may require that such stockholder leave the meeting. The chairman may, on his or her own motion, summarily adjourn any meeting for any period he or she deems necessary if he or she rules that orderly procedures cannot be maintained at the meeting. Unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. Section 12. PROCEDURE NECESSARY TO BRING BUSINESS BEFORE AN ANNUAL MEETING. To be properly brought before an annual meeting of stockholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) properly brought before the meeting by or at the direction of the Board, or (c) properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not less than one hundred and twenty (120) days in advance of the date of the Corporation's proxy statement released to stockholders in connection with the previous year's annual meeting of stockholders; provided, however, that if the Corporation did not release a proxy statement in connection with the previous year's annual meeting then the stockholder must give such notice not later than one hundred and twenty (120) days prior to the anniversary date of the immediately preceding annual meeting. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 12 of Article II and any other applicable requirements; provided, however, that nothing in this Section 12 of Article II shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 12 of Article II or any other applicable requirements, which determination shall be conclusive, and, as a result, any such business shall not be transacted. 4 ARTICLE III DIRECTORS Section 1. NUMBER AND ELECTION OF DIRECTORS. The number of directors which shall constitute the whole Board shall be not less than one (1) nor more than ten (10) directors. The Board, upon adoption of these By-laws, shall consist of one (1) director, and thereafter the number of directors which shall constitute the whole Board may be increased or decreased by resolution of the Board of Directors, but shall in no case be less than one (1) director. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 9 of this Article III, and each director elected shall hold office until his or her successor is elected and qualifies. Directors need not be stockholders. Section 2. REGULAR MEETINGS. Regular meetings of the Board may be held on five (5) days written notice, at such time as shall be from time to time determined by the Chairman of the Board, or the President. Written notice for any such meeting shall state the place, date and hour of the meeting and shall be delivered either personally or by first class mail or overnight courier service. Section 3. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the President or Secretary at the request in writing of a majority of the directors then in office. Written notice of any special meeting shall be given, either personally or by first class mail or overnight courier service, to each director at least two (2) days prior to the date thereof. Section 4. PLACE OF MEETING; WAIVER OF NOTICE. Meetings of the Board of Directors shall be held at such place as shall be designated in the notice of meeting if notice is required. Notice of any meeting, if required, need not be given to any director who signs a waiver of notice before or after the meeting. The attendance of any director at any meeting without the director protesting prior to the conclusion of such meeting the lack of notice thereof shall constitute a waiver of notice by such director. Section 5. QUORUM. Except as otherwise provided in the Certificate of Incorporation, a majority of the directors then in office shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 6. MANNER OF ACTING. Except as otherwise provided in the Certificate of Incorporation or herein, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 7. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the Board of Directors or by a committee thereof may be taken without a meeting if, prior to such action, all of the members of the Board or 5 committee consent in writing to a resolution authorizing the action. Such written consents may be executed in counterparts, and shall be filed with the minutes of the Corporation. Section 8. TELEPHONIC ATTENDANCE AT MEETING. Any or all directors may participate in a meeting of the Board of Directors or a committee of the Board by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. Section 9. VACANCIES. If the office of any director becomes vacant for any reason, such vacancy shall be filled by a majority vote of the directors remaining in office. Section 10. CHAIRMAN OF THE BOARD. A Chairman of the Board of Directors may be elected by the Board of Directors from among its members. Section 11. COMPENSATION OF DIRECTORS. The directors may be paid their expenses, if any, relating to their attendance at meetings of the Board of Directors, and directors who are not full-time employees of the Corporation may be paid a fixed sum for attendance at meetings of the Board of Directors or a stated salary as a director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 12. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution passed by a majority of the Board, designate one or more committees of the Board of Directors, including an executive committee, each committee to consist of two (2) or more directors of the Corporation. The Board may designate one or more directors as alternative members of any committee who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the enabling resolution and permitted under Section 141 the Delaware General Corporation Law, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report them to the Board of Directors when required. 6 ARTICLE IV OFFICERS Section 1. OFFICERS. The Corporation's officers shall be a President, a Treasurer, a Secretary and, if desired, one or more Vice Presidents. The officers shall be elected by the Board of Directors. Section 2. TERM; REMOVAL. The officers of the Corporation shall hold office until their successors are chosen and qualify. The Board of Directors may remove any officer at any time by the affirmative vote of a majority of the directors at any meeting of the Board at which there is a quorum, without the necessity of specifying any cause therefor and without any prior notice of such action to the person removed. Section 3. VACANCIES. Any vacancy in the Office of the President or any other office shall be filled by the Board of Directors. Section 4. PRESIDENT. The President shall, subject to the control of the Board of Directors, supervise and control all of the business and affairs of the Corporation. All other officers shall be subject to the authority and supervision of the President. The President may enter into and execute in the name of the Corporation contracts or other instruments not in the regular course of business which are authorized, either generally or specifically, by the Board of Directors. The President shall have the general powers and duties of management usually vested in the office of the president of a corporation. Section 5. VICE PRESIDENTS. The Board of Directors may appoint one or more Vice Presidents, each of whom shall perform such duties and possess such powers as shall be assigned him or her by the Board of Directors. Section 6. TREASURER AND ASSISTANT TREASURER. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation, shall keep or cause to be kept regular books of account for the Corporation and shall perform such other duties and possess such other powers as are incident to the office of the treasurer of a corporation or as shall be assigned to the Treasurer by the Board of Directors. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers, in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer set forth herein and as the Board of Directors from time to time may prescribe. Section 7. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall cause notices of all meetings to be served as prescribed in these By-laws or by statute, shall keep or cause to be kept the minutes of all meetings of the stockholders and the Board of Directors, shall have charge of the corporate records 7 and seal of the Corporation and shall keep a register of the post-office address of each stockholder which shall be furnished to the Secretary by such stockholder. The Secretary shall perform such other duties and possess such other powers as are incident to the office of the secretary of a corporation or as are assigned by the Board of Directors. The Assistant Secretary, or if there shall be more than one, the Assistant Secretaries, in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary set forth herein and as the Board of Directors from time to time may prescribe. Section 8. SUBORDINATE OFFICERS AND AGENTS. The Board of Directors may elect or appoint such other officers and agents as the Board shall deem necessary or desirable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. ARTICLE V EXECUTION OF DOCUMENTS Section 1. COMMERCIAL PAPER AND CONTRACTS. All checks, notes, drafts and other commercial paper of the Corporation shall be signed by the President or Treasurer of the Corporation or by such other person or persons as the Board of Directors may from time to time designate. Section 2. OTHER INSTRUMENTS. All contracts, deeds, mortgages and other instruments shall be executed by the President, any Vice President or any such other person or persons as the Board of Directors may from time to time designate, and, if necessary, by the Secretary or any Assistant Secretary. ARTICLE VI FISCAL YEAR The fiscal year of the Corporation shall be the calendar year. ARTICLE VII CERTIFICATES REPRESENTING SHARES Certificates representing shares of capital stock of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be executed by the President or any Vice President and by the Secretary or the Treasurer, unless the Board of Directors shall direct otherwise. 8 ARTICLE VIII RECORD DATE For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to or dissent from any proposal without any meeting or for the purpose of determining stockholders entitled to receive payment of any dividend or allotment of any right, or in order to make a determination of stockholders for any other purpose, the Board of Directors shall fix, in advance, a date as the record date for any such determination of stockholders. Such date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action or event to which it relates. When a determination of stockholders of record for a stockholders' meeting has been made as provided in this Article VIII, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting. ARTICLE IX DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends or make other distributions on its outstanding shares of capital stock in the manner and upon the terms and conditions provided by the Certificate of Incorporation and by statute. ARTICLE X AMENDMENT As provided in the Certificate of Incorporation, these By-laws may be altered, amended or repealed, or new by-laws may be adopted by the Board of Directors, at any regular or special meeting of the Board of Directors. These By-laws, or any new By-laws adopted by the Board, may also be altered, amended, or repealed, or new by-laws may be adopted, by the holders of Common Stock, at any annual or special meeting of the stockholders if notice of such alteration, amendment, repeal or adoption of new by-laws is contained in the notice of such meeting. ARTICLE XI INDEMNIFICATION Section 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact: 9 a) that he or she is or was a director or officer of the Corporation, or b) that he or she, being at the time a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (collectively, "Another Enterprise" or "Other Enterprise"), whether either in case (a) or in case (b) the basis of such Proceeding is alleged action or inaction (x) in an official capacity as a director or officer of the Corporation, or as a director, trustee, officer, employee or agent of such Other Enterprise, or (y) in any other capacity related to the Corporation or such Other Enterprise while so serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent permitted under Section 145 of the Delaware General Corporation Law (or any successor provision or provisions) as the same exists or may hereafter be amended (but, in the case of any such amendment, with respect to actions taken prior to such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including without limitation attorneys' fees, judgments, fines, excise taxes assessed in connection with an employee benefit plan or penalties and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith. The persons indemnified by this Article XI are hereinafter referred to as "indemnitees." Such indemnification as to such alleged action or inaction shall continue as to an indemnitee who has after such alleged action or inaction ceased to be a director of officer of the corporation, or director, officer, employee or agent of such Other Enterprise; and shall inure to the benefit of the indemnitee's heirs, executors and administrators. Notwithstanding the foregoing, except as may be provided in the Certificate of Incorporation or by the Board of Directors, the Corporation shall not indemnify any such indemnitee in connection with a proceeding (or portion thereof) initiated by such indemnitee (but this prohibition shall not apply to a counterclaim, cross-claim or third-party brought by the indemnitee in any proceeding) unless such proceeding (or portion thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article XI: (i) shall be a contract right; (ii) shall not be affected adversely to any indemnitee by any amendment of these By-laws with respect to any action or inaction occurring prior to such amendment; and (iii) shall, subject to any requirements imposed by law and the Certificate of Incorporation, include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition. Section 2. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING INDEMNIFICATION. The rights to indemnification and to the advancement of expenses conferred in this Article XI shall not be exclusive of any other right which 10 any person may have or hereafter acquire under these By-laws or under any statute, agreement, vote of stockholders or disinterested directors or otherwise. The Certificate of Incorporation may contain such other provisions concerning indemnification, including provisions specifying reasonable procedures relating to and conditions to the receipt by indemnitees of indemnification. In the event of a conflict between the indemnification provision of these By-laws and an indemnification provision of the Certificate of Incorporation, the Certificate of Incorporation shall prevail. Section 3. AGENTS AND EMPLOYEES. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of expenses, to any employee or agent of the Corporation (or any person serving at the Corporation's request as a director, trustee, officer, employee or agent of Another Enterprise) or to persons who are or were a director, officer, employee or agent of any of the Corporation's affiliates, predecessor or subsidiary corporations or of a constituent corporation absorbed by the Corporation in a consolidation or merger or who is or was serving at the request of such affiliate, predecessor or subsidiary corporation or of such constituent corporation as a director, officer, employee or agent of Another Enterprise, in each case as determined by the Board of Directors to the fullest extent of the provisions of this Article XI in cases of the indemnification and advancement of expenses of directors and officers of the Corporation, or to any lesser extent (or greater extent, if permitted by law) determined by the Board of Directors. ARTICLE XII LOANS TO AND GUARANTEES OF OBLIGATIONS OF OFFICERS, DIRECTORS AND EMPLOYEES This Corporation may lend money to, or guarantee any obligation of, or otherwise assist, any officer or other employee of this Corporation or of any subsidiary, even if said officer or other employee is also a director of this Corporation or of any subsidiary, whenever, in the judgement of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation. Such loan, guarantee or assistance, if made to an officer or employee who is also a director, must be authorized by a majority of the directors then in office. Any such loan, guarantee or other assistance may be made with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of the Corporation, and may be made upon such other terms and conditions as the Board may determine. The proceeds of any such loan may be applied to the purchase of shares of the Corporation and any shares so purchased shall be deemed to be fully paid and non-assessable. 11 ARTICLE XIII The Corporate Seal shall have inscribed thereon the following: "Aeries Healthcare Corporation, 1999 Incorporated, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE XIV FORCE AND EFFECT OF BY-LAWS These By-laws are subject to the provisions of the law of the State of Delaware and the Corporation's Certificate of Incorporation, as it may be amended from time to time. If any provision of these By-laws is inconsistent with a provision in the Delaware statutes or the Certificate of Incorporation, the provision of the Delaware statutes or the Certificate of Incorporation shall govern. Adopted as of: September 9, 1999 12 EX-3.6 5 g83903exv3w6.txt EX-3.6 ARTICLES OF INCORPORATION EXHIBIT 3.6 File #6067-095-1 ARTICLES OF AMENDMENT 1. CORPORATE NAME: AERIES HEALTHCARE OF ILLINOIS, INC. ------------------------------------------------------- 2. MANNER OF ADOPTION OF AMENDMENT: The following amendment of the Articles of Incorporation was adopted on 6/28/2002, in the manner indicated below. ("X" one box only) --------- [ ] By a majority of the incorporators, provided no directors were named in the articles of incorporation and no directors have been elected; [ ] By a majority of the board of directors, in accordance with Section 10.10, the corporation having issued no shares as of the time of adoption of this amendment; [ ] By a majority of the board of directors, in accordance with Section 10.15, shares having been issued but shareholder action not being required for the adoption of the amendment; [ ] By the shareholders, in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment; [ ] By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10; [X] By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by all the shareholders entitled to vote on this amendment. 3. TEXT OF AMENDMENT: a. When amendment effects a name change, insert the new corporate name below. Use Page 2 for all other amendments. Article I: The name of the corporation is: - -------------------------------------------------------------------------------- (NEW NAME) TEXT OF AMENDMENT b. (If amendment affects the corporate purpose, the amended purpose is required to be set forth in its entirety. If there is not sufficient space to do so, add one or more sheets of this size.) Amend Number 4, Paragraph 1, entitled Authorized Shares, Issued Shares and Consideration Received to reduce the Number of Shares Authorized from 100,000 to 1,000. 4. The manner, if not set forth in Article 3b, in which any exchange, reclassification or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for or effected by this amendment, is as follows: (If not applicable, insert "No change") No Change 5. (a) The manner, if not set forth in Article 3b, in which said amendment effects a change in the amount of paid-in capital (Paid-in capital replaces the terms Stated Capital and Paid-in Surplus and is equal to the total of these accounts) is as follows: (If not applicable, insert "No change") No Change (b) The amount of paid-in capital (Paid-in Capital replaces the terms Stated Capital and Paid-in Surplus and is equal to the total of these accounts) as changed by this amendment is as follows: (If not applicable, insert "No change") No Change Before Amendment After Amendment Paid-in Capital $ $ ---------------- --------------- (COMPLETE EITHER ITEM 6 OR 7 BELOW. ALL SIGNATURES MUST BE IN BLACK INK.) 6. The undersigned corporation has caused this statement to be signed by its duly authorized officers, each of whom affirms, under penalties of perjury, that the facts stated herein are true. Dated July 24, 2002 AERIES HEALTHCARE OF ILLINOIS, INC. ------------- ----------------------------------- attested by /s/ Steven T. Davidson by /s/ Joey A. Jacobs ---------------------- ------------------------------- Steven T. Davidson, Secretary Joey A. Jacobs, President ---------------------------------- ------------------------------- 7. If amendment is authorized pursuant to Section 10.10 by the incorporators, the incorporators must sign below, and type or print name and title. OR If amendment is authorized by the directors pursuant to Section 10.10 and there are no officers, then a majority of the directors or such directors as may be designated by the board, must sign below, and type or print name and title. The undersigned affirms, under the penalties of perjury, that the facts stated herein are true. Dated , ---------------- ---------------- --------------------------------- ------------------------------------ --------------------------------- ------------------------------------ --------------------------------- ------------------------------------ --------------------------------- ------------------------------------ ARTICLES OF INCORPORATION 1. CORPORATE NAME: AERIES HEALTHCARE OF ILLINOIS, INC. ------------------------------------------------------- 2. Initial Registered Agent: Mark R. Russell --------------------------------------------- Initial Registered Office: 8311 West Roosevelt Road -------------------------------------------- Forest Park IL Cook 60130 -------------------------------------------- 3. Purpose or purposes for which the corporation is organized: (If not sufficient space to cover this point, add one or more sheets of this size.) To engage in any lawful act or activity for which corporations may be organized under the Illinois Business Corporation Act of 1983, as amended from time to time. 4. Paragraph 1: Authorized Shares, Issued Shares and Consideration Received:

5. OPTIONAL: (a) Number of directors constituting the initial board of directors of the corporation: one --- (b) Names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and qualify:

6. OPTIONAL: (a) It is estimated that the value of all property to be owned by the corporation for the following year wherever located will be: $ ------- (b) It is estimated that the value of the property to be located within the State of Illinois during the following year will be: $ ------- (c) It is estimated that the gross amount of business that will be transacted by the corporation during the following year will be: $ ------- (d) It is estimated that the gross amount of business that will be transacted from places of business in the State of Illinois during the following year will be: $ ------- 7. OPTIONAL: OTHER PROVISIONS See Articles 6 and 7 attached hereto. Attach a separate sheet of this size for any other provision to be included in the Articles of Incorporation, e.g., authorized preemptive rights, denying cumulative voting, regulating internal affairs, voting majority requirements, fixing a duration other than perpetual, etc. 8. NAME(S) & ADDRESS(ES) OF INCORPORATOR(S) The undersigned incorporator(s) hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true. Dated September 9 , 1999 --------------------------------------------------- ----------- SIGNATURE AND NAME ADDRESS 1. /s/ Shelley Clifford Panico 1. 321 North Clark St., Suite 3400 ----------------------------------- ----------------------------------- Shelley Clifford Panico Chicago, IL 60610 ----------------------------------- ----------------------------------- 2. 2. ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- 3. 3. ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- (Signatures must be in BLACK INK on original document. Carbon copy, photocopy or rubber stamp signatures may only be used on conformed copies.) NOTE: If a corporation acts as incorporator, the name of the corporation and the state of incorporation shall be shown and the execution shall be by its president or vice president and verified by him, and attested by its secretary or assistant secretary. - -------------------------------------------------------------------------------- FEE SCHEDULE - - The initial franchise tax is assessed at the rate of 15/100 of 1 percent ($1.50 per $1,000) on the paid-in capital represented in this state, with a minimum of $25. - - The filing fee is $75. - - The minimum total due (franchise tax + filing fee) is $100. (Applies when the Consideration to be Received as set forth in Item 4 does not exceed $16,667) - - The Department of Business Services in Springfield will provide assistance in calculating the total fees if necessary. Illinois Secretary of State Springfield, IL 62756 Department of Business Services Telephone (217) 782-9522 or 782-9523 ARTICLES OF INCORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. ARTICLE 6 LIMITATION OF LIABILITY To the fullest extent permitted by the Illinois Business Corporation Act of 1983, as amended from time to time (the "Act"), directors of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that this Article shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 8.65 of the Act, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article by the shareholders shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. ARTICLE 7 INDEMNIFICATION The current and former officers, directors and employees of the Corporation and the legal representatives of any such persons shall be indemnified by the Corporation, in accordance with the procedures established in the Bylaws of the Corporation from time to time in effect, to the fullest extent permitted by Illinois law. The Corporation, in accordance with procedures established in the Bylaws of the Corporation from time to time in effect and to the extent authorized in each specific instance by the Board of Directors, may indemnify any agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification of current and former officers, directors and employees of the Corporation. EX-3.7 6 g83903exv3w7.txt EX-3.7 BYLAWS EXHIBIT 3.7 BYLAWS OF AERIES HEALTHCARE OF ILLINOIS, INC. (An Illinois Corporation) ARTICLE I. NAME, PURPOSE AND OFFICES. Section 1. Name; Date of Incorporation. The name of the corporation is Aeries Healthcare of Illinois, Inc. (the "Corporation"). The Corporation was incorporated in the State of Illinois on September 10, 1999. Section 2. Purpose. The purpose of the Corporation is to provide comprehensive mental health care to patients through construction, management and operation of healthcare facilities and programs, including Riveredge Hospital, located at 8311 West Roosevelt Road, Forest Park, Illinois 60130. The Corporation shall strive to meet this purpose through the continuing education of health care professionals and the promotion of health care within the communities it serves while maintaining quality patient care in a cost-efficient manner. Section 3. Principal Office. The principal office of the Corporation shall be located at 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, County of Williamson, or at such other location as is designated by the Corporation's Board of Directors. Section 4. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Illinois, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II. STOCKHOLDERS' MEETINGS. Section 1. Annual Meetings. (a) The annual meeting of the stockholders of the Corporation for the transaction of any proper business, including the election of directors, shall be held on such date and at such time as the Board of Directors may determine within the State of Illinois or at any other place within or without the State of Illinois as may be determined by the Board of Directors and as may be designated in the notice of that meeting. (b) If the election of directors shall not be held on the day herein designated for any annual meeting, or at any adjournment of that meeting, the Board of Directors shall call a special meeting of the stockholders as soon as possible thereafter. At this meeting the election of directors shall take place, and the election and any other business transacted shall have the same force and effect as at an annual meeting duly called and held. (c) No change in the time or place for a meeting for the election of directors shall be made within 20 days preceding the day on which the election is to be held. Written notice of any change shall be given each stockholder at least 20 days before the election is held, either in person or by letter mailed to the stockholder at the address last shown on the books of the Corporation. (d) In the event the annual meeting is not held at the time prescribed herein, and if the Board of Directors shall not call a special meeting as prescribed above within three months after the date prescribed for the annual meeting, then any stockholder may call that meeting, and at that meeting the stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting duly called and held. Section 2. Special Meetings. Special meetings of the stockholders may be called by the President, Board of Directors, or by the holders of at least twenty percent (20%) of the stock entitled to vote at that meeting. At any time, upon the written request of any person or persons entitled to call a special meeting, it shall be the duty of the Secretary to send out notices of the meeting, to be held within or without the State of Illinois and at such time, but not less than 10 days nor more than 60 days after receipt of the request, as may be fixed by the Board of Directors. If the Board of Directors fails to fix a time or place, the meeting shall be held at the principal office of the Corporation at a time as shall be fixed by the Secretary within the above limits. Section 3. Notice and Purpose of Meetings; Waiver. Each stockholder of record entitled to vote at any meeting shall be given in person, or by mail, or by prepaid telegram, written or printed notice of the purpose or purposes, and the time and place within or outside the State of Illinois of every meeting of stockholders. This notice shall be delivered not less than 10 days nor more than 60 days before the meeting or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets not less than 20 days nor more than 60 days before the meeting. If mailed or telegraphed, it should be directed to the stockholder at the address last shown on the books of the Corporation. No publication of the notice of meeting shall be required. A stockholder may waive the notice of meeting by attendance, either in person or by proxy, at the meeting, or by so stating in writing, either before or after the meeting. Attendance at a meeting for the express purpose of objecting that the meeting was not lawfully called or convened shall not, however, constitute a waiver of notice. Except where otherwise required by law, notice need not be given of any adjourned meeting of the stockholders. Section 4. Quorum. Except as otherwise provided by law, a quorum at all meetings of stockholders shall consist of the holders of record of a majority of the shares entitled to vote present in person or by proxy. Section 5. Closing of Transfer Books; Record Date. (a) In order to determine the holders of record of the Corporation's stock who are entitled to notice of meetings, to vote at a meeting or its adjournment, to receive payment of any dividend, or to make a determination of the stockholders of record 2 for any other proper purpose, the Board of Directors of the Corporation may order that the Stock Transfer Books be closed for a period not to exceed sixty days. If the purpose of this closing is to determine who is entitled to notice of a meeting and to vote at such meeting, the Stock Transfer Books shall be closed for at least 30 days preceding such meeting. (b) In lieu of closing the Stock Transfer Books, the Board of Directors may fix a date as the record date for the determination of stockholders. This date shall be no more than sixty days prior to the date of the action which requires the determination, nor, in the case of a stockholders' meeting, shall it be less than thirty days in advance of such meeting. (c) If the Stock Transfer Books are not closed and no record date is fixed for the determination of the stockholders of record, the date of which notice of the meeting is mailed, or on which the resolution of the Board of Directors declaring a dividend is adopted, as the case may be, shall be the record date for the determination of stockholders. (d) When a determination of stockholders entitled to vote at any meeting has been made as provided in this section, this determination shall apply to any adjournment of the meeting, except when the determination has been made by the closing of the Stock Transfer Books and the stated period of closing has expired. Section 6. Presiding Officer; Order of Business. (a) Meetings of the stockholders shall be presided over by the Chairman of the Board, or, if he or she is not present, by the Chief Executive Officer, or if not present, by the President, or if he or she is not present, by a Vice-President, or if neither the Chairman of the Board nor the Chief Executive Officer nor the President nor a Vice-President is present, by a chairman to be chosen by a majority of the stockholders entitled to vote at the meeting who are present in person or by proxy. The Secretary of the Corporation, or, in her or his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the stockholders present at the meeting shall choose any person present to act as secretary of the meeting. (b) The order of business shall be as follows: 1. Call of meeting to order. 2. Proof of notice of meeting. 3. Reading of minutes of last previous annual meeting. 4. Reports of officers. 5. Reports of committees. 6. Election of directors. 7. Miscellaneous business. Section 7. Voting. (a) Except in the election of directors, at which time the stockholders shall be entitled to cumulate their votes, and except as otherwise provided in the Articles of 3 Incorporation, the Bylaws, or the laws of the State of Illinois at every meeting of the stockholders, each stockholder of the Corporation entitled to vote at the meeting shall have, as to each matter submitted to a vote, one vote in person or by proxy for each share of stock having voting rights registered in his or her name on the books of the Corporation. A stockholder may vote his or her shares through a proxy appointed by a written instrument signed by the stockholder or by a duly authorized attorney-in-fact and delivered to the secretary of the meeting. No proxy shall be valid after three months from the date of its execution unless a longer period is expressly provided. (b) A majority vote of those shares entitled to vote and represented at the meeting, a quorum being present, shall be the act of the meeting except that in electing directors a plurality of the votes cast shall elect. (c) At all elections of directors, the voting shall be by ballot. Section 8. List of Stockholders. (a) A complete list of the stockholders of the Corporation entitled to vote at the ensuing meeting, arranged in alphabetical order, and showing the address of, and number of shares owned by, each stockholder shall be prepared by the Secretary, or other officer of the Corporation having charge of the Stock Transfer Books. This list shall be kept on file for a period of at least ten days prior to the meeting at the principal office of the Corporation and shall be subject to inspection during the usual business hours of such period by any stockholder. This list shall also be available at the meeting and shall be open to inspection by any stockholder at any time during the meeting. (b) The original Stock Transfer Books shall be prima facie evidence as to who are the stockholders entitled to examine the list or to vote at any meeting of the stockholders. (c) Failure to comply with the requirements of this section shall not affect the validity of any action taken at any meetings of the stockholders. ARTICLE III. DIRECTORS. Section 1. Number, Qualification, Term, Quorum, and Vacancies. (a) The property, affairs and business of the Corporation shall be managed by a Board of Directors of two persons. Except as provided, directors shall be elected at the annual meeting of the stockholders and each director shall serve for one year and/or until his or her successor shall be elected and qualify. (b) The number of directors may be increased or decreased from time to time by an amendment to these Bylaws. Any increased number of directors shall be elected by the stockholders at the next regular annual meeting or at a special meeting called for that purpose. The number of directors shall never be less than one. 4 (c) Directors need not be stockholders of the Corporation. (d) A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business. If, at any meeting of the Board of Directors, there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained. In case there are vacancies on the Board of Directors, other than vacancies created by the removal of a director or directors by the stockholders or by an increase in the number of directors, the remaining directors, although less than a quorum, may by a majority vote elect a successor or successors for the unexpired term or terms. Section 2. Meetings. Meetings of the Board of Directors may be held either within or without the State of Illinois. Meetings of the Board of Directors shall be held at those times as are fixed from time to time by resolution of the Board. Special meetings may be held at any time upon call of the Chairman of the Board, the Chief Executive Officer, the President, or a Vice-President, or a majority of directors, upon written or telegraphic notice deposited in the U.S. mail or delivered to the telegraph company at least thirty days prior to the day of the meetings. A meeting of the Board of Directors may be held without notice immediately following the annual meeting of the stockholders. Notice need not be given of regular meetings of the Board of Directors held at times fixed by resolution of the Board of Directors nor need notice be given of adjourned meetings. Meetings may be held at any time without notice if all the directors are present or if, before the meeting, those not present waive such notice in writing. Notice of a meeting of the Board of Directors need not state the purpose of, nor the business to be transacted at, any meeting. Section 3. Removal. (a) At any meeting of the stockholders, any director or directors may be removed from office, without assignment of any reason, by a majority vote of the shares or class of shares, as the case may be, which elected the director or directors to be removed, provided, however, that if less than all the directors are to be removed, no individual director shall be removed if the number of votes cast against her or his removal would be sufficient, if cumulatively voted at an election of the entire board, to elect one or more directors. (b) When any director or directors are removed, new directors may be elected at the same meeting of the stockholders for the unexpired term of the director or directors removed. If the stockholders fail to elect persons to fill the unexpired term or terms of the director or directors removed, these unexpired terms shall be considered vacancies on the board to be filled by the remaining directors. Section 4. Indemnification. (a) The Corporation shall indemnify each of its directors, officers, and employees whether or not then in service as such (and his or her executor, administrator and heirs), against all reasonable expenses actually and necessarily incurred by him or her in connection with the defense of any litigation to which the individual may have 5 been made a party because he or she is or was a director, officer or employee of the Corporation. The individual shall have no right to reimbursement, however, in relation to matters as to which he or she has been adjudged liable to the Corporation for negligence or misconduct in the performance of his or her duties, or was derelict in the performance of his or her duty as director, officer or employee by reason of willful misconduct, bad faith, gross negligence or reckless disregard of the duties of his or her office or employment. The right to indemnity for expenses shall also apply to the expenses of suits which are compromised or settled if the court having jurisdiction of the matter shall approve such settlement. (b) The foregoing right of indemnification shall be in addition to, and not exclusive of, all other rights to that which such director, officer or employee may be entitled. Section 5. Compensation. Directors, and members of any committee of the Board of Directors, shall be entitled to any reasonable compensation for their services as directors and members of any committee as shall be fixed from time to time by resolution of the Board of Directors, and shall also be entitled to reimbursement for any reasonable expense incurred in attending those meetings. The compensation of directors may be on any basis as determined in the resolution of the Board of Directors. Any director receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and receiving reasonable compensation for such other services. Section 6. Committees. (a) The Board of Directors, by a resolution or resolutions adopted by a majority of the members of the whole Board, may appoint an Executive Committee, an Audit Committee, and any other committees as it may deem appropriate. Each committee shall consist of at least three members of the Board of Directors. Each committee shall have and may exercise any and all powers as are conferred or authorized by the resolution appointing it. A majority of each committee may determine its action and may fix the time and place of its meetings, unless provided otherwise by the Board of Directors. The Board of Directors shall have the power at any time to fill vacancies in, to change the size of membership of, and to discharge any committee. (b) Each committee shall keep a written record of its acts and proceedings and shall submit that record to the Board of Directors at each regular meeting and at any other times as requested by the Board of Directors. Failure to submit the record, or failure of the Board to approve any action indicated therein will not, however, invalidate the action to the extent it has been carried out by the Corporation prior to the time the record of such action was, or should have been, submitted to the Board of Directors as provided. Section 7. Dividends. Subject always to the provisions of law and the Articles of Incorporation, the Board of Directors shall have full power to determine whether any, and, if so, what part, of the funds legally available for the payment of dividends shall be declared in dividends and paid to the 6 stockholders of the Corporation. The Board of Directors may fix a sum which may be set aside or reserved over and above the paid-in capital of the Corporation for working capital or as a reserve for any proper purpose, and from time to time may increase, diminish, and vary this fund in the Board's absolute judgment and discretion. ARTICLE IV. OFFICERS. Section 1. Number. The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice-Presidents, a Treasurer, a Controller, a Secretary, and one or more Assistant Secretaries. In addition, there may be such subordinate officers as the Board of Directors may deem necessary. Any person may hold two, but no more than two, offices. Section 2. Term of Office. The principal officers shall be chosen annually by the Board of Directors at the first meeting of the Board following the stockholders' annual meeting, or as soon as is conveniently possible. Subordinate officers may be elected from time to time. Each officer shall serve until his or her successor shall have been chosen and qualified, or until his, death, resignation, or removal. Section 3. Removal. Any officer may be removed from office with or without cause, at any time by the affirmative vote of a majority of the Board of Directors then in office. Such removal shall not prejudice the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy in any office from any cause may be filled for the unexpired portion of the term by the Board of Directors. Section 5. Duties. (a) The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors. Except where, by law, the signature of the President is required, the Chairman shall possess the same power as the President to sign all certificates, contracts, and other instruments of the Corporation which may be authorized by the Board of Directors. (b) The Chief Executive Officer shall have general active management of the business of the corporation, and in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and the Board of Directors; and shall see that all orders and resolutions of the Board of Directors are carried into effect. (c) The President, in the absence of the Chairman of the Board, shall preside at all meetings of the stockholders and the Board of Directors. She or he shall have 7 general supervision of the affairs of the Corporation, shall sign or countersign all certificates, contracts, or other instruments of the Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and stockholders, and shall perform any and all other duties as are incident to her or his office or are properly required of him or her by the Board of Directors. (d) The Vice-Presidents, in the order designated by the Board of Directors, shall exercise the functions of the President during the absence or disability of the President. Each Vice-President shall have any other duties as are assigned from time to time by the Board of Directors. (e) The Secretary, the Treasurer, and the Controller shall perform those duties as are incident to their offices, or are properly required of them by the Board of Directors, or are assigned to them by the Articles of Incorporation or these Bylaws. The Assistant Secretaries, in the order of their seniority, shall, in the absence of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform any other duties as may be assigned by the Board of Directors. (f) Other subordinate officers appointed by the Board of Directors shall exercise any powers and perform any duties as may be delegated to them by the resolutions appointing them, or by subsequent resolutions adopted from time to time. (g) In case of the absence or disability of any officer of the Corporation and of any person authorized to act in his or her place during such period of absence or disability, the Board of Directors may from time to time delegate the powers and duties of that officer to any other officer, or any director, or any other person whom it may select. Section 6. Salaries. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. No officer shall be ineligible to receive such salary by reason of the fact that he is also a Director of the Corporation and receiving compensation therefor. ARTICLE V. CERTIFICATES OF STOCK. Section 1. Form. (a) The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock, certifying the number of shares represented thereby and in such form not inconsistent with the Articles of Incorporation as the Board of Directors may from time to time prescribe. (b) The certificates of stock shall be signed by the President or a Vice-President and by the Secretary or an Assistant Secretary or the Treasurer, and sealed with the seal of the corporation. This seal may be a facsimile, engraved or printed. Where any certificate is manually signed by a transfer agent or a transfer clerk and by a registrar, the signatures of the President, Vice-President, Secretary, Assistant Secretary, or Treasurer upon that certificate may be facsimiles, engraved or printed. 8 In case any officer who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be an officer before the certificate is issued, it may be issued by the corporation with the same effect as if that officer had not ceased to be so at the time of its issue. Section 2. Subscriptions for Shares. Unless the subscription agreement provides otherwise, subscriptions for shares, regardless of the time when they are made, shall be paid in full at that time, or in installments and at any periods, as shall be specified by the Board of Directors. All calls for payments on subscriptions shall carry the same terms with regard to all shares of the time class. Section 3. Transfers. (a) Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the registered owner, or by his or her duly authorized attorney, with a transfer clerk or transfer agent appointed as provided in Section 5 of this Article of the Bylaws, and on surrender of the certificate or certificates for those shares properly endorsed with all taxes paid. (b) The person in whose name shares of stock stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes. However, if any transfer of shares is made only for the purpose of furnishing collateral security, and that fact is made known to the Secretary of the Corporation, or to the Corporation's transfer clerk or transfer agent, the entry of the transfer may record that fact. Section 4. Lost, Destroyed, or Stolen Certificates. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed, or stolen except on production of evidence, satisfactory to the Board of Directors, of that loss, destruction or theft, and, if the Board of Directors so requires, upon the furnishing of an indemnity bond in such amount (but not to exceed twice the value of the shares represented by the certificate) and with such terms and surety as the Board of Directors, if any, in its discretion, require. Section 5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars, and may require all certificates for shares to bear the signature or signatures of any of them. ARTICLE VI. CORPORATE ACTIONS. Section 1. Deposits. The Board of Directors shall select banks, trust companies, or other depositories in which all funds of the Corporation not otherwise employed shall, from time to time, be deposited to the credit of the Corporation. 9 Section 2. Voting Securities Held by the Corporation. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the Corporation to attend, act, and vote at any meeting of security holders of other corporations in which the Corporation may hold securities. At that meeting the President shall possess and may exercise any and all rights and powers incident to the ownership of those securities which the corporation might have possessed and exercised if it had been present. The Board of Directors may, from time to time, confer like powers upon any other person or persons. ARTICLE VII. CORPORATE SEAL. The Corporation may have a corporate seal that shall consist of two concentric circles, between which shall be the name of the Corporation, and in the center of which shall be inscribed the year of its incorporation and the words "Corporate Seal, State of Illinois." ARTICLE VIII. AMENDMENT OF BYLAWS. The Board of Directors shall have the power to amend, alter or repeal these Bylaws, and to adopt new Bylaws, from time to time, by an affirmative vote of a majority of the whole Board as then constituted, provided that notice of the proposal to make, alter, amend, or repeal the Bylaws was included in the notice of the directors' meeting at which such action takes place. At the next stockholders' meeting following any action by the Board of Directors, the stockholders, by a majority vote of those present and entitled to vote, shall have the power to alter or repeal Bylaws newly adopted by the Board of Directors, or to restore to their original status Bylaws which the Board may have altered or repealed, and the notice of such stockholders' meeting shall include notice that the stockholders will be called on to ratify the action taken by the Board of Directors with regard to the Bylaws. I hereby certify that the foregoing is a full, true and correct copy of the Bylaws of Aeries Healthcare of Illinois, Inc., a corporation of the State of Illinois, as in effect on the date hereof. WITNESS my hand and the seal of the corporation this 28th day of June, 2002. /s/ Steven T. Davidson ----------------------------- Steven T. Davidson, Secretary 10 EX-3.8 7 g83903exv3w8.txt EX-3.8 ARTICLES OF INCORPORATION EXHIBIT 3.8 ARTICLES OF INCORPORATION OF BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. We, the undersigned natural persons of the age of twenty-one years or more, acting as incorporators of a corporation under the Utah Business Corporation Act, adopt the following Articles of Incorporation for such corporation: FIRST: The name of the corporation is BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. SECOND: The period of its duration is Perpetual. THIRD: The purpose or purposes for which the corporation is organized are: The corporation is organized for the purpose of engaging in the development and operation of a free standing treatment facility for the treatment of adult, adolescent and child psychiatry and for the treatment of alcohol and substance abuse and any lawful act or activity. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is Fifty Thousand Dollars (50,000.00) of the par value of One Dollar ($1.00) each. FIFTH: The corporation will not commence business until consideration of the value of at least $1,000 has been received for the issuance of shares. SIXTH: Provisions limiting or denying to shareholders the preemptive right to acquire additional or treasury shares of the corporation are: No shareholder shall be entitled as a matter of right to subscribe for or receive additional shares of any class of stock of the corporation, whether now or hereafter authorized, or any bonds, debentures or other securities convertible into stock, but such additional shares of stock or other securities convertible into stock may be issued or disposed of by the board of directors to such persons and on such terms as in its discretion it shall deem advisable. SEVENTH: The post office address of its initial registered office is 170 South Main Street, c/o C T Corporation System, Salt Lake City, Utah 84101, and the name of its initial registered agent at such address is C T Corporation System. EIGHTH: The number of directors constituting the initial board of directors of the corporation is four (4), and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are:

NINTH: The name and address of each incorporator is:

Dated March 6, 1985. /s/ M. E. Kraemer ----------------- M. E. Kraemer /s/ T. S. Merker ---------------- T. S. Merker /s/ G. F. Robinson ----------------- G. F. Robinson STATE OF GEORGIA) ) SS. COUNTY OF FULTON) I, Kathy L. Slayman, a notary public, hereby certify that on the 6th day of March, 1985, personally appeared before me M. E. Kraemer. T. S. Merker, and G. F. Robinson, who being by me first duly sworn, severally declared that they are the persons who signed the foregoing document as incorporators and that the statements therein contained are true. In witness whereof I have hereunto set my hand and seal this 6th day of March, A.D. 1985. My Commission expires : Notary Public, Georgia State at Large My Commission Expires March 30, 1988 /s/ Kathy L. Slayman -------------------- Notary Public EX-3.9 8 g83903exv3w9.txt EX-3.9 RESTATED BYLAWS EXHIBIT 3.9 RESTATED BYLAWS OF BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. ARTICLE I PURPOSE Bountiful Psychiatric Hospital, Inc. (the "Corporation") will maintain a role in meeting the health needs of area residents through its facilities including "Benchmark Regional Hospital" (the "Hospital"). The Corporation's commitments are: to provide quality psychiatric care and substance abuse treatment; to provide modern facilities and staff with motivated mental health professionals; to create appropriate environments to facilitate psychiatric and substance abuse treatment to individuals in need of psychiatric and substance abuse care, without respect to age, sex, national origin, race, color, handicap status, political or religious beliefs; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through appropriate activity developed at professional and community levels. The Corporation is prepared to work in cooperation with other appropriate health agencies and institutions in an effort to improve existing health services in the community and to design, plan and develop innovative systems of health care management in the community. These activities shall be conducted with an overriding concern for the patient and the recognition of the patient's dignity as a human being. The Corporation will encourage the community to participate in the planning and development of program policies for the Hospital. ARTICLE II OFFICES The principal office of the Corporation shall be located in New Orleans, Louisiana. The Corporation shall continuously maintain in the State of Utah a registered office and a registered agent, and may have such other offices as the Board may determine from time to time. All dividends shall be deemed to be paid in the State of Utah. The Corporation shall have such other offices, either within or without the State of Utah, as the Board of Directors may designate or as the business of the Corporation may require from time to time. ARTICLE III SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders will be held at such time and on such date as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at 2 the request of the shareholders of not less than ten percent (10%) of all the outstanding shares of the Corporation entitled to vote at the meeting. SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Utah, to conduct any annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Utah, to hold such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon paid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for 3 any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, thirty (30) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for at least fifteen (15) days immediately preceding such meeting. In lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than thirty (30) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the 4 address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting shall be kept on file at the place where the meting is to be held and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence of the identities of the shareholders entitled to examine such list or transfer books or to vote at any meeting of the shareholders. SECTION 7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless a time of expiration is otherwise 5 specified in a proxy, no proxy shall be valid if dated more than eleven (11) months prior to the date of the meeting. SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Such shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. 6 Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any time. SECTION 11. Action Without a Meeting. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action to be taken shall be signed by all of the shareholders entitled to vote thereon that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote thereon were present and voted. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Articles of Incorporation or by these Bylaws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws, and as may be provided for the Board of Directors by the laws of the State of Utah. The Board of Directors of the Corporation shall report to the Board of Directors of Ramsay Health Care, Inc. 7 The Board of Directors shall have the authority and responsibility for carrying out the purposes of the Corporation. Included in this responsibility shall be the active participation by members of the Board of Directors in activities necessary for any licensure, approvals, or accreditation of the Corporation's health care facilities and related services. The Board of Directors shall appoint a Consulting Board which shall have the authority to have its own bylaws and shall be responsible for the operations of the Hospital, for the appointment of Medical Staff of the Hospital, and for the quality of care rendered in the Hospital. SECTION 2. Number, Term and Qualification. The number of directors shall be fixed by the Board of Directors and shall include two ex officio members as described below. Directors need not be residents of the State of Utah nor shareholders of the Corporation. The directors, other than the ex officio directors, shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may serve provided 8 the director continues to meet other qualifications set forth in this Article IV, Section 2. The number of directors may not be increased or decreased by more than thirty percent (30%) without the approval of the majority of shareholders entitled to vote for the election of directors. The Board of Directors of this corporation shall include two ex officio members: the President of the Corporation, who shall be entitled to vote as a director, and a selected representative of the Medical Staff, who shall not have any voting rights as a director and who shall be entitled to attend and have a voice at all meetings of the Board of Directors. SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by the reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders or until his successor is elected and qualified. SECTION 4. Compensation. The Board of Directors shall have the authority to fix the compensation of the directors. SECTION 5. Standard of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably 9 believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. SECTION 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 8. Quorum and Voting. A majority of the number of directors then serving shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 9. Conflicts of Interest. (a) Interested Director Transactions. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves 10 or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (1) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (2) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (3) the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. (b) Written Conflict of Interest Policy. The Board of Directors shall implement from time to time a written conflict of interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest. ARTICLE V MEETINGS SECTION 1. Place of Meeting of the Board of Directors. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of Utah. 11 SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the Corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; or written request of two (2) directors. Special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. 12 A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting is announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's meeting shall be kept and shall include at least the following: (A) The date of the meeting; (B) The name of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. 13 SECTION 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board of Directors or of the respective committee. Such consent shall have the same effect as a unanimous vote. ARTICLE VI COMMITTEES The Board of Directors shall establish such committees as may be necessary to effect the discharge of its responsibilities, each such committee to consist of two (2) or more of the directors. The Board of Directors may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of the committee, the members of the Committee who are present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member if an alternate member or members has not been selected or is absent from the meeting. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. 14 Each committee shall have and may exercise all authority granted to it by the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the Bylaws; (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other 15 features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State of the State of Utah. Written minutes shall be kept of all meetings of committees of the Board of Directors and shall include the information specified in Article V, Section 2 hereof. ARTICLE VII OFFICERS SECTION I. Number. The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. One person may hold more than one office, provided that one person may not hold the offices of president and secretary. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. 16 SECTION 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall, in general, supervise and manage all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. The President shall not sell, transfer, incumber, or otherwise dispose of any assets of the Corporation, 17 the value of which exceeds $50,000.00, without the express authorization of such transaction from the Board of Directors. SECTION 6. Vice-President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice-President shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Vice-President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is necessary and duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. 18 SECTION 8. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; (b) give and receive receipt for monies due and payable to the Corporation from any source whatsoever; (c) deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article IX of these Bylaws; and (d) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 9. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE VIII ADMINISTRATION SECTION 1. Chief Administrative Officer. The Consulting Board shall select and employ a competent, experienced Chief Administrative officer, to be designated from time to time as the Administrator of the Hospital. ARTICLE IX CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any 19 instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidence of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do. All certificates for shares shall be consecutively numbered or otherwise identified. The 20 name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. The shares of the Corporation shall not be transferable until such time as the owner thereof shall have given the Corporation fifteen (15) days in which to purchase said stock for the same amount as any bona fide offer. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner and holder thereof for all purposes. 21 ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of July and end on the 30th day of June of each year. ARTICLE XII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE XIII SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have subscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". ARTICLE XIV WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 22 ARTICLE XV AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by a vote of the shareholders representing a majority of all the shares issued and outstanding, at any annual shareholders' meeting or at any special shareholders' meeting when the proposed amendment has been set out in the notice of such meeting. These Bylaws shall be reviewed by the Board of Directors at least every two (2) years. ARTICLE XVI INDEMNIFICATION The Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, and may procure insurance on behalf of its officers, directors, employees, and agents to the full extent permitted by Section 16-10-4(2) of the Utah Business Corporation Act, as amended. 23 EX-3.10 9 g83903exv3w10.txt EX-3.10 CHARTER EXHIBIT 3.10 ARTICLES OF AMENDMENT TO THE CHARTER OF COLLABORATIVE CARE CORPORATION (Control Number: 0293295) Pursuant to the provisions of Section 48-20-106 of the Tennessee Business Corporation Act, the undersigned corporation adopts the following articles of amendment to its charter: 1. The name of the corporation is Collaborative Care Corporation. 2. The amendment as adopted is: The Charter of the corporation (as amended) is amended by striking Number 3 in its entirety and replacing therefor the following: 3. The corporation's registered office is located at 113 Seaboard Lane, Suite C-100, Williamson County, Franklin, Tennessee 37067. The registered agent at the office is Steven T. Davidson. The Charter of the corporation (as amended) is amended by striking Number 5 in its entirety and replacing therefor the following: 5. The complete address of the corporation's principal office is 113 Seaboard Lane, Suite C-100, Williamson County, Franklin, Tennessee 37067. 3. The corporation is a for-profit corporation. 4. The amendment was duly adopted by the joint unanimous consent action of the sole shareholder and the members of the Board of Directors of the corporation on August 5, 2002. 5. The amendment shall be effective when these articles are filed with the Secretary of State. Dated this 22nd day of August, 2002. COLLABORATIVE CARE CORPORATION By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President ARTICLES OF AMENDMENT TO THE CHARTER OF TENNESSEE MENTAL HEALTH COOPERATIVE, INC. Pursuant to the provisions of Section 48-20-106 of the Tennessee Business Corporation Act, as amended, the undersigned corporation adopts the following Articles of Amendment to its Charter: 1. The name of the corporation is Tennessee Mental Health Cooperative, Inc. 2. The text of the amendments adopted are: A. The Charter of Tennessee Mental Health Cooperative, Inc. (the "Company") is amended by deleting item No. 1 in its entirety and inserting in lieu thereof the following: "The name of the corporation is "COLLABORATIVE CARE CORPORATION." B. The Charter is further amended to include the following item No. 10: "Case Management, Inc., a Tennessee nonprofit corporation ("CMI") and Mental Health Cooperative, Inc., a Tennessee nonprofit corporation ("MHC"), shall each have the right to designate one person to be a member of the Corporation's Board of Directors. The directors appointed by CMI and MHC may be removed or replaced at any time by either CMI or MHC, as the case may be, by the delivery of notice to the board of directors of such removal or replacement. The Corporation's Charter and Bylaws regarding the appointment of one member of the Corporation's Board of Directors by each of CMI and MHC shall not be amended without the prior approval of the Board of Directors of CMI and MHC, which approval shall not be unreasonably withheld." 3. This amendment was duly adopted as of February 29, 1996, by written consents of the sole shareholder and board of directors of the Company. 4. This amendment is to be effective when filed with the Secretary of State of Tennessee. TENNESSEE MENTAL HEALTH COOPERATIVE, INC. By: /s/ Fred D. Furman ----------------------------------------- Fred D. Furman, Secretary C H A R T E R O F TENNESSEE MENTAL HEALTH COOPERATIVE, INC. The undersigned person(s) under the Tennessee Business Corporation Act adopt(s) the following charter for the above listed corporation: 1. The name of the corporation is TENNESSEE MENTAL HEALTH COOPERATIVE, INC. 2. The number of shares of stock the corporation is authorized to issue is one (1) million shares of common stock with a par value of one cent ($.01) per share. The holders of said shares shall have unlimited voting rights and shall be entitled to receive the net assets of the corporation upon dissolution in accordance with their respective rights and interests. 3. (a) The complete address of the corporation's initial registered office in Tennessee is c/o C T CORPORATION SYSTEM 530 Gay Street Knoxville Tennessee 37902 - -------------------------------------------------------------------------------- Street Address City State, Zip Code County of Knox . -------------------- (b) The name of the initial registered agent, to be located at the address listed in 3(a), is C T CORPORATION SYSTEM ---------------------------------------------- 4. The came and complete address of the incorporator is: Allen Tepper 3990 Old Town Avenue, Suite 206A, San Diego, CA 92110 - ----------------------------------------------------------------------- Name Address Zip Code 5. The complete address of the corporation's principal office is: 275 Cumberland Bend, Nashville, Tennessee 37228. 6. The corporation is for profit. 7. The affairs of the corporation shall be under the direction of the board of directors. The number, term of office, manner of election of appointment, and qualifications of the directors shall be as fully set forth in the bylaws of the corporation. The names of the persons who shall serve as the initial directors of the corporation until their successors are duly elected and qualified are: Allen Tepper Susan D. Erskine 2 8. The corporation shall indemnify (which indemnification shall include, without limitation, advancing reasonable expenses) any person who is or was a director or officer of the corporation to the fullest extent required or permitted by applicable law; provided, however, that no indemnification shall be made in any proceeding involving acts or omissions of such director or officer in such person's personal capacity. In addition, the corporation shall have the power to indemnify (which indemnification shall include, without limitation, advancing reasonable expenses) to the fullest extent permitted by law such other persons (including, without limitation, an employee or agent of the corporation or any person who is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise) as the board of directors may determine from time to time. The corporation shall have the power to purchase and maintain at its expense insurance on behalf of such persons to the fullest extent permitted by applicable law, whether or not the corporation would have the power to indemnify such person under the foregoing provisions. 9. A director of the corporation shall not be liable to the corporation for monetary damages for an act or omission in the director's capacity as a director, except that the liability of a director of the corporation shall not be eliminated or limited to the extent that the director is found liable: (i) for a breach of the director's duty of loyalty to the corporation; (ii) for an act or omission not in good faith that constitutes a breach of duty of the director to the corporation or an act or omission that involves intentional misconduct or a knowing violation of the law; (iii) for a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; (iv) for an act or omission for which the liability of a director is expressly provided by an applicable statute; (v) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or (vi) in connection with any other proceeding charging improper personal benefit to the director whether or not involving action in the director's official capacity in which he was adjudged liable on the basis that benefit was improperly received by him. If any statute of the State of Tennessee is amended to authorize the further elimination or limitation of the liability of the directors of the corporation, then the liability of directors of the corporation shall be limited to the fullest extent permitted by the statutes of the State of Tennessee, as so amended, and such elimination or limitation of liability of a director of the corporation provided by the foregoing provisions of this section. 4/5/95 /s/ Allen Tepper - ------------------------------- -------------------------------------- Allen Tepper -------------------------------------- Incorporator's Name (typed or printed) 3 EX-3.11 10 g83903exv3w11.txt EX-3.11 BYLAWS EXHIBIT 3.11 BYLAWS OF TENNESSEE MENTAL HEALTH COOPERATIVE, INC. ARTICLE I OFFICES Section 1.1 Registered Office. The registered office shall be in the City of Knoxville, State of Tennessee. Section 1.2 Other Offices. The corporation may also have offices at such other places both within and without the State of Tennessee as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 2.1 Annual Meeting. An annual meeting of shareholders of the corporation shall be held on such date and at such time as shall be designated from time to time by the board of directors and stated in the notice of the meeting. At such meeting, the shareholders shall elect directors and transact such other business as may properly be brought before the meeting. Section 2.2 Special Meetings. Special meetings of the shareholders for any purpose whatsoever may be called at any time by the chief executive officer, the board of directors, or the holders of not less than ten percent of all shares entitled to vote at such meeting. Section 2.3 Place of Meetings. All meetings of shareholders for any purpose or purposes may be held at such places, within or without the State of Tennessee, as may from time to time be fixed by the board of directors or as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2.4 Notice. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, either personally or by mail. Section 2.5 Quorum of Shareholders. The holders of a majority of the shares issued and outstanding and entitled to vote at such meeting, present in person or represented by proxy shall constitute a quorum for the transaction of business at all meetings of the shareholders. Section 2.6 Voting of Shares. Except as otherwise provided by statute or the articles of incorporation, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the shareholders to one vote for every share of such stock standing in his or her name on the record books of shareholders of the corporation on the date on which such notice of the meeting is mailed, unless some other day is fixed by the board of directors for the determination of shareholders of record. Section 2.7 Voting List. The officer who has charge of the stock transfer books for shares of the corporation shall prepare at least ten days before every meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, including the address of each shareholder and the number of voting shares held by each shareholder. For a period of ten days prior to such meeting, such list shall be kept open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not so specified, at the place where said meeting is to be held. Such list shall be produced at such meeting and at all times during such meeting shall be subject to inspection by any shareholder. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or stock transfer books. Section 2.8 Treasury Stock. The corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes. Section 2.9 Consent of Shareholders in Lieu of Meeting. Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, the meeting, the notice thereof, and the vote of shareholders can be dispensed with, if a consent in writing, setting forth the action so taken, shall be signed by the holders of stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereof were present and voted, provided that prompt notice must be given to all shareholders of the taking of corporate action without a meeting by less than unanimous written consent. ARTICLE III DIRECTORS Section 3.1 Powers of Directors. The business and affairs of the corporation shall be managed by its board of directors which shall have and may exercise all 2 such powers of the corporation, subject to the restrictions imposed by law, the articles of incorporation, or these bylaws. Section 3.2 Number and Qualification. The number of directors which shall constitute the board of directors, exclusive of those directors appointed pursuant to Section 3.5, shall be determined by resolution of the board of directors at any meeting thereof or by the shareholders at any meeting thereof. Directors need not be residents of Tennessee or shareholders of the corporation. Section 3.3 Election and Term of Office. Except with respect to the directors to be appointed pursuant to Section 3.5 hereof, the directors shall be elected by the shareholders at the annual meeting of the shareholders. Except as provided in Section 3.5, each director shall hold office until the next succeeding annual meeting of shareholders and until his or her successor shall have been elected or until his or her earlier death, resignation, or removal. The board of directors may, by resolution, appoint one of its members as chairman to preside over meetings of the board of directors. Section 3.4 Vacancies. Except as provided in Section 3.5, any vacancy occurring in the board of directors by reason of death, resignation, or removal may be filled by affirmative vote of a majority of the shareholders. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office or until his or her death, resignation, retirement, disqualification, or removal. Section 3.5 Designation of Board of Directors by Case Management, Inc. and Mental Health Cooperative. Inc. Case Management, Inc., a Tennessee nonprofit corporation ("CMI") and Mental Health Cooperative, Inc., a Tennessee nonprofit corporation ("MHC"), shall each have the right to designate one person to be a member of the Corporation's Board of Directors. The directors appointed by CMI and MHC may be removed or replaced at any time by either CMI or MHC, as the case may be, by the delivery of notice to the board of directors of such removal or replacement. The Corporation's Charter and Bylaws regarding the appointment of one member of the Corporation's Board of Directors by each of CMI and MHC shall not be amended without the prior approval of the Board of Directors of CMI and MHC, which approval shall not be unreasonably withheld. Section 3.6 Resignation of Directors. Any director may resign from office at any time by delivering a written resignation to the secretary of the corporation, and such resignation shall be effective upon delivery of such resignation to the secretary. Section 3.7 Removal of Directors. Any director may be removed with or without cause at any time by the shareholders, except for a director appointed pursuant to Section 3.5 who may only be removed for cause by the shareholders or with or without cause by the party who appointed the director. 3 Section 3.8 Place of Meetings. Regular or special meetings of the board of directors may be held either within or without the State of Tennessee. Section 3.9 Regular Meetings. Regular meetings of the board of directors may be held without notice at such times and places as may be designated from time to time as may be determined by the board of directors. Section 3.10 Special Meetings. Special meetings of the board of directors may be called by the chief executive officer or any director on twenty-four (24) hours notice to each director, either personally or by telephone, mail, telegram or other means of telecommunications. Neither the business to be transacted at, nor the purpose of, any special meeting of the board of directors need be specified in the notice or waiver of notice of any special meeting. Section 3.11 Quorum of Directors. At all meetings of the board of directors, a majority of the directors shall constitute a quorum for the transaction of business and the act or a majority of the directors present at any meeting at which there is a quorum shall be an act of the board of directors. If a quorum is not present at a meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Section 3.12 Committees. The board of directors may, by resolution passed by a majority of the entire board, designate one or more committees, including, if they shall so determine, an executive committee, each such committee to consist of one or more of the directors of the corporation. Any such designated committee shall have and may exercise such of the powers and authority of the board of directors in the management of the business and affairs of the corporation as may be provided in such resolution, except that no such committee shall have the power or authority of the board of directors in reference to amending the articles of incorporation, adopting an agreement of merger or consolidation, recommending to the shareholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the shareholders a dissolution of the corporation or a revocation of a dissolution of the corporation, or amending, altering or repealing the bylaws or adopting new bylaws for the corporation and, unless such resolution or the articles of incorporation expressly so provides, no such committee shall have the power or authority to authorize the issuance of stock. The board of directors shall have the power at any time to change the number and members of any such committee, to fill vacancies and to discharge any such committee. Section 3.13 Compensation of Directors. The board of directors shall have authority to determine, from time to time, the amount of compensation, if any, which shall be paid to its members for their services as directors and as members of committees of the board of directors. The board of directors shall also have power in 4 its discretion to provide for and to pay to directors rendering services to the corporation not ordinarily rendered by directors as such, special compensation appropriate to the value of such services as determined by the board of directors from time to time. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 3.14 Action by Unanimous Written Consent. Any action required or permitted to be taken at a meeting of the board of directors or any committee may be taken without a meeting if a consent in writing, setting forth the actions so taken, is signed by all of the members of the board of directors or such committee, as the case may be. Section 3.15 Minutes of Meetings. The board of directors shall keep regular minutes of its proceedings and such minutes shall be placed in the minute book of the corporation. Committees of the board of directors shall maintain a separate record of the minutes of their proceedings. ARTICLE IV NOTICES AND TELEPHONE MEETINGS Section 4.1 Notice. Any notice to directors or shareholders shall be in writing and shall be delivered personally or by mail, telegram, telex, cable, telecopier or similar means to the directors or shareholders at their respective addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be deposited in the United States mail, postage prepaid. Any notice required or permitted to be given by telegram, telex, cable, telecopier, or similar means shall be deemed to be delivered and given at the time transmitted. Section 4.2 Waiver of Notice. Whenever by law, the articles of incorporation, or these bylaws, notice is required to be given to any shareholder, director, or committee member of the corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time notice should have been given, shall be equivalent to the giving of such notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 4.3 Telephone and Similar Meetings. Shareholders, directors, or committee members may participate in and hold a meeting by means of a conference telephone or similar communications equipment by means of which persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a person 5 participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE V OFFICERS Section 5.1 Officers. The corporation shall have a chief executive officer and a secretary and such other officers and assistant officers as the board may deem desirable to conduct the affairs of the corporation. The position of chairman of the board of directors shall be an officer of the corporation. Any two or more offices may be held by the same person. No officer need be a shareholder or a director. Section 5.2 Powers and Duties of Officers. The officers of the corporation shall have the powers and duties generally ascribed to the respective offices, and such additional authority or duty as may from time to time be established by the board of directors. Section 5.3 Removal and Resignation. Any officer appointed by the board of directors may be removed by the board of directors or shareholders whenever, in the judgment of the board of directors or shareholders, the best interests of the corporation will be served thereby. Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of receipt of such notice or at a later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5.4 Term and Vacancies. The officers of the corporation shall hold office until their successors are elected or appointed, or until their death, resignation, or removal from office. Any vacancy occurring in any office of the corporation by death, resignation, removal, or otherwise, may be filled by the board of directors. Section 5.5 Compensation. The salaries of all officers of the corporation shall be fixed by the board of directors. The board of directors shall have the power to enter into contracts for the employment and compensation of officers on such terms as the board of directors deems advisable. No officer shall be disqualified from receiving a salary or other compensation by reason of the fact that he or she is also a director of the corporation. ARTICLE VI CERTIFICATES AND SHAREHOLDERS Section 6.1 Certificates for Shares. The certificates for shares of stock of the Corporation shall be in such form as shall be approved by the board of directors in 6 conformity with law and the articles of incorporation. Every certificate for shares issued by the corporation must be signed by the President or a Vice President and the Secretary or an Assistant Secretary under the seal of the corporation. Any or all of the signatures on the face of the certificate may be facsimile. Such certificates shall bear a legend or legends in the form and containing the restrictions to be stated thereon by the Tennessee Business Corporation Act (the "Tennessee Code"), other provisions of law, the articles of incorporation or these bylaws. Certificates shall be consecutively numbered and shall be entered as they are issued. Each certificate shall state on the face thereof the holder's name, the number and class of shares, the par value of such shares, and such other matters as may be required by law, the articles of incorporation or these bylaws. Section 6.2 Lost, Stolen, or Destroyed Certificates. The board of directors, the executive committee, or the president of the corporation may direct a new certificate or certificates representing shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate or certificates to be lost, stolen, or destroyed. When authorizing such issue of a new certificate the board of directors, the executive committee or the president may require the owner of such lost, stolen, or destroyed certificate, or his or her legal representative, to advertise the same in such manner as it or he or she shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 6.3 Transfer of Shares. Shares of stock of the corporation shall be transferable only on the books of the corporation by the holder thereof in person or by the holder's duly authorized attorneys or legal representatives. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. Section 6.4 Registered Shareholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments, a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any person, whether or not it shall have actual or other notice thereof, except as otherwise provided by law. 7 ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.1 Dividends. Dividends upon the outstanding shares of the corporation, subject to the provisions of the applicable statutes and of the articles of incorporation, may be declared by the board of directors at any annual, regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the corporation, or in any combination thereof. Section 7.2 Reserves. There may be set aside out of any funds of the corporation available for dividends such sum or sums as the board of directors from time to time in their sole and absolute discretion think proper as a reserve to meet contingencies, or to equalize dividends, or to repair or maintain any property of the corporation, or for such other purpose as the board of directors shall think conducive to the interest of the corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. Section 7.3 Signature of Negotiable Instruments. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Section 7.4 Fiscal Year. The fiscal year of the corporation shall be fixed by the board of directors; provided, that if such fiscal year is not fixed by the board of directors it shall be the calendar year. Section 7.5 Books of the Corporation. The books of the corporation may be kept, subject to the provisions of the applicable statutes, within or outside of the State of Tennessee, at such place or places as may from time to time be designated by the board of directors or as the business of the corporation may require. Section 7.6 Seal. The seal, if any, of the corporation shall be in such form as may be approved from time to time by the board of directors. If the board of directors approves a seal, the affixation of such seal shall not be required to create a valid and binding obligation against the corporation. Section 7.7 Securities of Other Corporations. Unless otherwise ordered by the board of directors, the chief executive officer or the secretary of the corporation shall have full power and authority on behalf of the corporation to attend, to vote and to grant proxies to be used at any meeting of shareholders of such other corporation in which the corporation may hold stock. The board of directors may confer like powers upon any other person or persons. Section 7.8 Fixed Record Date. In order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing 8 without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock for the purpose of any other lawful action, the board of directors may fix, in advance, a record date which shall be not more than sixty 60 days before the date of such meeting, nor more than 60 days prior to any other action. Section 7.9 Amendment. The power to alter, amend, or repeal these bylaws or to adopt new bylaws is vested in the board of directors, except as provided in Section 3.5 above. Section 7.10 Right to Indemnification. (A) Each person (hereinafter an "indemnitee") who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she was a director, officer or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Code, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith, and such indemnification shall continue with respect to an indemnitee who has ceased to be a director, officer, employee or .agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in paragraph (B) hereof with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any such indemnitee only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Tennessee Code requires, an advancement of expenses incurred by an indemnitee shall be made only upon delivery to the corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this section or otherwise. 9 (B) If a claim under paragraph (A) of this section is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking the corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard of conduct set forth in the Tennessee Code. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Tennessee Code, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its shareholders) that the indemnitee has not met such applicable standard of conduct shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense of such suit. In any suit brought by the indemnitee to enforce a right of indemnification or to an advancement of expenses hereunder, or by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this section or otherwise shall be on the corporation. (C) The rights to indemnification and to the advancement of expenses conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the corporation's certificate of incorporation, by agreement, by vote of shareholders or by disinterested directors or otherwise. (D) The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Code. Section 7.11 Invalid Provisions. If any provision of these bylaws is held to be illegal, invalid, or unenforceable under present or future laws, such provision shall 10 be fully severable; these bylaws shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of these bylaws a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. Section 7.12 Headings. The headings used in these bylaws are for reference purposes only and do not affect in any way the meaning or interpretation of these bylaws. The above bylaws were duly adopted as the bylaws of the corporation effective as of the 4th day of April, 1995. 11 EX-3.12 11 g83903exv3w12.txt EX-3.12 ARTICLES OF INCORPORATION EXHIBIT 3.12 ARTICLES OF AMENDMENT TO THE CHARTER OF EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION The undersigned corporation hereby executes these Articles of Amendment for the purpose of amending its Charter: 1. The name of the corporation is East Carolina Psychiatric Services Corporation. 2. The following amendments to the Charter of the corporation were adopted by its shareholders on the 12th day of October, 1982, in the manner prescribed by law: "BE IT RESOLVED, that the Articles of Incorporation for this corporation be amended by deleting Article III from said Articles of Incorporation and substituting the following therefor: ARTICLE III The purposes for which the corporation is formed and the business to be carried on and the objectives to be affected by it are: 1. To engage in the general business of constructing, operating and maintaining a psychiatric care facility for the treatment of persons having emotional disorders. 2. To engage in any other lawful business or activity, including, but not limited to , constructing, developing, manufacturing, leasing, or otherwise caring for any type of structure, commodity, or livestock whatsoever; processing, developing, buying, selling, brokering, factoring, distributing, lending, leasing, borrowing, or investing in any type of property, whether real or personal, tangible or intangible, or other; promoting, financing, developing, operating, or otherwise in any manner participating in any business or enterprise of any kind or nature, either along or in conjunction with other persons, partnership, corporations, or other legal entities of any kind or nature; extracting and processing natural resources; transporting freight or passengers by land, sea or air; collecting and disseminating information or advertising through any media whatsoever; performing business services of any nature; entering into or serving in any type of management, investigative, promotional, protective, insurance, guarantorship, suretyship, fiduciary, or other lawful capacity or relationship for any persons or corporations or other legal entitles whatsoever. 3. (a) To create a private corporation to construct or to acquire a treatment center project or projects, and to operate the same; (b) to enable the financing of the construction of such project with the assistance of mortgage insurance under the National Housing Act; (c) to enter into, perform, and carry out contracts of any kind necessary to, or in connection with, or incidental to, the accomplishment of the purposes of the corporation, including, expressly, any contract or contracts with the Secretary of Housing and Urban Development which may be desirable or necessary to comply with the requirements of the National Housing Act, as amended, and the Regulations of the Secretary thereunder, relating to the regulation or restriction of mortgagors as to rents, sales, charges, capital structure, rate of return and methods of operation; (d) to acquire any property, real or personal, in fee or under lease, or any rights therein or appurtenant thereto, necessary for the construction and operation of such project; and (e) to borrow money, and to issue evidence of indebtedness, and to secure the same by mortgage, deed of trust, pledge, or other lien, in furtherance of any or all of the objects of its business in connection with said project. AND, BE IT FURTHER RESOLVED that an Article III-A be added to the Articles of Incorporation as follows: ARTICLE III-A 1. The corporation shall have the power to and perform all things whatsoever set out in Paragraph 3 of Article III above, and necessary or incidental to the accomplishment of said purposes. 2. The corporation, specifically and particularly, shall have the power and authority to enter into a Regulatory Agreement setting out the requirements of the Secretary of Housing and Urban Development." 3. The number of shares of the corporation outstanding at the time of such adoption was 2; and the number of shares entitled to vote thereon was 2. 4. The number of shares voted for such amendment was 2, and the number of shares voted against such amendment was 0. 5. The amendment herein effected does not give rise to dissenter's rights to payment for reason that the only effect of such amendment is to amend the stated purposes of the corporation and to state specific powers of the corporation. IN WITNESS WHEREOF, these Articles are signed by the President and Secretary of the corporation, this 12th day of October, 1982. EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION By: /s/ Jacob R. Fishman -------------------------------- Jacob R. Fishman, President ATTEST: /s/ M. J. Nabit - --------------------------- M. J. Nabit, Secretary NORTH CAROLINA CUMBERLAND COUNTY I, Judith A. Simmons, a Notary Public, herein certify that on the 13th day of October, 1982, personally appeared before me JACOB R. FISHMAN and M.J. NABIT, each of whom, being by me first duly sworn, declared that he signed the foregoing document in the capacity indicated and the statements therein contained are true. /s/ Judith A. Simmons -------------------------------- My Commission Expires: 08/03/87 ARTICLES OF INCORPORATION OF EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION I, the undersigned natural person of the age of eighteen years or more, do make and acknowledge these Articles of Incorporation for the purpose of forming a business corporation under the laws of the State of North Carolina. ARTICLE I The name of the corporation shall be: EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION. ARTICLE II The period of duration of the corporation is perpetual. ARTICLE III The purposes for which the corporation is organized are: (a) To engage in the general business of constructing, operating and maintaining a psychiatric care facility for the treatment of persons having emotional disorders. (b) To engage in any other lawful business or activity, including, but not limited to, constructing, developing, manufacturing, leasing, or otherwise caring for any type of structure, commodity, or livestock whatsoever; processing, developing, buying, selling, brokering, factoring, distributing, lending, leasing, borrowing, or investing in any type of property, whether real or personal, tangible or intangible, or other; promoting, financing, developing, operating, or otherwise in any manner participating in any business or enterprise of any kind or nature, either alone or in conjunction with other persons, partnerships, corporations, or other legal entities of any kind or nature; extracting and processing natural resources; transporting freight or passengers by land, sea or air; collecting and disseminating information or advertising through any media whatsoever; performing business services or any nature; entering into or serving in any type of management, investigative, promotional, protective, insurance, guarantorship, suretyship, fiduciary, or other lawful capacity or relationship for any persons or corporations or other legal entities whatsoever. ARTICLE IV The corporation shall have authority to issue ten-thousand (10,000) shares of stock with a par value of TEN DOLLARS ($10.00) each. ARTICLE V The minimum amount of consideration to be received by the corporation for its shares before it shall commence business is TEN DOLLARS ($10.00) in cash or property of equivalent value. ARTICLE VI The address of the initial Registered Office of the corporation in the State of North Carolina is 116 North Cool Spring Street, Fayetteville, Cumberland County, North Carolina; and the name of the initial Registered Agent at such address is: Ervin I. Baer. ARTICLE VII The number of Directors constituting the initial Board of Directors shall be two (2). The names and addresses of the persons who are to serve as Directors until the first meeting of shareholders or until their successors shall be elected and qualified are:

ARTICLE VIII The name and address of the Incorporator is: M. J. Nabit 3425 Melrose Road Fayetteville, NC 28305 IN WITNESS WHEREOF, I have hereunto set my hand and seal, this 26th day of June, 1981. /s/ M.J. Nabit ---------------------------------- M.J. Nabit EX-3.13 12 g83903exv3w13.txt EX-3.13 RESTATED BYLAWS EXHIBIT 3.13 RESTATED BYLAWS OF EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION ARTICLE I PURPOSE East Carolina Psychiatric Services Corporation (the "Corporation") will maintain a role in meeting the health needs of area residents through its facilities including "Brynn Marr Hospital" (the "Hospital"). The Corporation's commitments are: to provide quality psychiatric care and substance abuse treatment; to provide modern facilities and staff with motivated mental health professionals; to create appropriate environments to facilitate psychiatric and substance abuse treatment to individuals in need of psychiatric and substance abuse care, without respect to age, sex, national origin, race, color, handicap status, political or religious beliefs; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through appropriate activity developed at professional and community levels. The Corporation is prepared to work in cooperation with other appropriate health agencies and institutions in an effort to improve existing health services in the community and to design, plan and develop innovative systems of health care management in the community. These activities shall be conducted with an overriding concern for the patient and the recognition of the patient's dignity as a human being. The Corporation will encourage the community to participate in the planning and development of program policies for the Hospital. ARTICLE II OFFICES The principal office of the Corporation shall be located in New Orleans, Louisiana. The Corporation shall continuously maintain in the State of North Carolina a registered office and a registered agent, and may have such other offices as the Board may determine from time to time. All dividends shall be deemed to be paid in the State of North Carolina. The Corporation shall have such other offices, either within or without the State of North Carolina, as the Board of Directors may designate or as the business of the corporation may require from time to time. ARTICLE III SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders will be held at such time and on such date as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at the request of the shareholders of not less than ten percent (10%) of all the outstanding shares of the Corporation entitled to vote at the meeting. 2 SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the state of North Carolina to conduct any annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of North Carolina, to hold such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United states mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon paid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any 3 case, thirty (30) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for at least fifteen (15) days immediately preceding such meeting. In lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than thirty (30) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least two (2) days before notice of the meeting of shareholders is given, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period beginning two (2) business days after notice of the meeting is 4 given for which the list was prepared, shall be kept on file at the place where the meeting is to be held and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence of the identities of the shareholders entitled to examine such list or transfer books or to vote at any meeting of the shareholders. SECTION 7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless a time of expiration is otherwise 5 specified in a proxy, no proxy shall be valid if dated more than eleven (11) months prior to the date of the meeting. SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Such shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. 6 Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any time. SECTION 11. Action Without a Meeting. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action to be taken shall be signed by all of the shareholders entitled to vote thereon with respect to the subject matter thereof. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Articles of Incorporation or by these Bylaws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws, and as may be provided for the Board of Directors by the laws of the State of North Carolina. The Board of Directors of the Corporation shall report to the Board of Directors of Ramsay Health Care, Inc. The Board of Directors shall have the authority and responsibility for carrying out the purposes of the Corporation. Included in this responsibility shall be 7 the active participation by members of the Board of Directors in activities necessary for any licensures, approvals, or accreditation of the Corporation's health care facilities and related services. The Board of Directors shall appoint a Consulting Board which shall have the authority to have its own bylaws and shall be responsible for the operations of the Hospital, for the appointment of Medical Staff of the Hospital, and for the quality of care rendered in the Hospital. SECTION 2. Number, Term and Qualification. The number of directors shall be fixed by the Board of Directors and shall include two ex officio members as described below. Directors need not be residents of the State of North Carolina nor shareholders of the Corporation. The directors, other than the ex officio directors, shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may serve provided the director continues to meet other qualifications set forth in this Article IV, Section 2. 8 The number of directors may not be increased or decreased by more than thirty percent (30%) without the approval of the majority of shareholders entitled to vote for the election of directors. The Board of Directors of this Corporation shall include two ex officio members: the President of the Corporation, who shall be entitled to vote as a director, and the President of the Medical Staff, who shall not have any voting rights as a director. The President of the Medical Staff shall be entitled to attend and have a voice at ail meeting of the Board of Directors. SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by the reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders or until his successor is elected and qualified. SECTION 4. Compensation. The Board of Directors shall have the authority to fix the compensation of directors. SECTION 5. Standard of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. 9 SECTION 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 8. Quorum and Voting. A majority of the number of directors then serving shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 9. Conflicts of Interest. (a) Interested Director Transactions. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes approves or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (1) the fact of such relationship or interest is disclosed or known to 10 the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (2) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (3) the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. (b) Written Conflict of Interest Policy. The Board of Directors shall implement from time to time a written conflict of interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest. ARTICLE V MEETINGS SECTION 1. Place of Meeting of the Board of Directors. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of North Carolina. SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the 11 Corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; or written request of two (2) directors. Special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting is announced at the time of adjournment, to the other directors. 12 Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's meeting shall be kept and shall include at least the following: (A) The date of the meeting; (B) The name of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. SECTION 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board of Directors or of the respective committee. Such consent shall have the same effect as a unanimous vote. 13 ARTICLE VI COMMITTEES The Board of Directors shall establish such committees as may be necessary to effect the discharge of its responsibilities, each such committee to consist of two (2) or more of the directors. The Board of Directors may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of the committee, the members of the Committee who are present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member if an alternate member or members has not been selected or is absent from the meeting. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all authority granted to it by the Board of Directors of except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the Bylaws; 14 (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State of the State of North Carolina. Written minutes shall be kept of all meetings of committees of the Board of Directors and shall include the information specified in Article V, Section 2 hereof. 15 ARTICLE VII OFFICERS SECTION I. Number. The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. One person may hold more than one office, provided that no person may act in more than one capacity where the action of two or more officers is required. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. 16 SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall, in general, supervise and manage all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. The President shall not sell, transfer, incumber, or otherwise dispose of any assets of the Corporation, the value of which exceeds $50,000.00, without the express authorization of such transaction from the Board of Directors. SECTION 6. Vice-President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice-President shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all 17 the restrictions upon the President. The Vice-President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is necessary and duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 8. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; (b) give and receive receipt for monies due and payable to the Corporation from any source whatsoever; (c) deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be 18 selected in accordance with the provisions of Article IX of these Bylaws; and (d) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 9. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE VIII ADMINISTRATION SECTION 1. Chief Administrative Officer. The Consulting Board shall select and employ a competent, experienced Chief Administrative officer, to be designated from time to time as the Administrator of the Hospital. ARTICLE IX CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidence of indebtedness issued in the name of the 19 Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. The shares of the Corporation shall not be transferable until such time as the owner thereof shall have given the Corporation 20 fifteen (15) days in which to purchase said stock for the same amount as any bona fide offer. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner and holder thereof for all purposes. ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of July and end on the 30th day of June of each year. ARTICLE XII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. 21 ARTICLE XIII SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have subscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". ARTICLE XIV WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XV AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by a vote of the shareholders representing a majority of all the shares issued and outstanding, at any annual shareholders' meeting or at any special shareholders' meeting when the proposed amendment has been set out in the notice of such meeting. These Bylaws shall be reviewed by the Board of Directors at least every two (2) years. 22 ARTICLE XVI INDEMNIFICATION The Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, and may procure insurance on behalf of its officers, directors, employees, and agents to the full extent permitted by Section 55-8-51 of the North Carolina 1989 Business Corporation Act, as amended. The undersigned, _____________, Secretary of East Carolina Psychiatric Services Corporation, does hereby certify that the foregoing Restated Bylaws of East Carolina Psychiatric Services Corporation were adopted on the ___ day of _______, 1992. ___________________________ ___________________________, Secretary 23 EX-3.14 13 g83903exv3w14.txt EX-3.14 ARTICLES OF INCORPORATION EXHIBIT 3.14 ARTICLES OF INCORPORATION OF GREAT PLAINS HOSPITAL, INC. (1) The name of the corporation is: GREAT PLAINS HOSPITAL, INC. (2) The period of duration of the corporation shall be perpetual. (3) The purposes for which the corporation is organized are: (a) To own, operate, and manage hospitals and related health care facilities. (b) To include the transaction of any or all business for which corporations may be incorporated under the laws of the State of Missouri. (4) The aggregate number of shares which the corporation shall have authority to issue is One Hundred (100) all of said shares to be common stock, par value One Dollar ($1.00) per share. (5) The corporation shall have one class of stock which is common stock. Stockholders of the corporation shall have no pre-emptive rights. (6) The number of directors shall be fixed by, or in the manner provided in, the by-laws, and any change in the number of directors shall be reported to the Secretary of State of Missouri within thirty (30) calendar days of such change. (7) The location and mailing address of the initial registered office, and the name of the initial registered agent at such address of the corporation is: C T Corporation System, 314 North Broadway, St. Louis, Missouri 63102. (8) The number of directors constituting the initial board of directors is three (3) and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders, or until their successors be elected and qualified, are:

(9) The name and address of the incorporator is:

/s/ Charles A. Speir -------------------- Charles A. Speir Incorporator 2 EX-3.15 14 g83903exv3w15.txt EX-3.15 RESTATED BYLAWS EXHIBIT 3.15 RESTATED BYLAWS OF GREAT PLAINS HOSPITAL, INC. ARTICLE I PURPOSE Great Plains Hospital, Inc. (the "Corporation") will maintain a role in meeting the health needs of area residents through its facilities including "Heartland Hospital and Residential Treatment Center" (the "Hospital and RTC"). The Corporation's commitments are to provide quality psychiatric care and substance abuse treatment; to provide modern facilities and staff with motivated mental health professionals; to create appropriate environments to facilitate psychiatric and substance abuse treatment to individuals in need of psychiatric and substance abuse care, without respect to age, sex, national origin, race, color, handicap status, political or religious beliefs; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through appropriate activity developed at professional and community levels. The Corporation is prepared to work in cooperation with other appropriate health agencies and Institutions in an effort to improve existing health services in the community and to design, plan and develop innovative systems of health care management in the community. These activities shall be conducted with an overriding concern for the patient and the recognition of the patient's dignity as a human being. The Corporation will encourage the community to participate in the planning and development of program policies for the Hospital and RTC. ARTICLE II OFFICES The principal office of the Corporation shall be located in New Orleans, Louisiana. The Corporation shall continuously maintain in the State of Missouri a registered office and a registered agent, and may have such other offices as the Board may determine from time to time. All dividends shall be deemed to be paid in the State of Missouri. The Corporation shall have such other offices, either within or without the State of Missouri, as the Board of Directors may designate or as the business of the Corporation may require from time to time. ARTICLE III SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders will be held at such time and on such date as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at 2 the request of the shareholders of not less than ten percent (10%) of all the outstanding shares of the Corporation entitled to vote at the meeting. SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Missouri, to conduct any annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Missouri, to hold such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon paid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for 3 any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, thirty (30) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for at least fifteen (15) days immediately preceding such meeting. In lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than thirty (30) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting; or any adjournment thereof, arranged in alphabetical order, with the 4 address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting shall be kept on file at the place where the meeting is to be held and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence of the identities of the shareholders entitled to examine such list or transfer books or to vote at any meeting of the shareholders. SECTION 7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. Unless a time of expiration is otherwise 5 specified in a proxy, no proxy shall be valid if dated more than eleven (11) months prior to the date of the meeting. SECTION 9. Voting of Shares; Cumulative Voting Prohibited. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. In the election of directors, no shareholder shall have the right to multiply the number of votes to which the shareholder is entitled, by the number of directors to be elected, or to cast the whole number of votes for one candidate or distribute them among two or more candidates. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another Corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Such shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. 6 A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any time. SECTION 11. Action Without a Meeting. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing setting forth the action to be taken shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Articles of Incorporation or by these Bylaws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws, and as may be provided for the Board of Directors by the laws of the State of Missouri. The Board of Directors of the Corporation shall report to the Board of Directors of Ramsay Health Care, Inc. 7 The Board of Directors shall have the authority and responsibility for carrying out the purposes of the Corporation. Included in this responsibility shall be the active participation by members of the Board of Directors in activities necessary for any licensures, approvals, or accreditation of the Corporation's health care facilities and related services. The Board of Directors shall appoint a Consulting Board which shall have the authority to have its own bylaws and shall be responsible for the operations of the Hospital and RTC, for the appointment of Medical Staff of the Hospital and RTC, and for the quality of care rendered in the Hospital and RTC. SECTION 2. Number, Term and Qualification. The number of directors shall be fixed by the Board of Directors and shall include two ex officio members as described below. Directors need not be residents of the state of Missouri nor shareholders of the Corporation. The directors, other than the ex officio directors, shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their interest in the Hospital and RTC, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may 8 serve provided the director continues to meet other qualifications set forth in this Article IV, Section 2. The number of directors may not be increased or decreased by more than thirty percent (30%) without the approval of the majority of shareholders entitled to vote for the election of directors. The Board of Directors of this Corporation shall include two ex officio members: the President of the Corporation, who shall be entitled to vote as a director, and a selected representative of the Medical Staff, who shall not have any voting rights as a director and who shall be entitled to attend and have a voice at all meeting of the Board of Directors. SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by the reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors, A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders or until his successor is elected and qualified. SECTION 4. Compensation. The Board of Directors shall have the authority to fix the compensation of directors. SECTION 5. Standard of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably 9 believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. SECTION 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 8. Quorum and Voting. A majority of the number of directors then serving shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 9. Conflicts of Interest. (a) Interested Director Transactions. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves 10 or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (1) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (2) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (3) the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. (b) Written Conflict of Interest Policy. The Board of Directors shall implement from time to time a written conflict of interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest. ARTICLE V MEETINGS SECTION 1. Place of Meeting of the Board of Directors. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of Missouri. SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be 11 determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the Corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; or written request of two (2) directors. Special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at 12 the time of the adjournment and, unless the time and place of the adjourned meeting is announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's meeting shall be kept and shall include at least the following: (A) The date of the meeting; (B) The name of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. SECTION 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board of Directors or of the respective committee. Such consent shall have the same effect as a unanimous vote. 13 ARTICLE VI COMMITTEES The Board of Directors shall establish such committees as may be necessary to effect the discharge of its responsibilities, each such committee to consist of two (2) or more of the directors. The Board of Directors may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of the committee, the members of the Committee who are present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member if an alternate member or members has not been selected or is absent from the meeting. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all authority granted to it by the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the Bylaws; 14 (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State of the State of Missouri. Written minutes shall be kept of all meetings of committees of the Board of Directors and shall include the information specified in Article V, Section 2 hereof. 15 ARTICLE VII OFFICERS SECTION 1. Number. The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. One person may hold more than one office. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. 16 SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall, in general, supervise and manage all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. The President shall not sell, transfer, incumber, or otherwise dispose of any assets of the Corporation, the value of which exceeds $50,000.00, without the express authorization of such transaction from the Board of Directors. SECTION 6. Vice-President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice-president shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Vice-President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. 17 SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is necessary and duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 8. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; (b) give and receive receipt for monies due and payable to the Corporation from any source whatsoever; (c) deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article IX of these Bylaws; and (d) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. 18 SECTION 9. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE VIII ADMINISTRATION SECTION 1. Chief Administrative Officer. The Consulting Board shall select and employ a competent; experienced Chief Administrative Officer, to be designated from time to time as the Administrator of the Hospital and RTC. ARTICLE IX CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidence of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 19 SECTION 4. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or, by such other officers authorized by law and by the Board of Directors so to do. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be canceled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. The shares of the Corporation shall not be transferable until such time as the owner thereof shall have given the Corporation fifteen (15) days in which to purchase said stock for the same amount as any bona fide offer. 20 Transfer of shares of the corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner and holder thereof for all purposes. ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of July and end on the 30th day of June of each year. ARTICLE XII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE XIII SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have subscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". 21 ARTICLE XIV WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XV AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by a vote of the shareholders representing a majority of all the shares issued and outstanding, at any annual shareholders' meeting or at any special shareholders' meeting when the proposed amendment has been set out in the notice of such meeting. These Bylaws shall be reviewed by the Board of Directors at least every two (2) years. ARTICLE XVI INDEMNIFICATION The Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, and may procure insurance on behalf of its officers, directors, employees, and agents to the full extent permitted by Section 351.355 of the Missouri General and Business Corporation Law, as amended. 22 EX-3.16 15 g83903exv3w16.txt EX-3.16 ARTICLES OF INCORPORATION EXHIBIT 3.16 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF GULF COAST TREATMENT CENTER, INC. Pursuant to Sections 607.1001, 607.1003, 607.1006, and 607.1009 of the Business Corporation Act of the State of Florida (the "Act"), the undersigned, being the Vice President of Gulf Coast Treatment Center, Inc., a Florida corporation (the "Corporation"), does hereby execute these Articles of Amendment to the Articles of Incorporation, on behalf of the Corporation, and certifies as follows: 1. The name of the corporation is Gulf Coast Treatment Center, Inc. (the "Corporation"). 2. Article IV of the Corporation's Articles of Incorporation is hereby deleted in its entirety, with the following substituted in its place: The aggregate number of shares of Common Stock, jar value $10.00 per share, which the Corporation has authorized to issue is ten (10) shares. 3. Upon the effectiveness of the foregoing amendment, each ten (10) outstanding Common Shares of the Corporation, shall be combined into one (1) Common Share of the Corporation. Outstanding Common Shares which would otherwise be converted into a fractional Common Share will be cancelled, with the holders of such fractional Common Share being entitled to receive a cash payment equal to such share's fair value as determined in the good faith judgment of the Corporation's Board of Directors. 4. The date of adoption of the unanimous written consent of the Board of Directors approving the foregoing amendment is July 10, 2001. 5. The foregoing amendment was required to be approved by a majority of the shareholders of the Corporation and the number of votes cast for the amendment by the shareholders was sufficient for approval in accordance with the Business Corporation Act of the State of Florida. 6. The effective time of the amendment to the Articles of Incorporation of the Corporation set forth in these Articles of Amendment shall be 12:01 A.M., July 10, 2001. IN WITNESS WHEREOF, the undersigned has caused its corporate seal to be affixed and these Articles of Amendment of its Articles of Incorporation to be executed as of the 10th day of July, 2001. GULF COAST TREATMENT CENTER, INC. By: /s/ Marcio C. Cabrera ----------------------------------- Name: Marcio C. Cabrera Title: Vice President and Secretary ATTEST: /s/ Jorge Rico - ------------------------------ Name: Jorge Rico Title: Vice President ARTICLES OF INCORPORATION OF GULF COAST TREATMENT CENTER, INC. ARTICLE I - NAME The name of this corporation is GULF COAST TREATMENT CENTER, INC. ARTICLE II - DURATION This corporation shall exist perpetually, commencing upon the filing of the Articles of Incorporation by the Department of State. ARTICLE III - PURPOSE This corporation is organized for the purpose of engaging in the development and operation of a free standing treatment center for the treatment of adolescent adult and child psychiatry and treatment of alcohol and drug abuse, and for the purpose of transacting any or all lawful business not inconsistent with the laws of the State of Florida. ARTICLE IV - CAPITAL STOCK This corporation is authorized to issue one hundred (100) shares of Ten Dollar ($10.00) par value common stock. ARTICLE V - PREEMPTIVE RIGHTS Every shareholder, upon the sale for cash of any new stock of this corporation of the same kind, class, or series as that which he already holds, shall have the right to purchase his pro rata share thereof (as nearly as may be done without issuance of fractional shares) at the price at which it is offered to others. ARTICLE VI - INITIAL REGISTERED OFFICE AND AGENT The street address of the initial registered office of this corporation is 92 Eglin Parkway, Fort Walton Beach, Florida 32548, and the initial registered agent of this corporation at that address is C. LeDON ANCHORS. ARTICLE VII - INITIAL BOARD OF DIRECTORS This corporation shall have two directors initially. The number of directors may be either increased or diminished from time to time by the By-laws but shall never be less than two. The name and address of the initial directors of this corporation are: Jacob R. Fishman, M.D. 3425 Melrose Road Fayetteville, North Carolina 28304 Merwin J. Nabit 3425 Melrose Road Fayetteville, North Carolina 28304 ARTICLE VIII - INCORPORATOR The name and address of the persons signing these articles are: Jacob R. Fishman, M.D. 3425 Melrose Road Fayetteville, North Carolina 28304 Merwin J. Nabit 3425 Melrose Road Fayetteville, North Carolina 28304 ARTICLE IX - BY-LAWS The power to adopt, alter, amend, or repeal by-laws shall be vested in the Board of Directors and the shareholders. ARTICLE X It is the intent of this charter that the Directors may sell the capital stock of this corporation in accordance with the conditions of Sections 1242-1244, inclusive, of the Internal Revenue Code. IN WITNESS WHEREOF, the undersigned subscribers have executed these Articles of Incorporation this 30th day of March, 1982. /s/ Jacob R. Fishman, M.D. -------------------------- JACOB R. FISHMAN, M.D. /s/ Merwin J. Nabit -------------------------- MERWIN J. NABIT EX-3.17 16 g83903exv3w17.txt EX-3.17 BYLAWS EXHIBIT 3.17 GULF COAST TREATMENT CENTER, INC. UNANIMOUS CONSENT OF STOCKHOLDERS PURSUANT TO SECTION 607.394 OF THE GENERAL CORPORATION ACT OF THE STATE OF FLORIDA The undersigned, being all the stockholders of GULF COAST TREATMENT CENTER, INC., a Florida corporation (the "Corporation"), do hereby consent to, authorize, approve and adopt the resolutions attached hereto as Exhibit A. IN WITNESS WHEREOF, the undersigned have executed this Consent as of this 8th day of December, 1987. HEALTHCARE SERVICES OF AMERICA, INC. By /s/ Joanne E. Boyd ------------------------------------------- Joanne E. Boyd Vice President - Legal and Secretary /s/ Todd W. Estroff ------------------------------------------- Todd W. Estroff EXHIBIT A RESOLVED, that the present Directors of the Corporation be, and they hereby are, removed; and it is FURTHER RESOLVED, that the By-laws of the Corporation are hereby amended by deleting the first paragraph of Section 2 of Article IV thereof in its present form and substituting therefor a new first paragraph of Section 2 of Article IV therein in the following form: "Section 2. Number, Term and Qualification. The number of Directors which shall constitute the whole Board shall be not less than one (1) nor more than eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of stockholders of the Corporation, except as provided in Section 3 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified." ; and it is FURTHER RESOLVED, that, effective immediately, Robert E. Galloway be, and he hereby is, elected to serve as the sole Director of the Corporation until the next annual meeting of the stockholders of the Corporation or until his successor is elected and shall have duly qualified. UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS OF GULF COAST TREATMENT CENTER, INC. The undersigned, constituting all of the members of the Board of Directors (the "Board") of Gulf Coast Treatment Center, Inc. (the "Company") a Florida corporation, acting pursuant to Section 607.134 of the Florida Corporation Code, hereby adopt the following resolutions as the action of the Board by unanimous consent in lieu of a meeting and direct that this written consent be placed in the minutes of the proceedings of the Board: RESOLVED that Article VII, Section 1 of the Bylaws of the Company shall be and the same is hereby amended to read as follows: "Section 1. Officers of the Corporation. The board of directors at the regular annual meeting thereof shall elect a Chairman of the Board and a President; and, if it so chooses, the board of directors may elect one or more Vice Presidents, with such designation, if any, as the board of directors may determine, and such other officers, including, but not limited to, a Treasurer, a Secretary, and one or more Assistant Secretaries, as the board of directors may choose."; and PROVIDED FURTHER that the following persons shall be, and they are each hereby, appointed and elected to serve in the offices of the Company set forth below opposite their names at the pleasure of the Board until the meeting of the Board following the next annual meeting of the shareholders of the Company or until the successor of each such officer has been elected and qualified. Charles A. Speir Chairman of the Board Thomas M. Rodgers, Jr. President Dated and effective this 1st day of November, 1986. /s/ Charles A. Speir ------------------------------------------ CHARLES A. SPEIR /s/ Thomas M. Rodgers, Jr. ------------------------------------------ THOMAS M. RODGERS, JR. /s/ Ronald M. Norris, M.D. ------------------------------------------ RONALD M. NORRIS, M.D. /s/ Arthur P. Bolton, III ------------------------------------------ ARTHUR P. BOLTON, III ACTION BY WRITTEN CONSENT OF THE DIRECTORS OF GULF COAST TREATMENT CENTER, INC. IN LIEU OF A MEETING The undersigned, being all of the directors of Gulf Coast Treatment Center, Inc., a Florida corporation (herein called "the corporation"), acting by written consent in lieu of a meeting, do hereby adopt the following resolution: RESOLVED, that Section 2 of Article VII of the bylaws of the corporation shall be amended to add a new paragraph at the end thereof to read as follows: "The chairman of the board shall, subject to the direction of the board of directors, supervise and control the business and affairs of the corporation. He shall, when present, preside at all meetings of the shareholders and of the board of directors. He may sign certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments on behalf of the corporation, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. In general. he shall perform all duties incident to the office of chairman of the board and such other duties as may be prescribed by the board of directors." Dated as of the 1st day of November, 1986. /s/ Charles A. Speir ------------------------------------------ CHARLES A. SPEIR /s/ Thomas M. Rodgers, Jr. ------------------------------------------ THOMAS M. RODGERS, JR. /s/ Ronald M. Norris, M.D. ------------------------------------------ RONALD M. NORRIS, M.D. /s/ Arthur P. Bolton, III ------------------------------------------ ARTHUR P. BOLTON, III RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF GULF COAST TREATMENT CENTER, INC. ON MARCH 26, 1987 RESOLUTION BE IT RESOLVED by the Board of Directors of Gulf Coast Treatment Center, Inc. (the "Corporation") that the Bylaws of the Corporation shall be and they are hereby amended by adding a new Article XV which shall read as follows: ARTICLE XV QUALITY ASSURANCE ACTIVITIES The Board of Directors shall require the medical staff and administration of the Hospital to establish a Hospital-wide quality assurance program in which Hospital departments and medical staff conduct quality assurance activities and make quarterly reports thereon to the Board of Directors. UNANIMOUS WRITTEN CONSENT IN LIEU OF A MEETING BY THE BOARD OF DIRECTORS OF GULF COAST TREATMENT CENTER, INC, Pursuant to the provisions of Section 607.134 of the Florida Corporation Code, the following action is taken by the Board of Directors of Gulf Coast Treatment Center, Inc., a Florida corporation (the "Corporation"), by unanimous written consent as if a meeting of the Board of Directors had been properly called pursuant to notice and all directors were present and voting in favor of such action. 1. In order to amend Articles IV, V and IV of the By-laws of the Corporation, the following resolutions are adopted: BE IT RESOLVED, That the first paragraph of Article IV, Section 2 of the By-laws of the Corporation be, and they hereby are, amended so that the same shall read as Exhibit A, which is attached hereto and incorporated with this unanimous consent; and, BE IT FURTHER RESOLVED, That Article V, Section 2 of the By-laws of the Corporation be, and they hereby are, amended so that the same shall read as Exhibit B, which is attached hereto and incorporated with this unanimous consent; and, BE IT FURTHER RESOLVED, That Article VI of the Bylaws of the Corporation be, and they hereby are, amended so that the same shall read as Exhibit C, which is attached hereto and incorporated with this unanimous consent. 2. In order to approve the quality assurance plan for HSA Gulf Coast Hospital, the following resolution was adopted: RESOLVED, That the quality assurance plan of HSA Gulf Coast Hospital be approved as set out in Exhibit D which is attached hereto and incorporated in this unanimous consent. 3. In order to approve the utilization review plan for HSA Gulf Coast Hospital, the following resolution was adopted: RESOLVED, That the utilization review plan of HSA Gulf Coast Hospital be approved as set out in Exhibit E attached hereto and incorporated in this unanimous consent. 4. In order to approve appointments to the active medical staff of HSA Gulf Coast Hospital, the following resolution was adopted: RESOLVED, By the Board of Directors of the Corporation, upon review of the attached applications for the active medical staff, that the following named individuals be, and they hereby are, appointed to the active medical staff of HSA Gulf Coast Hospital, in the specialties set forth opposite their respective names: Frank E. Gill, M.D., General Psychiatry George A. Michas, M.D., General/Adolescent Psychiatry Eugene R. Valentine, M.D., General/Child/Adolescent Psychiatry Rajadorai Calnaido, M.D., General/Adolescent Psychiatry Alvin Edward Neumeyer, M.D., General/Child Psychiatry 5. In order to approve the recommendations for appointments to the consulting medical staff of HSA Gulf Coast Hospital, the following resolution was adopted: RESOLVED, By the Board of Directors of the Corporation, upon review of the attached applications for the consulting medical staff, that the following named individuals be, and they hereby are, appointed to the active medical staff of HSA Gulf Coast Hospital, in the specialties set forth opposite their respective names: Gary Wayne Watson, M.D., Internal Medicine/Infectious Diseases Robert J. Saxer, M.D., Pediatrics/Allergy Michael L, Shawbitz, M.D., Neurology/EEG Readings/Interpretation Roger Riggenbach, M.D., EKG Readings/Interpretations/Internal Medicine Lee David Ettinger, M.D., Pulmonary/Internal Medicine William W. Thompson, M.D., Pediatrics/Adult and Child Allergy James E. Mills, M.D., Obstetrics/Gynecology Earl B. Carr, M.D., Pediatric Medicine James Paul Wilson, M.D., EKG Readings/Interpretations/Internal Medicine/ Diabetology Mack Dana Jones, M.D., EEG Readings/Interpretations/Neurology Charles Barniv, M.D., Physical Exams/Treatment of Non-Psychiatric Problems William E. Haik, M.D., Internal Medicine Eleanor Ann McCain, M.D., Physical Exams/Treatment of Non-Psychiatric Problems Douglas W. Rigby, M.D., Pediatric/Medical Arthur H. Lester, M.D., Obstetrics/Gynecology Roy L. Clemens, M.D., Clinical Pathology Rodney E. Powell, M.D., Cardiology/EEG Readings/Interpretations Dated this 24th day of January, 1986. /s/ Charles A. Speir ------------------------------------------- CHARLES A. SPEIR /s/ Kerry G. Teel ------------------------------------------- KERRY G. TEEL, Director /s/ Carl M. Holden, Jr. ------------------------------------------- CARL M. HOLDEN, JR., Director /s/ Arthur P. Bolton, III ------------------------------------------- ARTHUR P. BOLTON, III /s/ C. Christian Plasberg ------------------------------------------- C. CHRISTIAN PLASBERG, Director EXHIBIT A ARTICLE IV GOVERNING BODY - THE BOARD OF DIRECTORS SECTION 2. Number, Term and Qualification. The number of directors shall be at least four (4). Directors need not be residents of the State of Florida nor shareholders of the Corporation. The directors shall be elected by the shareholders at the annual nesting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. EXHIBIT B ARTICLE V MEETINGS OF THE BOARD OF DIRECTORS SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the Corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; on written request of two (2) directors, special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's makings shall be kept and shall include at least the following: (A) The date of the meeting; (B) The names of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. EXHIBIT C ARTICLE VI COMMITTEES The Board shall establish such committees, including an executive committee, as may be necessary to effect the discharge of its responsibilities, each such committee to consist of one (1) or more of the directors. The Board may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of a committee, the members thereof present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of such absent or disqualified member. Members of the Medical Staff may be included on committees that deliberate issues affecting Medical Staff responsibilities. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all of the authority of the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the By-Laws; (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Beard of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State. Written minutes shall be kept of all meetings of committees of the Board of Directors. GULF COAST TREATMENT CENTER, INC. BY-LAWS TABLE OF CONTENTS

BY-LAWS OF GULF COAST TREATMENT CENTER, INC. ARTICLE I PURPOSE Gulf Coast Treatment Center, Inc. (the "Corporation") will maintain an active role in meeting the health needs of the Fort Walton Beach, Florida, area residents through its facility "HSA Gulf Coast Hospital" (the "Hospital"). The Corporation's commitment is: to provide the highest level of child and adolescent psychiatric care possible within the limits of current psychiatric treatment, knowledge and technology; to provide a modern facility and staff with highly-motivated mental health professionals; to create an environment to facilitate state-of-the-art psychiatric treatment, economically and cost effectively, to all individuals in need of child and adolescent psychiatric care, without respect to age, national origin, race, color, handicap status, political or religious beliefs; to focus the total resource allocation of specialized services towards the achievement of one specific treatment goal; and to contribute to the overall knowledge and understanding of the causes and effects of child and adolescent psychiatric pathology on individual patients as well as their significance to others, through research and educational activity developed at professional and community levels. The Corporation is prepared to work jointly with other appropriate health agencies and institutions in an effort to 1 improve existing health services and to design, plan and develop innovative systems of health care management. All these activities shall be conducted with an overriding concern for the patient and above all the recognition of the patient's dignity as a human being. The community is encouraged to participate in the planning and development of program policies for the Hospital. ARTICLE II DEFINITIONS 1. The term "Medical Staff" means all physicians holding unlimited licenses to practice medicine and other duly licensed individuals permitted by law and the Hospital to provide patient care services independently in the Hospital. 2. The term "Governing Body" means the Board of Directors of the Corporation. 3. The term "Hospital" is HSA Gulf Coast Hospital. 4. The term "Executive Committee" is the Executive Committee of the Board of Directors of the Corporation. 5. The "Chief Administrative Officer of the Hospital" is appointed by the Governing Body to act in its behalf in the overall management of the Hospital, and shall be known as the Administrator of the Hospital. 6. The term "the Board" means the Board of Directors of the Corporation. 7. The "Principal Office" of the Corporation is HSA Gulf Coast Hospital, Fort Walton Beach, Florida. 2 ARTICLE III STOCKHOLDERS' MEETINGS Section 1. Annual Meeting. The annual meeting of the shareholders of this Corporation shall be held on the 1st day of July in each year, beginning with the year 1985, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting is a legal holiday, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for the annual meeting of shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as convenient. Section 2. Special Meetings. Special meetings of the shareholders shall be held when directed by the President or the Board of Directors, or when requested in writing by the holders of not less than ten percent of all the shares entitled to vote at the meeting. Section 3. Place. Meetings of shareholders may be held within or without the State of Florida. Section 4. Notice. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the meeting, either personally or by first class mail, by or at the direction of the President, the Secretary, or the officer or persons calling the meeting to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall 3 be deemed to be delivered when deposited in the United States, mail addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in Section 4 of this Article to each shareholder of record on the new record date entitled to vote at such meeting. Section 6. Closing of Transfer Books and Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. 4 In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any determination of shareholders, such date in any case to be not more than sixty (60) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting. Section 7. Voting Record. The officers or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, with the address of and the number and class and series, if any, of shares held by each. The list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Corporation, at the principal place of business of the Corporation or at the office 5 of the transfer agent or registrar of the Corporation, and any shareholder shall be entitled to inspect the list at any time during usual business hours. The list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder at any time during the meeting. If the requirements of this section have not been substantially complied with, the meeting, on demand of any shareholder in person or by proxy, shall be adjourned until the requirements are complied with. If no such demand is made, failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. Section 8. Shareholder Quorum and Voting. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. When a specified item of business is required to be voted on by a class or series of stock, a majority of the shares of such class or series shall constitute a quorum for the transaction of such item of business by that class or series. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders unless otherwise provided by law. After a quorum has been established at a shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shareholders entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. 6 Section 9. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Treasury shares, shares of stock of this Corporation owned by another corporation the majority of the voting stock of which is owned or controlled by this Corporation, and shares of stock of this Corporation held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. A shareholder may vote either in person or by proxy executed in writing by the shareholder or his duly authorized attorney-in-fact. At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected at that time and for whose election he has a right to vote. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent or proxy designated by the by-laws of the corporate stockholder, or, in the absence of any applicable by-law, by such person as the Board of Directors of the corporate shareholder may designate. Proof of such designation may be made by presentation of a certified copy of the by-laws or other instrument of the corporate shareholder. In the absence of any such designation, or in case of conflicting designation by the corporate shareholder, the chairman of the board, president, any vice-president, secretary and treasurer of the corporate 7 shareholder shall be presumed to possess, in that order, authority to vote such shares. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee or his nominee shall be entitled to vote the shares so transferred. On and after the date on which written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares. 8 Section 10. Proxies. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting or a shareholders' duly authorized attorney-in-fact may authorize another person or persons to act for him by proxy. Every proxy must be sighed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise by law. The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of shareholders. If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of them present at the meeting, or if only one is present then that one, may exercise all the powers conferred by the proxy; but if the proxy holders present at the meeting are equally divided as to the right and manner of voting in any particular case, the voting of such shares shall be pro-rated. If a proxy expressly provides, any proxy holder may appoint in writing a substitute to act in his place. 9 Section 11. Voting Trusts. Any number of shareholders of this Corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, as provided by law. Where the counterpart of a voting trust agreement and the copy of the record of the holders of voting trust certificates has been deposited with the Corporation as provided by law, such documents shall be subject to the same rights of examination by a shareholder of the Corporation, in person or by agent or attorney, as are the books and records of the Corporation, and such counterpart and such copy of such records shall be subject to examination by any holder of record of voting trust certificates either in person or by agent or attorney, at any reasonable time for any proper purpose. Section 12. Shareholders' Agreements. Two or more shareholders of this Corporation may enter an agreement providing for the exercise of voting rights in the manner provided in the agreement or relating to any phase of the affairs of the Corporation as provided by law. Nothing therein shall impair the right of this Corporation to treat the shareholders of record as entitled to vote the shares standing in their names. Section 13. Action by Shareholders Without a Meeting. Any action required by law, these By-Laws, or the Articles of Incorporation of this Corporation to be taken at any annual or special meeting of shareholders of the Corporation, or any action which may be taken at any annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a 10 vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. If any class of shares is entitled to vote thereon as a class, such written consent shall be required of the holders of a majority of the shares of each class of shares entitled to vote as a class thereon and of the total shares entitled to vote thereon. Within ten (10) days after obtaining such authorization by written consent, notice shall be given to those shareholders who have not consented in writing. The notice shall fairly summarize the material features of the authorized action and, if the action be a merger, consolidation or sale or exchange of assets for which dissenters rights are provided under the Florida General Corporation Act, the notice shall contain a clear statement of the right of shareholders dissenting therefrom to be paid the fair value of their shares upon compliance with further provisions of the Florida General Corporation Act regarding the rights of dissenting shareholders. ARTICLE IV GOVERNING BODY - THE BOARD OF TRUSTEES Section 1. Powers. The Board of Directors shall be responsible for the operation of the Hospital, for the selection of the Medical Staff of the Hospital and for the quality of care rendered in the Hospital. The Board of Directors shall have the authority and responsibility for carrying out the purposes of the Corporation. 11 Included in this responsibility shall be the active participation by members of the Board of Directors in all activities necessary for the accreditation of the Corporation's health care facilities and related services. The Board of Directors shall use due diligence in determining that all physicians, dentists and other personnel for whom a state license or registration is required are currently licensed or registered; that physicians and dentists admitted to practice at the Hospital are granted privileges consistent with their individual training, experience and other qualifications; that physicians and dentists practicing in the Hospital are organized into a medical staff in such a manner as effectively to review the professional practices at the Hospital for the purposes of reducing morbidity and mortality and for the improvement of patient care. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Articles of Incorporation or by these By-Laws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these By-Laws, and as may be provided for the Board of Directors by the Florida General Corporation Act. Section 2. Number, Term and Qualification. The number of directors shall be five (5). Directors need not be residents of the State of Florida nor shareholders of the Corporation. The directors shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and 12 shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. (Article IV, Section 2, 1st paragraph - Amended 8-25-86. See Amendment at end of Bylaws,) The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Governing Body's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their intense interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may serve provided the director meets all other qualifications. Section 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders. Section 4. Compensation. The Board of Directors shall have the authority to fix the compensation of directors. Section 5. Standard for Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably 13 believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. In performing his duties, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements or other financial data, prepared or presented by; (a) one or more officers or employees of the Corporation whom the director reasonably believes to be reliable and competent in the matters presented, (b) counsel, public accountants or other persons as to matters which the director reasonably believes to be within such persons' professional or expert competence, or (c) a committee of the board upon which he does not serve, duly designated in accordance with the provisions of the Articles of Incorporation or these By-Laws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence. A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance described above to be unwarranted. A person who performs his duties in compliance with this section shall have no liability by reason of being or having been a director of the Corporation. Section 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. 14 Section 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Section 8. Quorum and Voting. A majority of the number of directors fixed by these By-Laws shall constitute a quorum for the transaction of business. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 9. Conflicts of Interest. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (a) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (b) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (c) the contract or transaction is fair and reasonable as to the 15 Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. Section 10. Continuing Education. There shall be an orientation program for each new member of the Board of Directors and a continuing educational program for all members of the Board. Such program shall be developed by the Administrator of the Hospital and presented by the Administrator to the President of the Corporation for approval and implementation. ARTICLE V MEETINGS OF THE BOARD OF DIRECTORS Section 1. Place of Meetings. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of Florida. Section 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at least quarterly at such time and at such place as shall be determined by the Board of Directors. No notice of any such regular quarterly meeting shall be necessary. Special meetings may be called by the President of the Corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the 16 meeting, first class mail, postage prepaid; on written request of two (2) directors, special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. 17 Minutes of all Board of Director's meetings shall be kept and shall include at least the following: (A) the date of the meeting; (B the names of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E The dates for implementation of recommendations; and (F) The reports of the Administrator and others. Section 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board or of the respective committee. Such consent shall have the same affect as a unanimous vote. ARTICLE VI EXECUTIVE AND OTHER COMMITTEES Section 1. Establishment and Authority. The Board shall establish such committees, including an executive committee, as may be necessary to affect the discharge of its responsibilities, each such committee to consist of one (1) or more of the directors. The Board may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of a 18 committee, the members thereof present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of such absent or disqualified member. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all of the authority of the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the By-Laws; (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, 19 authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Department of State. Written minutes shall be kept of all meetings of committees of the Board of Directors. Section 2. Joint Conference Committee. There shall be a Joint Conference Committee composed of two (2) members of the Board of Directors appointed by the Board of Directors and two (2) members of the Medical Staff appointed by the Executive Committee of the Medical staff. The Administrator of the Hospital shall be an ex officio member of the Joint Conference Committee, without voting power. A. The Joint Conference Committee shall serve as a forum for the discussion of matters of facility policy and practice, especially those policies and practices pertaining to efficient and effective patient care, and shall provide medico-administrative liaison among the Board of Directors, the Medical Staff and the Administrator. 20 B. It shall oversee and report to the Board of Directors with respect to the quality of patient care rendered in each facility. It shall receive and consider reports and recommendations of the committee on quality care and other appropriate committees and subcommittees of the Medical Staff relating to evaluation of the quality of patient care. C. The Joint Conference Committee shall have such other duties and functions as may be set forth in the By-Laws and Rules and Regulations of the Medical Staff. D. The Joint Conference Committee shall meet at least bi-annually and shall transmit written reports of its activities to the Board of Directors and to the Executive Committee of the Medical Staff. Section 3. Nominating Committee. There shall be a Nominating Committee consisting of two (2) or more members of the Board of Directors. This committee shall identify candidates and make recommendations to the Board of Directors relative to the officers of the Corporation, taking into account By-Law requirements concerning attendance and performance. This committee shall meet at least annually. ARTICLE VII OFFICERS Section 1. Officers of the Corporation. The officers of this Corporation shall consist of a president, one or more vice-presidents, a secretary and a treasurer, each of whom shall be elected by the Board of Directors and shall serve until their 21 successors are chosen and qualify. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors from time to time. Any two or more offices may be held by the same person. The failure to elect a president, secretary or treasurer shall not affect the existence of this Corporation. Section 2. Duties. The officers of this Corporation shall have the following duties: The President shall be the chief executive officer of the Corporation, shall have general and active management of the business and affairs of the Corporation subject to the directions of the Board of Directors, and shall preside at all meetings of the stockholders and Board of Directors. Each Vice President shall, subject to the authority and direction of the President, have general and active management of such operations, areas, or divisions of the business of the Corporation as may be designated by the Board of Directors or by the President. The regular powers and duties of the President in such areas and divisions may, upon delegation by the President, be exercised and performed by the Vice President to whom delegated, subject to the authority and direction of the President. Each of the Vice Presidents may execute bonds, mortgages, and bills of sale, assignments, conveyances, and all other contracts under the seal of the Corporation, if required or appropriate, except where required by law to be otherwise signed and executed, or except where the signing and 22 execution thereof, when permitted by law, shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The Secretary shall have custody or, and maintain, all of the Corporation records except the financial records; shall record the minutes of all meetings of the stockholders and Board of Directors, send all notices of meetings out, and perform such other duties as may be prescribed by the Board of Directors or the President. The Treasurer shall have custody of all corporate funds and financial records, shall keep full and accurate accounts of receipts and disbursements and render accounts thereof at the annual meetings of stockholders and whenever else required by the Board of Directors or the President, and shall perform such other duties as may be prescribed by the Board of Directors or the President. Section 3. Removal of Officers. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board whenever in its judgment the best interests of the Corporation will be served thereby. ARTICLE VIII ADMINISTRATION Section 1. Chief Administrative Officer. The Board of Directors shall select and employ a competent, experienced chief administrative officer, to be designated from time to time as the Administrator of the Hospital. Said Administrator shall be a health professional with appropriate professional qualifications and experience, including previous administrative responsibility in a health facility. The Administrator shall be the Board of Directors' direct executive 23 representative in the management of the Hospital and shall be responsible for implementing established policies of the Hospital and hiring management and administrative staff to carry on the day to day operations of the Hospital. The Administrator shall have the necessary authority and responsibility to efficiently and effectively operate the Hospital in all its activities and departments, subject only to such policies as may be adopted and such orders as may be issued by the Board of Directors or by any committee of the Board of Directors, to which the Board has delegated authority for such action. The Board of Directors shall review annually the performance of the Administrator and make recommendations for improvements. The authority and duties of the Administrator shall include: A. Preparation of the following items and presentation of the same to, and review of the same with, the Board of Directors: 1. Long-term and short-term plans for the Hospital; 2. Reports on the nature and extent of funding and other available resources; 3. Reports describing the Hospital's operations; 4. Reports evaluating the efficiency and effectiveness of the Hospital; and 5. Budgets and financial statements. B. Preparation of a written manual which defines Hospital policies and procedures and is regularly reviewed and updated. 24 C. Work with the Medical Staff and those concerned with rendering of professional services so that the best possible care may be rendered to all patients. D. Selection, employment, control and termination of all employees and development and maintenance of personnel policies and practices for the Hospital. E. Supervision of all business affairs, making certain all funds are collected and expended to the best possible advantage. F. Performance of any other duties or functions that may be necessary in the best interests of the Hospital. Section 2. Appointment. The Administrator shall be appointed by the Board of Directors. ARTICLE IX MEDICAL STAFF Section 1. Appointment. The Corporation shall have an organized Medical Staff of the Hospital (hereinafter referred to as the "Medical Staff") appointed by the Board of Directors in conformity with the requirements of these By-Laws. The Medical Staff shall constantly endeavor to maintain a high quality of medical, psychiatric and dental care for patients in the Hospital and in the other health care facilities operated by the Corporation, and high standards of ethical and professional practice of its members. It shall be responsible to the Board of Directors for the general quality of medical, psychiatric and dental care provided in 25 the Hospital and in the other health care facilities operated by the Corporation, and for the ethical and professional standards of its members. Section 2. Medical Staff Membership. The Medical Staff shall be composed of physicians and dentists professionally qualified and legally authorized to provide medical and dental service to the patients of the Hospital and the other health care facilities operated by the Corporation. The Medical Staff is delegated the authority to evaluate the professional competence of staff members and applicants for staff privileges and shall be responsible for making recommendations to the Board of Directors concerning appointments, reappointments and privileges. Section 3. By-Laws and Regulations. The procedures for appointment, reappointment, termination, classification and determination of privileges of members of the Medical Staff, and its organization, membership, officers, committees, meetings, procedures and approved practices, and related matters, shall be set forth in By-Laws and regulations adopted by the Medical Staff and approved by the Board of Directors. The Medical Staff shall be responsible for the periodic review and revision, where necessary, of such By-Laws and regulations. Such Medical Staff By-Laws shall provide fair hearing procedures for members of and applicants for appointment to the Medical Staff, including physicians and dentists whose engagement in medico-administrative positions requires membership on the Medical Staff (unless otherwise stated by contract); a requirement that each Medical Staff member continuously observe all ethical principles of his profession; provision for review of any recommendation of the 26 Medical Staff with which the Board of Directors disagrees relative to Medical Staff appointments, reappointments, or termination of appointment and granting or curtailment of clinical privileges by a combined committee of the Medical Staff and the Board of Directors prior to the rendering of a final decision by the Board of Directors; a provision that no qualified applicant shall be denied Medical Staff membership or clinical privileges on the basis of race, color, nationality, religious or political belief, sex, age or handicap; a provision that each practitioner applying for Medical Staff membership must sign a statement to the effect that he has read and agrees to be bound by the Medical Staff By-Laws and the Medical Staff rules and regulations, and by the current policies of the Corporation that apply to his activities. Such By-Laws or rules and regulations adopted pursuant thereto shall also provide that only a member of the Medical Staff with admitting privileges shall be permitted to admit patients to the Hospital; that only an appropriately licensed physician with clinical privileges shall be directly responsible for a patient's diagnosis and treatment within the areas of his privileges; that each patient's general medical and psychiatric condition shall be the responsibility of a physician member of the Medical Staff; that each patient admitted to the Hospital shall receive a medical history and physical, mental and social examination by a psychiatrist who is a member of the Medical Staff; shall define the responsibilities of physicians to non-physician members of the professional staff of the Hospital; and shall contain a provision to the effect that when a member of the Medical Staff desires to delegate the performance of certain practices related to medicine to 27 specified professional personnel, the Medical Staff shall review and make a recommendation, subject to the ratification of the Board of Directors, as to the responsibilities that may be so delegated. ARTICLE X STOCK CERTIFICATES Section 1. Issuance. Every holder of shares in this Corporation shall be entitled to have a certificate, representing all shares to which he is entitled. No certificate shall be issued for any share until such share is fully paid. Section 2. Form. Certificates representing shares in this Corporation shall be signed by the President or Vice President and the Secretary or an Assistant Secretary and may be sealed with the seal of this Corporation or a facsimile thereof. The signatures of the President or Vice President and the Secretary or Assistant Secretary may be facsimiles if the certificate is manually signed on behalf of a transfer agent or registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate issued, said certificate may be issued by the Corporation with the same effect as if he were such officer at the date or its issuance. Every certificate representing shares issued by this Corporation shall set forth or fairly summarize upon the face or back of the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge a full statement of, the designations, preferences, limitations and relative rights of 28 the shares of each class or series authorized to be issued, and the variations in the relative rights and preferences between the shares of each series so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Every certificate representing shares which are restricted as to the sale, disposition or other transfer of such shares shall state that such shares are restricted as to transfer and shall set forth or fairly summarize upon the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge a full statement of, such restrictions. Each certificate representing shares shall state upon the face thereof; the name of the Corporation; that the Corporation is organized under the laws of this state; the name of the person or persons to whom issued; the number and class of shares, and the designation of the series, if any, which such certificate represents; and the par value of each share represented by such certificate, or a statement that the shares are without par value. Section 3. Transfer of Stock. The Corporation shall register a stock certificate presented to it for transfer if the certificate is properly endorsed by the holder of record or his duly authorized attorney. Section 4. Lost, Stolen or Destroyed Certificates. The Corporation shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate (a) makes proof in affidavit form that it has been lost, destroyed or wrongfully taken; (b) requests the issue of a new certificate before 29 the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; (c) gives bond in such form as the Corporation may direct, to indemnify the Corporation, the transfer agent, and registrar against any claim that may be made on account of the alleged loss, destruction or theft of a certificate; and (d) satisfies any other reasonable requirements imposed by the Corporation. ARTICLE XI BOOKS AND RECORDS Section 1. Books and Records. This Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board of directors and committees of directors. This Corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addressed of all shareholders, and the number, class and series, if any, of the shares held by each. Any books, record and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. Section 2. Shareholders' Inspection Rights. Any person who shall have been a holder of record of shares or of voting trust certificates therefor at least six months immediately preceding his demand or shall be the holder of record of, or the holder of record of voting trust certificates for, at least five percent of the outstanding shares of any class or series of the Corporation, upon written demand 30 stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose its relevant books and records of accounts, minutes and records of shareholders and to make extracts therefrom. Section 3. Financial Information. Not later than four months after the close of each fiscal year, this corporation shall prepare a balance sheet showing in reasonable detail the financial condition of the Corporation as of the close of its fiscal year, and a profit and loss statement showing the results of the operations of the Corporation during its fiscal year. Upon the written request of any shareholder or holder of voting trust certificates for shares of the Corporation, the Corporation shall mail to such shareholder or holder of voting trust certificates a copy of the most recent such balance sheet and profit and loss statement. The balance sheets and profit and loss statements shall be filed in the registered office of the Corporation in this state, and shall be kept for at least five years, and shall be subject to inspection during the business hours by any shareholder or holder of voting trust certificates, in person or by agent. ARTICLE XII DIVIDENDS The Board of Directors of this Corporation may, from tine to time, declare and the Corporation may pay dividends on its shares in cash, property or its own shares, except when the Corporation is insolvent or when the payment thereof 31 would render the Corporation insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the Articles of Incorporation, subject to the following provisions: (a) Dividends in cash or property may be declared and paid, except as otherwise provided in this section, only out of the unreserved and unrestricted earned surplus of the Corporation or out of capital surplus, however arising, but each dividend paid out of capital surplus shall be identified as a distribution of capital surplus, and the amount per share paid from such surplus shall be disclosed to the shareholders receiving the same concurrently with the distribution. (b) Dividends may be declared and paid in the Corporation's own treasury shares. (c) Dividends may be declared and paid in the Corporation's own authorized but unissued shares out of any unreserved and unrestricted surplus of the Corporation upon the following conditions: (1) If a dividend is payable in shares having a par value, such shares shall be issued at not less than the par value thereof and there shall, be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend. (2) If a dividend is payable in shares without par value, such shares shall be issued at such stated value as shall be fixed by the Board of Directors by resolution adopted at the time such dividend is declared, and there shall be 32 transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate stated value so fixed in respect of such shares; and the amount per share so transferred to stated capital shall be disclosed to the shareholders receiving such dividend concurrently with the payment thereof. (d) No dividend payable in shares of any class shall be paid to the holders of shares of any other class unless the Articles of Incorporation so provide or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class in which the payment is to be made. (e) A split-up or division of the issued shares of any class into a greater number of shares of the dame class without increasing the stated capital of the Corporation shall not be construed to be a share dividend within the meaning of this section. ARTICLE XIII CORPORATE SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the following: 33 GULF COAST TREATMENT CENTER, INC. CORPORATE SEAL 1982 FLORIDA ARTICLE XIV AMENDMENTS TO BY-LAWS These By-Laws may be repealed or amended, and new By-Laws may be adopted, by either the Board of Directors or the shareholders, but the Board of Directors may not amend or repeal any By-Law adopted by the shareholders if the shareholders specifically provide such By-Law is not subject to amendment or repeal by the directors. ---------- I, the undersigned, as Secretary of Gulf Coast Treatment Center, Inc., a Florida corporation, hereby certify that the foregoing By-Laws were duly and unanimously adopted at a meeting of the Board of Directors of said Corporation held on the 6th day of March, 1985. DATED this 7th day of March, 1985. /s/ Arthur P. Bolton, III -------------------------------------------- Arthur P. Bolton, III Secretary 34 EX-3.18 17 g83903exv3w18.txt EX-3.18 ARTICLES OF INCORPORATION EXHIBIT 3.18 ARTICLES OF INCORPORATION OF H. C. CORPORATION A BODY CORPORATE TO THE HONORABLE JUDGE OF PROBATE, JEFFERSON COUNTY, ALABAMA: The undersigned, Healthcare Services of America, Inc., an Alabama corporation, acting as incorporator(s) and desiring to organize a body corporate under the laws of the State of Alabama, hereby adopt(s) the following Articles of Incorporation: 1. The name of the corporation is H. C. CORPORATION and the corporation shall be authorized to trade in said name or to use any other trade name not now being used by any other person, firm or corporation. 2. The objects and purposes for which the corporation is formed are: (a) To own, operate and manage hospitals, general, psychiatric and otherwise, and to provide management services therefor, and to do any and all things necessary and related thereto. (b) To purchase, acquire, hold, improve, sell, convey, assign, exchange, release, mortgage, encumber, lease, hire and deal in real and personal property of every kind and character. (c) To apply for, purchase, or acquire by assignment, transfer or otherwise, and hold, mortgage or otherwise pledge, and to sell, exchange, transfer, deal in and in any manner dispose of, and to exercise, carry out and enjoy any license, power, authority, concession, right or privilege which any corporation may make or grant. (d) To manufacture, purchase or otherwise acquire, own, mortgage, pledge, sell, assign and transfer, exchange or otherwise dispose of, and invest, trade and deal in and with goods, wares and merchandise and personal property of every class and description, whether or not the same specifically pertain to the classes of business above specified; and to own and operate mines, plants, factories, mills, warehouses, yards, merchandise stores, commissaries and all other installations or establishments of whatever character or description, together with the equipment, rolling stock and other facilities used or useful in connection with or incidental thereto. (e) To acquire bonds or stocks of this corporation or otherwise, the goodwill, rights, assets and property, and to undertake to assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. (f) To purchase or otherwise acquire, hold, use, sell, assign, lease, mortgage or in any manner dispose of, and to take, exchange and grant licenses, or other rights therein, in respect of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventories, improvements, processes, formulae, methods, copyrights, trademarks and trade names, relating to or useful in connection with any business, objects or purposes of the corporation. (g) To acquire, by purchase, subscription or otherwise, and to own, hold, sell and dispose of, exchange, deal in and deal with stocks, bonds, debentures, obligations, evidences of indebtedness, promissory notes, mortgages or securities, the stocks, bonds, debentures or other evidence of indebtedness of this corporation, and this corporation shall have the express power to hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of capital stocks, bonds, debentures, promissory notes, mortgages and securities so acquired by it, and, while the owner thereof, to exercise all the rights, privileges and powers of ownership, including the right to vote thereof, to the same extent as a natural person may do subject to the limitations, if any, on such rights now or hereafter provided by the laws of Alabama. (h) To endorse, or otherwise guarantee, or obligate itself for, or pledge or mortgage all or any part of its properties for the payment of the principal and interest, or either, on any bonds, debentures, notes, scrip, coupons or other obligations or evidences of indebtedness, or the performance of any contract, mortgage or obligation, or any other corporation or association, domestic or foreign, or of any firm, partnership or joint venture. (i) To enter into, make and perform any contracts of every kind for any lawful purpose without limit as to amount, with any person, firm, association, corporation, municipality, county, state territory, government, governmental subdivision or body politic. (j) To acquire the goodwill, rights, assets and properties, and to undertake the whole or any part of the liabilities of any person, firm, association or corporation; to pay for the same in cash, the stock or other securities of the corporation, or otherwise; to hold, or in any manner dispose of, the whole or any part of the property so acquired; to conduct in any lawful manner the whole or any part of the business so acquired and to exercise all the powers necessary or convenient in and about the conduct and management of any such business. (k) To borrow and lend money, without security, or upon the giving or receipt of such security as the Board of Directors of the corporation may deem advisable by way of mortgage, pledge, transfer, assignment or otherwise, of real and personal property of every nature and description, or by way of guaranty, or otherwise. (l) To draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bill of exchange, warrants, debentures, and other negotiable or transferable instruments. (m) To issue bonds, debentures or other securities or obligations and to secure the same by mortgage, pledge, deed of trust, or otherwise. (n) To act as agent, jobber, broker, or attorney in fact in buying, selling, and dealing in real and personal property of every nature and description and leases respecting the same and estates and interests therein and mortgages and securities thereof, in making and obtaining loans, whether secured by such property or not, and in supervising, managing and protecting such property and loans and all interest in and claims affecting the same. (o) To purchase, take, receive, redeem or otherwise acquire, hold, own, pledge, transfer or otherwise dispose of its own shares of stock, and its bonds, debentures, notes, scrip or other securities or evidences of indebtedness, and to hold, sell, transfer or reissue the same. (p) To enter into any plan or project for the assistance and welfare of its employees. (q) To enter into any legal arrangements for sharing of profits, union of interest, reciprocal concessions, or cooperation, as partner, joint venturer or otherwise, with any person, partnership, corporation, association, combination, organization, entity or other body whatsoever, domestic or foreign carrying on or proposing to carry on any business, which this corporation is authorized to carry on, or any business or transaction deemed necessary, convenient or incidental to carrying out of any of the objects of this corporation. (r) To have one or more offices to carry on all of its operations and business without restriction or limit as to amount, in any of the states, districts, territories, or possession or colonies of the United States, and in any and all foreign countries, subject to the laws of such state, district, territory, possession, colony or country. (s) To carry on any other business in connection with the foregoing. (t) To do any and all of the things herein set out and such other things as are incidental or conducive to the attainment of the objects and purposes of this corporation, to the same extent as natural persons might or could do and in any part of the world, as principal, factor, agent, contractor, or otherwise, either alone or in conjunction with any person, firm, association, corporation or any entity of whatsoever kind, and to do any and all such acts and things and to exercise any and all such powers to the full extent authorized or permitted to a corporation under any laws that may be now or hereafter applicable or available to this corporation. The foregoing clauses, and each phrase thereof, shall be construed as objects and purposes of this corporation, as well as powers and provisions for the regulation of the business and the conduct of the affairs of the corporation, the directors, and shareholders thereof, all in addition to those powers specifically conferred upon the corporation by law, and it is hereby expressly provided that the foregoing specific enumeration of purposes shall not be held to limit or restrict in any manner the powers of the corporation otherwise granted by law. Nothing herein contained, however, shall be construed as authorizing this corporation to carry on the business of banking or that of a trust or that of a trust company, or the business of insurance in any of its branches. 3. The location of the initial registered office of the corporation is 1212 Park Place Tower, Birmingham, Alabama 35203. The name of the initial registered agent at such address is Charles A. Speir. 4. The amount of the total number of shares authorized to be issued shall be 1,000 shares having a par value of $1.00 per share. 5. The names and post office addresses of the incorporator(s) are: NAME POST OFFICE ADDRESS Healthcare Services of America, Inc., 1212 Park Place Tower an Alabama corporation Birmingham, Alabama 35203 The names and post office addresses of the Directors who shall hold office until the first annual meeting of Shareholders and until their successors have been elected and qualified are: NAME OF DIRECTOR POST OFFICE ADDRESS Thomas C. Najjar, Jr., Chairman of Board Birmingham, Alabama Charles A. Speir Birmingham, Alabama Van Scott, M.D. Birmingham, Alabama 6. The period for the duration of the corporation shall be perpetual. 7. This corporation may, from time to time, lawfully enter into any agreement to which all, or less than all, the holders of record of the issued and outstanding shares shall be parties, restricting the transfer of any or all shares represented by certificates therefor upon such reasonable terms and conditions as may be approved by the Board of Directors of this corporation, provided that such restrictions be stated upon each certificate representing such shares. 8. All persons who shall acquire shares in this corporation shall acquire them subject to the provisions of this Certificate of Incorporation, as the same from time to time may hereafter be amended. So far as not otherwise expressly provided by the laws of the State of Alabama, the corporation shall be entitled to treat the person or entity in whose name any share is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in said share on the part of any other person, whether or not the corporation shall have notice thereof. 9. The President shall have authority to execute all deeds, mortgages, bonds and other contracts requiring a seal, under the seal of the corporation and the Secretary or any Assistant Secretary shall have authority to affix said seal to instruments requiring it, and attest the same. 10. The corporate powers shall be exercised by the Board of Directors, except as otherwise expressly provided by statute or by this Certificate of Incorporation. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is hereby expressly authorized: (a) To adopt, alter, amend and repeal the By-Laws of the corporation, but By-Laws so made by the Directors may be altered or repealed by the Directors or Shareholders; and (b) To fix and determine and to vary the amount of working capital of the corporation; to determine whether any, and if any, what part, of any accumulated profits shall be declared and paid as dividends; to determine the date or dates for the declaration and payment of dividends and to direct and determine the use and disposition of any surplus or net profit over and above the stated capital. The corporation may, in its By-Laws, confer powers upon its Board of Directors in addition to the foregoing, and in addition to the powers and authorities expressly conferred upon Directors by statute. 11. No contract or other transaction between the corporation and one or more of its Directors or any other corporation, firm, association or entity in which one or more of its Directors are Directors or Officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such Director or Directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction, if the contract or transaction is fair and reasonable to the corporation and if either: (1) The fact of such relationship or interest is disclosed to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested Directors; or (2) The fact of such relationship or interest is disclosed to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent. Common or interested Directors may not be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. IN WITNESS WHEREOF, the undersigned Incorporator(s) have hereunto subscribed their names to these Articles of Incorporation on this the 9th day of September, 1983. HEALTHCARE SERVICES OF AMERICA, INC. An Alabama Corporation BY: /s/ Charles A. Speir --------------------------------------------- Its President ATTEST: /s/ Ann D. Jacobs - ------------------------------ Its Secretary EX-3.19 18 g83903exv3w19.txt EX-3.19 AMENDED AND RESTATED BYLAWS EXHIBIT 3.19 AMENDED AND RESTATED BYLAWS OF H.C. CORPORATION ARTICLE I SHAREHOLDERS 1. SHARE CERTIFICATES. Certificates representing shares of H.C. Corporation (the "corporation") shall set forth thereon the statements prescribed by Section 10-2A-40 of the Alabama Business Corporation Act and by any other applicable provision of law, shall be signed by the Chairman of the Board or the President or an Executive Vice President or a Vice President or the Treasurer and by the Secretary or an Assistant Vice President or an Assistant Secretary or an Assistant Treasurer of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. The signature of any one of these officers upon a certificate may be a facsimile if the certificate is signed by another of such officers, and the signatures of both of such officers may be facsimiles if the certificate is counter signed by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. No certificate shall be issued for any share until such share is fully paid. 2. FRACTIONAL SHARE INTERESTS OR SCRIP. The corporation may issue fractions of a share, arrange for the disposition of fractional interests by those entitled thereto, pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or issue scrip in registered or bearer form, which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip aggregating a full share. A certificate for a fractional share shall, but scrip shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause such scrip to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the condition that the shares for which the scrip is exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of such scrip, or subject to any other conditions which the Board of Directors may deem advisable. 3. SHARE TRANSFERS. Upon compliance with any provisions restricting the transferability of shares that may be set forth in the Articles of Incorporation, these Bylaws, or any written agreement in respect thereof, transfers of shares of the corporation shall be made only on the books of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, or with a transfer agent or a registrar and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon, if any. Except as may be otherwise provided by law or these Bylaws, the person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation; provided that whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact, if known to the Secretary of the corporation, shall be so expressed in the entry of transfer. 4. RECORD DATE FOR SHAREHOLDERS. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, fifty days. If the stock transfer books are closed for the purpose of determining the shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding the meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring the dividend is adopted, as the case may be, shall be the record date for the determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. 5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of shareholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "shareholder" or "shareholders" refers to an outstanding share or shares and to a holder or holders of record of outstanding 2 shares when the corporation is authorized to issue only one class of shares, and said reference is also intended to include any outstanding share or shares and any holder or holders of record of outstanding shares of any class upon which or upon whom the Articles of Incorporation confer such rights where there are two or more classes or series of shares or upon which or upon whom the Alabama Business Corporation Act confers such rights notwithstanding that the Articles of Incorporation may provide for more than one class or series of shares, one or more of which are limited or denied such rights thereunder. 6. SHAREHOLDER MEETINGS. - TIME. The annual meeting shall be held on the first Monday of September in each year, if not a legal holiday, and if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as determined by the directors. A special meeting shall be held on the date fixed by the directors except when the Alabama Business Corporation Act confers the right to call a special meeting upon the shareholders. - PLACE. Annual meetings and special meetings shall be held at such place within or without the State of Alabama as shall be fixed from time to time by the Board of Directors. If the Board of Directors shall fail to fix the place for any such meeting, the meeting shall be held at the registered office of the corporation in the State of Alabama. - CALL. Annual meetings may be called by the directors or the President or the Secretary or by any officer instructed by the directors or the President to call the meeting. Special meetings may be called in like manner or by the holders of at least one-tenth of the shares. - NOTICE OF WAIVER OF NOTICE. Written notice stating the place, day, and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten days (or not less than any such other minimum period of days as may be prescribed by the Alabama Business Corporation Act) nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder. The notice of any annual or special meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the Alabama Business Corporation Act. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid; provided, however, if three successive letters mailed to the last-known address of any shareholder are returned as undeliverable, no further notices to such shareholder shall be necessary until another address for such shareholder is made known to the corporation. Whenever any notice is required to be given to any 3 shareholder, a waiver thereof in writing signed by him whether before, at, or after the time stated therein shall be the equivalent to the giving of such notice. Notwithstanding the provisions of this paragraph, the stock or bonded indebtedness of a corporation shall not be increased at a meeting unless notice of such meeting shall have been given as required by Section 234 of the Constitution of Alabama as the same may be amended from time to time. - VOTING RECORD. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be kept on file at the principal office of the corporation within or without the State of Alabama for a period of at least ten days before the meeting and shall be subject to inspection by any shareholder making written request therefor at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. - CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President, a Vice President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the shareholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but, if neither the Secretary nor an Assistant Secretary is present, the Chairman of the meeting shall appoint a secretary of the meeting. - PROXY REPRESENTATION. Every shareholder may authorize another person or persons to act for him by proxy in all matters in which a shareholder is entitled to participate, whether for the purposes of determining his presence at a meeting, or whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting, or otherwise. Every proxy shall be executed in writing by the shareholder, or by his duly authorized attorney-in-fact, and filed with the Secretary of the corporation. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. - QUORUM. A majority of the shares shall constitute a quorum. If a quorum shall not be represented at any meeting of the shareholders, such meeting may be adjourned for a period not to exceed sixty days at any one adjournment. 4 - VOTING. Except as the Articles of Incorporation, these Bylaws, or the Alabama Business Corporation Act, shall otherwise provide, the affirmative vote of the majority of the shares represented at the meeting, a quorum being present, shall be the act of the shareholders. 7. WRITTEN ACTION. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders and shall be filed with the Secretary of the corporation. 8. SHARES HELD FOR ACCOUNT. Pursuant to Section 10-2A-2 of the Alabama Business Corporation Act, the Board of Directors of the corporation may adopt by resolution a procedure by which any shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. ARTICLE II BOARD OF DIRECTORS 1. FUNCTIONS GENERALLY - COMPENSATION. The business and the affairs of the corporation shall be managed by a Board of Directors. The Board may fix the compensation of directors. 2. QUALIFICATIONS AND NUMBER. Each director shall be a natural person. A director need not be a shareholder, a citizen of the United States, or a resident of the State of Alabama. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). The number of directors may be increased or decreased by an amendment to these Bylaws or by a resolution of the full Board of Directors then in office or by the vote of the shareholders. 3. ELECTION AND TERM. The initial Board of Directors shall consist of the directors named in the Articles of Incorporation and shall hold office until the first annual meeting of shareholders and until their successors have been elected and qualified. Thereafter, directors who are elected at an annual meeting of shareholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next succeeding annual meeting of shareholders and until their successors have been elected and qualified. In the interim between annual meetings of shareholders or of special meetings of shareholders called for the election of directors, any vacancies in the Board of Directors, including vacancies resulting from the removal of directors by the shareholders which have not been filled by said shareholders, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum exists, and any directorship to be filled by reason of an increase in the 5 number of directors shall be filled by the affirmative vote of a majority of the directors then in office or by an election at an annual meeting or at a special meeting of shareholders called for that purpose. 4. MEETINGS. - TIME. Meetings of the Board of Directors or of any committee thereof shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. - PLACE. Meetings of the Board of Directors or of any committee thereof shall be held at such place within or without the State of Alabama as shall be fixed by the Board or by any committee thereof, as the case may be. - CALL. No call shall be required for regular meetings of the Board of Directors or of any committee thereof for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice Chairman of the Board, if any, of the President, or of a majority of the directors in office or a majority of the members of any committee thereof, as the case may be. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings of the Board of Directors or of any committee thereof, as the case may be, for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for any such special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any such meeting need not specify the business to be transacted or the purpose of the meeting. Any requirement of furnishing a notice shall be waived by any director who signs a waiver of notice before or after the meeting. Attendance of a director at any such meeting shall constitute a waiver of notice of the meeting, except where any such director attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. - QUORUM AND ACTION. A majority of the full Board of Directors shall constitute a quorum. Except as herein otherwise provided, and except as may be otherwise provided by the Alabama Business Corporation Act, the act of the Board shall be the act of a majority of the directors present at a meeting at which a quorum is present. Members of the Board of Directors or of any committee thereof may participate in a meeting of the Board of Directors or of a committee thereof, as the case may be, by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other at 6 the same time. Such participation shall constitute presence in person at the meeting. - CHAIRMAN OF THE MEETING. Meetings of the Board of Directors shall be presided over by the following directors in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President, or any other director chosen by the Board. 5. REMOVAL OF DIRECTORS. At a meeting called expressly for that purpose, the entire Board of Directors or any individual director may be removed from office with or without cause by the vote of the shareholders holding at least a majority of the shares then entitled to vote at an election of directors. In case the entire Board or any one or more directors be so removed, new directors may be elected at the same meeting. 6. COMMITTEES. The Board of Directors may, by resolution adopted by a majority of the full Board, designate from among its members an Executive Committee and one or more other committees, which, to the extent provided in the resolution shall have and may exercise all of the authority of the Board of Directors with the exception of any authority the delegation of which is prohibited by Section 10-2A-64 of the Alabama Business Corporation Act. 7. WRITTEN ACTION. Any action required or permitted to be taken at a meeting of directors, or any action which may be taken at a meeting of directors or of the Executive Committee or other committee, if any, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or all of the members of the Executive Committee or other committee, as the case may be. ARTICLE III OFFICERS The corporation shall have a President and a Secretary, each of whom shall be elected by the directors, and may have one or more Vice Presidents, who shall be elected by the directors, and such other officers and assistant officers and agents as may be deemed necessary, each or any of whom may be elected or appointed by the directors or may be chosen in such manner as the directors shall determine. Any two or more offices may be held by the same person. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been elected and qualified. 7 The officers and agents of the corporation shall have the authority and perform the duties in the management of the corporation as determined by the resolution electing or appointing them, as the case may be. The Board of Directors may remove any officer or agent whenever in its judgment the best interests of the corporation will be served thereby. ARTICLE IV REGISTERED OFFICE AND AGENT The address of the initial registered office of the corporation, and the name of the initial registered agent of the corporation, are set forth in the original Articles of Incorporation of the corporation. ARTICLE V BOOKS AND RECORDS AND FINANCIAL REPORTS TO SHAREHOLDERS The corporation shall keep at a location within the State of Alabama correct and complete books and records of account and correct and complete records of all transactions of the corporation, and also shall keep complete and correct minutes of its shareholders and Board of Directors and of any committee thereof. The corporation shall keep at its registered office or at its principal place of business, or at the office of its transfer agent or registrar either within or without the State of Alabama, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each shareholder and shall keep on file at the principal office within or without the State of Alabama the voting record of shareholders for a period of at least ten days prior to any meeting of shareholders. The corporation shall comply with the requirements relating to the mailing of annual financial reports to shareholders set forth in Section 10-2A-79 of the Alabama Business Corporation Act. ARTICLE VI CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the corporation and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine or the law require. 8 ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. ARTICLE VIII CONTROL OVER BYLAWS The power to alter, amend, and repeal the Bylaws and to make new Bylaws shall be vested in the Board of Directors, provided, however, that the Board of Directors may not alter, amend, or repeal any Bylaw establishing what constitutes a quorum at shareholders' meetings. 9 EX-3.20 19 g83903exv3w20.txt EX-3.20 GENERAL PARTNERSHIP AGREEMENT EXHIBIT 3.20 GENERAL PARTNERSHIP AGREEMENT OF HILL CREST HOSPITAL PARTNERSHIP AGREEMENT made and entered into as of this the 26th day of January, 1984, between Amisub (Hill Crest), Inc. ("AMISUB"), an Alabama corporation and a wholly owned subsidiary of American Medical International, Inc. ("AMI"), a Delaware corporation, and H.C. Corporation ("H.C."), an Alabama corporation and a wholly owned subsidiary of Healthcare Services of America, Inc. ("HSA"), a Delaware corporation, the said AMISUB and H.C. being herein referred to as the Partners. W I T N E S S E T H: WHEREAS, THE Partners desire to form a general partnership (the "Partnership") under the Alabama Partnership Act (Acts 1971, No. 1513, p. 2609, herein called the "Act") and to enter into a written partnership agreement; and, WHEREAS, the Partnership desires to acquire from H.C. all of the rights, title and interest in and to the assets, including the psychiatric hospital facility (herein called Hill Crest Hospital) of Hill Crest Foundation, Inc. (the "Foundation"), an Alabama non-profit corporation, which H.C. acquired from the Foundation pursuant to that certain BUSINESS ASSETS PURCHASE AGREEMENT, dated November 15, 1983, between Hill Crest Foundation, Inc. and H.C.; and, WHEREAS, the Partnership desires to operate Hill Crest Hospital now owned and managed by Hill Crest Foundation, Inc.; NOW, THEREFORE, in consideration of the premises and of the mutual covenants set forth herein, the parties agree as follows: ARTICLE I FORMATION OF GENERAL PARTNERSHIP The Partners hereby form a general partnership and agree to be partners for the purpose of acquiring, developing, and managing Hill Crest Hospital as a psychiatric hospital, and alcohol and drug abuse treatment facility. ARTICLE II PARTNERS The names and addresses of the Partners are as follows:

ARTICLE III NAME OF PARTNERSHIP The name of this partnership shall be H. C. Partnership (the "Partnership"). 2 ARTICLE IV PLACE OF BUSINESS The principal place of business of the Partnership will be located at Hill Crest Hospital, 6869 South 5th Avenue, Birmingham, Alabama 35212. ARTICLE V DURATION OF PARTNERSHIP The Partnership shall commence on the date first above written and shall continue until termination as provided for herein or otherwise in accordance with applicable provisions of the Act. ARTICLE VI PARTNERSHIP INTERESTS The Partners agree to share equally in the profits and losses, and in the property of the Partnership. Capital shall be contributed by the Partners as required, in the minimum amount of One Million Dollars ($1,000,000) each. ARTICLE VII MANAGEMENT OF THE PARTNERSHIP 1. (a) Board of Governors. There hereby is created the Hill Crest Hospital Board of Governors (the "Board") to consist of not less than eight (8) individual persons comprised of three (3) members to be designated by AMISUB, three (3) members to be designated by H.C., and during the period of five (5) years commencing with the date first above written, two (2) members, one of which shall 3 be from the medical staff of Hill Crest Hospital, to be designated from the Board of Trustees, as composed on the date first above written, of Hill Crest Foundation, Inc. The Board shall act in accordance with by-laws prepared and approved by the Partners, which may be modified or amended from time to time by the Partners. Thomas C. Najjar, Jr. shall be one of the members designated by H.C., and AMISUB and H.C. agree the said Thomas C. Najjar, Jr. will serve as Chairman of the Board. The Board shall advise with the Partners concerning all aspects of the management of Hill Crest Hospital. (b) Executive Committee. From time to time, AMISUB will designate two (2) of the members of the Board and H.C. will designate two (2) of the members of the Board, said two or more persons to act as agents of the Partners and to constitute the Executive Committee of the Board. The Executive Committee shall direct the business and affairs of the Partnership. In case of a tie vote as to any matter before the Board Executive Committee, an Executive Committee interim member designated by action of the Executive Committee of AMI, after HSA has presented to the AMI Executive Committee the HSA view of the matter giving rise to the tie vote, shall be designated and shall have the deciding vote. Such AMI designee will resign from the Executive Committee of the Board immediately after exercising such vote and will not be allowed to vote on any issues other than those which have previously resulted in a tie. 4 (c) Executive Director. AMISUB and H.C. shall, together, designate an Executive Director of Hill Crest Hospital. The Executive Director shall manage the day to day operations of Hill Crest Hospital under the direction of the Executive Committee of the Board. 2. The Partnership, upon joint approval of the Partners, is authorized to pay compensation to the Partners, or to either of the Partners, for services rendered to the Partnership. 3. The Partners agree the fundamental principle of the Partnership is that Hill Crest Hospital will be operated for the best interests of Hill Crest Hospital and not for the benefit of either of the Partners, except for the financial return on the capital investment of the Partners and to maximize the said return on investment. ARTICLE VIII ASSIGNMENT 1. During the period of five years commencing with the date first above written, neither Partner shall sell, assign, hypothecate, or otherwise dispose of its interest in the Partnership except to the other Partner on terms acceptable to both Partners. Notwithstanding the foregoing, during such five year period, HSA, with the prior approval, in writing, of AMI, may sell, assign, hypothecate, or otherwise dispose of its respective interest in the Partnership to a third party, provided the rights of such third party as a Partner are subject and subordinate to the rights of AMI in the Partnership and provided AMI approves any purchase in advance in 5 writing. As soon as practicable after the end of such five year period, AMI agrees to purchase the Partnership interest of H.C. at an aggregate price, payable in cash, determined as follows, provided, said price shall not be less than the total net cash investment (net of distributions and other returns of capital of H.C.) in the Partnership interest of H.C.: MULTIPLY (x) an amount equal to the aggregate earnings of the Partnership allocable to H.C. for the most recent 12 month accounting period, with such earnings restated downward to the amount they would be if they were corporate earnings subject to federal and state taxes, by (y) the average price to earnings ratio of AMI common stock, as reported in The Wall Street Journal, during the 24 month period immediately preceding the date of such determination; and, SUBTRACT (z) an amount equal to 25% of the product thus obtained. 2. In recognition of the fact that AMI and HSA have jointly and severally guaranteed the $12.5 million loan obtained by the Partnership from Bank of America, in the event that either or both AMI or HSA is required to make any payment pursuant to that guarantee obligation or otherwise make additional contributions to the capital of the Partnership then AMI and HSA shall make equal payment of such amount, pari passu. Failure by either HSA or AMI to pay its required on-half share of such amount shall constitute a forfeiture of such party's interest in the Partnership to the contributing party, with no consideration or other payment due therefore, and the partnership arrangement created hereby shall thereupon terminate. 6 3. This agreement shall inure to the benefit of, and be binding upon the parties hereto and upon their respective successors and assigns. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original for all purposes; but such counterparts shall be deemed to constitute but one and the same instrument. 7 IN WITNESS WHEREOF, the parties have hereunto set their hands and seals on the day and year first above written. AMISUB (Hill Crest), Inc. By: /s/ E. Jeffrey Taylor ----------------------------------- Its: Vice President Attest: - ----------------------------------- Its H.C. CORPORATION By: /s/ Charles A. Speir ----------------------------------- Its: President Attest: /s/ Ann D. Jacobs - ----------------------------------- Its: Assistant Secretary AMERICAN MEDICAL INTERNATIONAL, INC. By: /s/ Thomas T. Schleck ----------------------------------- Its: Treasurer HEALTHCARE SERVICES OF AMERICA, INC. By: /s/ Charles A. Speir ----------------------------------- Its: President 8 EX-3.21 20 g83903exv3w21.txt EX-3.21 BYLAWS EXHIBIT 3.21 BYLAWS OF H. C. PARTNERSHIP ARTICLE I PURPOSE H. C. Partnership (the "Partnership") will maintain an active role in meeting the health needs of the Jefferson County, Alabama, including Birmingham, Alabama, area residents through its facility HSA Hill Crest Service Hospital (the "Hospital"). The Partnership's commitment is: to provide the highest level of psychiatric care and substance abuse treatment possible within the limits of current psychiatric treatment, knowledge and technology; to provide modern facilities and staff with highly-motivated mental health professionals; to create environments to facilitate state-of-the-art psychiatric and substance abuse treatment, economically and cost effectively, to all individuals in need of psychiatric and substance abuse care, without respect to age, national origin, race, color, handicap status, political or religious beliefs; to focus the total resource allocation of specialized services towards the achievement of one specific treatment goal; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through research and educational activity developed at professional and community levels. The Corporation is prepared to work jointly with other appropriate health agencies and institutions in an effort to improve existing activities necessary for the accreditation of the Partnership's health care facilities and related services. The Board of Governors shall use due diligence in determining that all physicians, and other personnel for whom a state license or registration is required are currently licensed or registered; that physicians admitted to practice at the Hospital are granted privileges consistent with their individual training, experience and other qualifications; that physicians practicing in the Hospital are organized into a medical staff in such a manner as effectively to review the professional practices at the Hospital for the purposes of reducing morbidity and mortality and for the improvement of patient care. The business and affairs of the Corporation shall be managed by the Board of Governors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the General Partnership Agreement or by these Bylaws to be exercised or done by the Partners. The Board of Governors shall ensure that the institutional planning procedures prescribed by these by-laws are carried out and shall approve and monitor the implementation of an annual operating budget, and shall develop, and monitor the implementation of a long-term capital expenditure plan as required by applicable law and regulation. The Board of Governors shall require the medical staff and administration of each hospital operated by the Partnership to establish a hospital-wide quality assurance program in which hospital departments and medical staff conduct quality assurance activities and make quarterly reports thereon to the Board of Governors. The Board 2 of Governors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws and as may be provided for the Board of Governors in the General Partnership Agreement, as the same may be amended from time to time. Not less than once each year, the Board of Governors, acting as a committee of the whole, shall evaluate its performance with respect to its responsibilities as set forth in these Bylaws. SECTION 2. Number, Term and Qualification. The number of Board members shall be at least one (1). The Board members shall be appointed by the Partners and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such Board member. Board members need not be residents of the State of Alabama nor Partners of the Partnership. Members of the Medical Staff of the Hospital shall be eligible for full membership on the Board of Governors in the same manner as other individuals. The nominees for membership on the Board of Governors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their intense interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a Board member may serve provided the director meets all other qualifications. 3 SECTION 3. Annual and Other Regular Meetings. The regular annual meeting of the Board shall be held the third Wednesday of January of every year, without the necessity of notice of such meeting. SECTION 4. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, by either Partner of the Partnership or by any two (2) members of the Board. The person(s) authorized to call a special meeting of the Board shall fix the place, either within or without the State of Alabama, and the date and time for holding any such meeting. SECTION 5. Notice. Notice of any special meeting and of the monthly meetings shall state the date, time and place of the meeting and the purpose(s) for which the meeting is called and may be given under any one of the following methods: (a) By written notice at least seventy-two (72) hours in advance of such meeting, delivered in person or by leaving such notice at the place of business or residence of such member, or by depositing such notice in the United States mail, postage prepaid, addressed to the member at his address as it appears on the records of the Partnership; (b) By telegram delivered to the telegraph company at least twenty-four (24) hours in advance of such meeting. SECTION 6. Quorum. The presence of a majority of the Board members shall constitute a quorum for the transaction of business, but if such quorum is not present, a majority of the members present may adjourn the meeting, which may be 4 held on a subsequent date without further notice, provided a quorum shall be present at such deferred meeting. SECTION 7. Manner of Acting. The act of a majority of the members present at a meeting at which a quorum is present shall be the act of the Board of Governors. SECTION 8. Vacancies. Any vacancy occurring in a Board of Governors position may be filled by appointment by the Partners. SECTION 9. Compensation. The Board of Governors shall have the authority to fix the compensation of Board members. SECTION 10. Standard for Board Members. A Board member shall perform his duties as a Board member, including his duties as a member of any committee of the Board of Governors upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interest of the Partnership, and with such care as an ordinary prudent person in a like position would use under similar circumstances. SECTION 11. Presumption of Assent. A Board member of the Partnership who is present at a meeting of its Board of Governors at which action on any Partnership matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. 5 SECTION 12. Removal of Board Members. At a meeting of the Partnership called expressly for that purpose, any Board member or the entire Board of Governors may be removed, with or without cause, by a vote of the Partnership. SECTION 13. Conflicts of Interest. No contract or other transaction between the Partnership and one or more of its Board members or any other corporation, firm, association or entity in which one or more of the Board members are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such Board member or members are present at the meeting of the Board of Governors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (a) the fact of such relationship or interest is disclosed or known to the Board of Governors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (b) the fact of such relationship or interest is disclosed or known to the Partners entitled to vote and they authorize, approve or ratify such contract or transaction is fair and reasonable as to the Partnership at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Governors or a committee thereof which authorizes, approves or ratifies such contract or transaction. 6 SECTION 14. Continuing Education. There shall be an orientation program for each new member of the Board of Governors and a continuing educational program for all members of the Board. Such program shall be developed by the Administrator of the Hospital. SECTION 15. Record of Proceedings. The Board of Governors shall appoint a person to act as Secretary at each meeting thereof, who shall record the proceedings of the Board. ARTICLE IV COMMITTEES The Board shall establish such committees, including an executive committee, as may be necessary to effect the discharge of its responsibilities, each such committee to consist of one (1) or more of the Board members. The Board may designate one (1) or more Board members as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of a committee, the members thereof present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of such absent or disqualified member. Members of the Medical Staff who may or may not be Board members shall be included on committees that deliberate issues affecting the discharge of Medical Staff responsibilities. Each such committee and each member thereof shall serve at the pleasure of the Board of Governors. 7 Each committee shall have and may exercise all of the authority of the Board of Governors, except no committee shall have the authority to: (1) Approve or recommend to the Partners actions or proposals required by the General Partnership Agreement to be approved by the Partners; (2) Designate candidates for the office of Board member; (3) Fill vacancies on the Board of Governors or any committee thereof; (4) Amend the Bylaws; Written minutes shall be kept of all meetings of committees of the Board of Governors. ARTICLE V OFFICERS SECTION 1. Various Officers. The officers of the Partnership shall be elected by the Board of Governors and shall hold such offices, including a chief administrative officer, as shall be designated by the Board of Governors. SECTION 2. Removal. Any officer elected or appointed by the Board of Governors may be removed at any time by the affirmative vote of the majority of the members of the Board of Governors. SECTION 3. Vacancies. A vacancy in any office on account of death, resignation, removal, disqualification or otherwise, may, at any regular or special meeting, be filled by the Board of Governors for the unexpired portion of the term. 8 SECTION 4. Chairman of the Board. The Board of Governors shall elect a Chairman of the Board of Governors, who shall preside at all meetings of the Board of Governors. SECTION 5. Power of Officers. Any officer elected or appointed by the Executive Committee shall have such powers and responsibilities as shall be assigned to that office by the Board of Governors. ARTICLE VI ADMINISTRATION SECTION 1. Chief Administrative Officer. The Board of Governors shall select and appoint a competent, experienced chief administrative officer as the Administrator of the Hospital. Said Administrator shall be a health professional with appropriate professional and educational qualifications and experience, including previous administrative responsibility in a health facility. The Administrator shall be the Board of Governors' direct executive representative in the management of the Hospital and shall be responsible for implementing established policies of the Hospital and hiring management and administrative staff to carry on the day to day operations of the Hospital. The Administrator shall have the necessary authority and responsibility to efficiently and effectively operate the Hospital in all its activities and departments, subject only to such policies as may be adopted and such orders as may be issued by the Board of Governors or by any committee of the Board of Governors, to which the Board has delegated authority for such action. The Board of Governors, acting as a committee of the 9 whole, shall review annually the performance of the Administrator and make recommendations for improvements. The authority and duties of the Administrator shall include: A. Preparation of the following items and presentation of the same to, and review of the same with, the Board of Governors: 1. Long-term and short-term institutional plans for the Hospital, after consultation with the administration, the medical staff, the nursing department and any other advisors the Administrator deems appropriate; 2. Reports on the nature and extent of funding and other available resources; 3. Reports describing the Hospital's operations; 4. Reports evaluating the efficiency and effectiveness of the Hospital; and 5. Budgets and financial statements. B. Preparation of a written manual which defines Hospital policies and procedures and is regularly reviewed and updated. C. Work with the Medical Staff and those concerned with rendering of professional services so that the best possible care may be rendered to all patients. D. Selection, employment, control and termination of all employees and development and maintenance of personnel policies and practices for the Hospital. E. Supervision of all business affairs, making certain all funds are collected and expended to the best possible advantage. 10 F. Lend support to all efforts by medical staff and other personnel to improve quality assurance activities and mechanisms. G. Performance of any other duties or functions that may be necessary in the best interests of the Hospital. ARTICLE VII MEDICAL STAFF SECTION 1. Appointment. The Partnership shall have an organized Medical Staff of the Hospital (hereinafter referred to as the "Medical Staff") appointed by the Board of Governors in conformity with the requirements of these Bylaws. The Medical Staff shall constantly endeavor to maintain a high quality of medical and psychiatric care for patients in the Hospital and in the other health care facilities operated by the Hospital. The Medical Staff shall be responsible to the Board of Governors for the general quality of medical and psychiatric care provided in the Hospital and for the ethical and professional standards of its members. SECTION 2. Medical Staff Membership. The Medical Staff shall be composed of physicians professionally qualified and legally authorized to provide medical service to the patients of the Hospital and the other health care facilities, if any, operated by the Partnership. The Medical Staff shall evaluate the professional competence of staff members and applicants for staff privileges and shall be responsible for making recommendations to the Board of Directors concerning appointments, reappointments and privileges. 11 SECTION 3. Bylaws and Rules and Regulations. The procedures for appointments, reappointments, terminations of appointments, and the granting or revision of clinical privileges of members of the Medical Staff, and for approval or disapproval thereof by the Board of Governors within a reasonable period of time, and the organization, membership, officers, committees, meeting, procedures, and practices of the Medical Staff, and related matters, shall be set forth in Bylaws and Rules and Regulations adopted by the Medical Staff and approved by the Board of Governors. The Medical Staff shall be responsible for the development, adoption and periodic review and revision, where necessary, or appropriate, of such Bylaws and Rules and Regulations which shall be consistent with Hospital policy and with any applicable legal or other requirements. Revisions shall be effective upon approval of the Board of Governors, which approval shall not be unreasonably withheld. Such Medical Staff Bylaws shall contain, among other things, provisions setting forth fair hearing procedures for members of and applicants for appointment to the Medical Staff; the mechanism used to review credentials; a requirement that each medical staff member continuously observe all ethical principles of his or her profession; provisions for the review, within a reasonable period of time, of any recommendation of the Medical Staff with which the Board of Governors disagrees relative to Medical Staff appointments, reappointments, or termination of appointment and granting or revision of clinical privileges by a combined committee of the Medical Staff and the Board of Governors prior to the rendering of a final decision by the Board of Governors; provisions establishing a committee to serve as 12 a forum for the discussion of matters of hospital policy and practice and to provide medical-administrative liaison with the governing body and the chief administrative officer; a provision that no qualified applicant shall be denied Medical Staff membership or clinical privileges on the basis of race, color, nationality, religious or political belief, sex, age or handicap; a provision requiring that each practitioner applying for Medical Staff membership sign a statement to the effect that he has read and agrees to be bound by the Medical Staff Bylaws and Rules and Regulations, and by current policies of the Partnership that apply to his or her activities. Such Bylaws or Rules and Regulations adopted pursuant thereto shall also provide that only a member of the Medical Staff with admitting privileges shall be permitted to admit patients to the Hospital and that only an appropriately licensed practitioner with clinical privileges shall be directly responsible for a patient's diagnosis and treatment within the areas of his privileges; that each patient's general medical and psychiatric condition shall be the responsibility of a physician member of the Medical Staff; that each patient admitted to the Hospital shall receive a medico-administrative history and physical, mental and social examination by a psychiatrist who is a member of the Medical Staff; and that when a member of the Medical Staff desires to delegate the performance of certain practices related to medicine to specified professional personnel, the Medical Staff shall review and make a recommendation, subject to the approval of the Board of Governors, as to the responsibilities that may be delegated. 13 ARTICLE VIII CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Governors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Partnership, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Partnership and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Governors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Partnership, shall be signed by such officer or officer, agent or agents of the Partnership and in such manner as shall from time to time be determined by resolution of the Board of Governors. SECTION 4. Deposits. All funds of the Partnership not otherwise employed shall be deposited from time to time to the credit of the Partnership in such banks, trust companies or other depositaries as the Board of Governors may select. ARTICLE IX FISCAL YEAR The fiscal year of the Partnership shall begin on the 1st day of January and end on the 31st day of December of each year. 14 ARTICLE X WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any Board member under the provisions of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time state therein, shall be deemed equivalent to the giving of such notice. ARTICLE XI AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Partners. These Bylaws shall be reviewed by the Board of Governors, acting as a committee of the whole, who shall suggest changes to the Partners, at least every two (2) years. 15 EX-3.22 21 g83903exv3w22.txt EX-3.22 ARTICLES OF INCORPORATION EXHIBIT 3.22 CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION For use by Domestic Corporations Pursuant to the provisions of Act 284, Public Acts of 1972, as amended (profit corporations), or Act 762, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificates: 1. The name of the corporation is Havenwyck Hall, Inc. 2. The corporation identification number (CID) assigned by the Bureau is 206-296 3. The location of the registered office is 4300 City Nat'l Bank Building, Detroit, Michigan 48226 4. Article I of the Articles of Incorporation is hereby amended to read as follows: The name of the corporation is Havenwyck Hospital Inc. 5. The foregoing Amendment to the Articles of Incorporation was duly adopted on the 1st day of March, 1983, in accordance with the provisions of the Act. Complete and execute either a or b below, but not both. This Amendment a. was duly adopted by the unanimous consent of the incorporator(s) before the first meeting of the board of directors or trustees. Signed this _____ day of ____ ,19 ___. - ------------------------------------ ----------------------------------- - ------------------------------------ ----------------------------------- - ------------------------------------ ----------------------------------- - ------------------------------------ ----------------------------------- b. (Check one of the following) [ ] was duly adopted by the shareholders or members, or by the directors if it is a nonprofit corporation organized on a nonstock directorship basis, in accordance with Section 611(2) of the Act. The necessary votes were cast in favor of the amendment. [ ] was duly adopted by written consent of the shareholders or members having not less than the minimum number of votes required by statute in accordance with Section 407 (1) and (2) of the Act. Written notice to shareholders or members who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders or members is permitted only if such provision appears in the Articles of Incorporation.) [X] was duly adopted by written consent of all the shareholders or members entitled to vote in accordance with Section 407 (3) of the Act. Signed this 4th day of March, 1983 By: /s/ Charles A. Speir -------------------- Charles A. Speir, Chairman of the Board ARTICLES OF INCORPORATION Domestic Profit Corporation These Articles of Incorporation are signed by the incorporator(s) for the purpose of forming a profit corporation pursuant to the provisions of Act 284, Public Acts of 1972, as amended, as follows: Article I The name of the corporation is Havenwyck Hall, Inc. Article II The purpose or purposes for which the corporation is organized is to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of Michigan. Article III The total authorized capital stock is: 1. Common Shares $50,000 Par Value Par Share $1.00 -------------------------- ---------------------------- Preferred Shares Par Value Per Share $ ----------------------- ---------------------------- and/or shares without par value as follows 2. Common Shares Stated Value Per Share $ --------------------------- ------------------------- Preferred Shares Stated Value Per Share $ ------------------------ ------------------------- 3. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows:

Article IV 1. The address of the initial registered office is 3000 Town Center, Suite 2990, Southfield, Michigan 48075. 2. Mailing address of the initial registered office, (Need not be completed unless different than above). 3. The name of the initial resident agent at the registered office is Myles B. Hoffert. 1 Article V The name(s) and address(es) of the incorporator(s) is (are) as follows: Name Resident or Business Address Garry E. Craig 259 Grosse Pines Drive Rochester, MI 48063 Article VI When a compromise or arrangement or a plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders or any class of them, a court of equity jurisdiction within the state on application of this corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation, may order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing 3/4 in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or arrangement or a reorganization of this corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on this corporation. Article VII Optional Any action required or permitted by this act to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting of which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to shareholders who have not consented in writing. This corporation is authorized to issue stock pursuant to Section 1244 of the Internal Revenue Code, as amended. (See Attached Rider for Article VIII) I (We), the incorporator(s) sign my (our) name(s) this 6th day of May 1980. /s/ Garry E. Craig ------------------ Garry E. Craig RIDER Article VIII A. Any present or future director, officer or employee of the corporation, and any present or future director, officer or employee of any other corporation who shall have served as such by reason of the corporation's interest in such other corporation (any such other corporation being in this Article VIII called "another corporation") and the legal representatives of any such director, officer or employee, shall be indemnified and held harmless by the corporation from and against any and all loss, cost, liability and expense which may be imposed upon, or which may be paid or incurred by him, in connection with or resulting from any claim, action, suit or proceeding, in which he may be or become involved, as a party or otherwise, by reason of his being or having been, a director, officer or employee of the Corporation, or of another corporation, whether or not he continues to be such at the time such loss, cost, liability or expense have been imposed, paid or incurred. The provisions of this Article VIII are intended to constitute and shall be construed to constitute not only as the grant to the directors, officers and employees of the corporation, or of another corporation, and their respective legal representatives, of the right to be indemnified as in this Article VIII provide, but also as granted to the corporation the power, and as imposing on in the obligation, to indemnify the directors, officers and employees of the corporation or of another corporation, and their respective legal representatives, as in this Article VIII provided. The power and obligations of the corporation to indemnify, and the right of indemnification of, directors, officers and employees of the corporation, or of another corporation, and their respective legal representatives, set forth in this Article VIII shall not be exclusive of any other power or obligation which the corporation may have to indemnify any director, officer or employee of the corporation, or of another corporation, or his legal representatives or exclusive of any other rights to which any director, officer or employee of the corporation or of another corporation, or his legal representative, or any of them, may have or to which he or they may be entitled as a matter of law or which may be lawfully granted to him, or them; and the right of indemnification granted in this Article VIII by the corporation shall be in addition to, and not in restriction or limitation of, any other obligation, right, privilege or power which the corporation may have or lawfully exercise with respect to the indemnification or reimbursement of directors, officers or employees of the corporation, or of another corporation, or their respective legal representatives. B. Notwithstanding any other provision of this Article VIII to the contrary, no director, officer or employee of the corporation, or of another corporation, or his legal representatives shall be entitled to indemnification pursuant to this Article VIII: (1) with respect to any matter as to which there shall have been a final determination on the merits that he has committed or allowed some act of omission during the course of, or in connection with, his duties and responsibilities as a director, officer of employee of the corporation, or of another corporation, which constitutes a dereliction on his part in the performance of such duties and responsibilities (a) otherwise than in good faith in what be considered to be the best interest of the corporation, or of another corporation, and (b) without reasonable cause to believe that any such act or omission was proper and legal or (2) in the event that any claim, action, suit or proceeding shall be settled or otherwise terminated unless (a) the court having jurisdiction thereof shall have approved such settlement or other termination with knowledge of the indemnity provided in the Article VIII or (b) a written opinion of independent and disinterested legal counsel, selected by, or in a manner determined by, the Board of Directors of the corporation shall have been rendered, substantially concurrently with such settlement or other termination to the effect that it was not probable that the matter as to which indemnification is being made would have resulted in a final determination that such director, officer or employee committed or allowed some act or omission during the course of, or in connection with, his duties and responsibilities as a director, officer or employee of the corporation, or of another corporation, which would constitute a dereliction on his part in the performance of such duties and responsibilities (i) otherwise than in good faith in what he considered to be the best interest of the corporation, or of another corporation, and (ii) without reasonable cause to believe that any act or omission on his part involved in such matter was proper and legal, and that the said loss, cost, liability or expense may properly be borne by the corporation. C. For purposes of this Article VIII: (1) the words "claim, action, suit or proceeding" shall mean any claim, action, suit or proceeding, whether civil, criminal or otherwise; (2) the right of indemnification conferred thereby shall extend to any threatened action, suit or proceeding and failure to institute it shall be deemed its final determination; (3) the termination of an action, suit or proceeding by a plea of nolo contendere or other like pleas, or a demurrer or like plea of procedure, shall not constitute a final determination on the merits; (4) a conviction of judgment (whether based on a plea of guilty, or nolo contendere or its equivalent or after trial or otherwise) of or against any or its equivalent or after trial or otherwise) of or against any director, officer or employee of the corporation, or of another corporation, in a criminal action, suit or proceeding shall not be deemed (unless the court or other tribunal in which such conviction shall have occurred, or which shall have entered such judgment, expressly and specifically so finds and determines) a determination that such director, officer or employee has been derelict in the performance of his duties and obligations as a director, officer or employee of the corporation, or of another corporation, if independent and disinterested legal counsel selected by, or in the manner determined by, the Board of Directors of the corporation shall, substantially concurrently with such conviction or judgment, render to the corporation a written opinion to the effect that, in or in connection with the transaction or transactions involved in the criminal action, suit or proceedings resulting in such conviction or judgment, such director, officer or employee of the corporation, or of another corporation, was acting in good faith or of another corporation, and that he had reasonable cause to believe that his conduct was lawful; (5) the words "loss, cost, liability or expense" shall include, but shall not be limited to, fees and disbursements of legal counsel, amounts of judgments, fines or penalties against, the corporation, or of another corporation, who is involved, in any claim, suit or proceeding and (6) advances may be made by the corporation against, and on account of, any loss, cost, liability or expenses as and when, and upon such terms and conditions, as shall be determined by the Board of Directors of the Corporation. D. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the corporation or is serving or shall have served as such, by reason of the corporation's interest in another corporation, against any liability assessed against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation shall have the power to indemnify such person against such liability under the provisions of this Article. E. If any portion or portions of this Article VIII or any part thereof shall have been determined or held to be invalid or illegal, for any reason, by a court of competent jurisdiction, the remaining portion or portions or parts thereof, if not determined to be subject to like or other invalidity or illegality, shall, nevertheless, be considered to be valid and lawful, and to be in force and effect notwithstanding the invalidity or illegality of any other portion or portions of this Article VIII. EX-3.23 22 g83903exv3w23.txt EX-3.23 RESTATED BYLAWS EXHIBIT 3.23 RESTATED BYLAWS OF HAVENWYCK HOSPITAL, INC. ARTICLE I PURPOSE Havenwyck Hospital, Inc. (the "Corporation") will maintain a role in meeting the health needs of area residents through its facilities including "Havenwyck Hospital" (the "Hospital"). The Corporation's commitments are: to provide quality psychiatric care and substance abuse treatment; to provide modern facilities and staff with motivated mental health professionals; to create appropriate environments to facilitate psychiatric and substance abuse treatment to individuals in need of psychiatric and substance abuse care, without respect to age, sex, national origin, race, color, handicap status, political or religious beliefs; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through appropriate activity developed at professional and community levels. The Corporation is prepared to work in cooperation with other appropriate health agencies and institutions in an effort to improve existing health services in the community and to design, plan and develop innovative systems of health care management in the community. These activities shall be conducted with an overriding concern for the patient and the recognition of the patient's dignity as a human being. The corporation will encourage the community to participate in the planning and development of program policies for the Hospital. ARTICLE II OFFICES The principal office of the Corporation shall be located in New Orleans, Louisiana. The Corporation shall continuously maintain in the State of Michigan a registered office and a registered agent, and may have such other offices as the Board may determine from time to time. All dividends shall be deemed to be paid in the State of Michigan. The Corporation shall have such other offices, either within or without the State of Michigan, as the Board of Directors may designate or as the business of the Corporation may require from time to time. ARTICLE III SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders will be held at such time and on such date as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at the request of the shareholders of not less than ten percent (10%) of all the outstanding shares of the Corporation entitled to vote at the meeting. 2 SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the state of Michigan to conduct any annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Michigan, to hold such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon paid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any 3 case, thirty (30) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for at least fifteen (15) days immediately preceding such meeting. In lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than thirty (30) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting shall be kept on file at the place where the meeting is to 4 be held and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence of the identities of the shareholders entitled to examine such list or transfer books or to vote at any meeting of the shareholders. SECTION 7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless a time of expiration is otherwise specified in a proxy, no proxy shall be valid if dated more than three (3) years prior to the date of the meeting. 5 SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Such shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and 6 shall not be counted in determining the total number of outstanding shares at any time. SECTION 11. Action Without a Meeting. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action to be taken shall be signed by the holders of outstanding shares having not less than the minimum number of votes of shareholders entitled to vote with respect to the subject matter thereof. Such written consents shall bear the date of signature of each shareholder signing the consent and shall not be effective unless the consent is delivered to the corporation within sixty (60) days after the record date for determining the shareholders entitled to vote on the action. Prompt notice shall be given to shareholders who have not consented in writing. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Articles of Incorporation or by these Bylaws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws, and as may be provided for the Board of Directors by the laws of the State of Michigan. The Board of Directors of the Corporation shall report to the Board of Directors of Ramsay Health Care, Inc. 7 The Board of Directors shall have the authority and responsibility for carrying out the purposes of the corporation. Included in this responsibility shall be the active participation by members of the Board of Directors in activities necessary for any licensures, approvals, or accreditation of the Corporation's health care facilities and related services. The Board of Directors shall appoint a Consulting Board which shall have the authority to have its own bylaws and shall be responsible for the operations of the Hospital, for the appointment of Medical Staff of the Hospital, and for the quality of care rendered in the Hospital. SECTION 2. Number, Term and Qualification. The number of directors shall be fixed by the Board of Directors and shall include two ex officio members as described below. Directors need not be residents of the State of Michigan nor shareholders of the Corporation, The directors, other than the ex officio directors, shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may serve provided 8 the director continues to meet other qualifications set forth in this Article IV, Section 2. The number of directors may not be increased or decreased by more than thirty percent (30%) without the approval of the majority of shareholders entitled to vote for the election of directors. The Board of Directors of this corporation shall include two ex officio members: the President of the Corporation, who shall be entitled to vote as a director, and a selected representative of the Medical Staff, who shall not have any voting rights as a director and who shall be entitled to attend and have a voice at all meetings of the Board of Directors. SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by the reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders or until his successor is elected and qualified. SECTION 4. Compensation. The Board of Directors shall have the authority to fix the compensation of directors. SECTION 5. Standard of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably 9 believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. SECTION 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 8. Quorum and Voting. A majority of the number of directors then serving shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 9. Conflicts of Interest. (a) Interested Director Transactions. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves 10 or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (1) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (2) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (3) the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. (b) Written Conflict of Interest Policy. The Board of Directors shall implement from time to time a written conflict of interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest. ARTICLE V MEETINGS SECTION 1. Place of Meeting of the Board of Directors. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of Michigan. SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be 11 determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; or written request of two (2) directors. Special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at 12 the time of the adjournment and, unless the time and place of the adjourned meeting is announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's meeting shall be kept and shall include at least the following: (A) The date of the meeting; (B) The name of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. SECTION 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board of Directors or of the respective committee. Such consent shall have the same effect as a unanimous vote. 13 ARTICLE VI COMMITTEES The Board of Directors shall establish such committees as may be necessary to effect the discharge of its responsibilities, each such committee to consist of two (2) or more of the directors. The Board of Directors may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of the committee, the members of the Committee who are present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member if an alternate member or members has not been selected or is absent from the meeting. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all authority granted to it by the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the Bylaws; 14 (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock of designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State of the State of Michigan. Written minutes shall be kept of all meetings of committees of the Board of Directors and shall include the information specified in Article V, Section 2 hereof. 15 ARTICLE VII OFFICERS SECTION 1. Number. The officers of the Corporation shall be a President, one or more Vice-presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. One person may hold more than one office, provided that an officer shall not execute, acknowledge, or verify an instrument in more than one capacity if the instrument is required by law or the articles or bylaws to be executed, acknowledged, or verified by two or more officers. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. 16 SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall, in general, supervise and manage all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. The President shall not sell, transfer, incumber, or otherwise dispose of any assets of the Corporation, the value of which exceeds $50,000.00, without the express authorization of such transaction from the Board of Directors. SECTION 6. Vice President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice-President shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all 17 the restrictions upon the President. The Vice-president shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is necessary and duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 8. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. He shall: (a) have charge and custody of, and be responsible for all funds and securities of the Corporation; (b) give and receive receipt for monies due and payable to the Corporation from any source whatsoever; (c) deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be 18 selected in accordance with the provisions of Article IX of these Bylaws; and (d) in general perform all the duties incident to the of f ice of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 9. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE VIII ADMINISTRATION SECTION 1. Chief Administrative Officer. The Consulting Board shall select and employ a competent, experienced Chief Administrative Officer, to be designated from time to time as the Administrator of the Hospital. ARTICLE IX CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidence of indebtedness issued in the name of the 19 Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. The shares of the Corporation shall not be transferable until such time as the owner thereof shall have given the Corporation 20 fifteen (15) days in which to purchase said stock for the same amount as any bona fide offer. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner and holder thereof for all purposes. ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of July and end on the 30th day of June of each year. ARTICLE XII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. 21 ARTICLE XIII SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have subscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". ARTICLE XIV WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XV AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by a vote of the shareholders representing a majority of all the shares issued and outstanding, at any annual shareholders' meeting or at any special shareholders' meeting when the proposed amendment has been set out in the notice of such meeting. These Bylaws shall be reviewed by the Board of Directors at least every two (2) years. 22 ARTICLE XVI INDEMNIFICATION The Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, and may procure insurance on behalf of its officers, directors, employees, and agents to the full extent permitted by Sections 21.200(561)-(567) of the Michigan Business Corporation Act, as amended. EX-3.24 23 g83903exv3w24.txt EX-3.24 ARTICLES OF INCORPORATION EXHIBIT 3.24 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF AMISUB (HILL CREST), INC. --------------------------------------------------- Pursuant to the provisions of Section 10-2A-113 of the Code of Alabama, the undersigned Corporation adopts the following Articles of Amendment to its Articles of Incorporation: First: The name of the corporation is Amisub (Hill Crest), Inc. Second: The following amendments of the Articles of Incorporation were adopted by the shareholder of the corporation on April 8, 1986, in the manner prescribed by the Alabama Corporation Act: RESOLVED, that the amendment proposed by the Board of Directors of the Corporation is hereby ratified and approved and that Article First of the Articles of Incorporation of the Corporation shall be amended to read as follows: "First: The name of the Corporation is HSA Hill Crest Corporation." FURTHER RESOLVED, that the officers of the Corporation be and they hereby are authorized and directed to execute and file such documents as may be necessary to effect the foregoing resolutions. Third: The number of shares of the Corporation outstanding at the time of such adoption was one thousand (1,000); and the number of shares entitled to vote thereon was one thousand (1,000). All shares entitled to vote were common shares. Fourth: The number of shares voted for such amendment was one thousand (1,000); and the number of shares voted against such amendment was zero (-0-). Dated April 8, 1986. ATTEST: AMISUB (HILL CREST), INC. By /s/ A.P. Bolton, III By /s/ Charles A. Speir --------------------------- ------------------------------- Its Secretary Its President ATTEST: By /s/ Martha A. Campbell By /s/ A.P. Bolton, III ---------------------------- ------------------------------- Its Assistant Secretary Its Secretary ARTICLES OF INCORPORATION OF Amisub (Hill Crest), Inc. ----------------------------------------- The undersigned, acting as incorporator(s) of a corporation under the Alabama Business Corporation Act, adopt(s) the following Articles of Incorporation for such corporation: FIRST: The name of the corporation is Amisub (Hill Crest), Inc. SECOND: The period of its duration is perpetual. THIRD: The purpose or purposes for which the corporation is organized include: The transaction of any or all lawful business for which corporations may be incorporated under the Alabama Business Corporation Act. FOURTH: The aggregate number of shares which the corporation shall have authority to issue one thousand shares of common stock, and the par value of each such shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars ($1,000.00). FIFTH: Provisions for the regulation of the internal affairs of the corporation are: No shareholder shall have the right to cumulative voting at election of directors. SIXTH: The location and mailing address of the initial registered office of the corporation is 60 Commerce Street, Montgomery, Alabama 36103 and the name of its initial registered agent at such address is The Corporation Company. SEVENTH: The number of directors constituting the initial board of directors of the corporation is three (3), and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are:
Name Address - ---- ------- M. Scott Athens 4170 Ashford Dunwoody Road, Suite 500 Atlanta, GA 30319 E. Jeffrey Taylor 414 N. Camden Drive, Beverly Hills, CA 90210 John Wolfe 414 N. Camden Drive, Beverly Hills, CA 90210
EIGHTH: The name and address of each incorporator is:
Name Address - ---- ------- D.A. Tiu 800 South Figueroa St., Los Angeles, CA 90017 D.A. Yarboi 800 South Fegueroa St., Los Angeles, CA 90017 M. Goffredo 800 South Figueroa St., Los Angeles, CA 90017
Dated January 25, 1984 /s/ D.A. Tiu --------------------------- D.A. Tiu /s/ D.A. Yarboi --------------------------- D.A. Yarboi /s/ M. Goffredo --------------------------- M. Goffredo Incorporators EX-3.25 24 g83903exv3w25.txt EX-3.25 AMENDED AND RESTATED BYLAWS EXHIBIT 3.25 HSA HILL CREST CORPORATION AMENDED AND RESTATED BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Montgomery, County of Montgomery, State of Alabama. The Corporation may also have offices at such other places, both within and without the State of Alabama, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Alabama) outside of the State of Alabama and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Alabama as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Monday of November in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Alabama for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Alabama, as may be specified in the 2 notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Alabama, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place 3 within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Alabama, the Articles of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 5. Organization. The President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman 4 of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Articles of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Articles of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. 5 When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Alabama or of the Articles of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Articles of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the State of Alabama or of the Articles of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the 6 qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Articles of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Alabama, the Articles of Incorporation or these By-Laws required to be exercised or done by the stockholders. 7 Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Alabama, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each 8 Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Alabama, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-third or more of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Alabama, the Articles of Incorporation or these 9 By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Articles of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 10 Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. President. The President shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the 11 laws of the State of Alabama. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Alabama, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. Vice Presidents. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of 12 Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be 13 designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 9. Transfer of Duties. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Alabama. Section 10. Vacancies. If the office of President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, 14 with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Articles of 15 Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, 16 it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Alabama. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. 17 ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Articles of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Articles of Incorporation. 18 Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Articles of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Alabama." ARTICLE XIV Amendments Subject to the provisions of the Articles of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the 19 stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 20 EX-3.26 25 g83903exv3w26.txt EX-3.26 ARTICLES OF INCORPORATION EXHIBIT 3.26 ARTICLES OF INCORPORATION STATE OF GEORGIA ) COUNTY OF FULTON ) TO SECRETARY OF STATE OF THE STATE OF OKLAHOMA: We, the undersigned Incorporators,
- ------------------------------------------------------------------ Name Number/Street City State - ------------------------------------------------------------------ L.A. Canero 2 Peachtree Street, N.W. Atlanta GA 30303 - ------------------------------------------------------------------ D.P. McMahon 2 Peachtree Street, N.W. Atlanta GA 30303 - ------------------------------------------------------------------ R.L. Tuttle, Jr. 2 Peachtree Street, N.W. Atlanta GA 30303 - ------------------------------------------------------------------
being persons legally competent to enter into contracts, for the purpose of forming a corporation under "The Business Corporation Act" of the State of Oklahoma, do hereby adopt the following Articles of Incorporation: ARTICLE ONE The name of this Corporation is: HSA OF OKLAHOMA, INC. - -------------------------------------------------------------------------------- (must end with "Corporation", "Company", "Incorporated" or "Limited" or an abbreviation of one). ARTICLE TWO The address of its registered office in the State of Oklahoma is 735 FIRST NATIONAL BUILDING in the city of OKLAHOMA CITY, OKLAHOMA 73102, County of OKLAHOMA and the name of its registered agent at such address is THE CORPORATION COMPANY. ARTICLE THREE The duration of the corporation is: Perpetual (Perpetual if not otherwise stated). ARTICLE FOUR The purposes for which this corporation is formed are: THE CONSTRUCTION, DEVELOPMENT AND MANAGEMENT OF PSYCHIATRIC HOSPITALS, AND FACILITIES FOR THE CONTROL AND TREATMENT OF ALCOHOL AND DRUG ABUSE AND ANY LAWFUL PURPOSE. ARTICLE FIVE The aggregate number of shares which the corporation shall have authority to allot is $1,000, divided into one classes. The designation of each class, the number of shares of each class, and the par value of the shares of each class are as follows: CLASS PAR VALUE PER SHARE NUMBER OF SHARES COMMON $1.00 Common 1,000 Preferred ___________ TOTAL AUTHORIZED CAPITAL $1,000 ARTICLE SIX The amount of stated capital with which it will begin business is $500, which has been fully paid in. (Not less than $500,000). ARTICLE SEVEN The number and class of shares to be allotted by the corporation before it shall begin business and the consideration to be received by the corporation therefore, are: CLASS OF NUMBER OF CONSIDERATION TO BE SHARES SHARES RECEIVED THEREFOR COMMON 500 $1.00 per share ARTICLE EIGHT The number of directors to be elected at the first meeting of the shareholders is THREE. (At least three) ARTICLE NINE: DIRECTORS SHALL BE AUTHORIZED TO ADOPT BYLAWS SUBJECT TO THE POWER OF THE SHAREHOLDERS TO ALTER OR REPEAL. /s/ L.A. Canero --------------- L.A. Canero /s/ D.P. McMahon ---------------- D.P. McMahon /s/ R.L. Tuttle, Jr. -------------------- R.L. Tuttle Jr. STATE OF GEORGIA ) ) ss. COUNTY OF FULTON ) Before me, a Notary Public in and for said County and State on this 21st day of December, 1983, personally appeared L.A. Canero, D.P. McMahon and R.L. Tuttle, Jr. to me known to be the identical persons who executed the foregoing Articles of Incorporation and acknowledge to be that they executed the same as their free and voluntary act and deed for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year above written. /s/ Kathy Slayman ----------------- Kathy Slayman (Notary Public) My Commission expires March 31, 1984 (SEAL) EX-3.27 26 g83903exv3w27.txt EX-3.27 RESTATED BYLAWS EXHIBIT 3.27 RESTATED BYLAWS OF HSA OF OKLAHOMA, INC. ARTICLE I PURPOSE HSA of Oklahoma, Inc. (the "Corporation") will maintain a role in meeting the health needs of area residents through its facilities including "Meadowlake Hospital" (the "Hospital"). The Corporation's commitments are: to provide quality psychiatric care and substance abuse treatment; to provide modern facilities and staff with motivated mental health professionals; to create appropriate environments to facilitate psychiatric and substance abuse treatment to individuals in need of psychiatric and substance abuse care, without respect to age, sex, national origin, race, color, handicap status, political or religious beliefs; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through appropriate activity developed at professional and community levels. The Corporation is prepared to work in cooperation with other appropriate health agencies and institutions in an effort to improve existing health services in the community and to design, plan and develop innovative systems of health care management in the community. These activities shall be conducted with an overriding concern for the patient and the recognition of the patient's dignity as a human being. The Corporation will encourage the community to participate in the planning and development of program policies for the Hospital. ARTICLE II OFFICES The principal office of the Corporation shall be located in New Orleans, Louisiana. The Corporation shall continuously maintain in the State of Oklahoma a registered office and a registered agent, and may have such other offices as the Board may determine from time to time. All dividends shall be deemed to be paid in the State of Oklahoma. The Corporation shall have such other offices, either within or without the State of Oklahoma, as the Board of Directors may designate or as the business of the Corporation may require from time to time. ARTICLE III SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders will be held at such time and on such date as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at the request of the shareholders of not less than ten percent (10%) of all the outstanding shares of the Corporation entitled to vote at the meeting. 2 SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Oklahoma to conduct any annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Oklahoma, to hold such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon paid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any 3 case, thirty (30) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for at least fifteen (15) days immediately preceding such meeting. In lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than thirty (30) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting shall be kept on file at the place where the meeting is to 4 be held and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence of the identities of the shareholders entitled to examine such list or transfer books or to vote at any meeting of the shareholders. SECTION 7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless a time of expiration is otherwise specified in a proxy, no proxy shall be valid if dated more than eleven (11) months prior to the date of the meeting. 5 SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Such shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and 6 shall not be counted in determining the total number of outstanding shares at any time. SECTION 11. Action Without a Meeting. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action to be taken shall be signed by the shareholders having not less than the minimum number of votes entitled to vote with respect to the subject matter thereof that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Such consent shall bear the date of signature of each shareholder and shall not be effective unless it is delivered to the Corporation within sixty (60) days of the date of signing. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Certificate of Incorporation or by these Bylaws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws, and as may be provided for the Board of Directors by the laws of the State of Oklahoma. The Board of Directors of the Corporation shall report to the Board of Directors of Ramsay Health Care, Inc. 7 The Board of Directors shall have the authority and responsibility for carrying out the purposes of the Corporation. Included in this responsibility shall be the active participation by members of the Board of Directors in activities necessary for any licensures, approvals, or accreditation of the Corporation's health care facilities and related services. The Board of Directors shall appoint a Consulting Board which shall have the authority to have its own bylaws and shall be responsible for the operations of the Hospital, for the appointment of Medical Staff of the Hospital, and for the quality of care rendered in the Hospital. SECTION 2. Number, Term and Qualification. The number of directors shall be fixed by the Board of Directors and shall include two ex officio members as described below. Directors need not be residents of the State of Oklahoma nor shareholders of the Corporation. The directors, other than the ex officio directors, shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may serve provided 8 the director continues to meet other qualifications set forth in this Article IV, Section 2. The number of directors may not be increased or decreased by more than thirty percent (30%) without the approval of the majority of shareholders entitled to vote for the election of directors. The Board of Directors of this corporation shall include two ex officio members: the President of the Corporation, who shall be entitled to vote as a director, and a selected representative of the Medical Staff, who shall not have any voting rights as a director and who shall be entitled to attend and have a voice at all meetings of the Board of Directors. SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by the reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders or until his successor is elected and qualified. SECTION 4. Compensation. The Board of Directors shall have the authority to fix the compensation of directors. SECTION 5. Standard of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably 9 believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. SECTION 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 8. Quorum and Voting. A majority of the number of directors then serving shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 9. Conflicts of Interest. (a) Interested Director Transactions. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves 10 or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (1) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (2) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (3) the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. (b) Written Conflict of Interest Policy. The Board of Directors shall implement from time to time a written conflict of interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest. ARTICLE V MEETINGS SECTION 1. Place of Meeting of the Board of Directors. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of Oklahoma. SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be 11 determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the Corporation on such date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; or written request of two (2) directors. Special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at 12 the time of the adjournment and, unless the time and place of the adjourned meeting is announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's meeting shall be kept and shall include at least the following: (A) The date of the meeting; (B) The name of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. SECTION 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the minutes of the proceedings of the Board of Directors or of the respective committee. Such consent shall have the same effect as a unanimous vote. 13 ARTICLE VI COMMITTEES The Board of Directors shall establish such committees as may be necessary to effect the discharge of its responsibilities, each such committee to consist of two (2) or more of the directors. The Board of Directors may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of the committee, the members of the Committee who are present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member if an alternate member or members has not been selected or is absent from the meeting. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all authority granted to it by the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; (4) Amend the Bylaws; 14 (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State of the State of Oklahoma. Written minutes shall be kept of all meetings of committees of the Board of Directors and shall include the information specified in Article V, Section 2 hereof. 15 ARTICLE VII OFFICERS SECTION 1. Number. The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. One person may hold more than one office. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. 16 SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall, in general, supervise and manage all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of the President and such other duties as may be prescribed by the Board of Directors from time to time. The President shall not sell, transfer, incumber, or otherwise dispose of any assets of the Corporation, the value of which exceeds $50,000.00, without the express authorization of such transaction from the Board of Directors. SECTION 6. Vice-President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice-President shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Vice-President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. 17 SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is necessary and duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 8. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; (b) give and receive receipt for monies due and payable to the Corporation from any source whatsoever; (c) deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article IX of these Bylaws; and (d) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. 18 SECTION 9. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE VIII ADMINISTRATION SECTION 1. Chief Administrative Officer. The Consulting Board shall select and employ a competent, experienced Chief Administrative Officer, to be designated from time to time as the Administrator of the Hospital. ARTICLE IX CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidence of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 19 SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. The shares of the Corporation shall not be transferable until such time as the owner thereof shall have given the Corporation fifteen (15) days in which to purchase said stock for the same amount as any bona fide offer. 20 Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner and holder thereof for all purposes. ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of July and end on the 30th day of June of each year. ARTICLE XII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation. ARTICLE XIII SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have subscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". 21 ARTICLE XIV WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XV AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by a vote of the shareholders representing a majority of all the shares issued and outstanding, at any annual shareholders' meeting or at any special shareholders' meeting when the proposed amendment has been set out in the notice of such meeting. These Bylaws shall be reviewed by the Board of Directors at least every two (2) years. ARTICLE XVI INDEMNIFICATION The Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, and may procure insurance on behalf of its officers, directors, employees, and agents to the full extent permitted by Section 1031 of the Oklahoma Business Corporation Law, as amended. 22 EX-3.28 27 g83903exv3w28.txt EX-3.28 CERTIFICATE OF INCORPORATION EXHIBIT 3.28 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF NEUROINFORMATICS SOLUTIONS, INC. NeuroInformatics Solutions, Inc., a Delaware corporation, organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: The name of the Corporation is NEUROINFORMATICS SOLUTIONS, INC. SECOND: The date on which the Certificate of Incorporation was originally filed with the Secretary of State of the State of Delaware is September 23, 1999, under the name NeuroInformatics Solutions, Inc. THIRD: This Certificate of Amendment amends certain provisions of the Certificate of Incorporation of the Corporation and has been duly adopted by the Board of Directors in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, and further adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware by the sole stockholder of the Corporation. FOURTH: Article I. of the Certificate of Incorporation shall be amended to read in its entirety as follows: "I. The name of the Corporation is InfoScriber Corporation." IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by a duly authorized officer of the Corporation. NEUROINFORMATICS SOLUTIONS, INC., a Delaware corporation By: /s/ Fred D. Furman -------------------------------- Fred D. Furman, President Dated: December 9, 1999 /s/ Susan D. Erskine - --------------------------------- Susan D. Erskine, Secretary SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 03:00 PM 12/15/1999 991540403 - 3101386 STATE OF DELAWARE CERTIFICATE OF INCORPORATION A STOCK CORPORATION First: The name of the Corporation is NeuroInformatics Solutions, Inc. Second: Its registered office in the State of Delaware is to be located at 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801. The registered agent in charge thereof is The Corporation Trust Company. Third: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Fourth: The amount of the total authorized capital stock of this corporation is One Hundred Thousand Dollars ($100,000.00) divided into 10,000,000 shares of one hundredth of a dollar ($.01) each. Fifth: The name and mailing address of the incorporator are as follows: Fred D. Furman, Esq. 501 Washington Street, 5th Floor San Diego, California 92103 I, The Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, a file and record this Certificate, and do so certify that the facts herein stated are true, and I have accordingly hereunto set my hand this twenty-third day of September, A.D. 1999. BY: /s/ Fred D. Furman ------------------------------------- Incorporator NAME: /s/ Fred D. Furman ----------------------------------- Print ADDRESS: 501 Washington St., 5th -------------------------------- Floor, San Diego, CA 92103 ----------------------------------------- SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 03:00 PM 12/15/1999 991540403 - 3101386 EX-3.29 28 g83903exv3w29.txt EX-3.29 BYLAWS EXHIBIT 3.29 BY-LAWS OF NEUROINFORMATICS SOLUTIONS, INC. ARTICLE I Identification Section 1. Name. The name of the Corporation is NEUROINFORMATICS SOLUTIONS, INC. Section 2. Registered Office. The address of the registered office of the Corporation shall be 501 Washington Street, 5th Floor, San Diego, California 92103. Section 3. Seal. The seal of the Corporation shall be circular in form and mounted upon a metal die, suitable for impressing the same upon paper. About the periphery of the seal shall appear the words "NEUROINFORMATICS SOLUTIONS, INC." In the center of the seal shall appear the word "Delaware" and the year of incorporation of the Corporation. The seal shall be kept in the Office of the Secretary of the Corporation. Section 4. Fiscal Year. The Board of Directors shall have the power by resolution to fix the fiscal year of the Corporation. If the Board of Directors shall fail to do so, the President shall fix the fiscal year, ARTICLE II Capital Stock Section 1. Certificates Representing Shares. The certificates for shares of the Corporation shall be signed by the Chairman of the Board, the President or by a Vice-President and the Secretary or an Assistant Secretary and shall be sealed with the corporate seal, which may be a facsimile, engraved or printed, but where such certificate is signed by a transfer agent or a registrar, the signature of any corporate officer upon such certificate may be a facsimile, engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon any share certificate shall have ceased to be such officer because of death, resignation, or otherwise, before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issue. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Corporation's books, and on the face of the share certificate. The share certificates shall be of the form, not inconsistent with the Certificate of Incorporation, as shall be approved by the Board of Directors. Section 2. Form. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by the Chairman of the Board, the President or a Vice-President and the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the Corporation or its employee or (2) by a registrar, other than the Corporation or its employee, the signature of any such President, Vice-President, Secretary, or Assistant Secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. Shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. Section 3. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate for shares of stock in the place of any certificate theretofore issued and alleged to have been lost, stolen or destroyed, but the Board of Directors may require the owner of such lost, stolen or destroyed certificate, or his legal representative, to furnish an affidavit as to such loss, theft, or destruction and to give a bond in-such form and substance, and with such surety or sureties, with fixed or open penalty, as it may direct, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of such certificate. ARTICLE III The Stockholders Section 1. Place of Meetings. Meetings of the stockholders of the Corporation may be held at such place, either within or without the State of 2 Delaware, as may be designated in the respective notices, or waivers of notice, thereof, or proxies to represent stockholders thereat. Section 2. Stockholders' Meetings. 2.1 Annual Meeting. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held in each calendar year on such day as shall be fixed by the Board of Directors from time to time. If the annual meeting shall not be called and held during a calendar year, any stockholder may call such meeting at any time thereafter. 2.2 Special Meetings. Special meetings of the stockholders may be called by or at the request of the Chairman of the Board, the Chief Executive Officer or President. The Secretary or any Assistant Secretary shall call a special meeting of the stockholders at the written request of a majority of the directors. At any time upon written request of any person or persons entitled to call a special meeting, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held at such time as the Secretary may fix, not less than ten (10) nor more than sixty (60) days after the receipt of the request. If the Secretary shall neglect or refuse to issue such call, the person or persons making the request may do so. Section 3. Corporate Records; Inspection. 3.1 Obligation to Maintain. The Corporation shall keep at its registered office or at its principal place of business an original or duplicate record of the proceedings of the stockholders and of the Board of Directors, the original or a copy of its By-Laws, certified by the Secretary of the Corporation, the Corporation's stock ledger, and a list of its stockholders, giving the names of the stockholders in alphabetical order, and showing their respective addresses, the number and classes of shares held by each, the number and date of certificates issued for the shares, and the number and date of cancellation of every certificate surrendered for cancellation. The Corporation shall also keep appropriate, complete and accurate books or records of account, which may be kept at its registered office, or at its principal place of business. 3.2 Right of Inspection. Every stockholder of record shall have a right to examine, upon written demand under oath stating the purpose thereof, in person or by agent or attorney, during usual business hours, for any proper purpose, the stock ledger, the list of stockholders, the Corporation's books or records of account, and records of the proceedings of the stockholders and directors, and make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other 3 writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in the State of Delaware or at its principal place of business. Section 4. Notice of Meetings - Waiver. Written or printed notice, stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10), nor more than sixty (60), days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each stockholder of record entitled to vote at such meeting, and to each holder of other securities having voting power. If mailed, such notice shall be deemed to be delivered when deposited in the United Sates mail, postage prepaid, directed to the stockholder or such other security holder at his address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Waiver by a stockholder of notice in writing of a stockholders' meeting, signed by him, whether before or after the time stated therein, shall be equivalent to the giving of such notice, and neither the business to be transacted at, nor the purpose of, such meeting need be specified in such waiver. Attendance by a stockholder, whether in person or by proxy, at a stockholders' meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 5. Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders, such date in any case to be not more than sixty (60) days, and in case of a meeting of stockholders not less than ten (10) days, prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. If no record date is fixed: (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (b) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. When a determination of stockholders entitled to notice of or to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 4 Section 6. Voting List. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list shall be open to the examination of any stockholder, for any purpose germane to the meeting during the ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified at the place where the meeting is to be held. Such list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and shall be subject to the inspection of any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the stockholder's list, or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. Section 7. Quorum. The holders of a majority of the shares outstanding and entitled to vote at a meeting, present in person or represented by proxy, shall constitute a quorum at a meeting of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. The stockholders present at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough of the stockholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, the majority of those present or represented by proxy, and entitled to vote at the meeting, may, except as otherwise provided by law, adjourn the meeting to such time and place as they may determine. When a specified item of business requires a vote by a class or series (if the Corporation shall then have outstanding shares of more than one (1) class or series) voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business. Section 8. Voting at Meetings. 8.1 Voting Stock. Except as otherwise provided by law or by the Certificate of Incorporation, each stockholder shall have one (1) vote for each share of stock entitled to vote and held of record by such stockholder and a proportionate vote for each fractional share so held. Any action which may be taken at a meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon present and voted and shall be filed with the Secretary of the Corporation. 5 8.2 Proxies. A stockholder, or the holder of any other security having voting power, may vote either in person or by proxy executed in writing by the stockholder, or by his duly authorized attorney-in-fact. No unrevoked proxy shall be voted or acted upon after three (3) years from the date of its execution, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. 8.3 Voting of Shares Owned by Other Corporations. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the By-Laws of such other corporation may prescribe, or, in the absence of such provision, as the board of directors of such other corporation may determine; or, in the absence of such provision or determination, as the President or Vice President and Secretary or Assistant Secretary of such other corporation may by proxy, duly executed and sealed (but not necessarily acknowledged or verified), designate. 8.4 Voting of Shares Owned by Fiduciaries. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. It shall not be necessary for such fiduciary to obtain a court order authorizing him to vote such shares. The general proxy of a fiduciary shall be given the same weight and effect as the general proxy of an individual or corporation. 8.5 Voting of Securities Owned by Two or More Persons. If shares or other securities having voting power stand of record in the names of two or more persons, the right to vote such securities and the effect of such vote shall be determined as provided in Section 217 of the General Corporation Law of Delaware, effective July 3, 1967, or any law amending or supplementing the same. 8.6 Voting of Shares Owned by Receivers. Shares standing in the name of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. 8.7 Voting of Pledged Shares. A stockholder whose shares are pledged shall be entitled to vote such shares unless in the transfer by the pledgor on the books of the Corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. 8.8 Order of Business. The order of business at annual meetings, and so far as practicable at all other meetings, of stockholders, shall be as follows: 6 (a) Proof of due notice of meeting. (b) Call of roll - examination of proxies. (c) Reading and disposal of any unapproved minutes. (d) Annual reports of officers and committees. (e) Unfinished business. (f) New business. (g) Election of directors. (h) Adjournment. Section 9. Judges of Election. 9.1 Appointment of Judges. In advance of any meeting of stockholders, the Board of Directors may appoint judges of election, who need not be stockholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may, and on the request of any stockholder or his proxy, shall make such appointment at the meeting. The number of judges shall be one (1) or three (3). If appointed at a meeting on the request of one (1) or more stockholders or proxies, the majority of shares present and entitled to vote shall determine whether one (1) or three (3) judges are to be appointed. No person who is a candidate for office shall act as a judge. 9.2 Failure to Act. In case any person appointed as judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting, or at the meeting by the person or officer acting as chairman. 9.3 Duties of Judges. The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count, and tabulate all votes, determine the result, and do such acts as may be proper to conduct the election. If there be three (3) judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. 9.4 Judges' Certificate. On request of the chairman of the meeting, or of any stockholder or his proxy, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of 7 any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. ARTICLE IV The Board of Directors Section 1. Qualifications. The business and affairs of the Corporation shall be managed by a Board of Directors (who need not be residents of the State of Delaware, nor stockholders of the Corporation). Section 2. Numbers. Elections and Terms. Except as otherwise fixed by or pursuant to provisions of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over common stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time by affirmative vote of a majority of the directors then in office. The directors, other than those who may be elected by the holders of any classes or series of stock having a preference over the common stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1997, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1998, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1999, with each class to hold office until its successor is elected and qualified. At each annual meeting of the stockholders of the Corporation after 1996, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. The directors shall be elected by a plurality of votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. Election of directors shall be by written ballot if any stockholder so requests. Section 3. Nomination. Only persons who are nominated in accordance with the following procedures shall be eligible for election by the stockholders as directors of the Corporation. Nominations of persons for election as directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors, (b) by any nominating committee or persons appointed by the Board of Directors or (c) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive office of the 8 Corporation not less than 50 days nor more than 75 days prior to the meeting; provided, however, that in the event that less than 60 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary of the Corporation shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter amended; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by such stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election by the stockholders as a director of the Corporation unless nominated in accordance with the procedures set forth herein. The chairman of the meeting of the stockholders shall, if the facts warrant, determine and declare to the meeting that nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 4. Newly Created Directorships and Vacancies. Except as otherwise fixed by or pursuant to provisions of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over common stock as to dividends or upon liquidation to elect additional directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less then a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 5. Place of Meetings. Meetings of the Board of Directors of the Corporation, annual, regular or special, may be held either within or without the State of Delaware. 9 Section 6. Directors' Meetings. 6.1 Annual Meeting. The Board of Directors shall meet each year immediately after the annual meeting of the stockholders, at the place where such meeting of the stockholders has been held for the purpose of organization, election of officers, and consideration of any other business that may properly by brought before the meeting. No notice of any kind to either old or new members of the Board of Directors for such annual meeting shall be necessary. 6.2 Regular Meetings. Regular meetings of the Board of Directors shall be held without notice at such time and place as may, from time to time, be fixed by resolution of the Board or as may be specified in the call of the meeting. 6.3 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer or the President on at least forty-eight (48) hours notice to each director, either personally, by telephone, by mail, or by facsimile; in like manner and on like notice the Chairman of the Board, Chief Executive Officer or the President must call a special meeting on the written request of any member of the Board of Directors. Notice of any special meeting of the Board of Directors may be waived in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, and shall be equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors, need be specified in the notice or waiver of notice of such meeting. Notice of such special meeting shall include the place, day and hour of such special meeting. 6.4 Adjournment. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting. When a meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting, or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken. Section 7. Quorum. A majority of the number of directors fixed in accordance with these By-Laws shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors; provided that, if all of the directors shall severally or collectively consent in writing to any action to be taken by the Corporation, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors, such action shall be as valid corporate action as though it had been authorized at a duly convened meeting of the Board of Directors; and provided, further, that one (1) or more directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. 10 Section 8. Removal. Except as otherwise fixed by or pursuant to provisions of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over common stock as to dividends or upon liquidation to elect additional directors under specified circumstances, any director may be removed from office only for cause and only by the affirmative vote of the holders of two-thirds of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. Section 9. Interest of Directors and Officers in Contracts. 9.1 No contract or transaction between the Corporation and one (1) or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one (1) or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or (b) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof, or the stockholders. 9.2 Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 10. Financial Report to Shareholders. The directors of the Corporation shall cause to be sent to the stockholders, within one hundred and twenty (120) days after the close of its fiscal year, or as soon thereafter as possible, a financial report as of the closing date of the preceding fiscal year. Such report shall be independently audited and shall give a summary of the assets and liabilities of the Corporation, the amount of dividends paid or declared during the past year, the condition, as to surplus or deficit and how acquired or created, the number of shares issued and outstanding, together with any such particulars as are 11 necessary to disclose the general nature of the liabilities and assets of the Corporation. The report shall also set forth a balance sheet as of the closing date of the preceding fiscal or calendar year, together with a statement of income and profit and loss for the year ended on that date, accompanied by any report thereon of independent accountants. Section 11. Compensation of Directors. The members of the Board of Directors may pursuant to a resolution of the Board be paid a fee and expenses of attendance for attendance at all annual, regular, special and adjourned meetings of the Board or committee meetings. Any director of the Corporation may also serve the Corporation in -any other capacity, and receive compensation therefor in any form. ARTICLE V Committees Section 1. Committees. The Board of Directors may, by resolution passed by the majority of the whole board, designate one (1) or more committees, each committee to consist of one or more directors of the Corporation, to perform such duties and make such investigations and reports as the Board of Directors shall by resolution determine unless otherwise limited by these By-Laws or by law. The Board of Directors may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. No member of a committee shall continue to be a member thereof after he ceases to be a director of the Corporation. The Board of Directors shall have the power at any time to increase or decrease the number of members of any committee, to fill vacancies thereon, to change any members thereof, and to change the functions or terminate the existence thereof. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Section 2. Committee Rules. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided in a resolution of the Board designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. The vote of a majority of committee members present at a meeting at which a quorum is present shall be the act of a committee. ARTICLE VI The Officers Section 1. Number. The principal officers of the Corporation shall be elected by the Board of Directors and shall consist of a Chairman of the Board, a 12 President and/or Chief Executive Officer, one (1) or more Vice Presidents, if elected, a Chief Operating Officer and Chief Financial Officer, also if elected, a Secretary and a Treasurer, and such other subordinate officers and assistant officers and agents as may deemed necessary or desirable by the Board of Directors, or by the Chief Executive Officer, in such manner and for such terms as the Board of Directors or the Chief Executive Officer may prescribe. Any two (2) or more principal offices may be held by the same person, except the offices of President and Secretary. In its discretion, the Board of Directors may choose not to fill an office for any period that it may deem advisable. Section 2. General Duties. All officers and agents of the Corporation, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-Laws, or as may be determined by resolution of the Board of Directors not inconsistent with these By-Laws. Section 3. Election, Term of Office and Qualification. The officers shall be elected annually by the Board of Directors at its annual meeting, or as soon after such annual meeting as may conveniently be possible. Each officer shall hold office until his successor is chosen and qualified; or until his death, or until he shall have resigned, or shall have been removed in the manner provided in Section 4. New offices may be created and filled at any meeting of the Board of Directors. Section 4. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 5. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, or to the Chairman of the Board, if one is elected, the President or Secretary. Such resignation shall take effect on receipt unless the time of effectiveness is specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. Vacancies. Any vacancy in any office because of death, resignation, removal or any other cause shall be filled for the unexpired portion of the term in the manner prescribed in these By-Laws for election or appointment to such office. Section 7. The Chairman of the Board. The Chairman of the Board, if one is elected, shall be chosen from among the directors, shall preside at all meetings of the stockholders and the Board of Directors, if present, and shall, in general, perform all duties incident to the office of Chairman of the Board and such other duties as, from time to time, may be assigned to him by the Board of Directors. 13 Section 8. The Chief Executive Officer. The Chief Executive Officer shall be the principal executive officer of the Corporation. The Chief Executive Officer shall have general charge of the business, affairs and property of the Corporation and control over its officers, agents and employees; and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The Chief Executive Officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or as may be provided in these By-Laws. Section 9. The President. The President shall, in the absence or disability of the Chief Executive Officer, act with all of the powers and be subject to all the restrictions of the Chief Executive Officer. The President shall also perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or these By-Laws may, from time to time, prescribe. Section 10. The Vice President. The Vice President or Vice Presidents, if elected, shall have such power and perform such duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate. At the request of the President, a Vice President may, in the case or the absence or inability to act of the President, temporarily act in his place. In the case of the death of the President, or in the case of his absence or inability to act, a Vice President shall act temporarily in his place until such time as the Board of Directors shall elect a new President. Section 11. The Secretary. The Secretary shall keep or cause to be kept in books provided for the purpose the minutes of the meetings of the stockholders and of the Board of Directors, shall see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law, shall be custodian of the records and of the seal of the Corporation and see that the seal is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-Laws; and, in general, shall perform all duties incident to the office of Secretary and such other duties as may, from time to time, be assigned to him by the Board of Directors or by the Corporation's principal executive officer. Section 12. The Treasurer. The Treasurer shall: (a) in the absence of the Board's appointment of a Chief Financial Officer, whose specific duties shall be established by the Board, be the financial officer of the Corporation; (b) have charge and custody of and be responsible for, all funds of the Corporation, and deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected by the Board of Directors; (c) receive, and give 14 receipts for, moneys due and payable to the Corporation from any source whatsoever; and (d) in general, perform all the duties incident to the office of Treasurer and such other duties as, from time to time, may be assigned to him by the Board of Directors or by the Corporation's principal executive officer. The Treasurer shall render to the Corporation's principal executive officer and the Board of Directors, whenever the same shall be required, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall, if required to do so by the Board of Directors, give the Corporation a bond, the premiums for which shall be paid by the Corporation, in such amount and with such surety or sureties as may be ordered by the Board of Directors, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 13. Other Officers; Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these By-Laws, shall have such authority and perform such duties as may from time to time be prescribed by the Board of Directors or the Chief Executive Officer. Section 14. Compensation. The salaries or other compensation of the officers shall be fixed, from time to time, by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact he is also a director of the Corporation. ARTICLE VII Indemnification of Directors, Officers, Agents and Employees Section 1. Indemnification in Suits and Proceedings with Others. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, 15 create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Indemnification in Derivative Suits. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Reasonable Defense Expenses. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection therewith. Section 4. Standard of Conduct and Determination. Any indemnification under Section 1 and 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. 16 Section 5. Advance of Defense Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in Section 4 of this Article upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Section. Section 6. Nonexclusivity of Indemnification. The indemnification provided by this Section shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Section 7. Insurance Authorization. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Section. Section 8. Definition of "Corporation" in Mergers. For purposes of this Section, references to "the Corporation" shall include, in the case of a merger or consolidation, in addition to the resulting Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or supervising corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 9. Other Definitions. For purposes of this Section, reference to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person 17 who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Section. ARTICLE VIII Special Corporate Acts Section 1. Deposit of Funds. The moneys of the Corporation shall be deposited in the name of the Corporation in such depositories as the Board of Directors shall designate or otherwise authorize, and shall be drawn out only in such manner as the Board of Directors shall prescribe. Section 2. Execution of Deeds, Contract, Etc. Subject always to the specific directions of the Board of Directors, all deeds and mortgages made by the Corporation and all other written contracts and agreements to which the Corporation shall be a party shall be executed in its name by the Chief Executive Officer, the President or Vice President and attested by the Secretary or Assistant Secretary; and the Secretary or Assistant Secretary, when necessary or required, shall affix the corporate seal thereto. Section 3. Endorsement of Stock Certificates. Subject always to the specific directions of the Board of Directors, any share or shares of stock issued by any corporation and owned by the Corporation (including reacquired shares of stock of the Corporation) may, for sale or transfer, be endorsed in the name of the Corporation by the Chief Executive Officer, the President or a Vice President, and attested by the Secretary or an Assistant Secretary either with or without affixing thereto the corporate seal. Section 4. Voting of Shares Owned by Corporation. Subject always to the specific directions of the Board of Directors, any share or shares of stock issued by any other corporation and owned or controlled by the Corporation may be voted at any stockholders' meeting of such other corporation by the Chief Executive Officer, if he be present, or in his absence, the President of the Corporation, if he be present, or in his absence by a Vice President of the Corporation who may be present. Whenever, in the judgment of the Chief Executive Officer, or, in his absence, the President, or, in his absence, a Vice President, it is desirable for the Corporation to execute a proxy or give a stockholder's consent in respect to any share or shares of stock issued by any other corporation and owned by the Corporation, such proxy or consent shall be executed in the name of the Corporation by the Chief Executive Officer, the President or a Vice President of the Corporation and shall be attested by the Secretary or Assistant Secretary of the Corporation under the corporate seal without necessity of any authorization by the Board of Directors. Any person or persons designated in the manner above stated as the proxy or proxies of the 18 Corporation shall have full right, power and authority to vote the share or shares of stock issued by such other corporation and owned by the Corporation the same as such share or shares might be voted by the Corporation. Section 5. Loans. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiary, including any officer or employee who is a director of the Corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute. Section 6. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE IX Amendments The Board of Directors shall have the power to make, adopt, alter, amend and repeal from time to time the By-Laws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to adopt, alter, amend and repeal By-Laws by the Board of Directors; provided, however, that By-Laws shall not be adopted, altered, amended or repealed by the stockholders of the Corporation except by the affirmative vote of the holders of two-thirds of the combined voting power of the then outstanding shares of stock entitled to vote on any proposed amendment to the By-Laws. 19 EX-3.30 29 g83903exv3w30.txt EX-3.30 ARTICLES OF INCORPORATION EXHIBIT 3.30 ARTICLES OF INCORPORATION Domestic Profit Corporation These Articles of Incorporation are signed by the incorporator(s) for the purpose of forming a profit corporation pursuant to the provisions of Act 284, Public Acts of 1972, as amended, as follows: Article I The name of the corporation is Michigan Psychiatric Services, Inc. Article II The purpose or purposes for which the corporation is organized is to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of Michigan. The corporation will invest in and provide management, consultation and other services to psychiatric hospitals and other psychiatric institutions. Article III The total authorized capital stock is: 1. Common Shares $50,000 Par Value Par Share $1.00 ----------------------- --------------------------- Preferred Shares Par Value Per Share $ --------------------- --------------------------- and/or shares without par value as follows 2. Common Shares Stated Value Per Share $ ------------------------ ------------------------ Preferred Shares Stated Value Per Share $ --------------------- ------------------------ 3. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows:

Article IV 1. The address of the initial registered office is 4300 City National Bank Building, Detroit, Michigan 48226. 2. Mailing address of the initial registered office. 3. The name of the initial resident agent at the registered office is Grady Avant, Jr. Article V The name(s) and address(es) of the incorporator(s) is (are) as follows: Name Resident or Business Address Grady Avant, Jr. 4300 City National Bank Building Detroit, Michigan 48226 Article VI When a compromise or arrangement or a plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders or any class of them, a court of equity jurisdiction within the state on application of this corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation, may order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing 3/4 in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or arrangement or a reorganization of this corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on this corporation. Article VII Optional Any action required or permitted by this act to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting of which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to shareholders who have not consented in writing. 2 Article VIII Each of the holders of the common stock of this corporation shall have the preemptive right to subscribe for and purchase his proportional part of any stock now or hereafter authorized to be issued, or shares held in the treasury of this corporation or securities convertible into stock, whether issued for oath or other consideration or by way of dividend or otherwise. I (We) the incorporator(s) sign my (our) name(s) this 20th day of July, 1982. /s/ Grady Avant, Jr. -------------------- 3 EX-3.31 30 g83903exv3w31.txt EX-3.31 BYLAWS EXHIBIT 3.31 MICHIGAN PSYCHIATRIC SERVICES, INC. Consent of Sole Director Pursuant to Section 21.200(525) of the Business Corporation Act of the State of Michigan ------------------------------- The undersigned, being the sole director of MICHIGAN PSYCHIATRIC SERVICES, INC., a Michigan corporation (the "Corporation"), does hereby consent to, authorize, approve and adopt the resolutions attached hereto as Exhibit A. IN WITNESS WHEREOF, the undersigned has executed this Consent as of the 8th day of December, 1987. /s/ Thomas M. Haythe -------------------- Thomas M. Haythe EXHIBIT A RESOLVED, that the following persons be, and they hereby are, approved to hold the offices set forth opposite their respective names, to serve from 12:02 P.M., December 8, 1987, and thereafter at the pleasure of the Board of Directors:
Name Office ---- ------ Robert E. Galloway President and Chairman of the Board Joanne E. Boyd Vice President and Secretary Thomas M. Haythe Vice President and Assistant Secretary
; and it is FURTHER RESOLVED, that the By-laws of the Corporation are hereby amended by deleting Sections 6 and 7 of Article IX thereof in its present form and substituting therefor a new Section 6 and 7 of Article IX thereof in the following form: "CHAIRMAN OF THE BOARD Section 6. The chairman of the board shall, subject to the direction of the board of directors, supervise and control the business and affairs of the corporation. He shall, when present, preside at all meetings of the shareholders and of the board of directors. Section 7. He may sign certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments on behalf of the corporation, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. In general, he shall perform all duties incident to the office of chairman of the board and such other duties as may be prescribed by the board of directors." ; and it is FURTHER RESOLVED, that the By-laws of the Corporation are amended by deleting Section 8 of Article IX thereof in its present form and substituting therefor a new Section 8 of Article IX thereof in the following form: "PRESIDENT SECTION 8. The President shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and in general, shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time." ; and it is FURTHER RESOLVED, that the resignation of Thomas M. Haythe as the sole Director of the Corporation be, and it hereby is, accepted, effective at 12:02 P.M., December 8, 1987; and it is FURTHER RESOLVED, that three Directors shall constitute the whole Board of Directors of the Corporation, effective at 12:02 P.M., December 8, 1987; and it is FURTHER RESOLVED, that, effective at 12:02 P.M., December 8, 1987, Robert E. Galloway, Joanne E. Boyd and Thomas M. Haythe, be, and they hereby are, elected to serve as Directors of the Corporation until the next annual meeting of the stockholders of the Corporation or until their successors are elected and shall have duly qualified. WHEREAS, Healthcare Services of America, Inc., a Delaware corporation and the holder, directly or indirectly, of all of the outstanding capital stock of the Corporation (the "Parent"), is entering into an Amended Credit Agreement (the "Amended Credit Agreement") with Bank of America National Trust and Savings Association, in its capacity as General Agent and in its separate capacity as a Bank, Security Pacific National Bank, in its capacity as Collateral Agent and in its separate capacity as a Bank, and the other banks named therein (the banks parties thereto collectively referred to as the "Banks"), pursuant to which the Parent and the Banks have agreed to the restructuring (the "Restructuring") of the Parent's debt to the Banks; WHEREAS, it is a condition precedent to the Restructuring under the Amended Credit Agreement that the Corporation execute and deliver a consent and confirmation, substantially in the form attached to the draft of the Amended Credit Agreement dated December 16, 1987 (the "Consent"), in favor of the Banks with respect to the security documents previously executed by the Corporation in favor of the Banks; and WHEREAS, the Restructuring and the other transactions contemplated by the Amended Credit Agreement will result in a direct economic benefit to the Corporation, NOW, THEREFORE, BE IT RESOLVED, that this Board of Directors hereby approves the form, terms and provisions of the Consent, substantially in the form attached to the December 16, 1987 draft of the Amended Credit Agreement previously delivered to the members of this Board of Directors, together with such changes therein as the officers of the Corporation executing the same may approve upon the advice of counsel (such approval to be conclusively evidenced by their execution and delivery thereof); and it is FURTHER RESOLVED, that the appropriate officers of the Corporation, including without limitation the Chairman of the Board, the President and any Vice President of the Corporation be, and they hereby individually are, authorized and empowered on behalf of the Corporation to execute and deliver the Consent, together with such other documents as may be necessary or appropriate in connection with the Restructuring and the transactions contemplated thereby, in such form as may be approved by the officers executing the same; and it is FURTHER RESOLVED, that the appropriate officers of the Corporation be, and they hereby individually are, authorized and empowered to take such further action and to execute and deliver on behalf of the Corporation such additional documents, instruments and agreements as may be necessary or appropriate to effectuate the intent of the Amended Credit Agreement and the transactions contemplated thereby. MICHIGAN PSYCHIATRIC SERVICES, INC, Consent of Sole Shareholder Pursuant to Section 21.200(407)(1) of the Business Corporation Act of the State of Michigan ---------------------------------- The undersigned, being the sole shareholder of MICHIGAN PSYCHIATRIC SERVICES, INC., a Michigan corporation (the "Corporation"), does hereby consent to, authorize, approve and adopt the resolutions attached hereto as Exhibit A. IN WITNESS WHEREOF, the undersigned has executed this Consent as of this 8th day of December, 1987. HEALTHCARE SERVICES OF AMERICA, INC. /s/ Joanne E. Boyd ------------------------------------ Secretary and Vice President-Legal EXHIBIT A RESOLVED, that the present Director of the Corporation be, and he hereby is, removed; and it is FURTHER RESOLVED, that, effective at 12:01 P.M., December 8, 1987, Thomas M. Haythe be, and he hereby is, elected to serve as the sole Director of the Corporation until the next annual meeting of the stockholders of the Corporation or until his successor is elected and shall have duly qualified ; and it is FURTHER RESOLVED, that the By-laws of the Corporation are hereby amended by deleting the Section 1 of Article IV thereof in its present form and substituting therefor a new Section 1 of Article IV therein in the following form: "Section 1. The number of Directors which shall constitute the whole Board shall be not less than one (1) nor more than eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified." ACTION BY WRITTEN CONSENT OF THE SOLE SHAREHOLDER OF MICHIGAN PSYCHIATRIC SERVICES, INC. IN LIEU OF A MEETING The undersigned, being the sole shareholder of Michigan Psychiatric Services, Inc., a Michigan corporation (hereinafter the "corporation"), acting by written consent in lieu of a meeting of the shareholders, does hereby adopt the following resolutions: RESOLVED, that each director of the corporation be, and they each hereby are, removed as directors of the corporation; RESOLVED, that the by-laws of the corporation be amended to provide that there shall be one (1) director of the corporation; and RESOLVED, that Michael D. Murphy, M.D. be, and he hereby is, elected as the sole director of the corporation to serve until the next annual meeting of the shareholders of the corporation and until his successor has been duly elected and qualified or until he resigns or is removed. DATED this 30th day of July, 1987. HEALTHCARE SERVICES OF AMERICA, INC. BY: /s/ Michael D. Murphy, M.D. -------------------------------- Michael D. Murphy, M.D. Its: President and Proxy UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS OF MICHIGAN PSYCHIATRIC SERVICES, INC. The undersigned, constituting all of the members of the Board of Directors (the "Board") of Michigan Psychiatric Services, Inc. (the "Company") a Michigan corporation, acting pursuant to Section 21.200(525) of the Michigan General Corporation Code, hereby adept the following resolutions as the action of the Board by unanimous consent in lieu of a meeting and direct that this written consent be placed in the minutes of the proceedings of the Board: RESOLVED that Article IX, Section 1 of the Bylaws of the Company shall be and the same is hereby amended to read as follows: "Section 1. The board of directors at the regular annual meeting thereof shall elect a Chairman of the Board and a President; and, if it so chooses, the board of directors may elect one or more Vice Presidents, with such designation, if any, as the board of directors may determine, and such other officers, including, but not limited to, a Treasurer, a Secretary, and one or more Assistant Secretaries, as the board of directors may choose."; and PROVIDED FURTHER that the following persons shall be, and they are each hereby, appointed and elected to serve in the offices of the Company set forth below opposite their names at the pleasure of the Board until the meeting of the Board following the next annual meeting of the shareholders of the Company or until the successor of each such officer has been elected and qualified. Charles A. Speir Chairman of the Board Thomas M. Rodgers, Jr. President Dated and effective this 1st day of November, 1986. /s/ Charles A. Speir -------------------------- CHARLES A. SPEIR /s/ Thomas M. Rodgers, Jr. -------------------------- THOMAS M. RODGERS, JR. /s/ Ronald V. Norris, M.D. -------------------------- RONALD V. NORRIS, M.D. /s/ Arthur P. Bolton, III -------------------------- ARTHUR P. BOLTON, III BYLAWS OF MICHIGAN PSYCHIATRIC SERVICES, INC. a Michigan Corporation ARTICLE I OFFICES Section 1. The registered office shall be in the City of Detroit, Wayne County, Michigan, or such other place as may be designated as the registered office by the board of directors. Section 2. The corporation may also have offices at such other places both within and without the State of Michigan as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. All meetings of shareholders shall be held at the registered office of the corporation or at such other place either within or without the State of Michigan as may be designated from time to time by the board of directors. Section 2. Annual meetings of shareholders, commencing with the year 1984, shall be held on the first Tuesday of the fourth month of each fiscal year of the corporation if such date is not a legal holiday. If such date is a legal holiday, then the annual meeting shall be held on the next secular day following at such time as determined by the board of directors. At the annual meeting the shareholders shall elect by a plurality vote a board of directors and transact such other business as may properly be brought before the meeting. Section 3. Special meetings of the shareholders may be held at such time and place within or without the State of Michigan as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 4. Special meetings of shareholders may be called at any time for any purpose or purposes by the board of directors or by such other person as may be authorized by law. Section 5. Written notice of the time, place and purposes of a meeting of shareholders shall be given not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting. Section 6. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE III QUORUM AND VOTING OF STOCK Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. The shareholders present in person or by proxy at such meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough 2 shareholders to leave less than a quorum. Whether or not a quorum is present, the meeting may be adjourned by a vote of the shares present. When the holders of a class or series of shares are entitled to vote separately on an item of business, this section applies in determining the presence of a quorum of such class or series for transaction of the item of business. Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater number of shares of stock is required by law or by the articles of incorporation. Section 3. Each outstanding share of stock having voting power shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. In all elections for directors, every shareholder entitled to vote shall have the right to vote, in person or by proxy, the number of shares of stock owned by him for as many persons as there are directors to be elected. Section 4. Any action required or permitted to be taken at an annual or special meeting of the shareholders may be taken without a meeting, without prior notice and without vote, if a consent in writing setting forth the action so taken is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted. 3 Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to shareholders who have not consented in writing. ARTICLE IV DIRECTORS Section 1. The number of directors shall not be less than three nor more than fifteen. Directors need not be residents of the State of Michigan nor shareholders of the corporation. The first board shall consist of eight directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the shareholders at the annual meeting. The directors shall be elected by the shareholders, except as provided in Section 2 of this Article, and shall hold office for the terms for which they are elected and until their successors are elected and qualified. Section 2. Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A directorship to be filled because of an increase in the number of directors or because of a vacancy may be filled by the board for a term of office continuing only until the next election of directors by the shareholders. Section 3. The business and affairs of the corporation shall be managed by its board of directors which may exercise all powers and do all lawful acts and things except those which are required by statute or by the articles of incorporation or by these bylaws to be exercised or done by the shareholders. 4 Section 4. The directors may keep the books of the corporation outside of the State of Michigan at such place or places as they may from time to time determine. Section 5. The board of directors, by the affirmative vote of a majority of the directors in office and irrespective of any personal interest of any of them, may establish reasonable compensation of directors for services to the corporation as directors or officers. ARTICLE V MEETINGS OF THE BOARD OF DIRECTORS Section 1. Regular or special meetings of the board of directors may be held either within or without the State of Michigan. Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or the meeting may convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the board of directors may be called by the chairman of the board on ten days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the chairman of the board or secretary on like notice on the written request of two directors. 5 Section 4. Attendance of a director at a meeting constitutes a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of a regular or special meeting need be specified in the notice or waiver of notice of the meeting. Section 5. A majority of the members of the board then in office constitutes a quorum for transaction of business, unless the articles of incorporation provide for a larger or smaller number. The vote of the majority of members present at a meeting at which a quorum is present constitutes the action of the board unless the vote of a larger number is required by statute, the articles of incorporation or these bylaws. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting until a quorum shall be present. Section 6. Unless otherwise provided by the articles of incorporation, action required or permitted to be taken pursuant to authorization voted at a meeting of the board may be taken without a meeting, if, before or after the action, all members of the board consent thereto in writing. The written consents shall be filed with the minutes of the proceedings of the board. The consent has the same effect as a vote of the board for all purposes. 6 ARTICLE VI EXECUTIVE COMMITTEE Section 1. There shall be an executive committee of the board of directors which may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation. However, the executive committee shall not have the power to amend the articles of incorporation or to amend the bylaws or to fill vacancies on the board of directors or to fix the compensation of directors or to adopt an agreement of merger or consolidation or to recommend to shareholders the sale, lease or exchange of all or substantially all of the corporation's property and assets or to recommend to shareholders a dissolution of the corporation or a revocation of a dissolution. The executive committee may declare a dividend or authorize the issuance of stock. The executive committee may make recommendations to the board of directors with respect to any matter it considers appropriate for board action and may advise the board of directors in any matter on which the committee considers the advice to be appropriate. All action by the executive committee shall be reported orally or in writing to the next meeting of the board of directors, except as the board may waive compliance with this requirement. The board of directors may reconsider any action by the executive committee and take action thereon, provided that no such reconsideration shall adversely affect the rights of third parties who have acted in reliance on action of the executive committee taken in accordance with the authority conferred by these bylaws. 7 Section 2. The executive committee shall consist of the chairman of the board and the president and such other directors as shall be elected to the committee by the board of directors. Section 3. Members of the executive committee shall be elected annually by the board of directors at its first meeting following the annual meeting of the shareholders and may be elected at any meeting of the board. Members of the executive committee shall serve at the pleasure of the board. Section 4. The executive committee shall meet at the call of the chairman of the board at such time and place as he shall appoint, unless a different meeting place or time shall be directed or approved by a majority of the members of the committee. Reasonable notice of the time and place of meeting shall be given by the chairman of the board, orally or in writing; such notice can be waived orally or in writing by any member of the committee and shall be waived by attendance at the meeting without objection to the manner of notice. No notice need be given of adjourned meetings. A majority of the members of the committee shall constitute a quorum at all meetings, and the vote of a majority of the members present at any meeting shall be the action of the committee. Members of the committee may participate in a meeting by means of conference, telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation constitutes presence at the meeting. Action by the committee may be taken without a meeting if, before or after the action, all members of the committee consent thereto in writing. 8 ARTICLE VII COMMITTEES Section 1. In addition to the executive committee, the board may designate one or more other committees, each such committee to consist of one or more of the directors. The board may designate one or more directors as alternate members of such a committee who may replace an absent or disqualified member at a meeting of the committee, in the absence or disqualification of a member of a committee, the members thereof present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the board to act at the meeting in place of such an absent or disqualified member. Each such committee and each member thereof shall serve at the pleasure of the board. Each such committee may, to the extent provided in the resolution of the board or in the bylaws, exercise powers and authority of the board in management of the business and affairs of the corporation subject to any limitations by statute or by the articles of incorporation. ARTICLE VIII NOTICES Section 1. When a notice or communication is required or permitted to be given by mail, it shall be mailed, except as otherwise provided by statute, to the person to whom it is directed at the address designated by him for that purpose. If no address is designated, such notice or communication shall be mailed to his last known address. The notice or communication is given when deposited, with postage 9 thereon prepaid, in a post office or official depository under the exclusive care and custody of the United states postal service. The mailing shall be registered, certified or sent by other first class mail except where otherwise provided by statute. Section 2. When, under statutory requirement or the articles of incorporation or these bylaws or by the terms of an agreement or instrument, a corporation or the board or any committee thereof may take action after notice to any person or after the lapse of a prescribed period of time, the action may be taken without notice and without a lapse of the period of time, if at any time before or after the action is completed the person entitled to notice or to participation in the action to be taken or, in the case of a shareholder, the shareholder's attorney-in-fact submits a signed waiver of such requirements. ARTICLE IX OFFICERS Section 1. The officers of the corporation shall be appointed by the board of directors and shall be a chairman of the board, a president, one or more vice-presidents, a secretary, a treasurer and such other officers as may be determined by the board. Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a chairman of the board, a president, one or more vice-presidents, a secretary, and a treasurer, none of whom except the chairman of the board and the president need be a member of the board of directors. 10 Section 3. The board of directors may appoint such other officers, assistant officers, employees and agents as it deems necessary and may prescribe their powers and duties. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. An officer elected or appointed shall hold office for the term for which he is elected or appointed and until his successor is elected or appointed and qualified, or until his resignation or removal. An officer elected or appointed by the board may be removed by the board with or without cause. CHAIRMAN OF THE BOARD Section 6. The chairman of the board shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. 11 THE PRESIDENT Section 8. The president shall be the chief operating officer of the corporation and shall have the general powers and management usually vested in the chief operating officer of a corporation. The president shall, upon the direction of the chairman of the board or upon the disability of the chairman of the board, perform the duties and exercise the powers of the chairman of the board. The president shall perform such other duties as the board of directors may prescribe. THE VICE-PRESIDENTS Section 9. The vice-president or, if there shall be more than one, the vice-presidents in the order determined by the board of directors shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give or cause to be given notice of all meetings of the shareholders and special meetings of the board of directors and shall perform such other duties as may be prescribed by the board of directors or chairman of the board, under whose supervision he shall be. He shall have custody of the corporate 12 seal of the corporation, and he or an assistant secretary shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 11. The assistant secretary or, if there be more than one, the assistant secretaries in the order determined by the board of directors shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 13. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the chairman of the board and the board of directors, at its regular meetings or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. 13 Section 14. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 15. The assistant treasurer or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE X CERTIFICATES' FOR SHARES Section 1. The shares of the corporation shall be represented by certificates signed by the chairman of the board and by the treasurer, assistant treasurer, secretary or assistant secretary of the corporation and may be sealed with the seal of the corporation or a facsimile thereof. A certificate representing shares shall state upon its face that the corporation is formed under the laws of this state, the name of the person to whom issued, the number and class of shares, and the designation of the series, if any, which the certificate represents, the par value of each share represented by the certificate or a statement that the shares are 14 without par value and shall set forth on its face or back or state that the corporation will furnish to a shareholder upon request and without charge a full statement of the designation, relative rights, preferences and limitations of the shares of each class authorized to be issued, and if the corporation is authorized to issue any class of shares in series, the designation, relative rights, preferences and limitations of each series so far as the same have been prescribed and the authority of the board to designate and prescribe the relative rights, preferences and limitations of other series. Section 2. The signatures of the officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate ceases to be such officer before the certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed, and the board may require the owner of the lost or destroyed certificate or his legal representative to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on the account of the alleged lost or destroyed certificate or the issuance of such a new certificate. 15 TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession,, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, the old certificate cancelled, and the transaction recorded upon the books of the corporation. FIXING OF RECORD DATE Section 5. For the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders or an adjournment thereof or to express consent to or to dissent from a proposal without a meeting or for the purpose of determining shareholders entitled to receive payment of a dividend or allotment of a right or for the purpose of any other action, the board of directors may fix in advance a date as the record date for any such determination of shareholders. The date shall not be more than sixty nor less than ten days before the date of the meeting, nor shall the date be more than sixty days before any other action. If a record date is not fixed, the record date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the close of business on the day next preceding the day on which notice is given or, if no notice is given, the day next preceding the day on which the meeting is held. The record date for determining shareholders for any purpose shall be the close of business on the day on which the resolution of the board relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at a 16 meeting of shareholders has been made, the determination applies to any adjournment of the meeting, unless the board fixes a new record date for the adjourned meeting. REGISTERED SHAREHOLDERS Section 6. For the purpose of determining shareholders entitled to vote or receive payment of a dividend or allotment of a right, the corporation shall be authorized to accept the list of shareholders made and certified by the officer or agent having charge of the stock transfer books as prima facie evidence as to who are such shareholders on the designated record date. LIST OF SHAREHOLDERS Section 7. The officer or agent having charge of the stock transfer books for shares of a corporation shall make and certify a complete list of the shareholders entitled to vote at a shareholders' meeting or any adjournment thereof. The list shall be arranged alphabetically within each class and series with the address of and the number of shares held by each shareholder. Such list shall be produced at the time and place of the meeting, be subject to inspection by any shareholder during the whole time of the meeting, and be prima facie evidence as to who are the shareholders entitled to examine the list or to vote at the meeting. A person who is a shareholder of record of the corporation may, upon at least ten days' written demand, examine for any proper purpose in person or by agent or attorney, during usual business hours, the minutes of shareholders' meetings and record of 17 shareholders of the corporation and make extracts therefrom at the place where they are kept. ARTICLE XI DIVIDENDS Section 1. The board of directors or the executive committee may declare any pay dividends or make other distributions in cash, bonds or property of the corporation, including the shares or bonds of other corporations, on the outstanding shares of the corporation, except when currently the corporation is insolvent or would thereby be made insolvent or when the declaration, payment or distribution would be contrary to any statutory restriction or restriction contained in the articles of incorporation. Section 2. Before payment of any dividend, the board of directors or executive committee may create reserves from the earned surplus or capital surplus of the corporation for any proper purpose and may increase, decrease or abolish any such reserve. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. 18 SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Michigan". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XII AMENDMENTS Section 1. These bylaws may be amended or repealed or new bylaws may be adopted by the shareholders or board of directors except as may be provided in the articles of incorporation. The shareholders may prescribe in these bylaws that any bylaw made by them shall not be altered or repealed by the board of directors. Amendment of the bylaws by the board of directors requires a vote of not less than a majority of the members of the board then in office. ARTICLE XIII DIRECTORS' ANNUAL STATEMENT Section 1. At least once in each year the board of directors shall cause a financial report of the corporation for the preceding fiscal year to be made and distributed to each shareholder thereof within three months after the end of the fiscal year. The report shall include the corporation's statement of income, its year-end balance sheet and, if prepared by the corporation, its statement of source and application of funds and such other information as may be required by statute. 19 FINANCIAL STATEMENT TO SHAREHOLDERS Section 2. Upon written request of a shareholder, the corporation shall mail to the shareholder its balance sheet as at the end of the preceding fiscal year, its statement of income for such fiscal year, and, if prepared by the corporation, its statement of source and application of funds for such fiscal year. ARTICLE XIV INDEMNIFICATION Section 1. The corporation, acting by its board of directors, shall have power to indemnify any or all of its directors, officers, agents, employees, and committee members, and persons who are serving at the request of the corporation in those capacities for another corporation, partnership, joint venture, trust or other enterprise, at any time in office or while serving, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and including actions or suits by or in the right of the corporation, related to such persons being or serving in the manner and capacity above described to the extent permitted by the laws of the State of Michigan as now or hereafter in effect. Nothing herein provided shall affect any rights to indemnification to which any persons may be entitled by contract or otherwise by law. The corporation, acting by its board of directors, shall have power to purchase and maintain insurance on behalf of any of the persons above described or otherwise. The corporation, acting by 20 its board of directors, shall to the extent permitted by the laws of the State of Michigan as now or hereafter in effect have power to pay expenses and liabilities incurred by or on behalf of any of the persons above described in connection with any threatened or pending action, suit or proceeding in advance of the final disposition of such action, suit or proceeding as authorized by the laws of the State of Michigan. All rights of indemnification shall inure to the benefit of the heirs, executors, administrators and assigns of the person involved. REIMBURSEMENT TO CORPORATION OF DISALLOWED EXPENSES Section 2. Any payment made to an officer of the corporation as salary, commission, bonus, interest, rent, or as reimbursement for an expense incurred by him on behalf of the corporation, which is disallowed in whole or in part as a deductible expense to the corporation by the Internal Revenue Service, shall be reimbursed by such officer to the corporation to the full extent of such disallowance. It shall be the duty of the board of directors to enforce payment of each such amount disallowed. In lieu of payment by the officer, subject to the determination of the board of directors, proportionate amounts may be withheld from future compensation payments to the officer until the amount owed to the corporation has been recovered. 21 EX-3.32 31 g83903exv3w32.txt EX-3.32 CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.32 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP OF NEURO INSTITUTE OF AUSTIN, L.P. The undersigned, a general partner of NEURO INSTITUTE OF AUSTIN, L.P., a limited partnership, pursuant to Section 2.02 of the Texas Revised Uniform Limited Partnership Act, as amended, hereby certifies that: 1. The name of the limited partnership is Neuro Institute of Austin, L.P. 2. The Certificate of Limited Partnership is amended as follows: The Certificate of Limited Partnership of Neuro Institute of Austin, L.P. is amended by striking Number 4 in its entirety and replacing therefore the following: 4. The name, the mailing address, and the street address of the business or resident of each general partner is as follows: NAME MAILING ADDRESS STREET ADDRESS (INCLUDE CITY, STATE, (INCLUDE CITY, STATE, ZIP CODE) ZIP CODE) PSI Texas Hospitals, LLC 310 25th Avenue North Same as Mailing Address Suite 209 Nashville, TN 37203 Executed on this 30th day of October, 2001. GENERAL PARTNER: PSI HOSPITALS, INC. By: /s/ Steven T. Davidson ---------------------- Steven T. Davidson, Vice President CERTIFICATE OF LIMITED PARTNERSHIP 1. The name of the limited partnership is Neuro Institute of Austin, L.P. 2. The street address of its proposed registered office in Texas is 905 Congress Avenue, Austin. TX 78701 and the name of its proposed registered agent in Texas at such address is National Registered Agents, Inc. 3. The address of the principal office in the United States where records of the partnership are to be kept or made available is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203. 4. The name, the mailing address, and the street address of the business or residence of each general partner is as follows: NAME MAILING ADDRESS STREET ADDRESS (INCLUDE CITY, STATE, ZIP (INCLUDE CITY, STATE, ZIP CODE) CODE) PSI Hospitals, Inc. 310 25th Ave N, Suite 209, Same as Mailing Address Nashville, TN 37203 Date Signed: October 12, 2001 PSI HOSPITALS, INC. By: /s/ Steven T. Davidson ---------------------- Steven T. Davidson Vice President EX-3.33 32 g83903exv3w33.txt EX-3.33 LIMITED PARTNERSHIP AGREEMENT EXHIBIT 3.33 LIMITED PARTNERSHIP AGREEMENT OF NEURO INSTITUTE OF AUSTIN, L.P. This Limited Partnership Agreement is made and entered into this 31st day of October, 2001, by and between PSI TEXAS HOSPITALS, LLC, a Texas limited liability company, the principal place of business of which is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as the general partner (the "General Partner"), and PSI HOSPITALS, INC., a Delaware corporation, the principal place of business of which is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as the limited partner (the "Limited Partner"). (The General Partner and Limited Partner are collectively referred to herein as the "Partners.") The Partners hereby agree as follows: ARTICLE 1. GENERAL 1.1 Formation. The Partners hereby form Neuro Institute of Austin, L.P. (the "Partnership") as a limited partnership under the Texas Revised Limited Partnership Act (the "Limited Partnership Act"). 1.2 Name. The name of the Partnership shall be "Neuro Institute of Austin, L.P." and all business of the Partnership shall be conducted in such name; provided, however, the General Partner may change the name of the Partnership at any time and from time to time by notice to the Limited Partner. 1.3 Purpose. The purpose of the Partnership is to engage in any lawful act or activity in which a limited partnership may engage under the Limited Partnership Act including, without limitation, the acquisition, development, construction, owning, mortgaging, encumbering, leasing, disposition, improvement of and otherwise dealing with real property and related personal property. 1.4 Term. The term of the Partnership shall commence upon filing of the Certificate of Limited Partnership of Neuro Institute of Austin, L.P. (the "Certificate") with the Texas Secretary of State and shall continue until the completion of the Partnership's dissolution, winding up, and liquidation as provided herein. 1.5 Place of Business. The Partnership may have such places of business within the United States of America as the General Partner determines to be appropriate from time to time. 1.6 Registered Agent. The registered agent for service of process on the Partnership in the State of Texas shall be National Registered Agents, Inc., 905 Congress Avenue, Austin, Texas 78701, or such other person as the General Partner may designate from time to time. 1.7 Filings. The General Partner has executed and shall cause to be filed the Certificate in the office of the Texas Secretary of State, in accordance with the provisions of the Limited Partnership Act, and shall execute and file such other certificates or documents required by any state or other jurisdiction in which the Partnership engages in business. The General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership and shall execute and file for public record any and all filings in all places and at such times as necessary for the continuation of and transaction of business by the Partnership. ARTICLE 2. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 2.1 General Partner. The General Partner shall contribute the sum of One Dollar ($1.00) as and for the General Partner's initial capital contribution for its general partnership interest in the Partnership. Except as provided in this Section 2.1, the General Partner shall not be required to make any other capital contributions to the Partnership. 2.2 Contribution of Limited Partner. The Limited Partner shall contribute the sum of Ninety-Nine Dollars ($99.00) to the Partnership as and for its initial capital contribution for its limited partnership interest in the Partnership. 2.3 No Right to Demand Capital Contributions: No Priorities. Except as otherwise provided in this Agreement and permitted by the Limited Partnership Act, the Limited Partner shall not demand or receive a return of all or a portion of its capital contributions or withdraw from the Partnership without the written consent of the General Partner. Under circumstances requiring a return of any capital contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. No Partner shall have priority over any other Partner, either with respect to the return of capital contributions or with respect to profits, losses or distributions. 2.4 No Interest on Capital Contributions. No Partner shall receive any interest, salary or drawing with respect to its capital contributions or its capital account or for services rendered to the Partnership or otherwise in its capacity as a Partner, except as otherwise provided in this Agreement. 2.5 Limited Liability. The Limited Partner shall not be liable for the debts, liabilities, contracts or any other obligations of the Partnership. Except as otherwise provided by applicable law, the Limited Partner shall be liable only to 2 make its capital contributions and shall not be required to lend any funds to the Partnership or, after its initial capital contribution has been made, to make any additional capital contributions to the Partnership. Except as otherwise provided in this Agreement, the General Partner shall not have any personal liability for the repayment of any capital contributions of the Limited Partner. The Limited Partner shall not participate in the control of the business of the Partnership. 2.6 Establishment of Capital Accounts, A capital account shall be established and maintained for each Partner in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the U.S. Treasury Regulations promulgated thereunder (the "Regulations") and this Agreement. ARTICLE 3. ALLOCATIONS AND DISTRIBUTIONS 3.1 Participation in Profits or Losses. Profits or losses of the Partnership, including all items of income, gain, loss, deduction, and credit, for each fiscal year shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. 3.2 Basis for Determining Profits or Losses. For purposes of determining the profits, losses, and each item thereof allocable to any period, profits, losses, and each item thereof shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Code Section 706 and the Regulations thereunder. 33 Distributions. Except as otherwise provided in Article 7 hereof, distributions of cash or other property shall be made, at such times as the General Partner may determine, one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. ARTICLE 4. MANAGEMENT 4.1 Management of the Partnership. The General Partner shall have full, exclusive and complete charge of all affairs and business of the Partnership and of the management and control of the Partnership, subject only to the limitations in this Agreement. The General Partner shall have all the rights and powers that may be possessed by a general partner under the Limited Partnership Act and such rights and powers as are otherwise conferred by law or it deems necessary, advisable or convenient in managing the business and affairs of the Partnership. 4.2 Limited Role of Limited Partner. Except as otherwise set forth in this Section 4.2, the Limited Partner shall not take part in, or interfere in any manner with, the conduct or control of the business or affairs of the Partnership or have any 3 authority to act for, or on behalf of, the Partnership; provided, however, at the sole and absolute discretion of the General Partner, the Limited Partner may possess and exercise any of the powers allowed to be possessed or exercised by a limited partner under the Limited Partnership Act without the Limited Partner being deemed to participate in the control of the Partnership's business. 4.3 Exculpation of General Partner. No act or omission by the Partnership or the General Partner, except gross negligence or willful misconduct, shall ever subject the General Partner or its parent corporation, their shareholders, officers, directors, employees, or agents to any liability to the Partnership or any Partner. The foregoing exculpation and exoneration expressly covers acts or omissions which constitute or are accompanied by simple, common or ordinary negligence. 4.4 Indemnification of General Partner. To the fullest extent provided by law, the Partnership shall indemnify the General Partner and its parent corporation, their shareholders, officers, directors, partners, agents and employees, and hold them harmless from and against all claims and liabilities arising from, or related to, any qualified act or omission of the Partnership and/or the General Partner under this Agreement, including all damages, judgments, fees, settlements, costs and attorneys' fees actually and reasonably paid or incurred by the General Partner or its parent corporation in connection with any action, claim, suit or proceeding covered by this indemnity. A "qualified act or omission" for purposes of this Section 4.4 is an act or omission done in good faith or in a manner the General Partner or its parent corporation reasonably believed to be in, or not opposed to, the best interest of the Partnership. ARTICLE 5. TRANSFERS OF INTERESTS 5.1 Voluntary Transfers by General Partner. The General Partner shall have the right to sell, assign, transfer, give or in any other way dispose of its entire interest as general partner of the Partnership. Prior to the effective date of such sale, assignment or transfer, such purchaser, assignee or transferee shall be admitted as an additional general partner of the Partnership and is hereby authorized to continue the business of the Partnership without dissolution. Upon such a sale or other disposition, the General Partner shall cease to be a general partner of the Partnership as provided in Article 6. Notwithstanding anything in this Agreement to the contrary, the General Partner may pledge, encumber, or otherwise give as collateral for loans or other indebtedness, its general partnership interest in the Partnership without notice to or the consent of the Limited Partner; upon any such pledge, encumbrance or grant of a security interest by the General Partner, the General Partner shall not cease to be a general partner of the Partnership. 4 5.2 Transfer by Limited Partner. No voluntary assignments, transfers, hypothecation or encumbrance of the Limited Partner's interest or any portion thereof shall be permitted unless (i) the prior written consent of the General Partner is obtained, and (ii) said assignment, transfer, hypothecation or encumbrance, in the opinion of counsel satisfactory to the General Partner, complies with all applicable securities laws, and does not dissolve the Partnership under the Limited Partnership Act. The requirement of said opinion may be waived in the sole discretion of the General Partner. Any such transfer, assignment, hypothecation or encumbrance of the Limited Partner's interest shall not require the dissolution, winding up and liquidation of the Partnership. Except to the extent otherwise specified in any such assignment, an assignee of any interest in the Partnership shall be entitled to receive allocations of profits or losses, including all items of income, gain, loss, deduction, and credit thereof, and distributions of cash or other property attributable to the assigned interest from and after the date on which such assignment is treated to have occurred under this Agreement. No assignee of all or any part of the Limited Partner's interest shall become a substituted Limited Partner with respect to such interest unless the General Partner shall consent thereto in writing, such consent to be in the sole discretion of the General Partner. A person who acquires an interest in the Partnership but who is not admitted as a substituted Limited Partner pursuant to this Section 5.2 shall be entitled only to allocations and distributions with respect to such interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books and records of the Partnership, and shall not have any of the rights, including but not limited to the right to vote, of a General Partner or a Limited Partner under the Limited Partnership Act or this Agreement. Accordingly, with respect to such rights, including but not limited to the right to vote, a Limited Partner shall be treated for purposes of this Agreement as the owner of any interest assigned by him with respect to which the assignee has not become a substituted Limited Partner. 5.3 Bankruptcy or Dissolution of the Limited Partner. Upon the bankruptcy, dissolution, or cessation to exist as a legal entity of the Limited Partner, the authorized representative or successor of such Limited Partner shall have all the rights of the Limited Partner for the purpose of effecting the orderly winding up and dissolution of the business and affairs of such Limited Partner and such power as the Limited Partner possessed to constitute a successor as an assignee and in making application to substitute such assignee as a Limited Partner. 5 ARTICLE 6. RESIGNATION OF OR TERMINATION OF STATUS AS GENERAL PARTNER 6.1 Withdrawal of General Partner. The General Partner shall have the right to withdraw as and cease to be the General Partner at any time upon thirty (30) days written notice to the Limited Partner. Prior to the effective date of the withdrawal of a General Partner, the Limited Partner may elect an additional general partner of the Partnership who is hereby authorized to and shall continue the business of the Partnership without dissolution. 6.2 Termination of Status As General Partner. The General Partner shall cease to be the General Partner upon the occurrence of any of the following events: (i) the transfer of its general interest in the Partnership pursuant to Section 5.1, (ii) the vote by the Limited Partner to remove such General Partner for good cause (which shall mean gross negligence or fraud in failure to comply with any material covenant or agreement contained in this Agreement), and delivery to the General Partner of written notice of such vote, (iii) the bankruptcy of the General Partner or the filing of a certificate of dissolution, or its equivalent, or (iv) the involuntary transfer by operation of law of the General Partner's interest in the Partnership. 6.3 Liability of the General Partner after Resignation or Termination. If the General Partner resigns or its status as a general partner is terminated in accordance with the provisions of this Article 6 or the Limited Partnership Act, the General Partners liability as a general partner of the Partnership under the Limited Partnership Act and this Agreement shall cease and the Partnership shall promptly take all steps reasonably necessary under the Limited Partnership Act to cause such cessation of liability; provided, however, that if the General Partner resigns during dissolution and winding up the Partnership, the General Partner shall continue to be the General Partner for purposes of winding up the Partnership's affairs pursuant to Section 7.2 of this Agreement, unless a successor General Partner is elected. 6.4 Election of Successor General Partner. Upon the withdrawal or termination of general partnership status of a General Partner, the remaining General Partner, if any, is hereby authorized to and shall continue the Partnership without dissolution. If all of the General Partners withdraw or their status is terminated pursuant to this Agreement or the Limited Partnership Act, the Limited Partner may, within ninety (90) days of such withdrawal or termination of status, consent in writing to continue the business of the Partnership and to the election, to be effective as of the date of such withdrawal or termination of status, of one or more successor General Partners. Such election may occur before or after the effectiveness of such withdrawal or termination; provided, however, that if such election occurs before such effectiveness, the person so elected shall not become the 6 General Partner until such withdrawal or termination is effective and such person has executed an amendment to this Agreement and has filed any and all such amendments to the Certificate and other documents necessary to comply with the Limited Partnership Act, and shall agree to accept all accompanying liabilities, duties and obligations hereunder. The successor General Partner or General Partners shall purchase from the terminated or withdrawing General Partner its interest as general partner in the Partnership for an amount equal to its then capital account balance. If an additional or successor General Partner is admitted to the Partnership as provided in this Agreement, the additional or successor General Partner, together with all remaining General Partners, are hereby authorized to and shall continue the business of the Partnership without dissolution (and if a successor General Partner is admitted at a time when the withdrawing General Partner is the sole remaining General Partner, such successor shall be admitted as a General Partner immediately prior to the effective date of the withdrawal from the Partnership of the withdrawing General Partner and such successor General Partner shall continue the business of the Partnership without dissolution). ARTICLE 7. DISSOLUTION AND WINDING UP OF THE PARTNERSHIP 7.1 Dissolution of the Partnership. The Partnership shall dissolve and commence winding up its affairs and liquidating its assets upon the occurrence of (i) the written consent of the Limited Partner to dissolve, wind up and liquidate the Partnership, (ii) the withdrawal, removal, bankruptcy, the filing of a certificate of dissolution, or its equivalent, of the General Partner, or any other event which under the Limited Partnership Act causes a general partner to cease to be a general partner of the Partnership, unless (a) at the time of the occurrence of such event there is a remaining general partner who agrees to continue the business of the Partnership without dissolution and does so, or (b) within ninety (90) days of such event, the Limited Partner agrees in writing to the continuation of the business of the Partnership and to the appointment (effective as of the date of such event) of one or more additional or successor general partners of the Partnership, (iii) the occurrence of any other event that makes it unlawful, impossible, or impractical to carry on the business of the Partnership, (iv) the bankruptcy of the Partnership, or (v) the entry of a decree of judicial dissolution of the Partnership pursuant to the Limited Partnership Act. 7.2 Winding Up and Liquidation of the Partnership. Upon the dissolution of the Partnership as described in Section 7.1, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The General Partner shall be responsible for overseeing the winding up and liquidation of the Partnership and shall take full account of the Partnership's liabilities and assets. Such assets shall be liquidated thereafter as promptly as is consistent with obtaining the fair market value thereof. The proceeds therefrom, to the extent 7 sufficient, shall be applied and distributed (i) first to creditors, including Partners who are creditors to the extent otherwise permitted by law, in satisfaction of liabilities of the Partnership (whether by payment or the making of reasonable provisions for payment thereof), and (ii) the balance, if any, to the Partners in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods. 7.3 Certificate of Cancellation. Upon completing the winding up and liquidation of the Partnership, the General Partner shall execute, acknowledge, and cause to be filed a Certificate of Cancellation of the Partnership as provided by the Limited Partnership Act and such other documents as may be required by any state or other jurisdiction in which the Partnership engages in business to evidence the Partnership's dissolution and termination of existence. The Limited Partner shall join in executing such documents if such joinder is required by the Limited Partnership Act or deemed necessary or appropriate by the General Partner. Upon the filing of a Certificate of Cancellation of the Partnership and any other, documents necessary to terminate the existence of the Partnership in the appropriate public office(s) as required under the Limited Partnership Act, the Partners shall cease to be such and the Partnership and this Agreement shall be terminated. ARTICLE 8. BOOKS OF ACCOUNT, ACCOUNTING, REPORTS, FISCAL YEAR AND BANKING 8.1 Books of Account. The Partnership's books and records and this Agreement, and all amendments hereto, shall be maintained at the office of the Partnership located at 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as required by the Limited Partnership Act, and the Limited Partner shall have reasonable access thereto for inspection and examination. The books and records shall reflect all Partnership transactions and shall be appropriate and adequate for the Partnership's business. 8.2 Accounting and Reports; Audit. As soon as reasonably practicable after the end of each fiscal year, each Partner shall be furnished with a copy of a statement of income or loss of the Partnership for such year, and a statement showing the amounts allocated to such Partner pursuant to this Agreement during or in respect of such year, and any items of income, expense or credit allocated to it for purposes of federal income taxation pursuant to this Agreement, all prepared in accordance with the accounting method adopted by the Partnership, all of which information will be reflected in the Partnership's federal income tax return; and delivery of a copy of such tax return to each Partner shall be sufficient to fulfill the obligation of the General Partner with respect to providing such information. In addition, the General Partner shall submit such other reports as it shall deem 8 necessary to keep the Limited Partner advised of the status of Partnership operations. ARTICLE 9. MISCELLANEOUS PROVISIONS 9.1 Further Action. Each Partner shall execute and deliver such papers, documents and instruments, and perform such acts as are necessary or appropriate, in the sole discretion of the General Partner, to implement the terms hereof and the intent of the Partners hereto. 9.2 Indemnity of Partners. Each Partner shall be liable to the extent of its respective interest in the Partnership. Subject to the foregoing limitation, each Partner shall indemnify and hold harmless the other Partners from and against any and all claims, losses, damages, costs or expenses of any kind or character in excess of such other Partners' interests arising out of any transaction contemplated by this Agreement or resulting therefrom, 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby, and in lieu of such illegal, invalid and unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.4 Right to Rely Upon the Authority of General Partner. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of any property or interest owned by the Partnership shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any such instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchaser shall have received written notice affecting the same. 9.5 Texas Law. The Partners intend that the laws of Texas govern the determination of the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. 9.6 Waiver of Action for Partition. Each of the Partners irrevocably waives, during the term of the Partnership, any right to maintain any action for partition with respect to the Partnership's property. 9 9.7 Parties in Interest. Subject to the provisions contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the respective parties hereto. (Remainder of page intentionally left blank) 10 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GENERAL PARTNER: PSI TEXAS HOSPITALS, LLC, a Texas limited liability company By: /s/ Steven T. Davidson ------------------------------------ Steven T. Davidson, Vice President LIMITED PARTNER: PSI HOSPITALS, INC., a Delaware corporation By: /s/ Steven T. Davidson ------------------------------------ Steven T. Davidson, Vice President 11 EX-3.34 33 g83903exv3w34.txt EX-3.34 CERTIFICATE OF INCORPORATION EXHIBIT 3.34 CERTIFICATE OF INCORPORATION OF PSI CEDAR SPRINGS HOSPITAL, INC. The undersigned, for the purposes of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that: FIRST: The name of this corporation is PSI Cedar Springs Hospital, Inc. SECOND: Its Registered Office in the State of Delaware is to be located at 9 East Loockerman Street, in the City of Dover, County of Kent, 19901. The Registered Agent in charge thereof is National Registered Agents, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The amount of the total authorized capital stock of the corporation is one thousand (1,000), all of which are of a par value of $0.01 each and classified as Common stock. FIFTH: No holder of any of the shares of the corporation shall, as such holder, have any right to purchase or subscribe for any shares of any class which the corporation may issue or sell, whether or not such shares are exchangeable for any shares of the corporation of any other class or classes, and whether such shares are issued out of the number of shares authorized by the Certificate of Incorporation of the corporation as originally filed, or by any amendment thereof, or out of shares of the corporation acquired by it after the issue thereof; nor shall any holder of any of the shares of the corporation, as such holder, have any right to purchase or subscribe for any obligations which the corporation may issue or sell that shall be convertible into, or exchangeable for, any shares of the corporation of any class or classes, or to which shall be attached or shall appertain to any warrant or warrants or other instrument or instruments that shall confer upon the holder thereof the right to subscribe for, or purchase from the corporation any shares of any class or classes. SIXTH: The name and mailing address of the incorporator are as follows: NAME MAILING ADDRESS Lee C. Dilworth, Esq. c/o Harwell Howard Hyne Gabbert & Manner, P.C. 315 Deaderick Street, Suite 1800 Nashville, Tennessee 37238-1800 SEVENTH: The duration of the corporation shall be perpetual. EIGHTH: When a compromise or arrangement is proposed between the corporation and its creditors or any class of them or between the corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of the corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation pursuant to the provisions of Section 291 of Title 8 of the Delaware Code or on application of trustees in dissolution or of any receiver or receivers appointed for the corporation pursuant to provisions of Section 279 of Title 8 of the Delaware Code may order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or arrangement or a reorganization of the corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on the corporation. NINTH: The personal liability of all of the directors of the corporation is hereby eliminated to the fullest extent allowed as provided by the Delaware General Corporation Law, as the same may be supplemented and amended. TENTH: The corporation shall, to the fullest extent legally permissible under the provisions of the Delaware General Corporation Law, as the same may be amended and supplemented, indemnify and hold harmless any and all persons whom it shall have power to indemnify under said provisions from and against any and all liabilities (including expenses) imposed upon or reasonably incurred by him in connection with any action, suit or other proceeding in which he may be involved or with which he may be threatened, or other matters referred to in or covered by said provisions both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer of the corporation. Such indemnification provided shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, Agreement or Resolution adopted by the shareholders entitled to vote thereon after notice. Dated this 18th day of February, 2003. /s/ Lee C. Dilworth ----------------------------- Lee C. Dilworth, Incorporator EX-3.35 34 g83903exv3w35.txt EX-3.35 BYLAWS EXHIBIT 3.35 BYLAWS OF PSI CEDAR SPRINGS HOSPITAL, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the board of directors, or by the holders of not less than one-tenth (l/l0) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders of the corporation shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting; notice may be communicated in person; by telephone, telegraph, teletype or other form of wire or wireless communication; or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (l0) nor more than two months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transactions of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's Certificate of Incorporation or Bylaws, or by the laws of Delaware, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than three (3), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the board of directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The board may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication not less than two (2) days before the meeting noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the certificate of incorporation, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The board of directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two or more persons, who may or 2 may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the board of directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the board. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the board of directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, then upon its acceptance by the board of directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the board of directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 3 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by either the applicable securities laws or any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the board of directors shall prescribe. ARTICLE VI ACTION BY CONSENT 6.1 Actions by Board of Directors. Whenever the directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors. 6.2 Actions by Shareholders. Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by statute, the Certificate of Incorporation or these Bylaws, the meeting and vote of shareholders may be dispensed with, if the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted shall consent in writing to such corporate action being taken. ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (l) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors. ARTICLE VIII FISCAL YEAR The fiscal year for the corporation shall be determined by the Corporation's Board of Directors. 4 CERTIFICATION I certify that these Bylaws were adopted by unanimous written consent of the shareholders of the corporation on the 19th day of February, 2003. /s/ Steven T. Davidson ------------------------ Steven T. Davidson, Secretary 5 EX-3.36 35 g83903exv3w36.txt EX-3.36 CHARTER EXHIBIT 3.36 CHARTER OF PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. The undersigned person, having capacity to contract and acting as the incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation: 1. The name of the corporation is PSI Community Mental Health Agency Management, Inc. 2. The corporation's initial registered office is located at 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238, County of Davidson. The initial registered agent at that office is Glen Allen Civitts, Esq. 3. The name and address of the incorporator is Glen Allen Civitts, Esq., Harwell Howard Hyne Gabbert & Manner, P.C., 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238. 4. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203. 5. The corporation is for profit. 6. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 7. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the By-laws of the corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 1 8. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 8 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 9. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 9 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 9 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under 2 the Tennessee Business Corporation Act, and a determination is made that the facts then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 9 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expenses to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 20th day of June, 1997. /s/ Glen Allen Civitts, Incorporator 3 EX-3.37 36 g83903exv3w37.txt EX-3.37 BYLAWS EXHIBIT 3.37 BYLAWS OF PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of 1 business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director 2 of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such 3 resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of Directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The first fiscal year for the corporation shall be the calendar year. CERTIFICATION These Bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on June 20, 1997. /s/ Joey A. Jacobs --------------------- /s/ Douglas B. Lewis --------------------- 5 EX-3.38 37 g83903exv3w38.txt EX-3.38 CERTIFICATE OF INCORPORATION EXHIBIT 3.38 CERTIFICATE OF INCORPORATION OF PSI HOSPITALS, INC. The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified, and referred to as the "Delaware General Corporation Law"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "Corporation") is PSI Hospitals, Inc. SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 9 East Loockerman Street, Dover, Delaware 19901, County of Kent; and the name of the registered agent of the Corporation in the State of Delaware at such address is National Registered Agents, Inc. THIRD: The nature of the business or purposes of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. FOURTH: 1. The maximum number of shares of stock which the Corporation shall have the authority to issue is one thousand (1,000) shares of Common Stock having a par value of $0.01 per share, which shares shall not be subject to any preemptive rights. 2. Pursuant to Section 151 of the Delaware General Corporation Law, a statement of the designations, powers, preferences and rights, and the qualifications and restrictions thereof, in respect of each class of capital stock is as follows: A. COMMON STOCK (i) Dividends and Distributions. Except as otherwise provided by this Certificate of Incorporation, the holders of shares of Common Stock shall be entitled to receive such dividends and distributions as may be declared upon such shares of Common Stock, from time to time by a resolution or resolutions adopted by the Board of Directors. (ii) Voting Rights. All holders of Common Stock shall be entitled to notice of any stockholders' meeting. Subject to the provisions of any applicable law and except as otherwise provided in this Certificate of Incorporation, all voting rights shall be vested solely in the Common Stock. The holders of shares of Common Stock shall be entitled to vote upon the election of directors and upon any other matter submitted to the stockholders for a vote. Each share of Common Stock issued and outstanding shall be entitled to one noncumulative vote. A fraction of a share of Common Stock shall not be entitled to any voting rights whatsoever. (iii) Liquidation, Dissolution or Winding Up. Except as otherwise provided in this Certificate of Incorporation, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and liabilities of the Corporation, all assets of the Corporation shall be shared pro rata among the holders of the Common Stock. 3. Except as otherwise provided in this Certificate of Incorporation or by applicable law, the Corporation's capital stock, regardless of class, may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine by a resolution or resolutions adopted by a majority of the Board of Directors then in office. FIFTH: The name and the mailing address of the incorporator are as follows: NAME MAILING ADDRESS J. Gregory Giffen, Esq. Harwell Howard Hyne Gabbert & Manner, P.C. 315 Deaderick Street Suite 1800 Nashville, Tennessee 37238-1800 SIXTH: The Corporation shall have perpetual existence. SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors, or any class of them, and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation, or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code, or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the court directs. If a majority and number representing three-fourths (3/4) in value of the creditors or class of creditors and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which said application has been made, be binding on all the creditors or class of creditors and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. 2 EIGHTH: 1. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. 2. The Board of Directors shall consist of not less than two (2) nor more than fifteen (15) persons, the exact numbers to be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of directors then in office. 3. Whenever the Corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the Corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of this Certificate of Incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders, except as otherwise provided by applicable law; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. NINTH: The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of clause (b) of Section 102 of the Delaware General Corporation Law, as the same may be amended or supplemented. The provisions of this Article Ninth are not intended to, and shall not, limit, supersede or modify any other defense available to a director under applicable law. Any repeal or modification of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TENTH: 1. The Corporation shall, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as the same may be amended or supplemented (but in the case of any such amendment or supplement, only to the extent that such amendment or supplement permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment or supplement), indemnify any and all directors and officers whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. The Corporation may, in its sole discretion and to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as the same may be amended or supplemented, indemnify any and all employees and agents whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall continue as to a person who has ceased to be an employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. 3 2. The Corporation shall pay the expenses incurred in defending any proceeding against a director or officer which is or may be subject to indemnification pursuant to this Article Tenth in advance of final disposition of such proceeding; provided, however, that the payment of such expenses incurred by a director or officer shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article Tenth or otherwise. The Corporation may, in its sole discretion, advance expenses incurred by its employees or agents to the same extent as expenses may be advanced to its directors and officers hereunder. 3. The rights conferred on any person by this Article Tenth shall be deemed contract rights and shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation or the Corporation's Bylaws, agreement, or vote of stockholders or disinterested directors or otherwise. 4. The Corporation may purchase and maintain insurance to protect itself and any other director, officer, employee or agent of the Corporation or any corporation, partnership, joint venture, trust or other enterprise against any liability, whether or not the Corporation would have the power to indemnify such person under the Delaware General Corporation Law. ELEVENTH: 1. From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed in accordance with the laws of the State of Delaware. 2. The Corporation's Bylaws may be amended, added to or repealed by an affirmative vote of at least a majority of either (i) the shares of the Corporation's capital stock entitled to vote thereon, or (ii) the Board of Directors. The undersigned, being the incorporator, for the purpose of forming a Corporation under the laws of the State of Delaware does make, file and record this Certificate of Incorporation, does certify that the facts herein stated are true, and, accordingly, has here to set my hand and seal this 29th day of October, 2001. /s/ J. Gregory Giffen ------------------------------- J. Gregory Giffen, Incorporator 4 EX-3.39 38 g83903exv3w39.txt EX-3.39 BYLAWS EXHIBIT 3.39 BYLAWS OF PSI HOSPITALS, INC. (A Delaware Corporation) ARTICLE I. OFFICE. The principal office of the Corporation in the State of Tennessee is at 310 25th Avenue North, Suite 209, Nashville, Tennessee, County of Davidson. ARTICLE II. STOCKHOLDERS' MEETINGS. Section 1. Annual Meetings. (a) The annual meeting of the stockholders of the Corporation, commencing with the year 2002 shall be held at the principal office of the Corporation in the State of Delaware or at any other place within or without the State of Delaware as may be determined by the Board of Directors and as may be designated in the notice of that meeting. The meeting shall be held on the first Monday in November of each year. If that day is a legal holiday, the meeting shall be held on the next succeeding day not a legal holiday. The business to be transacted at the meeting shall be the election of directors and such other business as properly brought before the meeting. (b) If the election of directors shall not be held on the day herein designated for any annual meeting, or at any adjournment of that meeting, the Board of Directors shall call a special meeting of the stockholders as soon as possible thereafter. At this meeting the election of directors shall take place, and the election and any other business transacted shall have the same force and effect as at an annual meeting duly called and held. (c) No change in the time or place for a meeting for the election of directors shall be made within 20 days preceding the day on which the election is to be held. Written notice of any change shall be given each stockholder at least 20 days before the election is held, either in person or by letter mailed to the stockholder at the address last shown on the books of the Corporation. (d) In the event the annual meeting is not held at the time prescribed in Article II, Section I(a) above, and if the Board of Directors shall not call a special meeting as prescribed in Article II, Section l(b) above within three months after the date prescribed for the annual meeting, then any stockholder may call that meeting, and at that meeting the stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting duly called and held. 1 Section 2. Special Meetings. Special meetings of the stockholders may be called by the President or by the holders of at least thirty three percent (33%) of the stock entitled to vote at that meeting. At any time, upon the written request of any person or persons entitled to call a special meeting, it shall be the duty of the Secretary to send out notices of the meeting, to be held within or without the State of Delaware and at such time, but not less than 10 days nor more than 60 days after receipt of the request, as may be fixed by the Board of Directors. If the Board of Directors fails to fix a time or place, the meeting shall be held at the principal office of the Corporation at a time as shall be fixed by the Secretary within the above limits. Section 3. Notice and Purpose of Meetings; Waiver. Each stockholder of record entitled to vote at any meeting shall be given in person, or by mail, or by prepaid telegram, written or printed notice of the purpose or purposes, and the time and place within or outside the State of Delaware of every meeting of stockholders. This notice shall be delivered not less than 20 days nor more than 45 days before the meeting. If mailed or telegraphed, it should be directed to the stockholder at the address last shown on the books of the Corporation. No publication of the notice of meeting shall be required. A stockholder may waive the notice of meeting by attendance, either in person or by proxy, at the meeting, or by so stating in writing, either before or after the meeting. Attendance at a meeting for the express purpose of objecting that the meeting was not lawfully called or convened shall not, however, constitute a waiver of notice. Except where otherwise required by law, notice need not be given of any adjourned meeting of the stockholders. Section 4. Quorum. Except as otherwise provided by law, a quorum at all meetings of stockholders shall consist of the holders of record of a majority of the shares entitled to vote present in person or by proxy. Section 5. Closing of Transfer Books; Record Date. (a) In order to determine the holders of record of the Corporation's stock who are entitled to notice of meetings, to vote at a meeting or its adjournment, to receive payment of any dividend, or to make a determination of the stockholders of record for any other proper purpose, the Board of Directors of the Corporation may order that the Stock Transfer Books be closed for a period not to exceed sixty days. If the purpose of this closing is to determine who is entitled to notice of a meeting and to vote at such meeting, the Stock Transfer Books shall be closed for at least thirty days preceding such meeting. (b) In lieu of closing the Stock Transfer Books, the Board of Directors may fix a date as the record date for the determination of stockholders. This date shall be no more than sixty days prior to the date of the action which requires the determination, nor, in the case of a stockholders' meeting, shall it be less than thirty days in advance of such meeting. 2 (c) If the Stock Transfer Books are not closed and no record date is fixed for the determination of the stockholders of record, the date of which notice of the meeting is mailed, or on which the resolution of the Board of Directors declaring a dividend is adopted, as the case may be, shall be the record date for the determination of stockholders. (d) When a determination of stockholders entitled to vote at any meeting has been made as provided in this section, this determination shall apply to any adjournment of the meeting, except when the determination has been made by the closing of the Stock Transfer Books and the stated period of closing has expired. Section 6. Presiding Officer; Order of Business (a) Meetings of the stockholders shall be presided over by the Chairman of the Board, or, if he or she is not present, by the Chief Executive Officer, or if not present, by the President, or if he or she is not present, by a Vice-President, or if neither the Chairman of the Board nor the Chief Executive Officer nor the President nor a Vice-President is present, by a chairman to be chosen by a majority of the stockholders entitled to vote at the meeting who are present in person or by proxy. The Secretary of the Corporation, or, in her or his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the stockholders present at the meeting shall choose any person present to act as secretary of the meeting. (b) The order of business shall be as follows: 1. Call of meeting to order. 2. Proof of notice of meeting. 3. Reading of minutes of last previous annual meeting. 4. Reports of officers. 5. Reports of committees. 6. Election of directors. 7. Miscellaneous business. Section 7. Voting. (a) Except in the election of directors, at which time the stockholders shall be entitled to cumulate their votes, and except as otherwise provided in the Articles of Incorporation, the Bylaws, or the laws of the State of Delaware at every meeting of the stockholders, each stockholder of the Corporation entitled to vote at the meeting shall have, as to each matter submitted to a vote, one vote in person or by proxy for each share of stock having voting rights registered in his or her name on the books of the Corporation. A stockholder may vote his or her shares through a proxy appointed by a written instrument signed by the stockholder or by a duly authorized attorney-in-fact and delivered to the secretary of the meeting. No proxy shall be valid after three months from the date of its execution unless a longer period is expressly provided. 3 (b) A majority vote of those shares entitled to vote and represented at the meeting, a quorum being present, shall be the act of the meeting except that in electing directors a plurality of the votes cast shall elect. (c) At all elections of directors, the voting shall be by ballot. Section 8. List of Stockholders. (a) A complete list of the stockholders of the Corporation entitled to vote at the ensuing meeting, arranged in alphabetical order, and showing the address of, and number of shares owned by, each stockholder shall be prepared by the Secretary, or other officer of the Corporation having charge of the Stock Transfer Books. This list shall be kept on file for a period of at least ten days prior to the meeting at the principal office of the Corporation and shall be subject to inspection during the usual business hours of such period by any stockholder. This list shall also be available at the meeting and shall be open to inspection by any stockholder at any time during the meeting. (b) The original Stock Transfer Books shall be prima facie evidence as to who are the stockholders entitled to examine the list or to vote at any meeting of the stockholders. (c) Failure to comply with the requirements of this section shall not affect the validity of any action taken at any meetings of the stockholders. ARTICLE III. DIRECTORS. Section 1. Number, Qualification, Term, Quorum, and Vacancies. (a) The property, affairs and business of the Corporation shall be managed by a Board of Directors of two persons. Except as provided, directors shall be elected at the annual meeting of the stockholders and each director shall serve for one year and/or until his or her successor shall be elected and qualify. (b) The number of directors may be increased or decreased from time to time by an amendment to these Bylaws. Any increased number of directors shall be elected by the stockholders at the next regular annual meeting or at a special meeting called for that purpose. The number of directors shall never be less than one. (c) Directors need not be stockholders of the Corporation. (d) A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business. If, at any meeting of the Board of Directors, there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained. In case there are vacancies on the Board of Directors, other than vacancies created by the removal of a director or directors by the stockholders or by an increase in the number of directors, the remaining directors, although less than a quorum, may by a majority vote elect a successor or successors for the unexpired term or terms. 4 Section 2. Meetings. Meetings of the Board of Directors may be held either within or without the State of Delaware. Meetings of the Board of Directors shall be held at those times as are fixed from time to time by resolution of the Board. Special meetings may be held at any time upon call of the Chairman of the Board, the Chief Executive Officer, the President, or a Vice-President, or a majority of directors, upon written or telegraphic notice deposited in the U.S. mail or delivered to the telegraph company at least thirty days prior to the day of the meetings. A meeting of the Board of Directors may be held without notice immediately following the annual meeting of the stockholders. Notice need not be given of regular meetings of the Board of Directors held at times fixed by resolution of the Board of Directors nor need notice be given of adjourned meetings. Meetings may be held at any time without notice if all the directors are present or if, before the meeting, those not present waive such notice in writing. Notice of a meeting of the Board of Directors need not state the purpose of, nor the business to be transacted at, any meeting. Section 3. Removal. (a) At any meeting of the stockholders, any director or directors may be removed from office, without assignment of any reason, by a majority vote of the shares or class of shares, as the case may be, which elected the director or directors to be removed, provided, however, that if less than all the directors are to be removed, no individual director shall be removed if the number of votes cast against her or his removal would be sufficient, if cumulatively voted at an election of the entire board, to elect one or more directors. (b) When any director or directors are removed, new directors may be elected at the same meeting of the stockholders for the unexpired term of the director or directors removed. If the stockholders fail to elect persons to fill the unexpired term or terms of the director or directors removed, these unexpired terms shall be considered vacancies on the board to be filled by the remaining directors. Section 4. Indemnification. (a) The Corporation shall indemnify each of its directors, officers, and employees whether or not then in service as such (and his or her executor, administrator and heirs), against all reasonable expenses actually and necessarily incurred by him or her in connection with the defense of any litigation to which the individual may have been made a party because he or she is or was a director, officer or employee of the Corporation. The individual shall have no right to reimbursement, however, in relation to matters as to which he or she has been adjudged liable to the Corporation for negligence or misconduct in the performance of his or her duties, or was derelict in the performance of his or her duty as director, officer or employee by reason of willful misconduct, bad faith, gross negligence or reckless disregard of the duties of his or her office or employment. The right to indemnity for expenses shall also apply to the expenses of suits which are compromised or settled if the court having jurisdiction of the matter shall approve such settlement. 5 (b) The foregoing right of indemnification shall be in addition to, and not exclusive of, all other rights to that which such director, officer or employee may be entitled. Section 5. Compensation. Directors, and members of any committee of the Board of Directors, shall be entitled to any reasonable compensation for their services as directors and members of any committee as shall be fixed from time to time by resolution of the Board of Directors, and shall also be entitled to reimbursement for any reasonable expense incurred in attending those meetings. The compensation of directors may be on any basis as determined in the resolution of the Board of Directors. Any director receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and receiving reasonable compensation for such other services. Section 6. Committees. (a) The Board of Directors, by a resolution or resolutions adopted by a majority of the members of the whole Board, may appoint an Executive Committee, an Audit Committee, and any other committees as it may deem appropriate. Each committee shall consist of at least (insert number of directors required for committee) of members of the Board of Directors. Each committee shall have and may exercise any and all powers as are conferred or authorized by the resolution appointing it. A majority of each committee may determine its action and may fix the time and place of its meetings, unless provided otherwise by the Board of Directors. The Board of Directors shall have the power at any time to fill vacancies in, to change the size of membership of, and to discharge any committee. (b) Each committee shall keep a written record of its acts and proceedings and shall submit that record to the Board of Directors at each regular meeting and at any other times as requested by the Board of Directors. Failure to submit the record, or failure of the Board to approve any action indicated therein will not, however, invalidate the action to the extent it has been carried out by the Corporation prior to the time the record of such action was, or should have been, submitted to the Board of Directors as provided. Section 7. Dividends. Subject always to the provisions of law and the Articles of Incorporation, the Board of Directors shall have full power to determine whether any, and, if so, what part, of the funds legally available for the payment of dividends shall be declared in dividends and paid to the stockholders of the Corporation. The Board of Directors may fix a sum which may be set aside or reserved over and above the paid-in capital of the Corporation for working capital or as a reserve for any proper purpose, and from time to time may increase, diminish, and vary this fund in the Board's absolute judgment and discretion. 6 ARTICLE IV. OFFICERS. Section 1. Number. The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice-Presidents, a Treasurer, a Controller, a Secretary, and one or more Assistant Secretaries. In addition, there may be such subordinate officers as the Board of Directors may deem necessary. Any person may hold two, but no more than two, offices. Section 2. Term of Office. The principal officers shall be chosen annually by the Board of Directors at the first meeting of the Board following the stockholders' annual meeting, or as soon as is conveniently possible. Subordinate officers may be elected from time to time. Each officer shall serve until his or her successor shall have been chosen and qualified, or until his, death, resignation, or removal. Section 3. Removal. Any officer may be removed from office with or without cause, at any time by the affirmative vote of a majority of the Board of Directors then in office. Such removal shall not prejudice the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy in any office from any cause may be filled for the unexpired portion of the term by the Board of Directors. Section 5. Duties. (a) The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors. Except where, by law, the signature of the President is required, the Chairman shall possess the same power as the President to sign all certificates, contracts, and other instruments of the Corporation which may be authorized by the Board of Directors. (b) The Chief Executive Officer shall have general active management of the business of the corporation, and in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and the Board of Directors; and shall see that all orders and resolutions of the Board of Directors are carried into effect. (c) The President, in the absence of the Chairman of the Board, shall preside at all meetings of the stockholders and the Board of Directors. She or he shall have general supervision of the affairs of the Corporation, shall sign or countersign all certificates, contracts, or other instruments of the Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and stockholders, and shall perform any and all other duties as are incident to her or his office or are properly required of him or her by the Board of Directors. 7 (d) The Vice-Presidents, in the order designated by the Board of Directors, shall exercise the functions of the President during the absence or disability of the President. Each Vice-President shall have any other duties as are assigned from time to time by the Board of Directors. (e) The Secretary, the Treasurer, and the Controller shall perform those duties as are incident to their offices, or are properly required of them by the Board of Directors, or are assigned to them by the Articles of Incorporation or these Bylaws. The Assistant Secretaries, in the order of their seniority, shall, in the absence of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform any other duties as may be assigned by the Board of Directors. (f) Other subordinate officers appointed by the Board of Directors shall exercise any powers and perform any duties as may be delegated to them by the resolutions appointing them, or by subsequent resolutions adopted from time to time. (g) In case of the absence or disability of any officer of the Corporation and of any person authorized to act in his or her place during such period of absence or disability, the Board of Directors may from time to time delegate the powers and duties of that officer to any other officer, or any director, or any other person whom it may select. Section 6. Salaries The salaries of all officers of the Corporation shall be fixed by the Board of Directors. No officer shall be ineligible to receive such salary by reason of the fact that he is also a Director of the Corporation and receiving compensation therefor. ARTICLE V. CERTIFICATES OF STOCK. Section 1. Form. (a) The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock, certifying the number of shares represented thereby and in such form not inconsistent with the Articles of Incorporation as the Board of Directors may from time to time prescribe. (b) The certificates of stock shall be signed by the President or a Vice-President and by the Secretary or an Assistant Secretary or the Treasurer, and sealed with the seal of the corporation. This seal may be a facsimile, engraved or printed. Where any certificate is manually signed by a transfer agent or a transfer clerk and by a registrar, the signatures of the President, Vice-President, Secretary, Assistant Secretary, or Treasurer upon that certificate may be facsimiles, engraved or printed. In case any officer who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be an officer before the certificate is issued, it may be issued by the corporation with the same effect as if that officer had not ceased to be so at the time of its issue. 8 Section 2. Subscriptions for Shares. Unless the subscription agreement provides otherwise, subscriptions for shares, regardless of the time when they are made, shall be paid in full at that time, or in installments and at any periods, as shall be specified by the Board of Directors. All calls for payments on subscriptions shall carry the same terms with regard to all shares of the time class. Section 3. Transfers. (a) Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the registered owner, or by his or her duly authorized attorney, with a transfer clerk or transfer agent appointed as provided in Section 5 of this Article of the Bylaws, and on surrender of the certificate or certificates for those shares properly endorsed with all taxes paid. (b) The person in whose name shares of stock stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes. However, if any transfer of shares is made only for the purpose of furnishing collateral security, and that fact is made known to the Secretary of the Corporation, or to the Corporation's transfer clerk or transfer agent, the entry of the transfer may record that fact. Section 4. Lost, Destroyed, or Stolen Certificates No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed, or stolen except on production of evidence, satisfactory to the Board of Directors, of that loss, destruction or theft, and, if the Board of Directors so requires, upon the furnishing of an indemnity bond in such amount (but not to exceed twice the value of the shares represented by the certificate) and with such terms and surety as the Board of Directors, if any, in its discretion, require. Section 5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars, and may require all certificates for shares to bear the signature or signatures of any of them. ARTICLE VI. CORPORATE ACTIONS. Section 1. Deposits. The Board of Directors shall select banks, trust companies, or other depositories in which all funds of the Corporation not otherwise employed shall, from time to time, be deposited to the credit of the Corporation. Section 2. Voting Securities Held by the Corporation. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the Corporation to attend, act, and vote at any meeting of security 9 holders of other corporations in which the Corporation may hold securities. At that meeting the President shall possess and may exercise any and all rights and powers incident to the ownership of those securities which the corporation might have possessed and exercised if it had been present. The Board of Directors may, from time to time, confer like powers upon any other person or persons. ARTICLE VII. CORPORATE SEAL. The corporate seal of the Corporation shall consist of two concentric circles, between which shall be the name of the Corporation, and in the center of which shall be inscribed the year of its incorporation and the words "Corporate Seal, State of Delaware. ARTICLE VIII. AMENDMENT OF BYLAWS. The Board of Directors shall have the power to amend, alter or repeal these Bylaws, and to adopt new Bylaws, from time to time, by an affirmative vote of a majority of the whole Board as then constituted, provided that notice of the proposal to make, alter, amend, or repeal the Bylaws was included in the notice of the directors' meeting at which such action takes place. At the next stockholders' meeting following any action by the Board of Directors, the stockholders, by a majority vote of those present and entitled to vote, shall have the power to alter or repeal Bylaws newly adopted by the Board of Directors, or to restore to their original status Bylaws which the Board may have altered or repealed, and the notice of such stockholders' meeting shall include notice that the stockholders will be called on to ratify the action taken by the Board of Directors with regard to the Bylaws. I hereby certify that the foregoing is a full, true and correct copy of the Bylaws of PSI Hospitals, Inc., a corporation of the State of Delaware, as in effect on the date hereof. WITNESS my hand and the seal of the corporation this 29th day of October, 2001. /s/ Steven T. Davidson -------------------------------- Steven T. Davidson Secretary of PSI Hospitals, Inc. (SEAL) 10 EX-3.40 39 g83903exv3w40.txt EX-3.40 ARTICLES OF ORGANIZATION EXHIBIT 3.40 ARTICLES OF ORGANIZATION OF PSI TEXAS HOSPITALS, LLC The undersigned, an authorized natural person, for the purpose of forming a limited liability company (hereinafter called the "Company"), under the provisions and subject to the requirements of the Texas Limited Liability Company Act, hereby certifies that: 1. The name of the limited liability company is PSI Texas Hospitals, LLC. 2. The period of duration of the limited liability company is perpetual. 3. The purpose for which the limited liability company is organized is the transaction of any and all lawful business for which limited liability companies may be organized under the Texas Limited Liability Company Act. 4. The address of the registered office and the name and the address of the registered agent of the limited liability company required to be maintained by Section 2.05 of the Texas Limited Liability Company Act are National Registered Agents, Inc., 1614 Sidney Baker Street, Kerrville, Texas 78028. 5. Management of the Company is reserved to members and the name and address of the member is as follows: Name Address Psychiatric Solutions, Inc. 310 25th Avenue North, Suite 209 Nashville, Tennessee 37203 6. The name and address of the organizer is as follows; Name Address Steven T. Davidson Psychiatric Solutions, Inc. 310 25th Avenue North, Suite 209 Nashville, Tennessee 37203 Executed on October 26, 2001. /s/ Steven T. Davidson ------------------------------ Steven T. Davidson, Organizer EX-3.41 40 g83903exv3w41.txt EX-3.41 CERTIFICATE OF INCORPORATION EXHIBIT 3.41 CERTIFICATE OF INCORPORATION OF PSI-EAP, INC. The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified, and referred to as the "Delaware General Corporation Law"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "Corporation") is PSI-EAP, Inc. SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 9 East Loockerman Street, Dover, Delaware 19901, County of Kent; and the name of the registered agent of the Corporation in the State of Delaware at such address is National Registered Agents, Inc. THIRD: The nature of the business or purposes of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. FOURTH: 1. The maximum number of shares of stock which the Corporation shall have the authority to issue is one thousand (1,000) shares of Common Stock having a par value of $0.01 per share, which shares shall not be subject to any preemptive rights. 2. Pursuant to Section 151 of the Delaware General Corporation Law, a statement of the designations, powers, preferences and rights, and the qualifications and restrictions thereof, in respect of each class of capital stock is as follows: A. COMMON STOCK (i) Dividends and Distributions. Except as otherwise provided by this Certificate of Incorporation, the holders of shares of Common Stock shall be entitled to receive such dividends and distributions as may be declared upon such shares of Common Stock, from time to time by a resolution or 1 resolutions adopted by the Board of Directors. (ii) Voting Rights. All holders of Common Stock shall be entitled to notice of any stockholders' meeting. Subject to the provisions of any applicable law and except as otherwise provided in this Certificate of Incorporation, all voting rights shall be vested solely in the Common Stock. The holders of shares of Common Stock shall be entitled to vote upon the election of directors and upon any other matter submitted to the stockholders for a vote. Each share of Common Stock issued and outstanding shall be entitled to one noncumulative vote. A fraction of a share of Common Stock shall not be entitled to any voting rights whatsoever. (iii) Liquidation, Dissolution or Winding Up. Except as otherwise provided in this Certificate of Incorporation, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and liabilities of the Corporation, all assets of the Corporation shall be shared pro rata among the holders of the Common Stock. 3. Except as otherwise provided in this Certificate of Incorporation or by applicable law, the Corporation's capital stock, regardless of class, may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine by a resolution or resolutions adopted by a majority of the Board of Directors then in office. FIFTH: The name and the mailing address of the incorporator are as follows: NAME MAILING ADDRESS J. Gregory Giffen, Esq. Harwell Howard Hyne Gabbert & Manner, P.C. 315 Deaderick Street, Suite 1800 Nashville, Tennessee 37238-1800 SIXTH: The Corporation shall have perpetual existence. SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors, or any class of them, and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation, or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code, or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors and/or of the stockholders or 2 class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the court directs. If a majority and number representing three-fourths (3/4) in value of the creditors or class of creditors and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which said application has been made, be binding on all the creditors or class of creditors and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. EIGHTH: 1. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. 2. The Board of Directors shall consist of not less than three (3) nor more than fifteen (15) persons, the exact numbers to be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of directors then in office. 3. Whenever the Corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the Corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of this Certificate of Incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders, except as otherwise provided by applicable law; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. NINTH: The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of clause (b) of Section 102 of the Delaware General Corporation Law, as the same may be amended or supplemented. The provisions of this Article Ninth are not intended to, and shall not, limit, supersede or modify any other defense available to a director under applicable law. Any repeal or modification of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TENTH: 1. The Corporation shall, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as the same may be amended or supplemented (but in the case of any such amendment or supplement, only to the extent that such amendment or supplement permits the Corporation to provide broader indemnification 3 rights than said law permitted the Corporation to provide prior to such amendment or supplement), indemnify any and all directors and officers whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. The Corporation may, in its sole discretion and to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as the same may be amended or supplemented, indemnify any and all employees and agents whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall continue as to a person who has ceased to be an employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. 2. The Corporation shall pay the expenses incurred in defending any proceeding against a director or officer which is or may be subject to indemnification pursuant to this Article Tenth in advance of final disposition of such proceeding; provided, however, that the payment of such expenses incurred by a director or officer shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article Tenth or otherwise. The Corporation may, in its sole discretion, advance expenses incurred by its employees or agents to the same extent as expenses may be advanced to its directors and officers hereunder. 3. The rights conferred on any person by this Article Tenth shall be deemed contract rights and shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation or the Corporation's Bylaws, agreement, or vote of stockholders or disinterested directors or otherwise. 4. The Corporation may purchase and maintain insurance to protect itself and any other director, officer, employee or agent of the Corporation or any corporation, partnership, joint venture, trust or other enterprise against any liability, whether or not the Corporation would have the power to indemnify such person under the Delaware General Corporation Law. ELEVENTH: 1. From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed in accordance with the laws of the State of Delaware. 2. The Corporation's Bylaws may be amended, added to or repealed by an affirmative vote of at least a majority of either (i) the shares of the Corporation's capital stock entitled to vote thereon, or (ii) the Board of Directors. 4 The undersigned, being the incorporator, for the purpose of forming a Corporation under the laws of the State of Delaware does make, file and record this Certificate of Incorporation, does certify that the facts herein stated are true, and, accordingly, has here to set my hand and seal this 18th day of December, 2000. /s/ J. Gregory Giffen, Incorporator ----------------------------------- 5 EX-3.42 41 g83903exv3w42.txt EX-3.42 BYLAWS EXHIBIT 3.42 BYLAWS OF PSI-EAP, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the board of directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders of the corporation shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting; notice may be communicated in person; by telephone, telegraph, teletype or other form of wire or wireless communication; or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) nor more than two months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transactions of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented 1 shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's Certificate of Incorporation or Bylaws, or by the laws of Delaware, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire board of directors shall be not less than one (1) nor more than fifteen (15) persons, the exact number to be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of directors then in office. 2.3 Meetings. The annual meeting of the board of directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The board may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication not less than two (2) days before the meeting noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall 2 constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the certificate of incorporation, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The board of directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the board of directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such Vice Presidents and other officers as the board of directors shall from time to time deemed necessary. Any two or more offices may be held by the same person. 3.2 Election and Term. The officers shall be elected by the board. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the board of directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, then upon its acceptance by the board of directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 3 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the board of directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by either the applicable securities laws or any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the board of directors shall prescribe. ARTICLE VI ACTION BY CONSENT 6.1 Actions by Board of Directors. Whenever the directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors. 6.2 Actions by Shareholders. Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by statute, the Certificate of Incorporation or these Bylaws, the meeting and vote of shareholders may be dispensed with, if the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted shall consent in writing to such corporate action being taken. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors. ARTICLE VIII FISCAL YEAR The fiscal year for the corporation shall be the calendar year. CERTIFICATION I certify that these Bylaws were adopted by written consent of the Board of Directors of the corporation and became effective on December 21, 2000. /s/ Steven T. Davidson, Secretary --------------------------------- 5 EX-3.43 42 g83903exv3w43.txt EX-3.43 ARTICLES OF INCORPORATION EXHIBIT 3.43 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF MEDICAL ACTIVITIES XCHANGE, INC. RODRIGO A. MUNOZ, M.D. certifies that: 1. He is the Sole Incorporator of MEDICAL ACTIVITIES XCHANGE, INC., a California corporation. 2. He hereby adopts the following amendments of the Articles of Incorporation of this Corporation: A. Article FIRST is amended to read as follows: "The name of this corporation is: PSYCHIATRIC MANAGEMENT RESOURCES, INC." B. Article FIFTH is added to the Articles of Incorporation which reads in full as follows: "The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. In the event the California Corporations Code is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the California Corporations Code, as so amended, without further shareholder action. Any repeal or modification of this Article Fifth shall not result in any liability for a director with respect to any action or omission occurring prior to such repeal or modification." C. Article SIXTH is added to the Articles of Incorporation which reads in full as follows: "The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) for breach of duty to the corporation and its stockholders through bylaw provisions or through agreements with the agents, or both, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject to the limits on such excess indemnification set forth in Section 204 of the California Corporations Code. Notwithstanding the foregoing, if the California Corporations Code is amended to permit greater indemnification of agents, then an agent of the Corporation shall be indemnified to the fullest extent permitted by the California Corporations Code, as so amended, without further shareholder action. Any repeal or modification of this Article Sixth shall not in any way prohibit, impair, or adversely affect indemnification of an agent with respect to any action or omission occurring prior to such repeal or modification." 3. No directors were named in the original Articles of Incorporation and none have been elected. 4. No shares have been issued. I further declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate are true and correct of my own knowledge. Dated this 22nd day of April 1988. /s/ Rodrigo A. Munoz, M.D. --------------------------------- RODRIGO A. MUNOZ, M.D. Incorporator ARTICLES OF INCORPORATION OF MEDICAL ACTIVITIES XCHANGE, INC. FIRST: The name of this corporation is MEDICAL ACTIVITIES XCHANGE, INC. SECOND: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. THIRD: The name and address in the State of California of the corporation's initial Agent for Service of Process is RODRIGO A. MUNOZ, 4045 Third Avenue, Suite 303, San Diego, California 92103. FOURTH: The total number of shares which this corporation is authorized to issue is one hundred thousand (100,000), all of the same class, designated "Common Stock". DATED this 14th day of August, 1987. /s/ Rodrigo A. Munoz, M.D. -------------------------------- RODRIGO A. MUNOZ, M.D. Incorporator The undersigned declares that he is the Incorporator who has executed the foregoing Articles of Incorporation and hereby declares that this instrument is the act and deed of the undersigned. /s/ Rodrigo A. Munoz, M.D. -------------------------------- RODRIGO A. MUNOZ, M.D. EX-3.44 43 g83903exv3w44.txt EX-3.44 BYLAWS EXHIBIT 3.44 BYLAWS OF PSYCHIATRIC MANAGEMENT RESOURCES, INC. A CALIFORNIA CORPORATION PSYCHIATRIC MANAGEMENT RESOURCES, INC. Table of Contents
Page ARTICLE I OFFICES .....................................................................................1 Section 1. Principal Offices............................................................................1 Section 2. Other Offices................................................................................1 ARTICLE II SHAREHOLDER MEETINGS.........................................................................1 Section 1. Place of Meetings............................................................................1 Section 2. Annual Meetings..............................................................................1 Section 3. Special Meeting..............................................................................2 Section 4. Notice of Meeting............................................................................2 Section 5. Waiver of Consent to Shareholder Meeting.....................................................3 Section 6. Adjourned Meeting and Notice Thereof.........................................................4 Section 7. Shareholders Acting Without A Meeting........................................................4 A. In General.........................................................................................4 B. Election of Directors..............................................................................4 C. Notice Requirements................................................................................4 D. Revocation of Consent..............................................................................5 Section 8. Quorum.......................................................................................5 Section 9. Voting.......................................................................................5 Section 10. Record Date for Shareholder Notice, Voting, and Giving Consents..........................................................................6 Section 11. Proxies......................................................................................7 Section 12. Organization.................................................................................7
Section 13. Inspectors of Election.......................................................................8 ARTICLE III DIRECTORS: MANAGEMENT........................................................................8 Section 1. Powers.......................................................................................8 Section 2. Number and Qualification of Directors........................................................9 Section 3. Election and Tenure of Office................................................................9 Section 4. Vacancies....................................................................................9 Section 5. Removal of Directors........................................................................10 Section 6. Place and Manner of Meetings................................................................10 Section 7. Annual Meeting..............................................................................10 Section 8. Other Regular Meetings......................................................................11 Section 9. Special Meetings............................................................................11 Section 10. Waiver of Notice............................................................................11 Section 11. Sole Director Provided by Articles of Incorporation.........................................11 Section 12. Directors Acting by Unanimous Written Consent...............................................12 Section 13. Quorum......................................................................................12 Section 14. Adjournment.................................................................................12 Section 15. Compensation of Directors...................................................................12 ARTICLE IV COMMITTEES..................................................................................13 Section 1. Committees of Directors.....................................................................13 Section 2. Meetings and Action of Committees...........................................................13 ARTICLE V OFFICERS....................................................................................14 Section 1. Officers....................................................................................14 Section 2. Election....................................................................................14 Section 3. Subordinate Officers........................................................................14

Section 4. Removal and Resignation of Officers.........................................................14 Section 5. Vacancies...................................................................................15 Section 6. Chairman of the Board.......................................................................15 Section 7. President/Chief Executive Officer...........................................................15 Section 8. Vice President..............................................................................15 Section 9. Secretary...................................................................................16 Section 10. Chief Financial Officer.....................................................................16 ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS..................................................................17 Section 1. Right to Indemnification....................................................................17 Section 2. Right of Claimant to Bring Suit.............................................................18 Section 3. Non-Exclusivity of Rights...................................................................18 Section 4. Insurance...................................................................................18 ARTICLE VII PAYMENTS OR LOANS MADE TO OFFICERS, DIRECTORS OR OTHER EMPLOYEES................................................................19 Section 1. Authority to Loan...........................................................................19 Section 2. Reimbursement to Corporation of Amounts Disallowed by Internal Revenue Service ................................................................19 Section 3. Duty to Enforce Payment.....................................................................19 ARTICLE VIII CORPORATE RECORDS AND REPORTS...............................................................19 Section 1. Records.....................................................................................19 Section 2. Inspection of Books and Records.............................................................20 Section 3. Certification and Inspection of Bylaws......................................................20 Section 4. Checks, Drafts, Etc.........................................................................20 Section 5. Authority to Execute Contracts..............................................................20 Section 6. Annual Report to Shareholders...............................................................20

Section 7. Financial Statements........................................................................20 Section 8. Annual Statement of General Information.....................................................21 ARTICLE IX CERTIFICATES AND TRANSFER OF SHARES.........................................................21 Section 1. Certificates for Shares.....................................................................21 Section 2. Transfer on the Books.......................................................................22 Section 3. Lost Certificates...........................................................................22 Section 4. Transfer Agents and Registrars..............................................................22 Section 5. Closing Stock Transfer Books................................................................22 Section 6. Legend Condition............................................................................22 ARTICLE X AMENDMENTS TO BYLAWS........................................................................23 Section 1. By Shareholders.............................................................................23 Section 2. Powers of Directors.........................................................................23 Section 3. Record of Amendments........................................................................23 ARTICLE XI MISCELLANEOUS...............................................................................23 Section 1. Construction and Definitions................................................................23 Section 2. Representation of Shares of Other Corporations..............................................24 Section 3. Seal........................................................................................24

BYLAWS OF PSYCHIATRIC MANAGEMENT RESOURCES, INC. A California Corporation ARTICLE I OFFICES Section 1. Principal Offices. The Board of Directors shall fix the location of the principal executive office of the Corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the Corporation has one or more business offices in this state, the Board of Directors shall fix and designate a principal business office in the State of California. Section 2. Other Offices. The Board of Directors may at any time establish branch or subordinate offices at any place or places where the Corporation is qualified to do business. ARTICLE II SHAREHOLDER MEETINGS Section 1. Place of Meetings. All meetings of the Shareholders shall be held at the office of the Corporation, in the State of California, or at some other appropriate and convenient location within or outside the State of California as may be designated for that purpose from time to time by the Board of Directors. Section 2. Annual Meetings. The annual meeting of the Shareholders shall be held, each year, at the time and on the day following: Time of Meeting: 4:00 p.m. Date of Meeting: First Tuesday in December 1 or at such other date and time as may be fixed by the Board of Directors; provided however, that such date shall not be later than fifteen (15) months after (i) the organization of the Corporation, or (ii) the last annual meeting of Shareholders. If this day shall be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same hour. At the annual meeting, the Shareholders shall elect a Board of Directors, consider reports of the affairs of the Corporation and transact such other business as may properly be brought before the meeting. Section 3. Special Meeting. A special meeting of the Shareholders may be called at any time by the Board of Directors, or by the Chairman of the Board, or by the President, or by one or more Shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. Upon request in writing to the Chairman of the Board, the President, any Vice President or the Secretary by any person (other than the Board) entitled to call a special meeting of Shareholders, the Officer forthwith shall cause notice to be given to the Shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person entitled to call the meeting may give the notice or apply to the Superior Court to order such notice to be given as provided in Section 305(c) of the Corporations Code. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of Shareholders called by action of the Board of Directors may be held. Section 4. Notice of Meeting. Notice of meetings, annual or special, shall be given in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting, to Shareholders entitled to vote thereat by the Secretary or the Assistant Secretary, or if there be no such Officer, or in the case of his neglect or refusal, by any Director or Shareholder. Such notices or any reports shall be given personally or by mail or other means of written communication as provided in Section 601 of the Corporations Code and shall be sent to the Shareholder's address appearing on the books of the Corporation, or supplied by him to the Corporation for the purpose of notice. If a Shareholder supplies no address, notice shall be deemed to have been given to him if mailed to the place where the principal executive office of the Corporation, in California, is situated, or published at least once in some newspaper of general circulation in the County of said principal office. 2 Such notice shall state the place, date, and hour of the meeting and (i) in the case of a special meeting the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, those matters which, the Board, at the time of the mailing of the notice, intends to present for action by the Shareholders, but, subject to the provisions of applicable law, any proper matter may be presented at the meeting for such action. The notice of any meeting at which Directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by management for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a Director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code, (ii) an amendment of the articles of incorporation, pursuant to Section 902 of that Code, (iii) a reorganization of the Corporation, pursuant to Section 1201 of that Code, (iv) a voluntary dissolution of the Corporation, pursuant to Section 1900 of that Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal. Notice shall be deemed given at the time it is delivered personally or deposited in the mail or sent by other means of written communication. The Officer giving such notice or report shall prepare and file an affidavit or declaration thereof in the corporate minute book. If any notice addressed to a Shareholder at the address of that Shareholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the Shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the Shareholder on written demand of the Shareholder at the principal executive office of the Corporation for a period of one (1) year from the date of the giving of the notice. Section 5. Waiver of Consent to Shareholder Meeting. The transactions of any meeting of Shareholders, however called and noticed, shall be valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the Shareholders entitled to vote, not present in person or by proxy, sign a written waiver of notice, or a consent to the holding of such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance shall constitute a waiver of notice, unless objection shall be made as provided in Section 60l(e) of the Corporations Code. Provided that if action is 3 proposed to be taken at any meeting for approval of (i) a contract or a transaction in which a Director has a direct or individual financial interest, pursuant to Section 310 of the Corporations Code, (ii) an amendment of the articles of incorporation pursuant to Section 902 of that Code, (iii) a reorganization of the Corporation pursuant to Section 1201 of that Code, (iv) a voluntary dissolution of the Corporation pursuant to Section 1900 of that Code, or (v) a distribution and dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, then the written waiver of notice shall state the general nature of that proposal, unless there is unanimous Shareholder approval by those entitled to vote. Section 6. Adjourned Meeting and Notice Thereof. Any Shareholders' meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but in the absence of a quorum (except as provided in Section 8 of this Article) no other business may be transacted at such meeting. It shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted thereat, other than by announcement at the meeting at which such adjournment is taken; provided however, when any Shareholders' meeting is adjourned for more than forty-five (45) days or, if after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. Section 7. Shareholders Acting Without A Meeting. A. In General. Unless otherwise provided in the articles, any action which may be taken at any annual or special meeting of Shareholders may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. B. Election of Directors. In the case of election of Directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of Directors; provided however, that a Director may be elected at any time to fill a vacancy on the Board of Directors that has not been filled by the Directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of Directors. C. Notice Requirements. If the consents of all Shareholders entitled to vote have not been solicited in writing, and if the unanimous written 4 consent of all such Shareholders shall not have been received, the Secretary shall give prompt notice of the corporate action approved by the Shareholders without a meeting. In the case of approval of (i) contracts or transactions in which a Director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code, (ii) indemnification of agents of the Corporation, pursuant to Section 317 of that Code, (iii) a reorganization of the Corporation, pursuant to Section 1201 of that Code, and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval. D. Revocation of Consent. Any Shareholder giving a written consent, or the Shareholder's proxy holders, or a transferee of the shares of a personal representative of the Shareholder or their respective proxy holders, may revoke the consent by a writing received by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation. Section 8. Quorum. The holders of a majority of the shares entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the Shareholders for the transaction of business except as otherwise provided by law, by the articles of incorporation, or by these Bylaws. If, however, such majority shall not be present or represented at any meeting of the Shareholders, the Shareholders entitled to vote thereat, present in person, or by proxy, shall have the power to adjourn the meeting from time to time, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. If a quorum be initially present, the Shareholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum, if any action taken is approved by a majority of the Shareholders required to initially constitute a quorum. Section 9. Voting. Subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code (relating to voting shares held by a fiduciary, in the name of a Corporation, or in joint ownership), only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the day fixed by the Board of Directors for 5 the determination of Shareholders of record shall be entitled to vote at such meeting. On any matter other than election of Directors, each Shareholder may cast one vote for each share owned of record. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of Directors) shall be the act of the Shareholders, unless the vote of a greater number or voting by classes is required by Corporations Code or by the articles of incorporation. At a Shareholders' meeting at which Directors are to be elected, no Shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the Shareholder's shares) unless the candidates' names have been placed in nomination prior to commencement of the voting and a Shareholder has given notice prior to commencement of the voting of the Shareholder's intention to cumulate votes. If any Shareholder has given such a notice, then every Shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of votes to which that Shareholder's shares are entitled, or distribute the Shareholder's votes on the same principle among any or all of the candidates, as the Shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of Directors to be elected, shall be elected. Section 10. Record Date for Shareholder Notice, Voting, and Giving Consents. For purposes of determining the Shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in this event only Shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date, except as otherwise provided in the Corporations Code. If the Board of Directors does not so fix a record date: (a) The record date for determining Shareholders entitled to notice of or to vote at a meeting of Shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. 6 (b) The record date for determining Shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the Board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the Board has been taken, shall be at the close of business on the day on which the Board adopts the resolution relating to that action, or the sixtieth day before the date of such other action, whichever is later. (c) The determination of Shareholders entitled to notice of or to vote at a meeting of Shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting. The Board shall fix a new record date if the meeting is adjourned for more than forty-five (45) days from the date set forth for the original meeting. Section 11. Proxies. Every person entitled to vote for Directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Corporation. A proxy shall be deemed signed if the Shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the Shareholder or the Shareholder's attorney-in-f act. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the Corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Corporation before the vote pursuant to that proxy is counted; provided however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Corporations Code. Section 12. Organization. The President, or in the absence of the President, any Vice President, shall call the meeting of the Shareholders to order, and shall act as Chairman of the meeting. In the absence of the President and all of the Vice Presidents, Shareholders shall appoint a Chairman for such meeting. The Secretary of the Corporation shall act as Secretary of all meetings of the Shareholders, but in the absence of the Secretary at any meeting of the Shareholders, the presiding Officer may appoint any person to act as Secretary of the meeting. 7 Section 13. Inspectors of Election. Before any meeting of Shareholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the Chairman of the meeting may, and on the request of any Shareholder or a Shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more Shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the meeting may, and upon the request of any Shareholder or a Shareholder's proxy shall, appoint a person to fill that vacancy. The duties of such inspectors shall be as prescribed by Section 707(b) of the Corporations Code and shall include: determining the number of shares outstanding and the voting power of each; the shares represented at the meeting; the existence of a quorum; the authenticity, validity, and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all votes or consents; determining when the polls shall close; determining the result; and doing such acts as may be proper to conduct the election or vote with fairness to all Shareholders. If there are three (3) inspectors of election, the decision, act, or certificate of a majority is effective in all respects as the decision, act, or certificate of all. ARTICLE III DIRECTORS: MANAGEMENT Section 1. Powers. Subject to the provisions of the Corporations Code, and any limitations in the articles of incorporation and these Bylaws relating to action required to be approved by the Shareholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. Each Director shall exercise such powers and otherwise perform such duties in good faith, in the manner such Director believes to be in the best interests of the Corporation, and with such care, including reasonable inquiry, using ordinary prudence, as a person in a like position would use under similar circumstances, in accordance with Section 309 of the Corporations Code. 8 Section 2. Number and Qualification of Directors. The authorized number of Directors shall be three (3) until changed by a duly adopted amendment to this bylaw adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided however, that an amendment reducing the number of Directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote. If such authorized number is less than three (3) and if at any time hereafter the number of Shareholders increases, the Shareholders shall amend this Section 2 of Article III of the Bylaws to increase the number of Directors herein authorized as required by Section 212(a) of the Corporations Code, which provides that the Board of Directors shall consist of at least one (1) Director if the Corporation has only one (1) Shareholder, at least two (2) Directors if the Corporation has only two (2) Shareholders, and at least three (3) Directors if the Corporation has three (3) or more Shareholders. The number of Directors herein provided may be changed by amendment adopted by the vote or written assent of Shareholders entitled to' exercise a majority of the voting power. Directors shall be Shareholders of the Corporation. Section 3. Election and Tenure of Office. The Directors shall be elected by ballot at the annual meeting of the Shareholders, to serve for one (1) year or until their successors are elected and have qualified. Their term of office shall begin immediately after election. Section 4. Vacancies. Vacancies in the Board of Directors may be filled by a majority of the remaining Directors, though less than a quorum, or by a sole remaining Director, except that a vacancy created by the removal of a Director by the vote or written consent of the Shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each Director so elected shall hold office until the next annual meeting of the Shareholders and until a successor has been elected and qualified. A vacancy or vacancies in the Board of Directors shall be deemed to exist in the event of the death, resignation, or removal of any Director, or if the authorized number of Directors is increased, or if the Shareholders fail, at any meeting of Shareholders at which any Director or Directors are elected, to elect the number of Directors to be voted for at that meeting. 9 The Shareholders may elect a Director or Directors at any time to fill any vacancy or vacancies not filled by the Directors, but any such election by written consent other than to fill a vacancy created by removal, shall require the consent of a majority of the outstanding shares entitled to vote. Any Director may resign effective on giving written notice to the Chairman of the Board, the President, the Secretary, or the Board of Directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a Director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective. No reduction of the authorized number of Directors shall have the effect of removing any Director before that Director's term of office expires. Section 5. Removal of Directors. The entire Board of Directors or any individual Director may be removed from office as provided by Sections 302, 303, and 304 of the Corporations Code of the State of California. In such case, the remaining Board members may elect a successor Director to fill such vacancy for the remaining unexpired term of the Director so removed. Section 6. Place and Manner of Meetings. Regular meetings of the Board of Directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the Board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the Corporation. Special meetings of the Board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the Corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all Directors participating in the meeting can hear one another, and all such Directors shall be deemed to be present in person at the meeting. Section 7. Annual Meeting. Immediately following each annual meeting of Shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, any desired election of Officers, and the transaction of other business. Notice of this meeting shall not be required. 10 Section 8. Other Regular Meetings. Other regular meetings of the Board of Directors shall be held without call at such time as shall from time to time be fixed by resolution of the Board of Directors. Such regular meetings may be held without notice. Section 9. Special Meetings. Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board or the President or any Vice President or the Secretary or any two (2) Directors, or by one (1) Director if only one is provided. Notice of the time and place of special meetings shall be delivered personally or by telephone to each Director or sent by first class mail or telegram, charges prepaid, addressed to each Director at that Director's address as it is shown on the records of the Corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally, or by telephone or telegram, it shall be delivered personally, or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the Director or to a person at the office of the Director who the person giving the notice has reason to believe, will promptly communicate it to the Director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the Corporation. Section 10. Waiver of Notice. When all of the Directors are present at any Directors' meeting, however called or noticed, and either (i) sign a written consent thereto on the records of such meeting, or, (ii) if a majority of the Directors are present and if those not present sign a waiver of notice of such meeting or a consent to holding the meeting or an approval of the minutes thereof, whether prior to or after the holding of such meeting, which said waiver, consent or approval shall be filed with the corporate records or made a part of the minutes of the meeting held pursuant thereto, or, (iii) if a Director attends a meeting without notice but without protesting, prior thereto or at its commencement, the lack of notice to him, then the transactions thereof are as valid as if had at a meeting regularly called and noticed. Section 11. Sole Director Provided by Articles of Incorporation. In the event only one (1) Director is required by the Bylaws or articles of incorporation, then any reference herein to notices, waivers, consents, meetings or other actions by a majority or quorum of the Directors shall be deemed to refer to such notice, waiver, etc., by such sole Director, who shall have all the rights and 11 duties and shall be entitled to exercise all of the powers and shall assume all the responsibilities otherwise herein described as given to a board of directors. Section 12. Directors Acting by Unanimous Written Consent. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting and with the same force and effect as if taken by a unanimous vote of Directors, if authorized by a writing signed individually or collectively by all members of the Board. Such consent shall be filed with the regular minutes of the Board. Section 13. Quorum. A majority of the authorized number of Directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 14 of this Article III; provided however, that such quorum may not be less than two (2) Directors unless the authorized number of Directors is one (1), in which case one (1) Director constitutes a quorum. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, subject to the provisions of Section 310 of the Corporations Code (as to approval of contracts or transactions in which a Director has a direct or indirect material financial interest), Section 311 of that Code (as to appointment of committees) and Section 317(e) of that Code (as to indemnification of Directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of Directors, if any action taken is approved by at least a majority of the required quorum for that meeting. Section 14. Adjournment. A majority of the Directors present, whether or not a quorum is present, may adjourn any Directors' meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place be fixed at the meeting adjourned. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the Directors who were not present at the time of the adjournment. Section 15. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board a fixed sum and expense of attendance, if any, may be allowed for attendance at each regular and special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 12 ARTICLE IV COMMITTEES Section 1. Committees of Directors. The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, designate one (1) or more committees, each consisting of two (2) or more Directors, to serve at the pleasure of the Board. The Board may also, by resolution adopted by a majority of the authorized number of Directors, designate one (1) or more Directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the Board, shall have all the authority of the Board, except with respect to: (a) The approval of any action which, under the Corporations Code, also requires Shareholders' approval or approval of the outstanding shares; (b) The filling of vacancies on the Board of Directors or in any committee; (c) The fixing of compensation of the Directors for serving on the Board or on any committee; (d) The amendment or repeal of Bylaws or the adoption of new Bylaws; (e) The amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable; (f) A distribution to the Shareholders of the Corporation, except at a rate or in a periodic amount or within a price range determined by the Board of Directors; or (g) The appointment of any other committees of the Board of Directors or the members of these committees. Section 2. Meetings and Action of Committees. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Sections 6 (Place and Manner of Meetings), 8 (Other Regular Meetings), 9 (Special Meetings), 10 (Waiver of Notice), 12 (Directors Acting by Unanimous Written Consent), 13 (Quorum), and 14 (Adjournment), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members, except that the time of regular meetings of 13 committees may be determined either by resolution of the Board of Directors or by resolution of the committee; special meetings of committees may also be called by resolution of the Board of Directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws. ARTICLE V OFFICERS Section 1. Officers. The Officers of the Corporation shall be a President, or Chief Executive Officer, a Secretary, and a Chief Financial Officer. The Corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one (1) or more Vice Presidents, one (1) or more Assistant Secretaries, one (1) or more Assistant Treasurers, and such other Officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person. Section 2. Election. The Officers of the Corporation, except such Officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article shall be chosen annually by the Board of Directors, and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified. Section 3. Subordinate Officers. The Board of Directors may appoint, and may empower the President to appoint, such other Officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board of Directors may from time to time determine. Section 4. Removal and Resignation of Officers. Subject to the rights, if any, of an Officer under any contract of employment, any Officer may be removed, either with or without cause, by the Board of Directors, at any regular or special meeting of the Board, or, except in case of an Officer chosen by the Board of Directors, by any Officer upon whom such power of removal may be conferred by the Board of Directors. 14 Any Officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the Officer is a party. Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the Bylaws for regular appointments to such office. Section 6. Chairman of the Board. The Chairman of the Board, if such an Officer be elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the Bylaws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article V. Section 7. President/Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an Officer, the President or Chief Executive Officer shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and Officers of the Corporation. He shall preside at all meetings of the Shareholders and in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be ex officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a Corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws. Section 8. Vice President. In the absence or disability of the President, the Vice Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to, all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws. 15 Section 9. Secretary. The Secretary shall keep or cause to be kept, at the principal executive office and such other place as the Board may order, a book of minutes of all meetings of Shareholders, the Board, and its committees, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at Board and committee meetings, the number of shares present or represented at Shareholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, a copy of the Bylaws of the Corporation at the principal executive office or business office in accordance with Section 213 of the Corporations Code. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent or registrar, if one be appointed, a share register, or a duplicate share register, showing the names of the Shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the Shareholders and of the Board and of any committees thereof required by these Bylaws or by law to be given, shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board. Section 10. Chief Financial Officer. This Officer shall keep and maintain, or cause to be kept and maintained in accordance with generally accepted accounting principles, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, earnings (or surplus) and shares. The books of account shall at all reasonable times be open to inspection by any Director. The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws. 16 ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS Section 1. Right to Indemnification. The Corporation shall, to the maximum extent permitted under the existing or as hereafter amended Corporations Code, and in excess of that otherwise expressly permitted by Section 317 of the Corporations Code, indemnify and hold harmless each of its agents and their successors, heirs, and assigns against any and all personal liability, expenses, judgments, fines, settlements and other amounts (including attorneys' fees) actually and reasonably incurred by the agent in connection with any actual, threatened, or alleged dispute, claim, action, or proceeding, whether civil, criminal, or administrative, arising by reason of the fact any such person is or was an agent of the Corporation; subject only to the limitation set forth in Section 204(a)11 of the Corporations Code that an agent of the Corporation shall be neither indemnified nor held harmless for any acts or omissions or transactions from which a director may not be relieved of liability as set forth in Section 204(a)10 of the Corporations Code, or as to circumstances in which indemnity is expressly prohibited by Section 317 of the Corporations Code. Except as provided in Section 2 of this Article VI with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such agent seeking indemnification in connection with a proceeding (or part thereof) initiated by such agent only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article VI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Corporations Code so requires, the payment of such expenses incurred by an agent in such agent's capacity as an agent in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such agent, to repay all amounts so advanced if it shall ultimately be determined that such agent is not entitled to be indemnified under this Article VI or otherwise. For purposes of this Article VI, an "agent" of the Corporation includes any person who is or was a director, officer, employee, or other agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, or was a director, officer, employee, or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 17 Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 of this Article VI is not paid in full by the Corporation within ninety (90) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claims and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Corporations Code for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the Corporations Code, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the articles of incorporation, by-law, agreement, vote of shareholders or disinterested directors, opinion of independent legal counsel, or otherwise. The rights to indemnity set forth in this Article VI shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. Section 4. Insurance. In order to meet any of its obligations under this Section the Corporation may purchase and maintain insurance on behalf of any agent of the Corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not this Corporation would have the power to indemnify the agent against that liability under the provisions of this Article. 18 ARTICLE VII PAYMENTS OR LOANS MADE TO OFFICERS, DIRECTORS OR OTHER EMPLOYEES Section 1. Authority to Loan. The Corporation shall not authorize any loan of money or property to or guarantee the obligation of any Officer, Director or employee of the Corporation except in accordance with the provisions of Section 315 of the Corporations Code. Any transaction which does not meet the requirements of Section 315 shall be subject to Section 316 of the Corporations Code. Section 2. Reimbursement to Corporation of Amounts Disallowed by Internal Revenue Service. Any payments heretofore or hereafter made to or for a Shareholder, Director, Officer or other employee of the Corporation such as salary, commission, bonus, interest, rent, loans, advances, entertainment expense incurred by him, or any other expenses deemed personal rather than corporate, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service or Franchise Tax Board, shall be reimbursed by such person to the Corporation to the full extent of such disallowance. Section 3. Duty to Enforce Payment. It shall be the duty of the Directors, as a Board, to enforce payment of each such amount loaned or disallowed. In lieu of payment by such person, subject to the determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered. ARTICLE VIII CORPORATE RECORDS AND REPORTS Section 1. Records. The Corporation shall maintain, in accordance with generally accepted accounting principles, adequate and correct accounts, books and records of its business and properties and shall maintain minutes of the proceedings of the Shareholders and the Board of Directors. All of such books, records and accounts shall be kept at its principal executive office in the State of California, as fixed by the Board of Directors from time to time. 19 Section 2. Inspection of Books and Records. All books and records provided for in Section 1500 of the Corporations Code shall be open to inspection of the Directors and Shareholders from time to time and in the manner provided in Sections 1600 through 1602 of that Code. Section 3. Certification and Inspection of Bylaws. The original or a copy of these Bylaws, as amended or otherwise altered to date, certified by the Secretary, shall be kept at the Corporation's principal executive office and shall be open to inspection by the Shareholders of the Corporation, at all reasonable times during office hours, as provided in Section 213 of the Corporations Code. Section 4. Checks, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by resolution of the Board of Directors. Section 5. Authority to Execute Contracts. The Board of Directors, except as in the Bylaws otherwise provided, may authorize any Officer or Officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no Officer, agent or employee shall have any power or authority to bind the Corporation by any contract or agreement, or to pledge its credit, or to render it liable for any purpose or to any amount, except as provided in Section 313 of the Corporations Code. Section 6. Annual Report to Shareholders. The annual report to Shareholders referred to in Section 1501 of the Corporations Code is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the Shareholders of the Corporation as they consider appropriate. Section 7. Financial Statements. A copy of any annual financial statement and any income statement of the Corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the Corporation as of the end of each such period, that has been prepared by the Corporation shall be kept on file in the principal executive office of 20 the Corporation for twelve (12) months and each such statement shall be exhibited at all reasonable times to any Shareholder demanding an examination of any such statement or a copy shall be mailed to any such Shareholder. The Shareholders shall have such rights to review the financial statements of the Corporation at the principal executive office of the Corporation at reasonable times or to receive a copy of such statements, as provided in Section 1501(c) through (e) of the Corporations Code. The quarterly income statements and balance sheets referred to in this Section shall be accompanied by the report, if any, of any independent accountants engaged by the Corporation or the certificate of an authorized Officer of the Corporation that the financial statements were prepared without audit from the books and records of the Corporation. Section 8. Annual Statement of General Information. Within ninety (90) days after the date of incorporation and annually thereafter, the Officers of this Corporation shall prepare and file with the California Secretary of State a statement setting forth the information as requested by and in compliance with Section 1502 of the Corporations Code. ARTICLE IX CERTIFICATES AND TRANSFER OF SHARES Section 1. Certificates for Shares. Certificates for shares shall be of such form and device as the Board of Directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; and shall state in a conspicuous manner, the rights, privileges and restrictions, if any; provisions for redemption or conversion, if any; liens or restrictions upon transfer or voting, if any; and if the shares are assessable or, if assessments are collectible by personal action. Every certificate for shares must be signed by the President or a Vice President and the Secretary or an Assistant Secretary or must be authenticated by facsimiles of the signatures of the President and Secretary or by a facsimile of the signature of its President and the written signature of its Secretary or an Assistant Secretary. Before it becomes effective every certificate for shares authenticated by a facsimile of a signature must be countersigned by a transfer agent or transfer clerk and must be registered by an incorporated bank or trust company, either domestic or foreign, as registrar of transfers. 21 Certificates for shares may be issued prior to full payment under such restrictions and for such purposes as the Board may provide; provided however, that on any certificate issued to represent any partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Section 2. Transfer on the Books. Upon surrender to the Secretary or transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 3. Lost Certificates. Except as provided in this Section, no new certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the Corporation and canceled at the same time. The Board of Directors may, in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the Board may require, including provision for indemnification of the Corporation secured by a bond or other adequate security sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate. Section 4. Transfer Agents and Registrars. The Board of Directors may appoint one (1) or more transfer agents or transfer clerks, and one or more registrars, which shall be an incorporated bank or trust company, either domestic or foreign, who shall be appointed at such times and places as the requirements of the Corporation may necessitate and the Board of Directors may designate. Section 5. Closing Stock Transfer Books. In order that the Corporation may determine the Shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board may fix, in advance, a record date, in accordance with Section 10 of Article II of these Bylaws. Section 6. Legend Condition. In the event any shares of this Corporation are issued pursuant to a permit or exemption therefrom requiring the imposition of a legend condition the person or 22 persons issuing or transferring said shares shall make sure said legend appears on the certificate and on the stub relating thereto in the stock record book and shall not be required to transfer any shares free of such legend unless an amendment to such permit or a new permit be first issued so authorizing such a deletion. ARTICLE X AMENDMENTS TO BYLAWS Section 1. By Shareholders. New Bylaws may be adopted or these Bylaws may be repealed or amended at the annual meeting, or at any other meeting of the Shareholders called for that purpose, by a vote of Shareholders entitled to exercise a majority of the voting power of the Corporation, or by written assent of such Shareholders. Section 2. Powers of Directors. Subject to the right of the Shareholders to adopt, amend or repeal Bylaws, as provided in Section 1 of this Article X, and the limitations of Section 204(a)(5) and Section 212, the Board of Directors may adopt, amend or repeal any of these Bylaws other than a bylaw or amendment thereof changing the authorized number of Directors. Section 3. Record of Amendments. Whenever an amendment or new bylaw is adopted, it shall be copied in the book of Bylaws with the original Bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in said book. ARTICLE XI MISCELLANEOUS Section 1. Construction and Definitions. Unless the context otherwise requires, the general provisions, rules of construction, and definitions contained in the General Provisions of the California Corporations Code and in the Corporations Code shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a Corporation and a natural person. 23 Section 2. Representation of Shares of Other Corporations. The President, Chairman of the Board, or any other Officer or Officers authorized by the Board or the President are each authorized to vote, represent, and exercise on behalf of the Corporation all rights incident to any and all shares of any other Corporation or corporations standing in the name of the Corporation. The authority herein granted may be exercised either by any such Officer in person or by any other person authorized so to do by proxy or power of attorney duly executed by said Officer. Section 3. Seal. The corporate seal shall be circular in form, and shall have inscribed thereon the name of the Corporation, the date of its incorporation, and the word "California". 24 EX-3.45 44 g83903exv3w45.txt EX-3.45 AMENDED AND RESTATED CHARTER EXHIBIT 3.45 AMENDED AND RESTATED CHARTER OF PHYSICIAN PRACTICE MANAGEMENT OF ARKANSAS, INC Pursuant to the provisions of Section 48-20-107 of the Tennessee Business Corporation Act, the undersigned corporation certifies that: 1. The name of the corporation is Physician Practice Management of Arkansas, Inc. 2. The Amended and Restated Charter restates and further amends the Charter of the corporation. The Amended and Restated Charter was duly adopted by written consent of the Board of Directors of the corporation Dated May 21, 1998 and by written consent of the shareholders of the corporation dated May 21, 1998. 3. The text of the Charter of the corporation is hereby restated and further amended to read in its entirety as follows: AMENDED AND RESTATED CHARTER OF PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. 1. The name of the corporation is Psychiatric Practice Management of Arkansas, Inc. 2. The corporation's registered office is located at 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203, County of Davidson. The registered agent at that office is Laura C, Fisher, Esq. 3. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203. 4. The corporation is for profit. 5. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 6. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the Bylaws of the Corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 7. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 7 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 8. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to 2 indemnification conferred in this Section 8 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter and "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judgment decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 8 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under the Tennessee Business Corporation Act, and a determination is made that the facts then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 8 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expense to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 21st day of May, 1998. /s/ K. Bryce DeHaven -------------------------------- K. Bryce DeHaven, Vice President /s/ Laura C. Fisher - ------------------------------------ Laura C. Fisher, Assistant Secretary 3 EX-3.46 45 g83903exv3w46.txt EX-3.46 BYLAWS OF PHYSICIAN PRACTICE MANAGEMENT EXHIBIT 3.46 BYLAWS OF PHYSICIAN PRACTICE MANAGEMENT OF ARKANSAS, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United State mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision if this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall not be less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Director's Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and any other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS. REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of directors. 3 4.2 Removal of Officers. Any officer may be removed at any time with or without cause by the board whenever in its judgment the best interest of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificate. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholder or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholder's meeting; or 4 (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The fiscal year for the corporation shall be the calendar year. CERTIFICATION These bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on April 30,1998. /s/ Joey A. Jacobs --------------------------------------- Joey A. Jacobs /s/ Steven T. Davidson --------------------------------------- Steven T. Davidson 5 EX-3.47 46 g83903exv3w47.txt EX-3.47 THIRD AMENDED AND RESTATED CERTIFICATE EXHIBIT 3.47 THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PSYCHIATRIC SOLUTIONS HOSPITALS. INC. ARTICLE 1 The name of the corporation is Psychiatric Solutions Hospitals, Inc. (the "Corporation"). ARTICLE 2 The address of the registered office of this corporation in the State of Delaware is 9 Loockerman Street, Dover, County of Kent, Delaware 19901. The name of its registered agent at such address is National Registered Agents, Inc. ARTICLE 3 The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "DGCL"). ARTICLE 4 The Corporation is authorized to issue one class of stock to be designated "Common Stock," with a par value of $0.01 per share. The total number of shares which the Corporation is authorized to issue is 1000. The Corporation may purchase, directly or indirectly, its own shares to the extent that may be allowed by law. The number of authorized shares of any class or series of stock of the Corporation may be increased or decreased (but not below the number of shares of such class or series then outstanding) by an amendment to this Certificate approved by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote on such amendment voting together as a single class, and no such class or series of stock shall be entitled to vote on such amendment as a separate class. ARTICLE 5 The business and affairs of the Corporation shall be managed by and under the direction of the Board of Directors (the "Board"). The exact number of directors of the Corporation shall be fixed by or in the manner provided in the Bylaws of the Corporation (the "Bylaws"). ARTICLE 6 In furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to adopt, amend or repeal in any respect any or all of the Bylaws. ARTICLE 7 Elections of directors need not be by written ballot unless the Bylaws shall so provide. ARTICLE 8 Meetings of stockholders of the Corporation may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision of applicable law) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws. ARTICLE 9 A director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit If the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided in this Article, shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. ARTICLE 10 To the fullest extent permitted by applicable law, the Corporation is also authorized to provide indemnification of (and advancement of expenses to) its agents (and any other persons to which Delaware law permits this Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors, or otherwise, in excess 2 of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to this Corporation, its stockholders, and others. Any repeal or modification of any of the foregoing provisions of this Article shall not adversely affect any right or protection of a director, officer, agent, or other person existing at the time of, or increase the liability of any director of this Corporation with respect to any acts or omissions of such director, officer, or agent occurring prior to, such repeal or modification. ARTICLE 11 The Corporation reserves the right to amend, alter, change or repeal in any respect any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by applicable laws, and all rights conferred upon stockholders in this Certificate of Incorporation are granted subject to this reservation. 3 EX-3.48 47 g83903exv3w48.txt EX-3.48 AMENDED AND RESTATED BYLAWS EXHIBIT 3.48 PSYCHIATRIC SOLUTIONS HOSPITALS, INC. (A DELAWARE CORPORATION) AMENDED AND RESTATED BYLAWS ARTICLE 1 OFFICES Section 1.1. Registered Office. The registered office shall be in the City of Dover, County of Kent, State of Delaware. Section 1.2. Other Offices. The Corporation may also have offices at such other places, either within or without the State of Delaware, as the board of directors may from time to time to determine or as the business of the Corporation may require. ARTICLE 2 MEETINGS OF STOCKHOLDERS Section 2.1. Place of Meetings. All meetings of the stockholders shall be held at the office of the Corporation or at such other places as may be fixed from time to time by the board of directors, either within or without the State of Delaware, and stated in the notice of the meeting or in a duly executed waiver of notice of the meeting, or the board of directors, may in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication. Section 2.2. Annual Meetings. Annual meetings of stockholders, commencing with the year 2002, shall be held at the time and place, if any, to be selected by the board of directors. If the day is a legal holiday, then the meeting shall be held on the next following business day. At the meeting, the stockholders shall elect a board of directors and transact such other business as may properly be brought before the meeting. Each election of directors shall be by written ballot, unless otherwise provided in the Certificate of Incorporation. If authorized by the board of directors, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxyholder. Section 2.3. Notice of Annual Meeting. Notice of the annual meeting stating the place, if any, date, and hour of the meeting shall be given in accordance with Section 2.4 of this Article to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. Section 2.4. Manner of Giving Notice; Affidavit of Notice. If mailed, notice to stockholders shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Without limiting the manner by which notice may otherwise be given effectively to stockholders, any notice to stockholders may be given by electronic 1 transmission in the manner provided in Section 232 of the Delaware General Corporation Law. An affidavit of the secretary or an assistant secretary or of the transfer agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated in such affidavit. Section 2.5. Voting List. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during the whole time of the meeting as in the manner provided by law. Section 2.6. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the chairman of the board or the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or by the holders of 10% or more of the outstanding shares of stock of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Section 2.7. Notice of Special Meetings. Notice of a special meeting stating the place, if any, date, and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given in accordance with Section 2.4 of this Article not less than 10 nor more than 60 days before the date of the meeting, to each stockholder entitled to vote at such meeting. Business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice. Section 2.8. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote at meetings of the stockholders, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.9. Order of Business. At each meeting of the stockholders, one of the following persons, in the order in which they are listed (and in the absence of the first, the next, and so on), shall serve as chairman of the meeting: president, chairman of the board, vice presidents (in the order of their seniority if more than one), and secretary. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of 2 procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement of such meeting, and the opening and closing of the voting polls. Section 2.10. Majority Vote. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 2.11. Method of Voting. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 2.12. Action by Stockholders Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without notice and without a prior vote, if a consent or consents in writing or in accordance with Section 228 of the Delaware General Corporation Law, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the Corporation or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Section 2.13. Presence at Meetings. If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at the meeting of stockholders may by means of remote communication (1) participate in a meeting of stockholders and (2) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation. 3 ARTICLE 3 DIRECTORS Section 3.1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation of the Corporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 3.2. Number of Directors. The board of directors shall have not less than one nor more than five directors. The number of directors constituting the board shall be such number as shall be from time to time specified by resolution of the board of directors; provided that no director's term shall be shortened by reason of a resolution reducing the number of directors; and further provided that the number of directors constituting the initial board of directors shall be two and shall remain such number unless and until changed by resolution of the board of directors aforesaid. Section 3.3. Election, Qualification, and Term of Office of Directors. Directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws, which may prescribe other qualifications for directors. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Section 3.4. Notification of Nominations. Subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations for the election of directors may be made by the board of directors or by any stockholder entitled to vote for the election of directors. Section 3.5. Regular Meetings. Regular meetings of the board of directors may be held without notice at such times and at such places as shall from time to time be determined by the board. Section 3.6. Special Meetings. Special meetings of the board may be called by the chairman of the board or the president, and shall be called by the president or secretary on the written request of two directors. Section 3.7. Quorum, Majority Vote. At all meetings of the board, a majority of the entire board of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.8. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee of the board of directors may be 4 taken without a meeting, if all members of the board or committee, as the case may be, consent to such action in writing, or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of Delaware. Section 3.9. Telephone and Other Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 3.10. Notice of Meetings. Notice of regular meetings of the board of directors or of any adjourned meeting of the board of directors need not be given. Notice of each special meeting of the board shall be mailed to each director, addressed to such director at such director's residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telegraph or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to such director. Every such notice shall state the time and place but need not state the purpose of the meeting. Section 3.11. Rules and Regulations. The board of directors may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate of Incorporation of the Corporation, or these Bylaws for the conduct of its meetings and management of the affairs of the Corporation as the board may deem proper. Section 3.12. Resignations. Any director of the Corporation may at any time resign by giving notice in writing or by electronic transmission to the board of directors, the chairman of the board, the president, or the secretary of the Corporation. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt of such notice; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Section 3.13. Removal of Directors. Unless otherwise restricted by statute, by the Certificate of Incorporation, or by these Bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Section 3.14. Vacancies. Subject to the rights of the holders of any class or series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation, any vacancies on the board of directors resulting from death, resignation, removal, or other cause shall only be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the board of directors, 5 or by a sole remaining director, and newly created directorships resulting from any increase in the number of directors shall be filled by the board of directors, or if not so filled, by the stockholders at the next annual meeting of the stockholders or at a special meeting called for that purpose in accordance with Section 2.6 of Article 2 of these Bylaws. Any director elected in accordance with the preceding sentence of this Section shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such successor shall have been elected and qualified. Section 3.15. Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation for such service. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE 4 EXECUTIVE AND OTHER COMMITTEES Section 4.1. Executive Committee. The board of directors may, by resolution adopted by a majority of the entire board, designate annually one or more of its members to constitute members or alternate members of an executive committee, which committee shall have and may exercise, between meetings of the board, all the powers and authority of the board in the management of the business and affairs of the Corporation, including, if such committee is so empowered and authorized by resolution adopted by a majority of the entire board, the power and authority to declare a dividend and to authorize the issuance of stock, and may authorize the seal of the Corporation to be affixed to all papers which may require it, except that the executive committee shall not have such power or authority with reference to: (a) amending the Certificate of Incorporation of the Corporation; (b) adopting an agreement of merger or consolidation involving the Corporation; (c) recommending to the stockholders the sale, lease or exchange of all or substantially all of the property and assets of the Corporation; (d) recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution; (e) adopting, amending, or repealing any Bylaw; (f) filling vacancies on the board or on any committee of the board, including the executive committee; 6 (g) fixing the compensation of directors for serving on the board or on any committee of the board, including the executive committee; or (h) amending or repealing any resolution of the board which by its terms may be amended or repealed only by the board. Section 4.2. Other Committees. The board of directors may, by resolution adopted by a majority of the entire board, designate from among its members one or more other committees, each of which shall, except as otherwise prescribed by law, have such authority of the board as may be specified in the resolution of the board designating such committee. A majority of all the members of such committee may determine its action and fix the time and place of its meetings, unless the board shall otherwise provide. The board shall have the power at any time to change the membership of, to increase or decrease the membership of, to fill all vacancies in, and to discharge any such committee, or any member of any such committee, either with or without cause. Section 4.3. Procedure; Meetings; Quorum. Regular meetings of the executive committee or any other committee of the board of directors, of which no notice shall be necessary, may be held at such times and places as shall be fixed by resolution adopted by a majority of the members of such committee. Special meetings of the executive committee or any other committee of the board shall be called at the request of any member of such committee. Notice of each special meeting of the executive committee or any other committee of the board shall be sent by mail, telegraph, or telephone, or be delivered personally to each member of such committee not later than the day before the day on which the meeting is to be held, but notice need not be given to any member who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of such notice to such member. Any special meeting of the executive committee or any other committee of the board shall be a legal meeting without any notice of such meeting having been given, if all the members of such committee shall be present at such meeting. Notice of any adjourned meeting of any committee of the board need not be given. The executive committee or any other committee of the board may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate of Incorporation of the Corporation, or these Bylaws for the conduct of its meetings as the executive committee or any other committee of the board may deem proper. A majority of the executive committee or any other committee of the board shall constitute a quorum for the transaction of business at any meeting, and the vote of a majority of the members of such committee present at any meeting at which a quorum is present shall be the act of such committee. In the absence or disqualification of a member, the remaining members, whether or not a quorum, may fill a vacancy. The executive committee or any other committee of the board of directors shall keep written minutes of its proceedings, a copy of which is to be filed with the secretary of the Corporation, and shall report on such proceedings to the board. ARTICLE 5 NOTICES Section 5.1. Method. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be 7 given in writing, by mail, electronic mail, overnight delivery, facsimile or any other manner provided in Section 232 of the Delaware General Corporation Law, addressed to such director or stockholder, at his mailing address, electronic mail address, or facsimile number as it appears on the records of the Corporation, with postage on such notice prepaid (as applicable), and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail if sent by mail or when received if sent by electronic mail, overnight delivery, or facsimile. Notice to directors may also be given by telegram. Section 5.2. Waiver. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a written waiver of such notice, signed by the person or persons entitled to said notice or waiver by electronic transmission by such person, whether before or after the time stated in such waiver, shall be deemed equivalent to notice. ARTICLE 6 OFFICERS Section 6.1. Election, Qualification. The officers of the Corporation shall be chosen by the board of directors and shall be a president and a secretary. In addition, the board of directors may choose a chairman of the board, one or more vice presidents, a secretary, a treasurer, one or more assistant secretaries and assistant treasurers and such other officers and agents as it shall deem necessary. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Section 6.2. Salary. The salaries of all officers and agents of the Corporation shall be fixed by the board of directors. Section 6.3. Term, Removal. Each officer shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors. Section 6.4. Resignation. Subject at all times to the right of removal as provided in Section 6.3 of this Article, any officer may resign at any time by giving notice to the board of directors, the president, or the secretary of the Corporation. Any such resignation shall take effect at the date of receipt of such notice or at any later date specified in such notice; provided that the president or, in the event of the resignation of the president, the board of directors may designate an effective date for such resignation which is earlier than the date specified in such notice but which is not earlier than the date of receipt of such notice; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Section 6.5. Vacancies. A vacancy in any office because of death, resignation, removal, or any other cause may be filled for the unexpired portion of the term in the manner prescribed in these Bylaws for election to such office. Section 6.6. Chairman of the Board. The chairman of the board shall, if there be such an officer, preside at meetings of the board of directors and, if present, and, in the 8 absence of the president, preside at meetings of the stockholders. The chairman of the board shall counsel with and advise the president and perform such other duties as the president or the board or the executive committee may from time to time determine. Except as otherwise provided by resolution of the board, the chairman of the board shall be ex-officio a member of all committees of the board. The chairman of the board may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts, or other instruments authorized by the board or any committee of the board empowered to authorize the same. In the absence of the president, the chairman of the board shall be the chief executive officer of the Corporation. Section 6.7. President. The president shall be the chief executive officer of the Corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the board of directors are carried into effect. He shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution of such bonds, mortgages or other contracts shall be expressly delegated by the board of directors to some other officer or agent of the Corporation. Section 6.8. Vice Presidents. In the absence of the president and the chairman of the board or, in the event of their inability or refusal to act, the vice president, if there be such an officer (or in the event there be more than one vice president, the vice presidents in the order designated by the directors, or, in the absence of any designation, then in the order of their election), shall perform the duties of the president and, when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 6.9. Secretary. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 6.10. Assistant Secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 9 Section 6.11. Treasurer. The treasurer, if there be such an officer, shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the board of directors. He shall disburse the funds of the Corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation. If required by the board of directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in his possession or under his control belonging to the Corporation. If there is not a treasurer of the Corporation, then the duties set forth above shall be discharged by the President or such other officer as shall be designated by the board of directors. Section 6.12. Assistant Treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE 7 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS Section 7.1. Third-Party Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise, against all expenses (including attorney's fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit, or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful. 10 The Corporation may indemnify any employee or agent of the Corporation, or any employee or agent serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, in the manner and to the extent that it shall indemnify any director or officer under this Section. Section 7.2. Derivative Actions. The Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against all expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of such person's duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. Section 7.3. Determination of Indemnification. Any indemnification under Section 7.1 or Section 7.2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 7.1 or Section 7.2 of this Article. Such determination shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. Section 7.4. Right to Indemnification. Notwithstanding the other provisions of this Article, to the extent that a director, officer, employee, or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in Section 7.1 or Section 7.2 of this Article, or in defense of any claim, issue, or matter in any such claim or issue, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with such defense. Section 7.5. Advance of Expenses. Expenses incurred in defending a civil or criminal action, suit, or proceeding may be paid by the Corporation on behalf of a director, officer, employee, or agent in advance of the final disposition of such action, suit, or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee, or agent to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation as authorized in this Article. 11 Section 7.6. Indemnification Not Exclusive. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any law, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. Section 7.7. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against liability under the provisions of this Article. Section 7.8. Definitions of Certain Terms. For purposes of this Article, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, or agents, so that any person who is or was a director, officer, employee, or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; references to "serving at the request of the Corporation" shall include any service as a director, officer, employee, or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. Section 7.9. Liability of Directors. Notwithstanding any provision of the Certificate of Incorporation or any other provision in these Bylaws, no director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the Delaware General Corporation Law) or any amendment or successor provision to such provision or shall be liable by reason that, in addition to any and all other requirements for such liability, he (i) shall have breached his duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct 12 or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. ARTICLE 8 CERTIFICATES OF STOCK Section 8.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the chairman or vice chairman of the board of directors, or the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 8.2. Facsimile Signatures. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 8.3. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance of such new certificate or certificates, require the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen, or destroyed. Section 8.4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled to such certificate, cancel the old certificate and record the transaction upon its books. Section 8.5. Fixing Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment of any meeting of stockholders, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided that the board of directors may fix a new record date for the adjourned meeting. 13 Section 8.6. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice of such claim or interest, except as otherwise provided by the laws of Delaware. ARTICLE 9 AFFILIATED TRANSACTIONS Section 9.1. Validity. Except as otherwise provided for in the Certificate of Incorporation and except as otherwise provided in these Bylaws, if Section 9.2 is satisfied, no contract or transaction between the Corporation and any of its directors, officers, or security holders, or any corporation, partnership, association, or other organization in which any of such directors, officers, or security holders are directly or indirectly financially interested, shall be void or voidable solely because of this relationship, or solely because of the presence of the director, officer, or security holder at the meeting authorizing the contract or transaction, or solely because of his or their participation in the authorization of such contract or transaction or vote at the meeting for authorization of such contract or transaction, whether or not such participation or vote was necessary for the authorization of such contract or transaction. Section 9.2. Disclosure, Approval, Fairness. Section 9.1 shall apply only if: (a) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known: (i) to the board of directors (or committee of the board of directors) and it nevertheless in good faith authorizes or ratifies the contract or transaction by a majority of the directors present, each such interested director to be counted in determining whether a quorum is present but not in calculating the majority necessary to carry the vote; or (ii) to the stockholders and they nevertheless authorize or ratify the contract or transaction by a majority of the shares present at a meeting considering such contract or transaction, each such interested person (stockholder) to be counted in determining whether a quorum is present and for voting purposes; or (b) the contract or transaction is fair to the Corporation as of the time it is authorized or ratified by the board of directors (or committee of the board of directors) or the stockholders. Section 9.3. Nonexclusive. This provision shall not be construed to invalidate a contract or transaction which would be valid in the absence of this provision. 14 ARTICLE 10 GENERAL PROVISIONS Section 10.1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 10.2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 10.3. Annual Statement. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation. Section 10.4. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Section 10.5. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the board of directors. Section 10.6. Seal. The board of directors may adopt a corporate seal having inscribed on such seal the name of the Corporation, the year of its organization, and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile of it to be impressed or affixed or reproduced or otherwise. ARTICLE 11 AMENDMENTS Section 11.1. Amendments. These Bylaws may be altered, amended, or repealed or new Bylaws may be adopted by a majority of the entire board of directors, at any meeting of the board of directors if notice of such alteration, amendment, repeal, or adoption of new Bylaws be contained in the notice of such meeting. The stockholders of the Corporation shall have the power to adopt, amend, or repeal any provisions of the Bylaws only to the extent and in the manner provided in the Certificate of Incorporation of the Corporation. 15 ARTICLE 12 ADVISORY COMMITTEES Section 12.1. Advisory Committees. The board of directors may, in its discretion, establish one or more technical, strategic or scientific advisory committees and appoint one or more persons as members of such advisory committees to serve in such capacity at the pleasure of the board. Each member of an advisory committee shall be entitled to receive such amounts as may be fixed from time to time by the board of directors as compensation for attending committee meetings and may be reimbursed for all reasonable expenses in attending and returning from any committee meeting. No advisory committee may set policy or be part of the corporate governance of the Corporation, and no advisory committee member may be responsible for the implementation of strategies or, in his or her capacity as a member of such committee, be involved in the management of the Corporation. Subject to the foregoing restrictions, the board may adopt a charter or other governing documents of any advisory board. 16 EX-3.49 48 g83903exv3w49.txt EX-3.49 CHARTER EXHIBIT 3.49 CHARTER OF PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. The undersigned person, having capacity to contract and acting as the incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation: 1. The name of the corporation is Psychiatric Solutions of Alabama, Inc. 2. The corporation's initial registered office is located at 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238, County of Davidson. The initial registered agent at that office is Glen Allen Civitts, Esq. 3. The name and address of the incorporator is Glen Allen Civitts, Esq., Harwell Howard Hyne Gabbert & Manner, P.C., 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238. 4. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203, County of Davidson. 5. The corporation is for profit. 6. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 7. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the By-laws of the corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 1 8. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 8 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 9. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 9 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 9 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under the Tennessee Business Corporation Act, and a determination is made that the facts 2 then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 9 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expenses to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 25th day of August, 1997. /s/ Glen Allen Civitts -------------------------------- Glen Allen Civitts, Incorporator 3 EX-3.50 49 g83903exv3w50.txt EX-3.50 BYLAWS EXHIBIT 3.50 BYLAWS OF PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of 1 business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director 2 of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such 3 resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of Directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The first fiscal year for the corporation shall be the calendar year. CERTIFICATION These Bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on August 26, 1997. /s/ Joey A. Jacobs ---------------------------------- /s/ Douglas B. Lewis ---------------------------------- 5 EX-3.51 50 g83903exv3w51.txt EX-3.51 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.51 RESTATED CERTIFICATE OF INCORPORATION OF PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. ARTICLE I NAME The name of the corporation is Psychiatric Solutions of Coral Gables, Inc. (the "Corporation"). ARTICLE II REGISTERED OFFICE AND AGENT The address of the registered office of the Corporation in the State of Delaware is 9 East Loockerman Street, Suite 1B, Dover, County of Kent, Delaware 19901. The name of the registered agent of the Corporation in the State of Delaware at the registered office is National Registered Agents, Inc. ARTICLE III PURPOSES The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any and all lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as now or hereinafter in force. The Corporation shall possess and exercise all of the powers and privileges granted by the General Corporation Law of the State of Delaware, by any other law or by this Certificate, together with all such powers and privileges incidental thereto as may be necessary or convenient to the conduct, promotion or attainment of the purposes of the Corporation. ARTICLE IV CAPITALIZATION The Corporation shall have authority, acting by its Board of Directors, to issue one thousand (1,000) shares of common stock, all of such shares having a par value of $.001 per share (the "Common Stock"), and such shares being entitled to one (1) vote per share on any matter on which shareholders of the Corporation are entitled to vote and such shares being entitled to participation in dividends and to receive the remaining net assets of the Corporation upon dissolution. The number of authorized shares of any class may be increased or decreased (but not below the number of such shares then outstanding) by the affirmative vote of the holders of a majority of the Common Stock. ARTICLE V BOARD OF DIRECTORS The Board of Directors of the Corporation shall consist of not less than two (2) nor more than fifteen (15) directors, the exact number to be fixed and determined from time to time by resolution of a majority of the Board of Directors. Any vacancy arising from the early retirement of a director may be filled by the vote of the remaining directors or the shareholders and the term of any such director shall be for the balance of the term of the retiring director. ARTICLE VI LIMITATION ON PERSONAL LIABILITY OF DIRECTORS A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director except for liability: (a) for any breach of the director's duty of loyalty to the Corporation or its shareholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) under Section 174 of the General Corporation Law of Delaware (or the corresponding provision of any successor act or law); and (d) for any transaction from which the director derived an improper personal benefit. If the law of the State of Delaware is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors or officers, then the liability of directors or officers to the Corporation or its shareholders shall be limited or eliminated to the fullest extent permitted by law of the State of Delaware as so amended from time to time. Any repeal or modification of the provisions of this Article VII, either directly or by the adoption of an inconsistent provision of these Articles, shall be prospective only and shall not adversely affect any right or protection set forth herein existing in favor of a particular individual at the time of such repeal or modification. In addition, if an amendment to the General Corporation Law of the State of Delaware limits or restricts in any way the indemnification rights permitted by law as of the date hereof, such amendment shall apply only to the extent mandated by law and only to activities of persons subject to indemnification under this Article VII which occur subsequent to the effective date of such amendment. ARTICLE VII INDEMNIFICATION (a) The Corporation shall indemnify, and upon request shall advance expenses to, in the manner and to the fullest extent permitted by law, any officer or director (or the estate of any such person) who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan (an "indemnitee"). The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan against any liability which may be asserted against such person. To the fullest extent permitted by law, the indemnification and advances provided for herein shall include expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses (including attorneys' fees), judgments, fines and amounts paid in settlement to the fullest extent permitted by law, both as to action in his official capacity and as to action in another capacity while holding such office. (b) Notwithstanding the foregoing, the Corporation shall not indemnify any such indemnitee with respect to any claim, issue or matter in any action or suit by or in the right of the Corporation as to which the indemnitee shall have been adjudged to be liable to the Corporation, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) The rights to indemnification and advancement of expenses set forth in this Article VII are intended to be greater than those which are otherwise provided for in the General Corporation Law of the State of Delaware, are contractual between the Corporation and the person being indemnified, his heirs, executors and administrators, and, with respect to this Article VII are mandatory, notwithstanding a person's failure to meet the standard of conduct required for permissive indemnification under the General Corporation Law of the State of Delaware, as amended from time to time. The rights to indemnification and advancement of expenses set forth in this Article VII above are nonexclusive of other similar rights which may be granted by law, these Articles, the Bylaws, a resolution of the Board of Directors or shareholders or an agreement with the Corporation, which means of indemnification and advancement of expenses are hereby specifically authorized. (d) Any repeal or modification of the provisions of this Article VII, either directly or by the adoption of an inconsistent provision of these Articles, shall be prospective only and shall not adversely affect any right or protection set forth herein existing in favor of a particular individual at the time of such repeal or modification. In addition, if an amendment to the General Corporation Law of the State of Delaware limits or restricts in any way the indemnification rights permitted by law as of the date hereof, such amendment shall apply only to the extent mandated by law and only to activities of persons subject to indemnification under this Article VII which occur subsequent to the effective date of such amendment. ARTICLE VIII AMENDMENTS The Board of Directors reserves the right from time to time to amend, alter, change or repeal any provision contained in these Articles in the manner now or hereinafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this reservation. ARTICLE IX PREEMPTIVE RIGHTS The holders of stock of the Corporation shall have no preemptive or preferential right to subscribe for or purchase any stock or securities of the Corporation. ARTICLE X PERPETUAL EXISTENCE The period of existence of the Corporation shall be perpetual. * * * EX-3.52 51 g83903exv3w52.txt EX-3.52 AMENDED AND RESTATED BYLAWS EXHIBIT 3.52 AMENDED AND RESTATED BYLAWS OF PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. (F/K/A RAMSAY YOUTH SERVICES, INC.) EFFECTIVE JUNE 30, 2003 WHEREAS, in accordance with Section 2.05 of the Agreement and Plan of Merger, dated as of April 8, 2003 (the "Agreement"), among Ramsay Youth Services, Inc., a Delaware corporation (the "Corporation"), Psychiatric Solutions, Inc., a Delaware corporation ("Purchaser"), and PSI Acquisition Sub, Inc., a Delaware corporation (the "Merger Subsidiary"), the bylaws of the Surviving Corporation (as that term is defined in the Agreement), its name having been changed to PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. upon the filing of a Restated Certificate of Incorporation with the Delaware Secretary of State on the date hereof, shall be amended to be identical to the bylaws of the Merger Subsidiary as in effect immediately prior to the Effective Time (as that term is defined in the Agreement). NOW, THEREFORE, the bylaws of the Corporation be and hereby are amended and restated, as of the date first above written, in accordance with the Agreement, as follows: 1. ANNUAL MEETING OF THE STOCKHOLDERS. The annual meeting of stockholders for the election of directors and such other purposes as may be set forth in the notice of meeting shall be held at the time and place, within or outside the State of Delaware, fixed by the Board of Directors. 2. SPECIAL MEETING OF THE STOCKHOLDERS. Special meetings of the stockholders may be held at any place within or outside the State of Delaware upon call of the Board of Directors, the Chairman of the Board of Directors, the President, or the holders of ten percent of the issued and outstanding shares of capital stock entitled to vote. 3. TRANSFER OF STOCK. The capital stock of the Corporation shall be transferred on the books of the Corporation by surrender of properly endorsed certificates therefor by the holders thereof or their duly authorized attorneys-in-fact. 4. DIRECTORS. The business of the Corporation shall be managed by a Board of Directors consisting of not less than two nor more than fifteen members. The range of size for the Board may be increased or decreased by the stockholders. Vacancies in the Board of Directors may be filled by a vote of a majority of the stockholders. Directors may be removed for or without cause by the stockholders. 5. MEETINGS OF THE BOARD OF DIRECTORS. Regular meetings of the Board of Directors, if any, may be held without notice of the date, time, place or purpose of the meeting. Special meetings of the Board of Directors may be held at any place within or outside the State of Delaware upon call of the President or any one director, which call shall set forth the date, time and place of meeting. Written, oral, or any other mode of notice of the date, time and place of meeting shall be given for special meetings in sufficient time, which need not exceed two days in advance. 6. OFFICERS. The Board of Directors shall elect a President and Secretary, and such other officers as it may deem appropriate. The President, Secretary, and any other officer so appointed by the Board of Directors are authorized to execute certificates representing shares of the Corporation's capital stock. Persons may hold more than one office. Officers shall have the authority and responsibilities given them by the Board of Directors, and each officer shall hold office until his successor is elected and qualified, unless a different term is specified by the Board of Directors. 7. AMENDMENT OF BYLAWS. The Bylaws of the Corporation may be amended or repealed, and additional Bylaws may be adopted, by action of the Board of Directors or of the stockholders, but any Bylaws adopted by the Board of Directors may be amended or repealed by the stockholders. * * * 2 EX-3.53 52 g83903exv3w53.txt EX-3.53 CHARTER EXHIBIT 3.53 CHARTER OF PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. The undersigned person, having capacity to contract and acting as the incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation: 1. The name of the corporation is Psychiatric Solutions of Florida, Inc. 2. The corporation's initial registered office is located at 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238, County of Davidson. The initial registered agent at that office is Glen Allen Civitts, Esq. 3. The name and address of the incorporator is Glen Allen Civitts, Esq., Harwell Howard Hyne Gabbert & Manner, P.C., 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238. 4. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203, County of Davidson. 5. The corporation is for profit. 6. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 7. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the By-laws of the corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 1 8. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 8 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 9. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 9 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 9 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under the Tennessee Business Corporation Act, and a determination is made that the facts 2 then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 9 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expenses to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 24th day of February, 1998. /s/ Glen Allen Civitts -------------------------------- Glen Allen Civitts, Incorporator 3 EX-3.54 53 g83903exv3w54.txt EX-3.54 BYLAWS EXHIBIT 3.54 BYLAWS OF PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of 1 business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director 2 of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such 3 resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of Directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The first fiscal year for the corporation shall be the calendar year. CERTIFICATION These Bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on February 25, 1998. /s/ Joey A. Jacobs ---------------------- /s/ Steven T. Davidson ---------------------- 5 EX-3.55 54 g83903exv3w55.txt EX-3.55 CHARTER EXHIBIT 3.55 CHARTER OF PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. The undersigned person, having capacity to contract and acting as the incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation: 1. The name of the corporation is Psychiatric Solutions of North Carolina, Inc. 2. The corporation's initial registered office is located at 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238, County of Davidson. The initial registered agent at that office is Glen Allen Civitts, Esq. 3. The name and address of the incorporator is Glen Allen Civitts, Esq., Harwell Howard Hyne Gabbert & Manner, P.C., 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238. 4. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203. 5. The corporation is for profit. 6. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 7. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the By-laws of the corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 1 8. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 8 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 9. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 9 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 9 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under 2 the Tennessee Business Corporation Act, and a determination is made that the facts then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 9 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expenses to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 27th day of May, 1997. /s/ Glen Allen Civitts, Incorporator ------------------------------------ 3 EX-3.56 55 g83903exv3w56.txt EX-3.56 BYLAWS EXHIBIT 3.56 BYLAWS OF PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of 1 business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director 2 of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such 3 resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of Directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The first fiscal year for the corporation shall be the calendar year. CERTIFICATION These Bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on May 27, 1997. /s/ Joey A. Jacobs -------------------- /s/ Douglas B. Lewis -------------------- 5 EX-3.57 56 g83903exv3w57.txt EX-3.57 CERTIFICATE OF INCORPORATION EXHIBIT 3.57 CERTIFICATE OF INCORPORATION OF PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. The undersigned, for the purposes of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that: FIRST: The name of this corporation is Psychiatric Solutions of Oklahoma, Inc. SECOND: Its Registered Office in the State of Delaware is to be located at 9 East Loockerman Street, in the City of Dover, County of Kent, 19901. The Registered Agent in charge thereof is National Registered Agents, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The amount of the total authorized capital stock of the corporation is one thousand (1,000), all of which are of a par value of $0.01 each and classified as Common stock. FIFTH: No holder of any of the shares of the corporation shall, as such holder, have any right to purchase or subscribe for any shares of any class which the corporation may issue or sell, whether or not such shares are exchangeable for any shares of the corporation of any other class or classes, and whether such shares are issued out of the number of shares authorized by the Certificate of Incorporation of the corporation as originally filed, or by any amendment thereof, or out of shares of the corporation acquired by it after the issue thereof; nor shall any holder of any of the shares of the corporation, as such holder, have any right to purchase or subscribe for any obligations which the corporation may issue or sell that shall be convertible into, or exchangeable for, any shares of the corporation of any class or classes, or to which shall be attached or shall appertain to any warrant or warrants or other instrument or instruments that shall confer upon the holder thereof the right to subscribe for, or purchase from the corporation any shares of any class or classes. SIXTH: The name and mailing address of the incorporator are as follows: NAME MAILING ADDRESS Lee C. Dilworth, Esq. c/o Harwell Howard Hyne Gabbert & Manner, P.C. 315 Deaderick Street, Suite 1800 Nashville, Tennessee 37238-1800 SEVENTH: The duration of the corporation shall be perpetual. EIGHTH: When a compromise or arrangement is proposed between the corporation and its creditors or any class of them or between the corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of the corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation pursuant to the provisions of Section 291 of Title 8 of the Delaware Code or on application of trustees in dissolution or of any receiver or receivers appointed for the corporation pursuant to provisions of Section 279 of Title 8 of the Delaware Code may order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or arrangement or a reorganization of the corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on the corporation. NINTH: The personal liability of all of the directors of the corporation is hereby eliminated to the fullest extent allowed as provided by the Delaware General Corporation Law, as the same may be supplemented and amended. TENTH: The corporation shall, to the fullest extent legally permissible under the provisions of the Delaware General Corporation Law, as the same may be amended and supplemented, indemnify and hold harmless any and all persons whom it shall have power to indemnify under said provisions from and against any and all liabilities (including expenses) imposed upon or reasonably incurred by him in connection with any action, suit or other proceeding in which he may be involved or with which he may be threatened, or other matters referred to in or covered by said provisions both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer of the corporation. Such indemnification provided shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, Agreement or Resolution adopted by the shareholders entitled to vote thereon after notice. Dated this 18th day of February, 2003. /s/ Lee C. Dilworth --------------------- Lee C. Dilworth, Incorporator 2 EX-3.58 57 g83903exv3w58.txt EX-3.58 BYLAWS EXHIBIT 3.58 BYLAWS OF PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the board of directors, or by the holders of not less than one-tenth (l/l0) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders of the corporation shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting; notice may be communicated in person; by telephone, telegraph, teletype or other form of wire or wireless communication; or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (l0) nor more than two months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transactions of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's Certificate of Incorporation or Bylaws, or by the laws of Delaware, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than three (3), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the board of directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The board may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication not less than two (2) days before the meeting noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the certificate of incorporation, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The board of directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two or more persons, who may or 2 may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the board of directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the board. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the board of directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, then upon its acceptance by the board of directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the board of directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 3 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by either the applicable securities laws or any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the board of directors shall prescribe. ARTICLE VI ACTION BY CONSENT 6.1 Actions by Board of Directors. Whenever the directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors. 6.2 Actions by Shareholders. Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by statute, the Certificate of Incorporation or these Bylaws, the meeting and vote of shareholders may be dispensed with, if the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted shall consent in writing to such corporate action being taken. ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (l) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors. ARTICLE VIII FISCAL YEAR The fiscal year for the corporation shall be determined by the Corporation's Board of Directors. 4 CERTIFICATION I certify that these Bylaws were adopted by unanimous written consent of the shareholders of the corporation on the 19th day of February, 2003. /s/ Steven T. Davidson ---------------------- Steven T. Davidson, Secretary 5 EX-3.59 58 g83903exv3w59.txt EX-3.59 CHARTER EXHIBIT 3.59 CHARTER OF PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. The undersigned person, having capacity to contract and acting as the incorporator of a corporation for profit under the Tennessee Business Corporation Act, hereby adopts the following Charter for such corporation: 1. The name of the corporation is Psychiatric Solutions of Tennessee, Inc. 2. The corporation's initial registered office is located at 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238, County of Davidson. The initial registered agent at that office is Glen Allen Civitts, Esq. 3. The name and address of the incorporator is Glen Allen Civitts, Esq., Harwell Howard Hyne Gabbert & Manner, P.C., 315 Deaderick Street, Suite 1800, Nashville, Tennessee 37238. 4. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203, County of Davidson. 5. The corporation is for profit. 6. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 7. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the By-laws of the corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 1 8. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 8 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 9. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 9 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 9 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under the Tennessee Business Corporation Act, and a determination is made that the facts 2 then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 9 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expenses to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 4th day of September, 1997. /s/ Glen Allen Civitts ------------------------ Glen Allen Civitts, Incorporator 3 EX-3.60 59 g83903exv3w60.txt EX-3.60 BYLAWS EXHIBIT 3.60 BYLAWS OF PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of 1 business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director 2 of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such 3 resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of Directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The first fiscal year for the corporation shall be the calendar year. CERTIFICATION These Bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on September 4, 1997. /s/ Joey A. Jacobs -------------------- /s/ Douglas B. Lewis -------------------- 5 EX-3.61 60 g83903exv3w61.txt EX-3.61 AMENDED AND RESTATED CERTIFICATE EXHIBIT 3.61 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF RAMSAY MANAGED CARE, INC. Pursuant to Sections 242 and 245 of the Delaware General Corporation Law Ramsay Managed Care, Inc., a corporation existing under the laws of the State of Delaware (the "Corporation"), does hereby certify as follows: (a) the name of the Corporation is Ramsay Managed Care, Inc.; (b) the Certificate of Incorporation of the Corporation was filed by the Secretary of State of the State of Delaware, on the 21st day of July, 1993; a Certificate of Amendment was filed by the Secretary of State of the State of Delaware, on the 11th day of January, 1994; a Restated Certificate was filed by the Secretary of State of the State of Delaware, on the 24th day of June, 1994; a Certificate of Designation was filed by the Secretary of State of the State of Delaware, on the 24th day of June, 1994; a Certificate of Amendment was filed by the Secretary of State of the State of Delaware, on the 20th day of September, 1994; a Certificate of Amendment was filed by the Secretary of State of the State of Delaware on the 5th day of April, 1995; and a Certificate of Designation was filed by the Secretary of State of the State of Delaware, on the 9th day of September, 1996; (c) this Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware, (i) the Board of Directors of the Corporation having duly adopted a resolution approving such amendment and declaring its advisability in a meeting of the Board of Directors of the Corporation on October 1, 1996 and (ii) the holders of the capital stock of the Corporation having not less than the minimum number of votes necessary to approve such amendment, approved such amendment at a special meeting of stockholders called for this purpose on April 18, 1997; and (d) the Certificate of Incorporation of the Corporation is hereby amended and restated to read in full as follows: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF RAMSAY MANAGED CARE, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is Ramsay Managed Care, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, which address is located in the County of New Castle, and the name of the Corporation's registered agent at such address is the Corporation Service Company. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 2 FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, $.01 par value per share. FIFTH: Subject to the provisions of the General Corporation Law of the State of Delaware, the number of Directors of the Corporation shall be determined as provided by the By-Laws. SIXTH: To the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify all persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he is or is threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or because he was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, except as specifically stated therein. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be 3 binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payment of dividends or unlawful stock purchases under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of Delaware is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of Delaware, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of stock of the Corporation and entitled to vote in the election of directors, considered for the purposes of this Article ELEVENTH as one class, shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. * * * * * IN WITNESS WHEREOF, the undersigned, being the officer hereinabove named, does hereby execute this Amended and Restated Certificate of Incorporation this 26th day of March, 1998. /s/ Carol C. Lang ----------------- Carol C. Lang Vice President 4 EX-3.62 61 g83903exv3w62.txt EX-3.62 AMENDED AND RESTATED BYLAWS EXHIBIT 3.62 RAMSAY MANAGED CARE, INC. AMENDED AND RESTATED BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Monday of November in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the Vice-chairman of the Board, or by the president, or by the holders of at least ten (10) percent of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of 2 the Corporation or at such other place or places, either within or without the State of Delaware, as may be specified in the notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any 3 stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4 Section 5. Organization. The Vice-Chairman of the Board, or in his absence the President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the Vice-chairman of the Board, the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. 5 The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the State of Delaware or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. 6 Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and ten (10). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. 7 In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold, office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the 8 State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the Vice-Chairman of the Board or by the President or any two Directors on notice given to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board, Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall be given. 9 Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-third or more of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and 10 expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the Vice-Chairman of the Board or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a Vice-Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Vice-chairman of the Board may from time to time appoint such other officers and agents 11 as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. Vice-Chairman of the Board. The Vice-Chairman of the Board shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, 12 he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. President. The President shall be the chief operating officer, or, if the office of Vice-Chairman of the Board shall be vacant, the chief executive officer of the Corporation. At the request of the Vice-Chairman of the Board, or in the case of his absence or inability to act, or if the office of Vice-Chairman of the Board shall be vacant, the President shall perform the duties of the Vice-Chairman of the Board, and when so acting, shall have all the powers of the Vice-chairman of the Board. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Vice-chairman of the Board or by the Board of Directors. Section 4. Vice Presidents. The Vice Presidents shall perform such duties as the Vice-Chairman of the Board, the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 5. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the stockholders of the Corporation in books to be kept for that 13 purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 6. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 7. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation 14 as may be ordered by the Board, and shall render to the Vice-chairman of the Board or the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 8. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 9. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 10. Transfer of Duties. The Board of Directors or the Vice-Chairman of the Board in its or his absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 11. Vacancies. If the office of Vice-Chairman of the Board, President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. 15 Section 12. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 13. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 14. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the Vice-Chairman of the Board or the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the Vice-chairman of the Board, the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. 16 ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Vice-chairman of the Board, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until 17 the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made 18 against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring, any bond when, in the judgment of the Directors, it is proper so to do. ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of 19 Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." 20 ARTICLE XIV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 21 EX-3.63 62 g83903exv3w63.txt EX-3.63 CERTIFICATE OF INCORPORATION EXHIBIT 3.63 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF RAMSAY EDUCATIONAL SERVICES, INC. Pursuant to the provisions of Section 242 of the Delaware General Corporation Law, this Delaware corporation whose Certificate of Incorporation was filed with the Delaware Secretary of State on July 24, 1998, adopts the following amendment to its Certificate of Incorporation. FIRST: Article I of the Certificate of Incorporation hereby is deleted in its entirety and replaced as follows: "ARTICLE I The name of the corporation is RAMSAY TREATMENT SERVICES, INC." SECOND: This Certificate of Amendment shall be effective upon its filing with the Delaware Secretary of State. IN WITNESS WHEREOF, the undersigned individual who is Vice President and Secretary of the Corporation has executed this Certificate of Amendment as of the 30th day of June, 2001. /s/ Marcio C. Cabrera ------------------------------- Marcio C. Cabrera Vice President and Secretary CERTIFICATE OF INCORPORATION OF RAMSAY EDUCATIONAL SERVICES, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware (the "General Corporation Law"), does hereby certify pursuant to Section 103(a)(1) of the General Corporation Law as follows: FIRST: The name of the corporation is "Ramsay Educational Services, Inc." (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, which address is located in the County of New Castle, and the name of the Corporation's registered agent at such address is Corporation Service Company. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, par value $.01 per share. FIFTH: Subject to the provisions of the General Corporation Law, the number of Directors of the Corporation shall be determined as provided in the By-Laws of the Corporation. SIXTH: To the fullest extent permitted by Section 145 of the General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify any persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he or she is or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or because he or she was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation, except as specifically stated therein. EIGHTH: Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of the General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of the General Corporation Law, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders, of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the Corporation. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended. Any repeal or modification of this 2 Article by the stockholders of the Corporation shall be by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article ELEVENTH as one class, shall be prospective only and shall not adversely affect any right or protection of any director of the Corporation existing at the time of such repeal or modification. TWELFTH: The name and address of the incorporator is Jonathan M. Anderson, Haythe & Curley, 237 Park Avenue, New York, New York 10017. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 24th day of July, 1998. /s/ Jonathan M. Anderson ------------------------------- Jonathan M. Anderson Incorporator 3 EX-3.64 63 g83903exv3w64.txt EX-3.64 AMENDED AND RESTATED BYLAWS EXHIBIT 3.64 Adopted as of November 25, 1998 AMENDED AND RESTATED BY-LAWS OF RAMSAY EDUCATIONAL SERVICES, INC. ARTICLE I Offices The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Thursday of June in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the Chief Executive Officer, or by the holders of a majority of the outstanding shares of capital stock of the Corporation, the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at 2 such other place or places, either within or without the State of Delaware, as may be specified in the notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any 3 stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4 Section 5. Organization. The Chief Executive Officer, or in his absence the President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the Chief Executive Officer, the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. 5 The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the State of Delaware or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. 6 Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. 7 In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the 8 State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the Chief Executive Officer or any two Directors on notice given to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall be given. 9 Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-half or more of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and 10 expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the Chief Executive Officer or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Chief Executive Officer or the Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. 11 Section 2. Chief Executive Officer. The Chief Executive Officer shall be the Chief Executive Officer of the Corporation and should have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation, and of all the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of 12 Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. President. The President shall be the chief operating officer, or, if the office of Chief Executive Officer shall be vacant, the chief executive officer of the Corporation. At the request of the Chief Executive Officer, or in the case of the absence of the Chief Executive Officer or inability to act, or if the office of the Chief Executive Officer shall be vacant, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of the Chief Executive Officer. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Chief Executive Officer or by the Board of Directors. Section 4. Vice Presidents. The Vice Presidents shall perform such duties as the Chief Executive Officer, the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 5. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of 13 Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Chief Executive Officer or the Board of Directors. Section 6. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 7. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the Chief Executive Officer or the President or the Directors, whenever they may require it, an account of all his 14 transactions as Treasurer and an account of the business and financial position of the Corporation. Section 8. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 9. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 10. Transfer of Duties. The Board of Directors or the Chief Executive Officer in its or his absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 11. Vacancies. If the office of Chief Executive Officer, President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 12. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, 15 with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 13. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 14. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the Chief Executive Officer, the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the Chief Executive Officer, the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of 16 Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chief Executive Officer or the President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, 17 it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. 18 ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to 19 time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." ARTICLE XIV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or 20 repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 21 EX-3.65 64 g83903exv3w65.txt EX-3.65 CERTIFICATE OF INCORPORATION EXHIBIT 3.65 CERTIFICATE OF INCORPORATION OF RAMSAY YOUTH SERVICES OF ALABAMA, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is Ramsay Youth Services of Alabama, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, which address is located in the County of New Castle, and the name of the Corporation's registered agent at such address is Corporation Service Company. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, $.01 par value per share. FIFTH: Subject to the provisions of the General Corporation Law of the State of Delaware, the number of Directors of the Corporation shall be determined as provided by the By-Laws. SIXTH: To the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify all persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he is or is threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or because he was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, except as specifically stated therein. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the `Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payment of dividends or unlawful stock purchases under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of Delaware is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the 2 fullest extent permitted by the General Corporation Law of Delaware, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TWELFTH: The name and address of the incorporator is Ronald J. Prague, 237 Park Avenue, New York, New York 10017. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 14th day of January, 1998. /s/ Ronald J. Prague -------------------- Ronald J. Prague Incorporator 3 EX-3.66 65 g83903exv3w66.txt EX-3.66 BYLAWS EXHIBIT 3.66 RAMSAY YOUTH SERVICES OF ALABAMA, INC BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the second Monday of January in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as may be specified in the 2 notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place 3 within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 5. Organization. The President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman 4 of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. 5 When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the State of Delaware or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the 6 qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. 7 Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each 8 Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-third or more of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or 9 these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 10 Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. President. The President shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the 11 laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. Vice Presidents. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of 12 Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be 13 designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 9. Transfer of Duties. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 10. Vacancies. If the office of President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, 14 with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of 15 Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, 16 it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. 17 ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. 18 Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." ARTICLE XIV Fiscal Year The fiscal year of the Corporation shall be the calendar year or such other period as may from time to time be prescribed by the Board of Directors. 19 ARTICLE XV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 20 EX-3.67 66 g83903exv3w67.txt EX-3.67 CERTIFICATE OF INCORPORATION EXHIBIT 3.67 CERTIFICATE OF INCORPORATION OF RAMSAY YOUTH SERVICES OF FLORIDA, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is Ramsay Youth Services of Florida, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, which address is located in the County of New Castle, and the name of the Corporation's registered agent at such address is the Corporation Service Company. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, $.01 par value per share. FIFTH: Subject to the provisions of the General Corporation Law of the State of Delaware, the number of Directors of the Corporation shall be determined as provided by the By-Laws. SIXTH: To the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify all persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he is or is threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or because he was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, except as specifically stated therein. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payment of dividends or unlawful stock purchases under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of Delaware is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the 2 fullest extent permitted by the General Corporation Law of Delaware, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TWELFTH: The name and address of the incorporator is Jonathan M. Anderson, 237 Park Avenue, New York, New York 10017. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 3rd day of March, 1998. /s/ Jonathan M. Anderson ------------------------ Jonathan M. Anderson Incorporator 3 EX-3.68 67 g83903exv3w68.txt EX-3.68 BYLAWS EXHIBIT 3.68 RAMSAY YOUTH SERVICES OF FLORIDA, INC. BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the second Monday of January in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as may be specified in the notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 5. Organization. The President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (l) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (l) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the State of Delaware or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-third or more of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. President. The President shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. Vice Presidents. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 9. Transfer of Duties. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 10. Vacancies. If the office of President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (l) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." ARTICLE XIV Fiscal Year The fiscal year of the Corporation shall be the calendar year or such other period as may from time to time be prescribed by the Board of Directors. ARTICLE XV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. EX-3.69 68 g83903exv3w69.txt EX-3.69 CERTIFICATE OF INCORPORATION EXHIBIT 3.69 CERTIFICATE OF INCORPORATION OF RAMSAY YOUTH SERVICES OF GEORGIA. INC. ARTICLE 1 The name of the corporation is RAMSAY YOUTH SERVICES OF GEORGIA, INC. (hereinafter called the "Corporation "). ARTICLE II The address of the Corporation's registered office in the State of Delaware is 2711 Centreville Road, Suite 400, City of Wilmington, County of New Castle and the name of its registered agent at such address is Corporation Service Company. ARTICLE III The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV The capital stock authorized, the par value thereof, and the characteristics of such stock shall be as follows:
Number of Shares Par Value Class of Authorized Per Share Stock - ---------------- --------- -------- ~~100 $ 0.01 Common~~
ARTICLE V The name of the Incorporates is Marcio C. Cabrera and the address of the Incorporator is One Alhambra Plaza, Suite 750, Coral Gables, Florida 33156. ARTICLE VI The Board of Directors of the Corporation shall consist of at least one director, with the exact number to be fixed from time to time in the manner provided in the Corporation's Bylaws, who will serve as the Corporation's director until successors are duly elected and qualified. ARTICLE VII No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. It is the intent that this provision be interpreted to provide the maximum protection against liability afforded to directors under the Delaware General Corporation Law in existence either now or hereafter. ARTICLE VIII This Corporation shall indemnify and shall advance expenses on behalf of its officers and directors to the fullest extent permitted by law in existence either now or hereafter. ARTICLE IX The directors of the Corporation shall have the power to adopt, amend or repeal the bylaws of the Corporation. IN WITNESS WHEREOF, the undersigned, being the Incorporator named above, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, has signed this Certificate of Incorporation this 1st day of July, 2002. /s/ Marcio C. Cabrera ------------------------------- Marcio C. Cabrera, Incorporator 2 EX-3.70 69 g83903exv3w70.txt EX-3.70 BYLAWS EXHIBIT 3.70 BYLAWS OF RAMSAY YOUTH SERVICES OF GEORGIA, INC. (A DELAWARE CORPORATION) INDEX
PAGE NUMBER ------ ARTICLE ONE OFFICES.....................................................1 Section 1. Registered Office............................................1 Section 2. Other Offices................................................1 ARTICLE TWO MEETINGS OF STOCKHOLDERS....................................1 Section 1. Place .......................................................1 Section 2. Time of Annual Meeting.......................................1 Section 3. Call of Special Meetings.....................................1 Section 4. Conduct of Meetings..........................................1 Section 5. Notice and Waiver of Notice..................................2 Section 6. Business of Special Meeting..................................2 Section 7. Quorum ......................................................2 Section 8. Required Vote................................................2 Section 9. Voting of Shares.............................................3 Section 10. Proxies......................................................3 Section 11. Stockholder List.............................................3 Section 12. Action Without Meeting.......................................3 Section 13. Fixing Record Date...........................................3 Section 14. Inspectors and Judges........................................4 ARTICLE THREE DIRECTORS...................................................4 Section 1. Number, Election and Term....................................4 Section 2. Vacancies....................................................5 Section 3. Powers.......................................................5 Section 4. Place of Meetings............................................5 Section 5. Annual Meeting...............................................5 Section 6. Regular Meetings.............................................5 Section 7. Special Meetings and Notice..................................5 Section 8. Quorum and Required Vote.....................................6 Section 9. Action Without Meeting.......................................6 Section 10. Telephone Meetings...........................................6 Section 11. Committees...................................................6 Section 12. Compensation of Directors....................................7 Section 13. Chairman of the Board........................................7 ARTICLE FOUR OFFICERS....................................................7 Section 1. Positions....................................................7 Section 2. Election of Specified Officers by Board......................7 Section 3. Election or Appointment of Other Officers....................7 Section 4. Salaries.....................................................7
i Section 5. Term.........................................................7 Section 6. President....................................................8 Section 7. Vice Presidents..............................................8 Section 8. Secretary....................................................8 Section 9. Treasurer....................................................8 ARTICLE FIVE CERTIFICATES FOR SHARES.....................................9 Section 1. Issue of Certificates........................................9 Section 2. Legends for Preferences and Restrictions on Transfer.........9 Section 3. Facsimile Signatures........................................10 Section 4. Lost Certificates...........................................10 Section 5. Transfer of Shares..........................................10 Section 6. Registered Stockholders.....................................10 ARTICLE SIX GENERAL PROVISIONS.........................................11 Section 1. Dividends...................................................11 Section 2. Reserves....................................................11 Section 3. Checks......................................................11 Section 4. Fiscal Year.................................................11 Section 5. Seal........................................................11 ARTICLE SEVEN AMENDMENTS OF BYLAWS.......................................11

ii RAMSAY YOUTH SERVICES OF GEORGIA, INC. BYLAWS ARTICLE ONE OFFICES Section 1. Registered Office. The registered office of RAMSAY YOUTH SERVICES OF GEORGIA, INC., a Delaware corporation (the "Corporation"), shall be located in the City of Wilmington, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places, either within or without the State of Delaware, as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine or as the business of the Corporation may require. ARTICLE TWO MEETINGS OF STOCKHOLDERS Section 1. Place. All annual meetings of stockholders shall be held at such place, within or without the State of Delaware, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of stockholders may be held at such place, within or without the State of Delaware, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Time of Annual Meeting. Annual meetings of stockholders shall be held on such date and at such time fixed, from time to time, by the Board of Directors, provided, that there shall be an annual meeting held every calendar year at which the stockholders shall elect a board of directors and transact such other business as may properly be brought before the meeting. Section 3. Call of Special Meetings. Special meetings of the stockholders may be called by the President, the Board of Directors or by the Secretary on the written request of the holders of not less than a majority of all shares entitled to vote at the meeting. Section 4. Conduct of Meetings. The Chairman of the Board (or in his absence, the President or such other designee of the Chairman of the Board) shall preside at the annual and special meetings of stockholders and shall be given full discretion in establishing the rules and procedures to be followed in conducting the meetings, except as otherwise provided by law or in these Bylaws. Section 5. Notice and Waiver of Notice. Written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the day of the meeting, either personally or by first-class mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each stockholder of record entitled to vote at such meeting. If the notice is mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. If a meeting is adjourned to another time and/or place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting or if the adjournment is for more than 30 days. Notice need not be given to any stockholder who submits a written waiver of notice by him before or after the time stated therein. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. Section 6. Business of Special Meeting. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. Section 7. Quorum. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at meetings of stockholders except as otherwise provided in the Corporation's certificate of incorporation (the "Certificate of Incorporation"). If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified and called. The stockholders present at a duly organized meeting may continue to transact business notwithstanding the withdrawal of some stockholders prior to adjournment, but in no event shall a quorum consist of the holders of less than one-third (1/3) of the shares entitled to vote and thus represented at such meeting. Section 8. Required Vote. The vote of the holders of a majority of the shares entitled to Vote and represented at a meeting at which a quorum is present shall be the act of the Corporation's stockholders, unless the vote of a greater number is required by law, the Certificate of Incorporation, or these Bylaws. 2 Section 9. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class are limited or denied by the Certificate of Incorporation or the General Corporation Law of Delaware. Section 10. Proxies. A stockholder may vote in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. No proxy shall be voted or acted upon after three (3) years from the date of its execution unless otherwise provided in the proxy. Each proxy shall be revocable unless expressly provided therein to be irrevocable, and unless otherwise made irrevocable by law. Section 11. Stockholder List. The officer or agent having charge of the Corporation's stock transfer books shall make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of, and the number and class and series, if any, of shares held by each. Such list, for a period of ten (10) days prior to such meeting, shall be subject to inspection by any stockholder at any time during the usual business hours at the place where the meeting is to be held. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer book or to vote at any such meeting of stockholders. Section 12. Action Without Meeting. Any action required by the statutes to be taken at a meeting of stockholders, or any action that may be taken at a meeting of the stockholders, may be taken without a meeting or notice if a consent, or consents, in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted with respect to the subject matter thereof, and such consent shall be delivered to the Corporation by delivery to its registered office, its principal place of business, or an officer or agent of the Corporation, having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or certified mail, return receipt requested. Such consent shall have the same force and effect as a vote of stockholders taken at such a meeting. Section 13. Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purposes, the Board of Directors may fix in advance a date as the record date for any such determination of 3 stockholders, such date in any case to be not more than sixty (60) days, and, in case of a meeting of stockholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. If no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolutions of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof, except where the Board of Directors fixes a new record date for the adjourned meeting. Section 14. Inspectors and Judges. The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them, and execute a certificate of any fact found by him or them. ARTICLE THREE DIRECTORS Section 1. Number, Election and Term. The number of directors of the Corporation shall be fixed from time to time, within the limits specified by the Certificate of Incorporation, by resolution of the Board of Directors; provided, however, no directors term shall be shortened by reason of a resolution reducing the number of directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office for the term for which he is elected and until his successor is elected and qualified. Directors need not be residents of the State of Delaware, stockholders of the Corporation or citizens of the United States. Unless provided 4 otherwise by law, any director may be removed at any time, with or without cause, at a special meeting of the stockholders called for that purpose. Section 2. Vacancies. A director may resign at any time by giving written notice to the Board of Directors or the Chairman of the Board, Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the size of the Board of Directors shall be filled by the affirmative vote of a majority of the current directors though less than a quorum of the Board of Directors, or may be filled by an election at an annual or special meeting of the stockholders called for that purpose, A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, or until the next election of one or more directors by stockholders if the vacancy is caused by an increase in the number of directors. Section 3. Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised and done by the stockholders. Section 4. Place of Meetings. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Delaware. Section 5. Annual Meeting. The first meeting of each newly elected Board of Directors shall be held, without call or notice, immediately following each annual meeting of stockholders. Section 6. Regular Meetings. Regular meetings of the Board of Directors may also be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Section 7. Special Meetings and Notice. Special meetings of the Board of Directors may be called by the President and shall be called by the Secretary on the written request of any two directors. Written notice of special meetings of the Board of Directors shall be given to each director at least twenty-four (24) hours before the meeting. Except as required by statute, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Notices to directors shall be in writing and delivered personally or mailed to the directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be received. Notice to directors may also be given by telegram, and shall be deemed delivered when the same shall be deposited at a telegraph office for transmission and all appropriate fees therefor have been 5 paid. Whenever any notice is required to be given to any director, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 8. Quorum and Required Vote. A majority of the directors shall constitute a quorum for the transaction of business and the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by the Certificate of Incorporation, If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present At such adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally notified and called. Section 9. Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or committee thereof may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of the Board of Directors or the committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a meeting. Section 10. Telephone Meetings. Directors and committee members may participate in and hold a meeting by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meetings shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened. Section 11. Committees. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation except where the action of the full Board of Directors is required by statute. Vacancies in the membership of a committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. 6 Section 12. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 13. Chairman of the Board. The Board of Directors may, in its discretion, choose a chairman of the board who shall preside at meetings of the stockholders and of the directors and shall be an ex officio member of all standing committees. The Chairman of the Board shall have such other powers and shall perform such other duties as shall be designated by the Board of Directors. The Chairman of the Board shall be a member of the Board of Directors but no other officers of the Corporation need be a director. The Chairman of the Board shall serve until his successor is chosen and qualified, but he may be removed at any time by the affirmative vote of a majority of the Board of Directors. ARTICLE FOUR OFFICERS Section 1. Positions. The officers of the Corporation shall consist of a President, one or more Vice Presidents, a Secretary and a Treasurer, and, if elected by the Board of Directors by resolution, a Chairman of the Board. Any two or more offices may be held by the same person. Section 2. Election of Specified Officers by Board. The Board of Directors at its first meeting after each annual meeting of stockholders shall elect a President, one or more Vice Presidents, a Secretary and a Treasurer. Section 3. Election or Appointment of Other Officers. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors, or, unless otherwise specified herein, appointed by the President of the Corporation. The Board of Directors shall be advised of appointments by the President at or before the next scheduled Board of Directors meeting. Section 4. Salaries. The salaries of all officers of the Corporation to be elected by the Board of Directors pursuant to Article Four, Section 2 hereof shall be fixed from time to time by the Board of Directors or pursuant to its discretion. The salaries of all other elected or appointed officers of the Corporation shall be fixed from time to time by the President of the Corporation or pursuant to his direction. Section 5. Term. The officers of the Corporation shall-hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the 7 Board of Directors or the President of the Corporation may be removed, with or without cause, by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officers or agents appointed by the President of the Corporation pursuant to Section 3 of this Article Four may also be removed from such officer positions by the President, with or without cause. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors, or, in the case of an officer appointed by the President of the Corporation, by the President or the Board of Directors. Section 6. President. The President shall be the Chief Executive Officer of the Corporation, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. In the absence of the Chairman of the Board or in the event the Board of Directors shall not have designated a chairman of the board, the President shall preside at meetings of the stockholders and the Board of Directors. Section 7. Vice Presidents. The Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Board of Directors shall prescribe or as the President may from time to time delegate. Section 8. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it. Section 9. Treasurer. The Treasurer shall have the custody of corporate funds and securities and shall keep foil and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors, He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings or when the Board of Directors so requires an 8 account of all his transactions as treasurer and of the financial condition of the Corporation. ARTICLE FIVE CERTIFICATES FOR SHARES Section 1. Issue of Certificates. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation, Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates (and upon request every holder of uncertificated shares) shall be entitled to have a certificate signed by, or in the name of the Corporation by the chairman or vice-chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Section 2. Legends for Preferences and Restrictions on Transfer. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. A written restriction on the transfer or registration of transfer of a security of the Corporation, if permitted by law and noted conspicuously on the certificate representing the security may be enforced against the holder of the restricted security or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder. Unless noted conspicuously on the certificate representing the security, a restriction, even though permitted by law, is ineffective except against a person with actual knowledge of the restriction. If the Corporation issues any shares that are not registered under the Securities Act of 1933, as amended, and registered or qualified under the applicable state 9 securities laws, the transfer of any such shares shall be restricted substantially in accordance with the following legend: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED." Section 3. Facsimile Signatures. Any and all signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be. such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of the issue. Section 4. Lost Certificates. The Corporation may issue a new certificate of stock in place of any certificate therefore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen, or destroyed certificate, or his legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 5. Transfer of Shares. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares oft the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. 10 ARTICLE SIX GENERAL PROVISIONS Section 1. Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of the Certificate of Incorporation. Section 2. Reserves. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. Section 3. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 4. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors. Section 5. Seal. The corporate seal shall have inscribed thereon the name and state of incorporation of the Corporation, The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced, ARTICLE SEVEN AMENDMENTS OF BYLAWS These Bylaws may be altered, amended or repealed or new Bylaws may be adopted at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the directors present at such meeting. 11 EX-3.71 70 g83903exv3w71.txt EX-3.71 CERTIFICATE OF INCORPORATION EXHIBIT 3.71 CERTIFICATE OF INCORPORATION OF RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is Ramsay Youth Services of South Carolina, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, which address is located in the County of New Castle, and the name of the Corporation's registered agent at such address is the Corporation Service Company. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, $.01 par value per share. FIFTH: Subject to the provisions of the General Corporation Law of the State of Delaware, the number of Directors of the Corporation shall be determined as provided by the By-Laws. SIXTH: To the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify all persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he is or is threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or because he was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, except as specifically stated therein. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payment of dividends or unlawful stock purchases under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of Delaware is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the 2 fullest extent permitted by the General Corporation Law of Delaware, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TWELFTH: The name and address of the incorporator is Susan Bienenfeld, 237 Park Avenue, New York, New York 10017. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 29th day of July, 1998. /s/ Susan Bienenfeld -------------------- Susan Bienenfeld Incorporator 3 EX-3.72 71 g83903exv3w72.txt EX-3.72 BYLAWS EXHIBIT 3.72 RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC. BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Monday of November in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as may be specified in the 2 notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place 3 within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 5. Organization. The President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman 4 of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. 5 When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the State of Delaware or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the 6 qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. 7 Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each 8 Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-third or more of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or 9 these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 10 Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. President. The President shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the 11 laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. Vice Presidents. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of 12 Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be 13 designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 9. Transfer of Duties. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 10. Vacancies. If the office of President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, 14 with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of 15 Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, 16 it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. 17 ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to 18 time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." ARTICLE XIV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or 19 repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 20 EX-3.73 72 g83903exv3w73.txt EX-3.73 CERTIFICATE OF INCORPORATION EXHIBIT 3.73 CERTIFICATE OF INCORPORATION OF RAMSAY YOUTH SERVICES PUERTO RICO, INC. (A Stock Corporation) The undersigned, acting as incorporator for the purpose to establish a corporation for the transaction of the business and the promotion and conduct of the objects and purpose hereinafter stated, under the provisions and subject to the requirements of the Laws of the Commonwealth of Puerto Rico, and particularly an act entitled the "General Corporation Law of Puerto Rico of 1995", as the same may be amended from time to time, do make and file this Certificate of Incorporation in writing and do hereby certify: ARTICLE I The name of the Corporation (hereafter referred to as the Corporation) is RAMSAY YOUTH SERVICES PUERTO RICO, INC. ARTICLE II The name of the resident agent of the Corporation; whose address is that of the principal office of the Corporation stated below is Jose O. Ramos Gonzalez. The principal office of the Corporation in the Commonwealth of Puerto Rico is located at: Suite 301, Midtown Bldg., 421 Munoz Rivera Ave, Hato Rey, PR 00918. ARTICLE III The nature of the business of the Corporation and the objects of purposes to be transacted, promoted or carried on by the Corporation are as follows: (1) To engage in any commercial, industrial, educational or medical enterprise calculated or designed to be profitable to the Corporation and in conformity with the laws of the Commonwealth of Puerto Rico. To generally engage in, do, and perform any enterprise, act, or vocation that a corporation might or could do or perform; and to carry on all other business incident thereto or connected therewith, provided however, that the Corporation will not engage in any way whatsoever in providing medical advice or treatment, and shall at all times be subject to the provisions of Section 14 of Article VI of the Constitution of the Commonwealth of Puerto Rico, to any and all other applicable laws and regulations. For the transaction, promotion and carrying on such business, the corporation will retain, hire, engage or employ all professional, technical and other necessary personnel. (2) To make, manufacture, produce, prepare, process, purchase or otherwise acquire, and to hold, own, use, sell, import, export, dispose of or otherwise trade or deal in and with, machines, machinery, appliances, apparatus, goods, wares, products and merchandise of every kind, nature and description; and in general, to engage or participate in any manufacturing or other business of any kind or character whatsoever, whether or not related to, conducive to, incidental to or in any way connected with the above business. (3) To engage in research, exploration, laboratory and development work relating to any material, substance, compound or mixture now known or which may hereafter be known, discovered, or developed and to perfect, 2 develop, manufacture, use, apply and generally to deal in and with any such material, substance, compound or mixture. (4) To adopt, apply for, obtain, register, purchase, lease, take licenses in respect of or otherwise acquire, and to maintain, protect, hold, use, own, exercise, develop, manufacture under, operate and introduce, and to sell and grant licenses or other rights in respect of, assign or otherwise dispose of, turn to account, or in any manner deal with and contract with reference to, any trademarks, trade names, patent rights, concessions, franchises, designs, copyrights and distinctive marks and rights analogous thereto, and inventions, devices, processes, recipes, formulas and improvements and modifications thereof. (5) To purchase, lease or otherwise acquire, to hold own, use, develop, maintain, manage and operate, and to sell, transfer, lease, assign, convey, exchange or otherwise turn to account or dispose of, and otherwise deal in and with such real property, whether located within the Commonwealth of Puerto Rico or elsewhere, as may be necessary of convenient in connection with the business of the Corporation, and personal property, tangible or intangible, without limitation; provided, however, that the Corporation shall not be authorized, as respects real property located within the Commonwealth of Puerto Rico, to conduct the business of buying and selling real estate, and shall in all other respects be subject to the 3 provision of Section 14 of Article VI of the Constitution of the Commonwealth of Puerto Rico. (6) To purchase, lease, construct or otherwise acquire, and hold, own, use, maintain, manage and operate, buildings, factories, plants, laboratories, installations, equipment, machinery, pipe lines, rolling stocks, and other structures, facilities and apparatus of every kind and description, used or useful in the conduct of the business of the Corporation. (7) To purchase, lease, contract, or otherwise acquire, and to hold, own, use, maintain, manage and operate dwelling houses and other buildings at or near any place of business of the Corporation for the purpose of furnishing housing and other conveniences to employees of the Corporation, and others, and to carry on a general mercantile business at or near any such place off business for the convenience of those residing in the vicinity thereof, and others. (8) To purchase or otherwise acquire, and to hold, mortgage, pledge, sell, exchange, or otherwise dispose of securities (which term, for the purpose of this Article THIRD, shall include without limitation of the generality thereof, any shares of stock, bonds, debentures, notes, mortgages or other obligations and any certificates, receipts or other instruments representing rights to receive, purchase, or subscribe for the same, or representing any other rights or interest therein or in any property or assets) created or issued by any person, firm, association, corporation or governmental body or 4 subdivisions thereof, to make payment thereof in any lawful manner and while the owner or holder thereof, to exercise all the rights, powers, and privileges in respect thereof, including the right to vote, to the same extent as a natural person might or could do. (9) To enter into, make, perform, and carry out contracts of every kind and description, not prohibited by law, with any person, firm, association, corporation or governmental body, or subdivision thereof. (10) To lend its uninvested funds from time to time to such extent, to such persons, firms, associations, corporations or governments or subdivisions thereof, agencies or instrumentalities thereof, and on such terms and on such security, if any, as the Board of Directors of the Corporation may determine. (11) To borrow money for any of the purposes of the Corporation, from time to time, and without limit as to amount; from time to time to issue and sell its own securities in such amounts, on such terms and conditions; for such purposes and for such consideration, as may now be or hereafter shall be permitted by the laws of the Commonwealth of Puerto Rico and by this Certificate of Incorporation, as the Board of Directors of the Corporation may determine and to secure the same by mortgage upon, or the pledge of, or the conveyance or assignment in trust of, the whole or any part of the properties, assets, business and good will of the Corporation, then owned or thereafter acquired. 5 (12) To draw, make, accept, endorse, discount, execute, issue, and deliver promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments and evidence of indebtedness whether secured by mortgage or otherwise, as well as to secure the same by mortgage or otherwise, so far as may be permitted by the laws of the Commonwealth of Puerto Rico. (13) To endorse or guarantee the payment of the principal, interest or dividends upon, and to guarantee the performance of sinking fund or other obligations or of, any securities, and to guarantee in any way permitted by law the performance of any of the contracts or other undertakings in which the Corporation may otherwise be or become interested, as the Board of Directors of the Corporation may determine, of any person, firm, association, corporation, government or subdivision thereof, or of any other combination, organization or entity whatsoever, including a mortgage upon the pledge of, or the conveyance assignment in trust of the whole or any part of the properties, assets, business and good will of the Corporation. (14) To acquire by purchase, exchange or otherwise, all, or any part of, or any interest in, the properties, assets, business, and good will of any one or more persons, firms, associations, or corporations heretofore or hereafter engaged in any business for which a corporation may now or hereafter be organized under the laws of the Commonwealth of Puerto Rico; to pay for the same in cash, property of its own or other securities; to hold, 6 operate, reorganize, liquidate, sell, or in any manner dispose of the whole or any part thereof; and in connection therewith, to assume or guarantee performance of any liabilities, obligations or contracts of such persons, firms, associations, or corporations, and to conduct the whole or any part of any business thus acquired. (15) To purchase, or otherwise acquire, and to hold, cancel, reissue, sell, exchange, transfer or otherwise deal in its own securities, from time to time, to such an extent, and in such manner, and upon such terms, as the Board of Directors of the Corporation shall determine; provided that the Corporation shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital, except to the extent permitted by law; and provided further that such shares of its own capital stock so purchased or held by the Corporation, shall not be directly or indirectly voted, nor shall they be entitled to dividends during such periods as they be held by the Corporation. (16) To merge into, merge into itself or consolidate with, reorganize, and to enter into agreements and cooperative relations, not in contravention of law, with any persons, firms associations, or corporations, and to participate with others in a corporation, partnership, joint venture or association of any type, or in any transaction, business arrangements or contract for which the Corporation is authorized and empowered, 7 notwithstanding that such participation requires the sharing with others or the delegation to others of the corporate control. (17) To organize or cause to be organized under the laws of the Commonwealth of Puerto Rico, or of any State of the United States of America, or of the District of Columbia, or of any territory, dependency of the United States of America, or of any foreign country, a corporation or corporations for the purpose of transacting, promoting, or carrying on any or all of the objects or purposes for which the Corporation is organized, and to dissolve wind up, liquidate, merge or consolidate any such corporation or corporations, or to cause the same to be dissolved, wound up, liquidated, merged, or consolidated. (18) To conduct its business in any and all of its branches and maintain offices both within and without the Commonwealth of Puerto Rico, in any and all States of the United States of America, in the District of Columbia, in any or all territories or dependencies of the United States of America, and in foreign countries. (19) To such extent as a corporation organized under the laws of the Commonwealth of Puerto Rico may now or hereafter lawfully do, either as principal or agent and either alone or through subsidiaries or in connection with other persons, firms, associations or corporations, all and everything necessary, suitable, convenient, or proper for, or in connection with, or incidental to, the accomplishment of any of the purposes or the attainment of 8 any one or more of the objects herein enumerated, or designed directly or indirectly to promote the interest of the Corporation, or to enhance the value of its properties; and in general, to do any and all things and exercise any and all powers, rights, and privilege which a corporation may now or hereafter be organized to do or to exercise under the laws of the Commonwealth of Puerto Rico. The foregoing provisions of this Article THIRD shall be constructed both as purposes and powers and each as an independent purpose and power. The foregoing enumeration of specific purposes and powers of the Corporation and the purposes and powers herein specified shall, except when otherwise provided in this Article THIRD, be in no wise limited or restricted by reference to, or inference from; the terms of any provisions of this or any other Article of this Certificate of Incorporation. ARTICLE IV The Corporation is to be carried on for pecuniary profit. ARTICLE V The total number of Shares of all classes of stock which the Corporation is authorized to issue is ONE HUNDRED (100) common shares of a par value of ONE DOLLAR ($1.00) each for a total authorized capital of ONE MILLION DOLLARS ($1,000,000.00). The above mentioned stocks may be issued from time to time for such consideration as may be fixed from time to time by the Board of Directors, and shares so issued, the full consideration for which has been paid or delivered, shall 9 be deemed full paid stock and the holder of such shares shall not be liable for any further payment thereon. The sole management of the corporation shall be in the hands of the holders of Common Stock, and they alone shall be entitled to vote at any meeting of the stockholders of the Corporation. Only holders of Common Stock shall have the right to hereafter subscribe for or buy or receive from the Corporation any stock hereafter issued by the Corporation, whether of the stock heretofore or hereby authorized, or in case of any increase in the stock of the Corporation, in any one or more classes or otherwise. ARTICLE VI The name and place of residence of each of the incorporators is as follows: Jael Gonzalez Agosto S #4 Street, Bo. Vietnam, Guaynabo, PR 00965 ARTICLE VII The Corporation is to have perpetual existence. ARTICLE VIII The private property of the stockholders of the Corporation shall not be subject to the payment of the corporate debts to any extent whatsoever. ARTICLE IX For the management of the business and for the conduct of the affairs of the Corporation, and in further creation, definition, limitation, and regulation of the powers of the Corporation and of its directors and stockholders, it is further provided: 10 (1) The number of directors of the Corporation shall be fixed by, or in the manner provided in the By-Laws, but such number may from time to time be increased or decreased in such manner as may be prescribed by the By-Laws. The Directors need not be stockholders. Election of directors need not be by ballot unless the By-Laws so require, Meetings of the Board of Directors may be held at such places within or without the Commonwealth of Puerto Rico as shall be specified in the respective notices thereof or in the respective waivers of notice thereof signed by all the directors of the Corporation at the time in office. (2) In furtherance and not in limitation of the powers conferred by the laws of the Commonwealth of Puerto Rico, and subject at all times to the provisions thereof, the Board of Directors if expressly authorized and empowered: (a) To make, alter, and repeal the By-Laws of the Corporation, subject to the power of the stockholders to alter or repeal the By-Laws made by the Board of Directors. (b) Subject to the applicable provisions of the By-Laws then in effect; to determine, from time to time, whether and to what extent and at what times and places, and under what conditions and regulations the accounts and books, and documents of the Corporation (other than the stock ledger), or any of them, shall be opened to inspection by the 11 stockholders; and no stockholders shall have any right to inspect any account or book, or document of the Corporation, except as conferred by the laws of the Commonwealth of Puerto Rico, unless and until duly authorized to do so by resolution of the Board of Directors or of the stockholders of the Corporation. (c) Without the assent or vote of the stockholders, to authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors in its sole discretion may determine, and to authorize the mortgaging or pledging of, and to authorize and cause to be executed mortgages and liens upon, any property of the Corporation, real or personal, including after acquired property. (d) To determine whether any, and, if any, what part of the net profits of the Corporation or of its net assets in excess of its capital shall be declared in dividends and paid to the stockholders, and to direct and determine the use and disposition thereof. (e) To set apart a reserve, and to abolish any such reserve or reserves, or to make such other provision, if any, as the Board of Directors may deem necessary or advisable for working capital, for additions, improvements, and betterment to the plant and equipment, for expansion of the Corporation (including the acquisition of real and 12 personal property for that purpose) and for any other purpose of the Corporation. (f) To establish bonus, profit-sharing, pension, thrift, and other types of incentives, compensation or retirement plans for the officers and employees (including officers and directors) of the Corporation, and to fix the amounts of profits to be distributed or shared, contributed, and the amounts of the Corporation's funds otherwise to be devoted thereto, and to determine the persons to participate in any such plans and the amounts of their respective participation. (g) To issue, or grant options for the purchase of, shares of stock of the Corporation to employees (including officers and directors) of the Corporation and its subsidiaries, for such consideration and on such terms and conditions as the Board of Directors may, from time to time, determine. (h) To enter into contracts for the management of the business of the Corporation for terms not exceeding three years. By resolution or resolutions passed by a majority of the whole Board of Directors, to designate one or more committees, each committee to consist of one or more of the directors of the Corporation, which to the extent provided in such resolution or resolutions or in the By-Laws, shall have and may exercise the powers of the Board of Directors (other than the power to remove or elect officers) in the management of the business and affairs 13 of the Corporation and may have the power to authorize the seal of the Corporation to be affixed to all papers which may require it; such committee or committees to have such name or names as may be stated in the By-Laws or as may be determined from time to time by resolution adopted by the Board of Directors. (i) To exercise all the powers of the Corporation, except such as are conferred by law or by this Certificate of Incorporation or by the By-Laws of the Corporation upon the stockholders. (3) Any one or all of the directors may be removed, with or without cause, at anytime by either (a) the vote of the holders of a majority of the stock of the Corporation issued and outstanding and entitled to vote and present, in person or by proxy, at any meeting of the stockholders called for that purpose, or (b) an instrument or instruments in writing addressed to the Board of Directors directing such removal and signed by the holders of a majority of the stock of the Corporation issued and outstanding and entitled to vote; and thereupon the term of each such director who shall be so removed shall terminate. (4) No contract or other transaction between the Corporation and any other corporation, whether or not such other corporation is related to the Corporation through the direct or indirect ownership by such other corporation of a majority of the shares of the capital stock of the Corporation or by the Corporation, of a majority of the shares of the capital stock of such other corporation, and no other act of the Corporation shall, in the absence of fraud, in any way be affected or 14 invalidated by the fact that any of the directors of the Corporation are pecuniarily or otherwise, interested in, or are directors or officers of, such other corporation or by the fact that such other corporation is so related to the Corporation. Any director of the Corporation individually, or any firm or association of which any director may be a member, may be a party to, or may be pecuniarily or otherwise interested in any contract or transaction of the Corporation, provided that the fact the that the individual or such firm or association is so interested shall be disclosed or shall have known to the Board of Directors or a majority of such members thereof, as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction shall betaken. Any director of the Corporation who is also a director or officer of such other corporation or who is so interested may be counted in determining the existence of a quorum at any meeting of the Board of Directors which shall authorize any such contract or transactions, with like force and effect as if he wore not such director or officer of such other corporation or not so interested. (5) Each director and officer of the Corporation (and each director or officer of any other corporation serving as such at the request of the Corporation because of the Corporation's interest in such other corporation) whether or not then in office, shall be indemnified by the Corporation against all costs and expenses reasonably incurred or imposed upon him in connection with or arising out of any action, suit or proceeding in which he may be involved or to which he may be made a party by reason of his being or having been a director or officer of the Corporation, 15 or of such other corporation, except in relation to matters as to which he shall be finally adjudged in any such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duty as such director or officer. In case of settlement of any such action, suit or proceeding, such director shall be indemnified by the Corporation against the cost and expense of such settlement (including any amount paid to the Corporation or to such other corporation) reasonably incurred by him, after, and only after (1) the Corporation shall have been advised by independent counsel that such director or officer in not liable for negligent or misconduct in the performance of his duty as such director or officer in relation to the matter covered by such action, suit or proceeding, and that such cost and expense does not substantially exceed the expense which might reasonably be incurred by such director or officer in conducting such action, suit or proceeding to a final conclusion, or (2) the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding in the hands of disinterested persons and entitled to vote shall by vote at any annual meetings of the stockholders; or at any special meeting called for the purpose, approve such settlements and the indemnification of such director or officers of the cost and expense thereof. The phrase "disinterested persons" are used herein shall mean any person other than, (a) a director or officer who, at the time, is or may, as such director or officer, be entitled to indemnification pursuant to the foregoing provisions, (b) any corporation or organization of which any such persons owns of record or beneficially five percent (5%) or more of the voting stock, (c) any firm or association of which any such 16 person is a member, and (d) any spouse, child, parent, brother or sister of any such stockholder. The foregoing rights of indemnification shall apply to the heirs, executors, and administrators of any such director or officers of the Corporation or of any other such corporation, and shall not be exclusive of any other rights to which any director or officer (or his heirs, executors or administrators) may be entitled under any provision of the By-Laws of the Corporation, any agreement or any vote of the stockholders, or as a matter of law, or otherwise. (6) Shares or other securities of the Corporation, offered for sale by the Corporation, shall not be subject to preemptive rights, unless otherwise specifically provided by resolution or resolutions passed by a whole majority of the Board of Directors of the Corporation. ARTICLE X The Corporation reserves the right to amend, alter or repeal any of the provisions of this Certificate of Incorporation and to add other provisions authorized by the laws of the Commonwealth of Puerto Rico at the time in force on the manner and at the time prescribed by said laws, and all rights, powers, and privileges at any time conferred upon the Board of Directors and the stockholders are granted subject to the provisions of this Article. IN WITNESS WHEREOF, we the undersigned, for the purpose of forming a corporation under the laws of the Commonwealth of Puerto Rico, do make and file this Certificate, and do swear that the facts herein stated are true and we have accordingly hereunto set our respective hands. 17 Dated at San Juan, Puerto Rico, this 26th day of February, 1998. /s/ Jael Gonzalez Agosto ------------------------------------ AFFIDAVIT NO. 1880 BE IT REMEMBERED that on this 26th day of February, 1998 before me personally appeared, Jael Gonzalez Agosto, of legal age, single, property owner, and resident of Guaynabo, Puerto Rico, all of the incorporator, known to me personally to be such, and I having first made known to them the contents thereof, she did swear and acknowledge that she executed the same as her voluntary act and deed, that the facts therein stated are truly set forth, and she signed before me the foregoing Certificate of Incorporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal the day and year first above written. /s/ Rafael A. Martinez Colon, LLM ------------------------------------ NOTARY PUBLIC 18 EX-3.74 73 g83903exv3w74.txt EX-3.74 BYLAWS EXHIBIT 3.74 RAMSAY YOUTH SERVICES PUERTO RICO, INC. BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Hato Rey, Commonwealth of Puerto Rico. The Corporation may also have offices at such other places, both within and without the Commonwealth of Puerto Rico, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the Commonwealth of Puerto Rico) outside of the Commonwealth of Puerto Rico and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the Commonwealth of Puerto Rico as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Thursday of June in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day and time as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the Commonwealth of Puerto Rico for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the Commonwealth of Puerto 2 Rico, as may be specified in the notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the Commonwealth of Puerto Rico, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business 3 hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the Commonwealth of Puerto Rico, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4 Section 5. Organization. The President, or in his absence the Chief Operating Officer, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President, the Chief Operating Officer and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after one year from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. 5 The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. When a quorum is present at any meeting of the stockholders of the Corporation, the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the Commonwealth of Puerto Rico or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the Commonwealth of Puerto Rico or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all of the holders of outstanding capital stock of the Corporation entitled to vote thereon. Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the 6 Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between three (3) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the Corporation as are not by the laws of the Commonwealth of Puerto Rico, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason 7 other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. At any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the Commonwealth of Puerto Rico, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each Director, and such meetings shall be held at the principal business office of the 8 Corporation or at such other place or places, either within or without the Commonwealth of Puerto Rico, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of one-third or more of the Directors constituting the Board, but in no event fewer than two Directors, shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the Commonwealth of Puerto Rico, the Certificate of Incorporation or these By-Laws, the affirmative 9 vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 10 Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, a Chief Operating Officer, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. President. The President shall be the Chief Executive Officer of the Corporation and should have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the 11 laws of the Commonwealth of Puerto Rico. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation, and of all the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the Commonwealth of Puerto Rico, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. Chief Operating Officer. The Chief Operating Officer shall be the chief operating officer, or, if the office of President shall be vacant, the chief executive officer of the Corporation. At the request of the President, or in the case of the absence of the President or inability to act, or if the office of the President shall 12 be vacant, the Chief Operating Officer shall perform the duties of the President, and when so acting, shall have all the powers of the President. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the Commonwealth of Puerto Rico, have such other powers and duties as shall from time to time be assigned to him by the President or by the Board of Directors. Section 4. Vice Presidents. The Vice Presidents shall perform such duties as the President, Chief Operating Officer or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 5. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as 13 required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the President or the Board of Directors. Section 6. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 7. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Chief Operating Officer or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 8. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. 14 Section 9. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 10. Transfer of Duties. The Board of Directors or President in its or his absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the Commonwealth of Puerto Rico. Section 11. Vacancies. If the office of President, Chief Operating Officer, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 12. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 13. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 14. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President, Chief Operating Officer or the Secretary of the Corporation. Any such resignation 15 shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President, the Chief Operating Officer or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President, the Chief Operating Officer or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be 16 consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to 17 recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the Commonwealth of Puerto Rico. ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for 18 the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than fifty (50) nor less than ten (10) days before the date of such meeting, nor more than fifty (50) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and the laws of the Commonwealth of Puerto Rico. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. 19 ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Puerto Rico." ARTICLE XIV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 20 EX-3.75 74 g83903exv3w75.txt EX-3.75 CERTIFICATE OF INCORPORATION EXHIBIT 3.75 CERTIFICATE OF INCORPORATION OF RHCI SAN ANTONIO, INC. 1. The name of the corporation is: 2. RHCI San Antonio, Inc. 3. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 4. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations nay be organized under the General Corporation Law of Delaware. 5. The total number of shares of stock which the corporation shall have authority to issue is One Thousand (1,000) and all of such shares shall be without par value. 6. The board of directors is authorized to make, alter, or repeal the bylaws of the corporation. Election of directors need not be by written ballot. 7. The name and mailing address of the incorporator is: Vivian B. Crane McGlinchey Law Firm 643 Magazine Street New Orleans, Louisiana 70130 I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 8th day of August, 1991. /s/ Vivian B. Crane ------------------- Vivian B. Crane EX-3.76 75 g83903exv3w76.txt EX-3.76 RESTATED BYLAWS EXHIBIT 3.76 RESTATED BYLAWS OF RHCI SAN ANTONIO, INC. ARTICLE I PURPOSE RHCI San Antonio, Inc. (the "Corporation") will maintain a role in meeting the health needs of area residents through its facilities including "Mission Vista Hospital Co." (the "Hospital"). The Corporation's commitments are: to provide quality psychiatric care and substance abuse treatment; to provide modern facilities and staff with motivated mental health professionals; to create appropriate environments to facilitate psychiatric and substance abuse treatment to individuals in need of psychiatric and substance abuse care, without respect to age, sex, national origin, race, color, handicap status, political or religious beliefs; and to contribute to the overall knowledge and understanding of the causes and effects of psychiatric pathology and substance abuse on individual patients as well as their significance to others, through appropriate activity developed at professional and community levels. The Corporation is prepared to work in cooperation with other appropriate health agencies and institutions in an effort to improve existing health services in the community and to design, plan and develop innovative systems of health care management in the community. These activities shall be conducted with an overriding concern for the patient and the recognition of the patient's dignity as a human being. The Corporation will encourage the community to participate in the planning and development of program policies for the Hospital. ARTICLE II OFFICES The principal office of the Corporation shall be located in New Orleans, Louisiana. The Corporation shall continuously maintain in the State of Delaware a registered office and a registered agent, and may have such other offices as the Board may determine from time to time. All dividends shall be deemed to be paid in the State of Delaware. The Corporation shall have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may require from time to time. ARTICLE III SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of the shareholders will be held at such time and on such date as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. SECTION 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Board of Directors, and shall be called by the President at the request of the shareholders of not less than ten percent (10%) of all the outstanding shares of the Corporation entitled to vote at the meeting. 2 SECTION 3. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Delaware to conduct any annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Delaware, to hold such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Corporation. SECTION 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon paid. SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any 3 case, thirty (30) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for at least fifteen (15) days immediately preceding such meeting, in lieu of closing stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than thirty (30) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting shall be kept on file at the place where the meeting is to 4 be held and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence of the identities of the shareholders entitled to examine such list or transfer books or to vote at any meeting of the shareholders. SECTION 7. Quorum. A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless a time of expiration is otherwise specified in a proxy, no proxy shall be valid if dated more than eleven (11) months prior to the date of the meeting. 5 SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Such shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the Corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and 6 shall not be counted in determining the total number of outstanding shares at any time. SECTION 11. Action Without a Meeting. Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action to be taken shall be signed by the shareholders having not less than the minimum number of votes of each voting group entitled to vote thereon that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote thereon were present and voted. If the consent is signed by fewer than all of the shareholders having voting power on the question, prompt notice shall be given to all of the shareholders of the action taken pursuant to the consent. ARTICLE IV THE BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors which may exercise all powers and do all lawful acts and things, except those which are required by statute or by the Certificate of Incorporation or by these Bylaws to be exercised or done by the shareholders. The Board of Directors shall have and exercise such powers, authorities, duties and responsibilities as may be provided by these Bylaws, and as may be provided for the Board of Directors by the laws of the State of Delaware. The Board of Directors of the Corporation shall report to the Board of Directors of Ramsay Health Care, Inc. 7 The Board of Directors shall have the authority and responsibility for carrying out the purposes of the Corporation. Included in this responsibility shall be the active participation by members of the Board of Directors in activities necessary for any licensures, approvals, or accreditation of the Corporation's health care facilities and related services. The Board of Directors shall appoint a Consulting Board which shall have the authority to have its own bylaws and shall be responsible for the operations of the Hospital, for the appointment of Medical Staff of the Hospital, and for the quality of care rendered in the Hospital. SECTION 2. Number, Term and Qualification. The number of directors shall be fixed by the Board of Directors and shall include two ex officio members as described below. Directors need not be residents of the State of Delaware nor shareholders of the Corporation. The directors, other than the ex officio directors, shall be elected by the shareholders at the annual meeting thereof, except as provided in Section 3 of this Article IV, and shall hold office for the term for which they are elected and until their successors are elected and qualified, or until the earlier resignation, removal from office, or death of any such director. The members of the Board of Directors shall be selected for their ability to participate effectively in fulfilling the Board's responsibilities. They shall also be selected for their areas of interest and expertise and capabilities in their own field, their interest in the Hospital, and their experience in organizational activities. No restrictions shall be placed on the number of terms a director may serve provided 8 the director continues to meet other qualifications set forth in this Article IV, Section 2. The number of directors may not be increased or decreased by more than thirty percent (30%) without the approval of the majority of shareholders entitled to vote for the election of directors. The Board of Directors of this corporation shall include two ex officio members: the President of the Corporation, who shall be entitled to vote as a director, and a selected representative of the Medical Staff, who shall not have any voting rights as a director and who shall be entitled to attend and have a voice at all meetings of the Board of Directors. SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by the reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though the number of the remaining directors may be less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders or until his successor is elected and qualified. SECTION 4. Compensation. The Board of Directors shall have the authority to fix the compensation of directors. SECTION 5. Standard of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the Board of Directors upon which he may serve, in good faith, in a manner he reasonably 9 believes to be in the best interest of the Corporation, and with such care as an ordinary prudent person in a like position would use under similar circumstances. SECTION 6. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest. SECTION 7. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. SECTION 8. Quorum and Voting. A majority of the number of directors then serving shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 9. Conflicts of Interest. (a) Interested Director Transactions. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves 10 or ratifies such contract or transaction or because his or their votes are counted for such purpose, if: (1) the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (2) the fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by a vote or written consent; or (3) the contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. (b) Written Conflict of Interest Policy. The Board of Directors shall implement from time to time a written conflict of interest policy that includes guidelines for the resolution of any existing or apparent conflict of interest. ARTICLE V MEETINGS SECTION 1. Place of Meeting of the Board of Directors. Regular or special meetings of the Board of Directors of the Corporation may be held within or without the State of Delaware. 11 SECTION 2. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held at such time and at such place as shall be determined by the Board of Directors and as often as necessary for the effective operation of the Corporation. Special meetings may be called by the President of the corporation on such, date and at such time and place as may be specified by telegraphic, written or oral notice duly served on, sent, mailed or otherwise communicated to each director not less than twelve (12) hours before such special meeting or by notice mailed to the director at least three (3) days before the meeting, first class mail, postage prepaid; or written request of two (2) directors. Special meetings shall be called by the President or Secretary on like notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of 12 any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting is announced at the time of adjournment, to the other directors. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Minutes of all Board of Director's meeting shall be kept and shall include at least the following: (A) The date of the meeting; (B) The name of the directors who attended; (C) The topics discussed; (D) The decisions reached and action taken; (E) The dates for implementation of recommendations; and (F) The reports of the Administrator and others. SECTION 3. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if consent in writing, setting forth the action so to be taken, signed by all of the directors, or all of the members of the committee, as the case may be, is filed in the 13 minutes of the proceedings of the Board of Directors or of the respective committee. Such consent shall have the same effect as a unanimous vote. ARTICLE VI COMMITTEES The Board of Directors shall establish such committees as may be necessary to effect the discharge of its responsibilities, each such committee to consist of one (1) or more of the directors. The Board of Directors may designate one (1) or more directors as an alternate member of any such committee to replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of the committee, the members of the Committee who are present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member if an alternate member or members has not been selected or is absent from the meeting. Each such committee and each member thereof shall serve at the pleasure of the Board of Directors. Each committee shall have and may exercise all authority granted to it by the Board of Directors, except no committee shall have the authority to: (1) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders; (2) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise; (3) Fill vacancies on the Board of Directors or any committee thereof; 14 (4) Amend the Bylaws; (5) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (6) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares of stock or designate the terms of the series of a class of shares, except that the Board of Directors, having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board of Directors, by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking funds, conversion, voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all of the terms thereof and to authorize the statement of the terms of the series for filing with the Secretary of State of the State of Delaware. Written minutes shall be kept of all meetings of committees of the Board of Directors and shall include the information specified in Article V, Section 2 hereof. 15 ARTICLE VII OFFICERS SECTION 1. Number. The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. One person may hold more than one office. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. SECTION 2. Election and Term of Office. The officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. 16 SECTION 5. President. The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall, in general, supervise and manage all of the business and affairs of the Corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed; and, in general, shall perform all duties incident to the office of the President and such other duties .as may be prescribed by the Board of Directors from time to time. The President shall not sell, transfer, incumber, or otherwise dispose of any assets of the Corporation, the value of which exceeds $50,000.00, without the express authorization of such transaction from the Board of Directors. SECTION 6. Vice-President. In the absence of the President or in the event of his death, inability or refusal to act, the Vice-President shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Vice-President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. 17 SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is necessary and duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. SECTION 8. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. He shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; (b) give and receive receipt for monies due and payable to the Corporation from any source whatsoever; (c) deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article IX of these Bylaws; and (d) in general perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors. 18 SECTION 9. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. ARTICLE VIII ADMINISTRATION SECTION 1. Chief Administrative Officer. The Consulting Board shall select and employ a competent, experienced Chief Administrative Officer, to be designated from time to time as the Administrator of the Hospital. ARTICLE IX CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. Checks. All checks, drafts or money orders for the payment of money, notes or other evidence of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 19 SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. Certificates for Shares. Certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Board of Directors so to do. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 2. Transfer of Shares. The shares of the Corporation shall not be transferable until such time as the owner thereof shall have given the Corporation fifteen (15) days in which to purchase said stock for the same amount as any bona fide offer. 20 Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner and holder thereof for all purposes. ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of July and end on the 30th day of June of each year. ARTICLE XII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation. ARTICLE XIII SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have subscribed thereon the name of the Corporation and the state of incorporation and the words, "Corporate Seal". 21 ARTICLE XIV WAIVER OF NOTICE Unless otherwise provided by law, whenever any notice is required to be given to any shareholder or director of the Corporation under the provisions of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XV AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by a vote of the shareholders representing a majority of all the shares issued and outstanding, at any annual shareholders' meeting or at any special shareholders' meeting when the proposed amendment has been set out in the notice of such meeting. These Bylaws shall be reviewed by the Board of Directors at least every two (2) years. ARTICLE XVI INDEMNIFICATION The Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, and may procure insurance on behalf of its officers, directors, employees, and agents to the full extent permitted by Section 145 of the Delaware General Corporation Law, as amended. 22 EX-3.77 76 g83903exv3w77.txt EX-3.77 AMENDED AND RESTATED CHARTER EXHIBIT 3.77 AMENDED AND RESTATED CHARTER OF PSI SOLUTIONS CENTER, INC. Pursuant to the provisions of Section 48-20-107 of the Tennessee Business Corporation Act, the undersigned corporation certifies that: 1. The name of the corporation is PSI Solutions Center, Inc. 2. The Amended and Restated Charter restates and further amends the Charter of the corporation. The Amended and Restated Charter was duly adopted by written consent of the Board of Directors of the corporation Dated December 1, 1998 and by written consent of the shareholders of the corporation dated December 1, 1998. 3. The text of the Charter of the corporation is hereby restated and further amended to read in its entirety as follows: AMENDED AND RESTATED CHARTER OF SOLUTIONS CENTER OF LITTLE ROCK, INC. 1. The name of the corporation is Solutions Center of Little Rock, Inc. 2. The corporation's registered office is located at 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203, County of Davidson. The registered agent at that office is Laura C. Fisher, Esq. 3. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, Tennessee 37203. 4. The corporation is for profit. 5. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 6. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the Bylaws of the Corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors; c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 7. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator then the liability of a director, officer or incorporator of the corporation shall be eliminated or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 7 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 8. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 8 shall be a contract right and shall 2 include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter and "advancement of expenses"); provided, however, that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judgment decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 8 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under the Tennessee Business Corporation Act, and a determination is made that the facts then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 8 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expense to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated this 31st day of December, 1998. /s/ Joey Jacobs --------------------------- Joey Jacobs, President /s/ Bryce DeHaven ------------------------ Bryce DeHaven, Secretary 3 EX-3.78 77 g83903exv3w78.txt EX-3.78 BYLAWS EXHIBIT 3.78 BYLAWS OF PSI SOLUTIONS CENTERS, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all the shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of 1 business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision of this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall be not less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Directors' Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special meeting. Attendance by a director at a meeting or subsequent execution or approval by a director 2 of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting of two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2 Election and Term. The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. ARTICLE IV RESIGNATIONS, REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such 3 resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of Directors. 4.2 Removal of Officers. Any officer or agent may be removed at any time with or without cause by the board whenever in its judgment the best interests of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. ARTICLE VI ACTION BY CONSENT Whenever the shareholders or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. 4 ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholders' meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The first fiscal year for the corporation shall be the calendar year. CERTIFICATION These Bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on September 4, 1997. /s/ Joey A. Jacobs -------------------- /s/ Douglas B. Lewis -------------------- EX-3.79 78 g83903exv3w79.txt EX-3.79 CHARTER EXHIBIT 3.79 ARTICLES OF AMENDMENT TO THE CHARTER OF SUNRISE GENERAL PARTNER, INC. Pursuant to the provisions of Section 48-20-106 of the Tennessee Business Corporation Act, the undersigned corporation adopts the following articles of amendment to its charter: 1. The name of the corporation is Sunrise General Partner, Inc. 2. The amendment as adopted is: The Charter of the corporation (as amended) is amended by striking Number 1 in its entirety and replacing therefor the following: 1. The name of the corporation is Sunstone Behavioral Health, Inc. 3. The corporation is a for-profit corporation. 4. The amendment was duly adopted by the unanimous consent action of the sole shareholder of the corporation on December 5, 2000. 5. The amendment shall be effective when these articles are filed with the Secretary of State. Dated this 5th day of December, 2000. SUNRISE GENERAL PARTNER, INC. By: /s/ Steven T. Davidson ----------------------------- Steven T. Davidson, Secretary EX-3.80 79 g83903exv3w80.txt EX-3.80 BYLAWS EXHIBIT 3.80 BYLAWS OF PSYCHIATRIC PRACTICE MANAGEMENT OF NORTH CAROLINA, INC. ARTICLE I MEETINGS OF SHAREHOLDERS 1.1 Annual Meeting. The annual meeting of the shareholders shall be held, at such place within or without the state of incorporation as may be designated by the Board of Directors, on such date and at such time as shall be designated each year by the Board of Directors and stated in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors by a plurality vote and transact such other business as may properly be brought before the meeting. 1.2 Special Meetings. Special meetings of the shareholders may be called by the president, a majority of the Board of Directors, or by the holders of not less than one-tenth (1/10) of all shares entitled to vote at such meeting. The place of said meetings shall be designated by the directors. The business transacted at special meetings of the shareholders shall be confined to the business stated in the notice given to the shareholders. 1.3 Notice of Shareholder Meetings. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting may be delivered in person, by telegraph, teletype or other form of wire or wireless communication, or by mail or private carrier by or at the direction of the president, secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United State mail addressed to the shareholder at his last known address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, or by confirmed telex; provided, however, that any such notice may be waived in writing, either prior to or subsequent to such meeting. 1.4 Quorum Requirements. A majority of the shares entitled to vote present, in person or represented by proxy, shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. When a quorum is present at any meeting, a majority in interest of the stock there represented shall decide any question brought before such meeting, unless the question is one upon which, by express provision if this corporation's charter or Bylaws, or by the laws of Tennessee, a larger or different vote is required, in which case such express provision shall govern the decision of such question. 1.5 Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy appointment made by an instrument in writing subscribed by such shareholder, which proxy shall be filed with the secretary of the meeting before being voted. Such proxy shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the said instrument expressly provides for a longer period. ARTICLE II BOARD OF DIRECTORS 2.1 Qualification and Election. Directors need not be shareholders or residents of this State, but must be of legal age. They shall be elected by a plurality of the votes cast at the annual meetings of the shareholders or at a special meeting of the shareholders called for that purpose. Each director shall hold office until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified. 2.2 Number. The number of directors that shall constitute the entire Board of Directors shall not be less than one (1) nor more than fifteen (15), the exact number of directors to be determined by resolution of the Board of Directors from time to time. 2.3 Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the corporation shall be elected. The Board of Directors may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by the chairman of the board, president, or any two directors. 2.4 Notice of Director's Meetings. The annual and all regular board meetings may be held without notice of the date, time, place or purpose of the meeting. Special meetings shall be held upon notice sent by any usual means of communication, not less than two (2) days before the meeting, noting the date, time and place of the meeting. The notice need not describe the purposes of the special 2 meeting. Attendance by a director at a meeting or subsequent execution or approval by a director of the minutes of a meeting or a consent action shall constitute a waiver of any defects in notice of such meeting and/or consent action. 2.5 Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed thirty (30) days in any one adjournment. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by the charter, these bylaws, or by the laws of the state of incorporation. 2.6 Executive and Other Committees. The Board of Directors, by a resolution adopted by a majority of its members, may designate an executive committee, consisting if two or more directors, and other committees, consisting of two (2) or more persons, who may or may not be directors, and may delegate to such committee or committees any and all such authority as it deems desirable, including the right to delegate to an executive committee the power to exercise all the authority of the Board of Directors in the management of the affairs and property of the corporation. ARTICLE III OFFICERS 3.1 Number. The corporation shall have a President, a Secretary, and any other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person, except the offices of President and Secretary. 3.2. Election and Term The officers shall be elected by the Board of Directors. 3.3 Duties. All officers shall have such authority and perform such duties in the management of the corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. 3 ARTICLE IV RESIGNATIONS. REMOVALS AND VACANCIES 4.1 Resignations. Any officer or director may resign at any time by giving written notice to the chairman of the board, the president, or the secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, upon its acceptance by the Board of directors. 4.2 Removal of Officers. Any officer may be removed at any time with or without cause by the board whenever in its judgment the best interest of the corporation will be served thereby. 4.3 Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders; and may be removed with cause by a majority vote of the entire board. 4.4 Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors remaining in office, even if less than a quorum exists. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the board, such certificates shall be signed by the president and the secretary of the corporation. 5.2 Transfer of Shares. Shares of stock may be transferred on the books of the corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by applicable federal and state securities laws and any shareholder agreement. 5.3 Loss of Certificate. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe. 4 ARTICLE VI ACTION BY CONSENT Whenever the shareholder or directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by all the persons or entities entitled to vote thereon, and such action shall be as valid and effective as any action taken at a regular or special meeting of the directors or shareholders. ARTICLE VII AMENDMENT OF BYLAWS These bylaws may be amended, added to, or repealed either by: (1) a majority vote of the shares represented at any duly constituted shareholder's meeting; or (2) by a majority vote of the Board of Directors pursuant to T.C.A. Section 48-20-201. ARTICLE VIII FISCAL YEAR The fiscal year for the corporation shall be the calendar year. CERTIFICATION These bylaws were adopted by written consent of the Board of Directors of the Corporation and became effective on May 21, 1998. /s/ Joey A. Jacobs ------------------------------------- Joey A. Jacobs /s/ Steven T. Davidson ------------------------------------- Steven T. Davidson 5 EX-3.81 80 g83903exv3w81.txt EX-3.81 CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.81 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP OF TEXAS CYPRESS CREEK HOSPITAL, L.P. The undersigned, a general partner of TEXAS CYPRESS CREEK HOSPITAL, L.P., a limited partnership, pursuant to Section 2.02 of the Texas Revised Uniform Limited Partnership Act, as amended, hereby certifies that: 1. The name of the limited partnership is Texas Cypress Creek Hospital, L.P. 2. The Certificate of Limited Partnership is amended as follows: The Certificate of Limited Partnership of Texas Cypress Creek Hospital, L.P. is amended by striking Number 4 in its entirety and replacing therefore the following: 4. The name, the mailing address, and the street address of the business or resident of each general partner is as follows: NAME MAILING ADDRESS STREET ADDRESS (INCLUDE CITY, STATE, (INCLUDE CITY, STATE, ZIP CODE) ZIP CODE) PSI Texas Hospitals, LLC 310 25th Avenue North Same as Mailing Suite 209 Address Nashville, TN 37203 Executed on this 30th day of October, 2001 GENERAL PARTNER: PSI HOSPITALS, INC By: /s/ Steven T. Davidson ---------------------- Steven T. Davidson, Vice President CERTIFICATE OF LIMITED PARTNERSHIP 1. The name of the limited partnership is Texas Cypress Creek Hospital, L.P. 2. The street address of its proposed registered office in Texas is 905 Congress Avenue, Austin, TX 78701 and the name of its proposed registered agent in Texas at such address is National Registered Agents, Inc. 3. The address of the principal office in the United States where records of the partnership are to be kept or made available is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203. 4. The name, the mailing address, and the street address of the business or residence of each general partner is as follows: NAME MAILING ADDRESS STREET ADDRESS (INCLUDE CITY, STATE, ZIP (INCLUDE CITY, STATE, ZIP CODE) CODE) PSI Hospitals, Inc. 310 25th Ave N. Suite 209 Same as Mailing Address Nashville, TN 37283 Date Signed: August 10, 2001 PSI HOSPITALS, INC. By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President EX-3.82 81 g83903exv3w82.txt EX-3.82 AMENDED AND RESTATED LIMITED PARTNERSHIP EXHIBIT 3.82 AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF TEXAS CYPRESS CREEK HOSPITAL, L.P. This Amended and Restated Limited Partnership Agreement is made and entered into this 31st day of October, 2001, by and between PSI TEXAS HOSPITALS, LLC, a Texas limited liability company, the principal place of business of which is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as the general partner (the "General Partner"), and PSI HOSPITALS, INC., a Delaware corporation, the principal place of business of which is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as the limited partner (the "Limited Partner"). (The General Partner and Limited Partner are collectively referred to herein as the "Partners.") The Partners hereby agree as follows: ARTICLE 1 GENERAL 1.1 Formation. The Partners hereby form Texas Cypress Creek Hospital, L.P. (the "Partnership") as a limited partnership under the Texas Revised Limited Partnership Act (the "Limited Partnership Act"). 1.2 Name. The name of the Partnership shall be "Texas Cypress Creek Hospital, L.P.," and all business of the Partnership shall be conducted in such name; provided, however, the General Partner may change the name of the Partnership at any time and from time to time by notice to the Limited Partner. 1.3 Purpose. The purpose of the Partnership is to engage in any lawful act or activity in which a limited partnership may engage under the Limited Partnership Act including, without limitation, the acquisition, development, construction, owning, mortgaging, encumbering, leasing, disposition, improvement of and otherwise dealing with real property and related personal property. 1.4 Term. The term of the Partnership shall commence upon filing of the Certificate of Limited Partnership of Texas Cypress Creek Hospital, L.P. (the "Certificate") with the Texas Secretary of State and shall continue until the completion of the Partnership's dissolution, winding up, and liquidation as provided herein. 1.5 Place of Business. The Partnership may have such places of business within the United States of America as the General Partner determines to be appropriate from time to time. 1.6 Registered Agent. The registered agent for service of process on the Partnership in the State of Texas shall be National Registered Agents, Inc., 905 Congress Avenue, Austin, Texas 78701, or such other person as the General Partner may designate from time to time. 1.7 Filings. The General Partner has executed and shall cause to be filed the Certificate in the office of the Texas Secretary of State, in accordance with the provisions of the Limited Partnership Act, and shall execute and file such other certificates or documents required by any state or other jurisdiction in which the Partnership engages in business. The General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership and shall execute and file for public record any and all filings in all places and at such times as necessary for the continuation of and transaction of business by the Partnership. ARTICLE 2 CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 2.1 General Partner. The General Partner shall contribute the sum of One Dollar ($1.00) as and for the General Partner's initial capital contribution for its general partnership interest in the Partnership. Except as provided in this Section 2.1, the General Partner shall not be required to make any other capital contributions to the Partnership. 2.2 Contribution of Limited Partner. The Limited Partner shall contribute the sum of Ninety-Nine Dollars ($99.00) to the Partnership as and for its initial capital contribution for its limited partnership interest in the Partnership. 2.3 No Right to Demand Capital Contributions; No Priorities. Except as otherwise provided in this Agreement and permitted by the Limited Partnership Act, the Limited Partner shall not demand or receive a return of all or a portion of its capital contributions or withdraw from the Partnership without the written consent of the General Partner. Under circumstances requiring a return of any capital contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. No Partner shall have priority over any other Partner, either with respect to the return of capital contributions or with respect to profits, losses or distributions. 2.4 No Interest on Capital Contributions. No Partner shall receive any interest, salary or drawing with respect to its capital contributions or its capital account or for services rendered to the Partnership or otherwise in its capacity as a Partner, except as otherwise provided in this Agreement. 2.5 Limited Liability. The Limited Partner shall not be liable for the debts, liabilities, contracts or any other obligations of the Partnership. Except as otherwise provided by applicable law, the Limited Partner shall be liable only to 2 make its capital contributions and shall not be required to lend any funds to the Partnership or, after its initial capital contribution has been made, to make any additional capital contributions to the Partnership. Except as otherwise provided in this Agreement, the General Partner shall not have any personal liability for the repayment of any capital contributions of the Limited Partner. The Limited Partner shall not participate in the control of the business of the Partnership. 2.6 Establishment of Capital Accounts. A capital account shall be established and maintained for each Partner in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the U.S. Treasury Regulations promulgated thereunder (the "Regulations") and this Agreement. ARTICLE 3 ALLOCATIONS AND DISTRIBUTIONS 3.1 Participation in Profits or Losses. Profits or losses of the Partnership, including all items of income, gain, loss, deduction, and credit, for each fiscal year shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. 3.2 Basis for Determining Profits or Losses. For purposes of determining the profits, losses, and each item thereof allocable to any period, profits, losses, and each item thereof shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Code Section 706 and the Regulations thereunder. 3.3 Distributions. Except as otherwise provided in Article 7 hereof, distributions of cash or other property shall be made, at such times as the General Partner may determine, one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. ARTICLE 4 MANAGEMENT 4.1 Management of the Partnership. The General Partner shall have full, exclusive and complete charge of all affairs and business of the Partnership and of the management and control of the Partnership, subject only to the limitations in this Agreement. The General Partner shall have all the rights and powers that may be possessed by a general partner under the Limited Partnership Act and such rights and powers as are otherwise conferred by law or it deems necessary, advisable or convenient in managing the business and affairs of the Partnership. 4.2 Limited Role of Limited Partner. Except as otherwise set forth in this Section 4.2, the Limited Partner shall not take part in, or interfere in any manner with, the conduct or control of the business or affairs of the Partnership or have any 3 authority to act for, or on behalf of, the Partnership; provided, however, at the sole and absolute discretion of the General Partner, the Limited Partner may possess and exercise any of the powers allowed to be possessed or exercised by a limited partner under the Limited Partnership Act without the Limited Partner being deemed to participate in the control of the Partnership's business. 4.3 Exculpation of General Partner. No act or omission by the Partnership or the General Partner, except gross negligence or willful misconduct, shall ever subject the General Partner or its parent corporation, their shareholders, officers, directors, employees, or agents to any liability to the Partnership or any Partner. The foregoing exculpation and exoneration expressly covers acts or omissions which constitute or are accompanied by simple, common or ordinary negligence. 4.4 Indemnification of General Partner. To the fullest extent provided by law, the Partnership shall indemnify the General Partner and its parent corporation, their shareholders, officers, directors, partners, agents and employees, and hold them harmless from and against all claims and liabilities arising from, or related to, any qualified act or omission of the Partnership and/or the General Partner under this Agreement, including all damages, judgments, fees, settlements, costs and attorneys' fees actually and reasonably paid or incurred by the General Partner or its parent corporation in connection with any action, claim, suit or proceeding covered by this indemnity. A "qualified act or omission" for purposes of this Section 4.4 is an act or omission done in good faith or in a manner the General Partner or its parent corporation reasonably believed to be in, or not opposed to, the best interest of the Partnership. ARTICLE 5 TRANSFERS OF INTERESTS 5.1 Voluntary Transfers by General Partner. The General Partner shall have the right to sell, assign, transfer, give or in any other way dispose of its entire interest as general partner of the Partnership. Prior to the effective date of such sale, assignment or transfer, such purchaser, assignee or transferee shall be admitted as an additional general partner of the Partnership and is hereby authorized to continue the business of the Partnership without dissolution. Upon such a sale or other disposition, the General Partner shall cease to be a general partner of the Partnership as provided in Article 6. Notwithstanding anything in this Agreement to the contrary, the General Partner may pledge, encumber, or otherwise give as collateral for loans or other indebtedness, its general partnership interest in the Partnership without notice to or the consent of the Limited Partner; upon any such pledge, encumbrance or grant of a security interest by the General Partner, the General Partner shall not cease to be a general partner of the Partnership. 4 5.2 Transfer by Limited Partner. No voluntary assignments, transfers, hypothecation or encumbrance of the Limited Partner's interest or any portion thereof shall be permitted unless (i) the prior written consent of the General Partner is obtained, and (ii) said assignment, transfer, hypothecation or encumbrance, in the opinion of counsel satisfactory to the General Partner, complies with all applicable securities laws, and does not dissolve the Partnership under the Limited Partnership Act. The requirement of said opinion may be waived in the sole discretion of the General Partner. Any such transfer, assignment, hypothecation or encumbrance of the Limited Partner's interest shall not require the dissolution, winding up and liquidation of the Partnership. Except to the extent otherwise specified in any such assignment, an assignee of any interest in the Partnership shall be entitled to receive allocations of profits or losses, including all items of income, gain, loss, deduction, and credit thereof, and distributions of cash or other property attributable to the assigned interest from and after the date on which such assignment is treated to have occurred under this Agreement No assignee of all or any part of the Limited Partner's interest shall become a substituted Limited Partner with respect to such interest unless the General Partner shall consent thereto in writing, such consent to be in the sole discretion of the General Partner. A person who acquires an interest in the Partnership but who is not admitted as a substituted Limited Partner pursuant to this Section 5.2 shall be entitled only to allocations and distributions with respect to such interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books and records of the Partnership, and shall not have any of the rights, including but not limited to the right to vote, of a General Partner or a Limited Partner under the Limited Partnership Act or this Agreement. Accordingly, with respect to such rights, including but not limited to the right to vote, a Limited Partner shall be treated for purposes of this Agreement as the owner of any interest assigned by him with respect to which the assignee has not become a substituted Limited Partner. 5.3 Bankruptcy or Dissolution of the Limited Partner. Upon the bankruptcy, dissolution, or cessation to exist as a legal entity of the Limited Partner, the authorized representative or successor of such Limited Partner shall have all the rights of the Limited Partner for the purpose of effecting the orderly winding up and dissolution of the business and affairs of such Limited Partner and such power as the Limited Partner possessed to constitute a successor as an assignee and in making application to substitute such assignee as a Limited Partner. ARTICLE 6 RESIGNATION OF OR TERMINATION OF STATUS AS GENERAL PARTNER 6.1 Withdrawal of General Partner. The General Partner shall have the right to withdraw as and cease to be the General Partner at any time upon thirty 5 (30) days written notice to the Limited Partner. Prior to the effective date of the withdrawal of a General Partner, the Limited Partner may elect an additional general partner of the Partnership who is hereby authorized to and shall continue the business of the Partnership without dissolution. 6.2 Termination of Status As General Partner. The General Partner shall cease to be the General Partner upon the occurrence of any of the following events; (i) the transfer of its general interest in the Partnership pursuant to Section 5.1, (ii) the vote by the Limited Partner to remove such General Partner for good cause (which shall mean gross negligence or fraud in failure to comply with any material covenant or agreement contained in this Agreement), and delivery to the General Partner of written notice of such vote, (iii) the bankruptcy of the General Partner or the filing of a certificate of dissolution, or its equivalent, or (iv) the involuntary transfer by operation of law of the General Partner's interest in the Partnership. 6.3 Liability of the General Partner after Resignation or Termination. If the General Partner resigns or its status as a general partner is terminated in accordance with the provisions of this Article 6 or the Limited Partnership Act, the General Partner's liability as a general partner of the Partnership under the Limited Partnership Act and this Agreement shall cease and the Partnership shall promptly take all steps reasonably necessary under the Limited Partnership Act to cause such cessation of liability; provided, however, that if the General Partner resigns during dissolution and winding up the Partnership, the General Partner shall continue to be the General Partner for purposes of winding up the Partnership's affairs pursuant to Section 7.2 of this Agreement, unless a successor General Partner is elected. 6.4 Election of Successor General Partner. Upon the withdrawal or termination of general partnership status of a General Partner, the remaining General Partner, if any, is hereby authorized to and shall continue the Partnership without dissolution. If all of the General Partners withdraw or their status is terminated pursuant to this Agreement or the Limited Partnership Act, the Limited Partner may, within ninety (90) days of such withdrawal or termination of status, consent in writing to continue the business of the Partnership and to the election, to be effective as of the date of such withdrawal or termination of status, of one or more successor General Partners. Such election may occur before or after the effectiveness of such withdrawal or termination; provided, however, that if such election occurs before such effectiveness, the person so elected shall not become the General Partner until such withdrawal or termination is effective and such person has executed an amendment to this Agreement and has filed any and all such amendments to the Certificate and other documents necessary to comply with the Limited Partnership Act, and shall agree to accept all accompanying liabilities, duties and obligations hereunder. The successor General Partner or General Partners shall purchase from the terminated or withdrawing General Partner its interest as general partner in the Partnership for an amount equal to its then 6 capital account balance. If an additional or successor General Partner is admitted to the Partnership as provided in this Agreement, the additional or successor General Partner, together with all remaining General Partners, are hereby authorized to and shall continue the business of the Partnership without dissolution (and if a successor General Partner is admitted at a time when the withdrawing General Partner is the sole remaining General Partner, such successor shall be admitted as a General Partner immediately prior to the effective date of the withdrawal from the Partnership of the withdrawing General Partner and such successor General Partner shall continue the business of the Partnership without dissolution). ARTICLE 7 DISSOLUTION AND WINDING UP OF THE PARTNERSHIP 7.1 Dissolution of the Partnership. The Partnership shall dissolve and commence winding up its affairs and liquidating its assets upon the occurrence of (i) the written consent of the Limited Partner to dissolve, wind up and liquidate the Partnership, (ii) the withdrawal, removal, bankruptcy, the filing of a certificate of dissolution, or its equivalent, of the General Partner, or any other event which under the Limited Partnership Act causes a general partner to cease to be a general partner of the Partnership, unless (a) at the time of the occurrence of such event there is a remaining general partner who agrees to continue the business of the Partnership without dissolution and does so, or (b) within ninety (90) days of such event, the Limited Partner agrees in writing to the continuation of the business of the Partnership and to the appointment (effective as of the date of such event) of one or more additional or successor general partners of the Partnership, (iii) the occurrence of any other event that makes it unlawful, impossible, or impractical to carry on the business of the Partnership, (iv) the bankruptcy of the Partnership, or (v) the entry of a decree of judicial dissolution of the Partnership pursuant to the Limited Partnership Act. 7.2 Winding Up and Liquidation of the Partnership. Upon the dissolution of the Partnership as described in Section 7.1, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The General Partner shall be responsible for overseeing the winding up and liquidation of the Partnership and shall take full account of the Partnership's liabilities and assets. Such assets shall be liquidated thereafter as promptly as is consistent with obtaining the fair market value thereof. The proceeds therefrom, to the extent sufficient, shall be applied and distributed (i) first to creditors, including Partners who are creditors to the extent otherwise permitted by law, in satisfaction of liabilities of (he Partnership (whether by payment or the making of reasonable provisions for payment thereof), and (ii) the balance, if any, to the Partners in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods. 7 7.3 Certificate of Cancellation. Upon completing the winding up and liquidation of the Partnership, the General Partner shall execute, acknowledge, and cause to be filed a Certificate of Cancellation of the Partnership as provided by the Limited Partnership Act and such other documents as may be required by any state or other jurisdiction in which the Partnership engages in business to evidence the Partnership's dissolution and termination of existence. The Limited Partner shall join in executing such documents if such joinder is required by the Limited Partnership Act or deemed necessary or appropriate by the General Partner. Upon the filing of a Certificate of Cancellation of the Partnership and any other documents necessary to terminate the existence of the Partnership in the appropriate public office(s) as required under the Limited Partnership Act, the Partners shall cease to be such and the Partnership and this Agreement shall be terminated. ARTICLE 8 BOOKS OF ACCOUNT, ACCOUNTING, REPORTS, FISCAL YEAR AND BANKING 8.1 Books of Account. The Partnership's books and records and this Agreement, and all amendments hereto, shall be maintained at the office of the Partnership located at 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as required by the Limited Partnership Act, and the Limited Partner shall have reasonable access thereto for inspection and examination. The books and records shall reflect all Partnership transactions and shall be appropriate and adequate for the Partnership's business. 8.2 Accounting and Reports; Audit. As soon as reasonably practicable after the end of each fiscal year, each Partner shall be furnished with a copy of a statement of income or loss of the Partnership for such year, and a statement showing the amounts allocated to such Partner pursuant to this Agreement during or in respect of such year, and any items of income, expense or credit allocated to it for purposes of federal income taxation pursuant to this Agreement, all prepared in accordance with the accounting method adopted by the Partnership, all of which information will be reflected in the Partnership's federal income tax return; and delivery of a copy of such tax return to each Partner shall be sufficient to fulfill the obligation of the General Partner with respect to providing such information. In addition, the General Partner shall submit such other reports as it shall deem necessary to keep the Limited Partner advised of the status of Partnership operations. ARTICLE 9 MISCELLANEOUS PROVISIONS 9.1 Further Action. Each Partner shall execute and deliver such papers, documents and instruments, and perform such acts as are necessary or appropriate, 8 in the sole discretion of the General Partner, to implement the terms hereof and the intent of the Partners hereto. 9.2 Indemnity of Partners. Each Partner shall be liable to the extent of its respective interest in the Partnership. Subject to the foregoing limitation, each Partner shall indemnify and hold harmless the other Partners from and against any and all claims, losses, damages, costs or expenses of any kind or character in excess of such other Partners' interests arising out of any transaction contemplated by this Agreement or resulting therefrom. 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby, and in lieu of such illegal, invalid and unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.4 Right to Rely Upon the Authority of General Partner. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of any property or interest owned by the Partnership shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any such instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchaser shall have received written notice affecting the same. 9.5 Texas Law. The Partners intend that the laws of Texas govern the determination of the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. 9.6 Waiver of Action for Partition. Each of the Partners irrevocably waives, during the term of the Partnership, any right to maintain any action for partition with respect to the Partnership's property. 9.7 Parties in Interest. Subject to the provisions contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the respective parties hereto. (Remainder of page intentionally left blank) 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GENERAL PARTNER: PSI TEXAS HOSPITALS, LLC, a Texas limited liability company By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President LIMITED PARTNER: PSI HOSPITALS, INC., a Delaware corporation By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President Signature Page to Amended and Restated Limited Partnership Agreement of Texas Cypress Creek Hospital, L.P. 10 EX-3.83 82 g83903exv3w83.txt EX-3.83 CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.83 CERTIFICATE OF LIMITED PARTNERSHIP PURSUANT TO ARTICLE 6132a-1 - -------------------------------------------------------------------------------- 1. Name of Limited Partnership - -------------------------------------------------------------------------------- The name of the limited partnership is as set forth below: - -------------------------------------------------------------------------------- Texas Laurel Ridge Hospital, L.P. - -------------------------------------------------------------------------------- The name must contain the words "Limited Partnership," or "Limited," or the abbreviation "L.P.," or "Ltd." As the last words or letters of its name. The name must not be the same as, deceptively similar to or similar to that of an existing corporate, limited liability company, or limited partnership name on file with the secretary of state. A preliminary check for "name availability" is recommended. - -------------------------------------------------------------------------------- 2. Principal Office - -------------------------------------------------------------------------------- The address of the principal office in the United States where records of the partnership are to be kept or made available is set forth below: - -------------------------------------------------------------------------------- Address: 113 Seaboard Lane, Suite C-100 - -------------------------------------------------------------------------------- City: Franklin State: TN Zip Code 37067 Country USA - -------------------------------------------------------------------------------- 3. Registered Agent and Registered Office (select and complete either A of B, then complete C.) - -------------------------------------------------------------------------------- A. The initial registered agent is a corporation by the name set forth below: - -------------------------------------------------------------------------------- OR | National Registered Agents, Inc. - -------------------------------------------------------------------------------- B. The initial registered agent is an individual resident of the state whose name is set forth below: - -------------------------------------------------------------------------------- First Name Middle Initial Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C. The business address of the registered agent and the registered office address is: - -------------------------------------------------------------------------------- Street Address City Zip Code 1614 Sidney Baker Street Kerrville TX 78028 - -------------------------------------------------------------------------------- 4. General Partner Information - -------------------------------------------------------------------------------- The name, mailing address, and the street address of the business or residence of each general partner is as follows: - -------------------------------------------------------------------------------- General Partner 1 - -------------------------------------------------------------------------------- Legal Entity: The general partner is a legal entity named: - -------------------------------------------------------------------------------- PSI Texas Hospitals, LLC - -------------------------------------------------------------------------------- Individual: The general partner is an individual whose name is set forth below: - -------------------------------------------------------------------------------- First Name M.I. Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAILING ADDRESS OF GENERAL PARTNER 1 - -------------------------------------------------------------------------------- Mailing Address City State Zip Code 113 Seaboard Ln, Suite C-100 Franklin TN 37067 - -------------------------------------------------------------------------------- STREET ADDRESS OF GENERAL PARTNER 1 - -------------------------------------------------------------------------------- Street Address City State Zip Code 113 Seaboard Ln, Suite C-100 Franklin TN 37067 - -------------------------------------------------------------------------------- General Partner 2 - -------------------------------------------------------------------------------- LEGAL ENTITY: The general partner is a legal entity named: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Individual: The general partner is an individual whose name is set forth below: - -------------------------------------------------------------------------------- Partner 2 - First Name M.I. Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAILING ADDRESS OF GENERAL PARTNER 2 - -------------------------------------------------------------------------------- Mailing Address City State Zip Code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STREET ADDRESS OF GENERAL PARTNER 2 - -------------------------------------------------------------------------------- Street Address City State Zip Code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. Supplemental Information - -------------------------------------------------------------------------------- Text Area: [The attached addendum are incorporated herein by reference.] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Effective Date of filing - -------------------------------------------------------------------------------- [X] A. This document will become effective when the document is filed by the secretary of state. - -------------------------------------------------------------------------------- OR - -------------------------------------------------------------------------------- [ ] B. This document will become effective at a later date, which is not more than ninety (90) days from the date of its filing by the secretary of state. The delayed effective date is - -------------------------------------------------------------------------------- Execution - -------------------------------------------------------------------------------- The undersigned sign this document subject to the penalties imposed by law for the submission of a false or fraudulent document. - -------------------------------------------------------------------------------- Name Name PSI Texas Hospitals, LLC - -------------------------------------------------------------------------------- /s/ Steven T. Davidson - -------------------------------------------------------------------------------- Signature of General Partner 1 Signature of General Partner 2 - -------------------------------------------------------------------------------- Steven T. Davidson, Vice President of Psychiatric Solutions, Inc., the sole member of PSI Texas Hospitals, LLC EX-3.84 83 g83903exv3w84.txt EX-3.84 LIMITED PARTNERSHIP AGREEMENT EXHIBIT 3.84 LIMITED PARTNERSHIP AGREEMENT OF TEXAS LAUREL RIDGE HOSPITAL, L.P. This Limited Partnership Agreement is made and entered into this 24th day of February, 2003, by and between PSI TEXAS HOSPITALS, LLC, a Texas limited liability company, the principal place of business of which is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as the general partner (the "General Partner"), and PSI HOSPITALS, INC., a Delaware corporation, the principal place of business of which is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as the limited partner (the "Limited Partner"). (The General Partner and Limited Partner are collectively referred to herein as the "Partners.") The Partners hereby agree as follows: ARTICLE 1. GENERAL 1.1 Formation. The Partners hereby form Texas Laurel Ridge Hospital, L.P. (the "Partnership") as a limited partnership under the Texas Revised Limited Partnership Act (the "Limited Partnership Act"). 1.2 Name. The name of the Partnership shall be "Texas Laurel Ridge Hospital, L.P." and all business of the Partnership shall be conducted in such name; provided, however, the General Partner may change the name of the Partnership at any time and from time to time by notice to the Limited Partner. 1.3 Purpose. The purpose of the Partnership is to engage in any lawful act or activity in which a limited partnership may engage under the Limited Partnership Act including, without limitation, the acquisition, development, construction, owning, mortgaging, encumbering, leasing, disposition, improvement of and otherwise dealing with real property and related personal property. 1.4 Term. The term of the Partnership shall commence upon filing of the Certificate of Limited Partnership of Texas Laurel Ridge Hospital, L.P. (the "Certificate") with the Texas Secretary of State and shall continue until the completion of the Partnership's dissolution, winding up, and liquidation as provided herein. 1.5 Place of Business. The Partnership may have such places of business within the United States of America as the General Partner determines to be appropriate from time to time. 1.6 Registered Agent. The registered agent for service of process on the Partnership in the State of Texas shall be National Registered Agents, Inc., 905 Congress Avenue, Austin, Texas 78701, or such other person as the General Partner may designate from time to time. 1.7 Filings. The General Partner has executed and shall cause to be filed the Certificate in the office of the Texas Secretary of State, in accordance with the provisions of the Limited Partnership Act, and shall execute and file such other certificates or documents required by any state or other jurisdiction in which the Partnership engages in business. The General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership and shall execute and file for public record any and all filings in all places and at such times as necessary for the continuation of and transaction of business by the Partnership. ARTICLE 2. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 2.1 General Partner. The General Partner shall contribute the sum of One Dollar ($1.00) as and for the General Partner's initial capital contribution for its general partnership interest in the Partnership. Except as provided in this Section 2.1, the General Partner shall not be required to make any other capital contributions to the Partnership. 2.2 Contribution of Limited Partner. The Limited Partner shall contribute the sum of Ninety-Nine Dollars ($99.00) to the Partnership as and for its initial capital contribution for its limited partnership interest in the Partnership. 2.3 No Right to Demand Capital Contributions; No Priorities. Except as otherwise provided in this Agreement and permitted by the Limited Partnership Act, the Limited Partner shall not demand or receive a return of all or a portion of its capital contributions or withdraw from the Partnership without the written consent of the General Partner. Under circumstances requiring a return of any capital contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. No Partner shall have priority over any other Partner, either with respect to the return of capital contributions or with respect to profits, losses or distributions. 2.4 No Interest on Capital Contributions. No Partner shall receive any interest, salary or drawing with respect to its capital contributions or its capital account or for services rendered to the Partnership or otherwise in its capacity as a Partner, except as otherwise provided in this Agreement. 2.5 Limited Liability. The Limited Partner shall not be liable for the debts, liabilities, contracts or any other obligations of the Partnership. Except as otherwise provided by applicable law, the Limited Partner shall be liable only to 2 make its capital contributions and shall not be required to lend any funds to the Partnership or, after its initial capital contribution has been made, to make any additional capital contributions to the Partnership. Except as otherwise provided in this Agreement, the General Partner shall not have any personal liability for the repayment of any capital contributions of the Limited Partner. The Limited Partner shall not participate in the control of the business of the Partnership. 2.6 Establishment of Capital Accounts. A capital account shall be established and maintained for each Partner in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the U.S. Treasury Regulations promulgated thereunder (the "Regulations") and this Agreement. ARTICLE 3. ALLOCATIONS AND DISTRIBUTIONS 3.1 Participation in Profits or Losses. Profits or losses of the Partnership, including all items of income, gain, loss, deduction, and credit, for each fiscal year shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. 3.2 Basis for Determining Profits or Losses. For purposes of determining the profits, losses, and each item thereof allocable to any period, profits, losses, and each item thereof shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Code Section 706 and the Regulations thereunder. 3.3 Distributions. Except as otherwise provided in Article 7 hereof, distributions of cash or other property shall be made, at such times as the General Partner may determine, one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. ARTICLE 4. MANAGEMENT 4.1 Management of the Partnership. The General Partner shall have full, exclusive and complete charge of all affairs and business of the Partnership and of the management and control of the Partnership, subject only to the limitations in this Agreement. The General Partner shall have all the rights and powers that may be possessed by a general partner under the Limited Partnership Act and such rights and powers as are otherwise conferred by law or it deems necessary, advisable or convenient in managing the business and affairs of the Partnership. 4.2 Limited Role of Limited Partner. Except as otherwise set forth in this Section 4.2, the Limited Partner shall not take part in, or interfere in any manner with, the conduct or control of the business or affairs of the Partnership or have any 3 authority to act for, or on behalf of, the Partnership; provided, however, at the sole and absolute discretion of the General Partner, the Limited Partner may possess and exercise any of the powers allowed to be possessed or exercised by a limited partner under the Limited Partnership Act without the Limited Partner being deemed to participate in the control of the Partnership's business. 4.3 Exculpation of General Partner. No act or omission by the Partnership or the General Partner, except gross negligence or willful misconduct, shall ever subject the General Partner or its parent corporation, their shareholders, officers, directors, employees, or agents to any liability to the Partnership or any Partner. The foregoing exculpation and exoneration expressly covers acts or omissions which constitute or are accompanied by simple, common or ordinary negligence. 4.4 Indemnification of General Partner. To the fullest extent provided by law, the Partnership shall indemnify the General Partner and its parent corporation, their shareholders, officers, directors, partners, agents and employees, and hold them harmless from and against all claims and liabilities arising from, or related to, any qualified act or omission of the Partnership and/or the General Partner under this Agreement, including all damages, judgments, fees, settlements, costs and attorneys' fees actually and reasonably paid or incurred by the General Partner or its parent corporation in connection with any action, claim, suit or proceeding covered by this indemnity. A "qualified act or omission" for purposes of this Section 4.4 is an act or omission done in good faith or in a manner the General Partner or its parent corporation reasonably believed to be in, or not opposed to, the best interest of the Partnership. ARTICLE 5. TRANSFERS OF INTERESTS 5.1 Voluntary Transfers by General Partner. The General Partner shall have the right to sell, assign, transfer, give or in any other way dispose of its entire interest as general partner of the Partnership. Prior to the effective date of such sale, assignment or transfer, such purchaser, assignee or transferee shall be admitted as an additional general partner of the Partnership and is hereby authorized to continue the business of the Partnership without dissolution. Upon such a sale or other disposition, the General Partner shall cease to be a general partner of the Partnership as provided in Article 6. Notwithstanding anything in this Agreement to the contrary, the General Partner may pledge, encumber, or otherwise give as collateral for loans or other indebtedness, its general partnership interest in the Partnership without notice to or the consent of the Limited Partner; upon any such pledge, encumbrance or grant of a security interest by the General Partner, the General Partner shall not cease to be a general partner of the Partnership. 4 5.2 Transfer by Limited Partner. No voluntary assignments, transfers, hypothecation or encumbrance of the Limited Partner's interest or any portion thereof shall be permitted unless (i) the prior written consent of the General Partner is obtained, and (ii) said assignment, transfer, hypothecation or encumbrance, in the opinion of counsel satisfactory to the General Partner, complies with all applicable securities laws, and does not dissolve the Partnership under the Limited Partnership Act. The requirement of said opinion may be waived in the sole discretion of the General Partner. Any such transfer, assignment, hypothecation or encumbrance of the Limited Partner's interest shall not require the dissolution, winding up and liquidation of the Partnership. Except to the extent otherwise specified in any such assignment, an assignee of any interest in the Partnership shall be entitled to receive allocations of profits or losses, including all items of income, gain, loss, deduction, and credit thereof, and distributions of cash or other property attributable to the assigned interest from and after the date on which such assignment is treated to have occurred under this Agreement. No assignee of all or any part of the Limited Partner's interest shall become a substituted Limited Partner with respect to such interest unless the General Partner shall consent thereto in writing, such consent to be in the sole discretion of the General Partner. A person who acquires an interest in the Partnership but who is not admitted as a substituted Limited Partner pursuant to this Section 5.2 shall be entitled only to allocations and distributions with respect to such interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books and records of the Partnership, and shall not have any of the rights, including but not limited to the right to vote, of a General Partner or a Limited Partner under the Limited Partnership Act or this Agreement. Accordingly, with respect to such rights, including but not limited to the right to vote, a Limited Partner shall be treated for purposes of this Agreement as the owner of any interest assigned by him with respect to which the assignee has not become a substituted Limited Partner. 5.3 Bankruptcy or Dissolution of the Limited Partner. Upon the bankruptcy, dissolution, or cessation to exist as a legal entity of the Limited Partner, the authorized representative or successor of such Limited Partner shall have all the rights of the Limited Partner for the purpose of effecting the orderly winding up and dissolution of the business and affairs of such Limited Partner and such power as the Limited Partner possessed to constitute a successor as an assignee and in making application to substitute such assignee as a Limited Partner. ARTICLE 6. RESIGNATION OF OR TERMINATION OF STATUS AS GENERAL PARTNER 6.1 Withdrawal of General Partner. The General Partner shall have the right to withdraw as and cease to be the General Partner at any time upon thirty 5 (30) days written notice to the Limited Partner. Prior to the effective date of the withdrawal of a General Partner, the Limited Partner may elect an additional general partner of the Partnership who is hereby authorized to and shall continue the business of the Partnership without dissolution. 6.2 Termination of Status As General Partner. The General Partner shall cease to be the General Partner upon the occurrence of any of the following events: (i) the transfer of its general interest in the Partnership pursuant to Section 5.1, (ii) the vote by the Limited Partner to remove such General Partner for good cause (which shall mean gross negligence or fraud in failure to comply with any material covenant or agreement contained in this Agreement), and delivery to the General Partner of written notice of such vote, (iii) the bankruptcy of the General Partner or the filing of a certificate of dissolution, or its equivalent, or (iv) the involuntary transfer by operation of law of the General Partner's interest in the Partnership. 6.3 Liability of the General Partner after Resignation or Termination. If the General Partner resigns or its status as a general partner is terminated in accordance with the provisions of this Article 6 or the Limited Partnership Act, the General Partner's liability as a general partner of the Partnership under the Limited Partnership Act and this Agreement shall cease and the Partnership shall promptly take all steps reasonably necessary under the Limited Partnership Act to cause such cessation of liability; provided, however, that if the General Partner resigns during dissolution and winding up the Partnership, the General Partner shall continue to be the General Partner for purposes of winding up the Partnership's affairs pursuant to Section 7.2 of this Agreement, unless a successor General Partner is elected. 6.4 Election of Successor General Partner. Upon the withdrawal or termination of general partnership status of a General Partner, the remaining General Partner, if any, is hereby authorized to and shall continue the Partnership without dissolution. If all of the General Partners withdraw or their status is terminated pursuant to this Agreement or the Limited Partnership Act, the Limited Partner may, within ninety (90) days of such withdrawal or termination of status, consent in writing to continue the business of the Partnership and to the election, to be effective as of the date of such withdrawal or termination of status, of one or more successor General Partners. Such election may occur before or after the effectiveness of such withdrawal or termination; provided, however, that if such election occurs before such effectiveness, the person so elected shall not become the General Partner until such withdrawal or termination is effective and such person has executed an amendment to this Agreement and has filed any and all such amendments to the Certificate and other documents necessary to comply with the Limited Partnership Act, and shall agree to accept all accompanying liabilities, duties and obligations hereunder. The successor General Partner or General Partners shall purchase from the terminated or withdrawing General Partner its interest as general partner in the Partnership for an amount equal to its then 6 capital account balance. If an additional or successor General Partner is admitted to the Partnership as provided in this Agreement, the additional or successor General Partner, together with all remaining General Partners, are hereby authorized to and shall continue the business of the Partnership without dissolution (and if a successor General Partner is admitted at a time when the withdrawing General Partner is the sole remaining General Partner, such successor shall be admitted as a General Partner immediately prior to the effective date of the withdrawal from the Partnership of the withdrawing General Partner and such successor General Partner shall continue the business of the Partnership without dissolution). ARTICLE 7. DISSOLUTION AND WINDING UP OF THE PARTNERSHIP 7.1 Dissolution of the Partnership. The Partnership shall dissolve and commence winding up its affairs and liquidating its assets upon the occurrence of (i) the written consent of the Limited Partner to dissolve, wind up and liquidate the Partnership, (ii) the withdrawal, removal, bankruptcy, the filing of a certificate of dissolution, or its equivalent, of the General Partner, or any other event which under the Limited Partnership Act causes a general partner to cease to be a general partner of the Partnership, unless (a) at the time of the occurrence of such event there is a remaining general partner who agrees to continue the business of the Partnership without dissolution and does so, or (b) within ninety (90) days of such event, the Limited Partner agrees in writing to the continuation of the business of the Partnership and to the appointment (effective as of the date of such event) of one or more additional or successor general partners of the Partnership, (iii) the occurrence of any other event that makes it unlawful, impossible, or impractical to carry on the business of the Partnership, (iv) the bankruptcy of the Partnership, or (v) the entry of a decree of judicial dissolution of the Partnership pursuant to the Limited Partnership Act. 7.2 Winding Up and Liquidation of the Partnership. Upon the dissolution of the Partnership as described in Section 7.1, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The General Partner shall be responsible for overseeing the winding up and liquidation of the Partnership and shall take full account of the Partnership's liabilities and assets. Such assets shall be liquidated thereafter as promptly as is consistent with obtaining the fair market value thereof. The proceeds therefrom, to the extent sufficient, shall be applied and distributed (i) first to creditors, including Partners who are creditors to the extent otherwise permitted by law, in satisfaction of liabilities of the Partnership (whether by payment or the making of reasonable provisions for payment thereof), and (ii) the balance, if any, to the Partners in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods. 7 7.3 Certificate of Cancellation. Upon completing the winding up and liquidation of the Partnership, the General Partner shall execute, acknowledge, and cause to be filed a Certificate of Cancellation of the Partnership as provided by the Limited Partnership Act and such other documents as may be required by any state or other jurisdiction in which the Partnership engages in business to evidence the Partnership's dissolution and termination of existence. The Limited Partner shall join in executing such documents if such joinder is required by the Limited Partnership Act or deemed necessary or appropriate by the General Partner. Upon the filing of a Certificate of Cancellation of the Partnership and any other documents necessary to terminate the existence of the Partnership in the appropriate public office(s) as required under the Limited Partnership Act, the Partners shall cease to be such and the Partnership and this Agreement shall be terminated. ARTICLE 8. BOOKS OF ACCOUNT, ACCOUNTING, REPORTS, FISCAL YEAR AND BANKING 8.1 Books of Account. The Partnership's books and records and this Agreement, and all amendments hereto, shall be maintained at the office of the Partnership located at 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as required by the Limited Partnership Act, and the Limited Partner shall have reasonable access thereto for inspection and examination. The books and records shall reflect all Partnership transactions and shall be appropriate and adequate for the Partnership's business. 8.2 Accounting and Reports: Audit. As soon as reasonably practicable after the end of each fiscal year, each Partner shall be furnished with a copy of a statement of income or loss of the Partnership for such year, and a statement showing the amounts allocated to such Partner pursuant to this Agreement during or in respect of such year, and any items of income, expense or credit allocated to it for purposes of federal income taxation pursuant to this Agreement, all prepared in accordance with the accounting method adopted by the Partnership, all of which information will be reflected in the Partnership's federal income tax return; and delivery of a copy of such tax return to each Partner shall be sufficient to fulfill the obligation of the General Partner with respect to providing such information. In addition, the General Partner shall submit such other reports as it shall deem necessary to keep the Limited Partner advised of the status of Partnership operations. ARTICLE 9. MISCELLANEOUS PROVISIONS 9.1 Further Action. Each Partner shall execute and deliver such papers, documents and instruments, and perform such acts as are necessary or appropriate, 8 in the sole discretion of the General Partner, to implement the terms hereof and the intent of the Partners hereto. 9.2 Indemnity of Partners. Each Partner shall be liable to the extent of its respective interest in the Partnership. Subject to the foregoing limitation, each Partner shall indemnify and hold harmless the other Partners from and against any and all claims, losses, damages, costs or expenses of any kind or character in excess of such other Partners' interests arising out of any transaction contemplated by this Agreement or resulting therefrom. 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby, and in lieu of such illegal, invalid and unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.4 Right to Rely Upon the Authority of General Partner. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of any property or interest owned by the Partnership shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any such instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchaser shall have received written notice affecting the same. 9.5 Texas Law. The Partners intend that the laws of Texas govern the determination of the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. 9.6 Waiver of Action for Partition. Each of the Partners irrevocably waives, during the term of the Partnership, any right to maintain any action for partition with respect to the Partnership's property. 9.7 Parties in Interest. Subject to the provisions contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the respective parties hereto. (Remainder of page intentionally left blank) 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GENERAL PARTNER: PSI TEXAS HOSPITALS, LLC, a Texas limited liability company By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President PSI HOSPITALS, INC., a Delaware corporation By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President 10 EX-3.85 84 g83903exv3w85.txt EX-3.85 CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.85 CERTIFICATE OF LIMITED PARTNERSHIP PURSUANT TO ARTICLE 6132a-1 - -------------------------------------------------------------------------------- 1. Name of Limited Partnership - -------------------------------------------------------------------------------- The name of the limited partnership is as set forth below: - -------------------------------------------------------------------------------- Texas Oaks Psychiatric Hospital, L.P. - -------------------------------------------------------------------------------- The name must contain the words "Limited Partnership," or "Limited," or the abbreviation "L.P.," or "Ltd." As the last words or letters of its name. The name must not be the same as, deceptively similar to or similar to that of an existing corporate, limited liability company, or limited partnership name on file with the secretary of state. A preliminary check for "name availability" is recommended. - -------------------------------------------------------------------------------- 2. Principal Office - -------------------------------------------------------------------------------- The address of the principal office in the United States where records of the partnership are to be kept or made available is set forth below: - -------------------------------------------------------------------------------- Address: 113 Seaboard Lane, Suite C-100 - -------------------------------------------------------------------------------- City: Franklin State: TN Zip Code 37067 Country USA - -------------------------------------------------------------------------------- 3. Registered Agent and Registered Office (Select and complete either A or B, then complete C.) - -------------------------------------------------------------------------------- [X] A. The initial registered agent is a corporation by the name set forth below: - -------------------------------------------------------------------------------- OR | National Registered Agents, Inc. - -------------------------------------------------------------------------------- [ ] B. The initial registered agent is an individual resident of the state whose name is set forth below: - -------------------------------------------------------------------------------- First Name Middle Initial Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C. The business address of the registered agent and the registered office address is: - -------------------------------------------------------------------------------- Street Address City Zip Code 1614 Sidney Baker Street Kerrville TX 78028 - -------------------------------------------------------------------------------- 4. General Partner Information - -------------------------------------------------------------------------------- The name, mailing address, and the street address of the business or residence of each general partner is as follows: - -------------------------------------------------------------------------------- General Partner 1 - -------------------------------------------------------------------------------- Legal Entity: The general partner is a legal entity named: - -------------------------------------------------------------------------------- PSI Texas Hospitals, LLC - -------------------------------------------------------------------------------- Individual: The general partner is an individual whose name is set forth below: - -------------------------------------------------------------------------------- First Name M.I. Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAILING ADDRESS OF GENERAL PARTNER 1 - -------------------------------------------------------------------------------- Mailing Address City State Zip Code 113 Seaboard Ln, Suite C-100 Franklin TN 37067 - -------------------------------------------------------------------------------- STREET ADDRESS OF GENERAL PARTNER 1 - -------------------------------------------------------------------------------- Street Address City State Zip Code 113 Seaboard Ln, Suite C-100 Franklin TN 37067 - -------------------------------------------------------------------------------- General Partner 2 - -------------------------------------------------------------------------------- LEGAL ENTITY: The general partner is a legal entity named: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Individual: The general partner is an individual whose name is set forth below: - -------------------------------------------------------------------------------- Partner 2 - First Name M.I. Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAILING ADDRESS OF GENERAL PARTNER 2 - -------------------------------------------------------------------------------- Mailing Address City State Zip Code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STREET ADDRESS OF GENERAL PARTNER 2 - -------------------------------------------------------------------------------- Street Address City State Zip Code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. Supplemental Information - -------------------------------------------------------------------------------- Text Area: [The attached addendum are incorporated herein by reference.] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Effective Date of filing - -------------------------------------------------------------------------------- [X] A. This document will become effective when the document is filed by the secretary of state. - -------------------------------------------------------------------------------- OR - -------------------------------------------------------------------------------- [ ] B. This document will become effective at a later date, which is not more than ninety (90) days from the date of its filing by the secretary of state. The delayed effective date is - -------------------------------------------------------------------------------- Execution - -------------------------------------------------------------------------------- The undersigned sign this document subject to the penalties imposed by law for the submission of a false or fraudulent document. - -------------------------------------------------------------------------------- Name Name PSI Texas Hospitals, LLC - -------------------------------------------------------------------------------- /s/ Steven T. Davidson - -------------------------------------------------------------------------------- Signature of General Partner 1 Signature of General Partner 2 - -------------------------------------------------------------------------------- Steven T. Davidson, Vice President of Psychiatric Solutions, Inc., the sole member of PSI Texas Hospitals, LLC EX-3.86 85 g83903exv3w86.txt EX-3.86 LIMITED PARTNERSHIP AGREEMENT EXHIBIT 3.86 LIMITED PARTNERSHIP AGREEMENT OF TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P. This Limited Partnership Agreement is made and entered into this 24th day of February, 2003, by and between PSI TEXAS HOSPITALS, LLC, a Texas limited liability company, the principal place of business of which is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as the general partner (the "General Partner"), and PSI HOSPITALS, INC., a Delaware corporation, the principal place of business of which is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as the limited partner (the "Limited Partner"). (The General Partner and Limited Partner are collectively referred to herein as the "Partners.") The Partners hereby agree as follows: ARTICLE 1. GENERAL 1.1 Formation. The Partners hereby form Texas Oaks Psychiatric Hospital, L.P. (the "Partnership") as a limited partnership under the Texas Revised Limited Partnership Act (the "Limited Partnership Act"). 1.2 Name. The name of the Partnership shall be "Texas Oaks Psychiatric Hospital, L.P." and all business of the Partnership shall be conducted in such name; provided, however, the General Partner may change the name of the Partnership at any time and from time to time by notice to the Limited Partner. 1.3 Purpose. The purpose of the Partnership is to engage in any lawful act or activity in which a limited partnership may engage under the Limited Partnership Act including, without limitation, the acquisition, development, construction, owning, mortgaging, encumbering, leasing, disposition, improvement of and otherwise dealing with real property and related personal property. 1.4 Term. The term of the Partnership shall commence upon filing of the Certificate of Limited Partnership of Texas Oaks Psychiatric Hospital, L.P. (the "Certificate") with the Texas Secretary of State and shall continue until the completion of the Partnership's dissolution, winding up, and liquidation as provided herein. 1.5 Place of Business. The Partnership may have such places of business within the United States of America as the General Partner determines to be appropriate from time to time. 1.6 Registered Agent. The registered agent for service of process on the Partnership in the State of Texas shall be National Registered Agents, Inc., 905 Congress Avenue, Austin, Texas 78701, or such other person as the General Partner may designate from time to time. 1.7 Filings. The General Partner has executed and shall cause to be filed the Certificate in the office of the Texas Secretary of State, in accordance with the provisions of the Limited Partnership Act, and shall execute and file such other certificates or documents required by any state or other jurisdiction in which the Partnership engages in business. The General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership and shall execute and file for public record any and all filings in all places and at such times as necessary for the continuation of and transaction of business by the Partnership. ARTICLE 2. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 2.1 General Partner. The General Partner shall contribute the sum of One Dollar ($1.00) as and for the General Partner's initial capital contribution for its general partnership interest in the Partnership. Except as provided in this Section 2.1, the General Partner shall not be required to make any other capital contributions to the Partnership. 2.2 Contribution of Limited Partner. The Limited Partner shall contribute the sum of Ninety-Nine Dollars ($99.00) to the Partnership as and for its initial capital contribution for its limited partnership interest in the Partnership. 2.3 No Right to Demand Capital Contributions; No Priorities. Except as otherwise provided in this Agreement and permitted by the Limited Partnership Act, the Limited Partner shall not demand or receive a return of all or a portion of its capital contributions or withdraw from the Partnership without the written consent of the General Partner. Under circumstances requiring a return of any capital contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. No Partner shall have priority over any other Partner, either with respect to the return of capital contributions or with respect to profits, losses or distributions. 2.4 No Interest on Capital Contributions. No Partner shall receive any interest, salary or drawing with respect to its capital contributions or its capital account or for services rendered to the Partnership or otherwise in its capacity as a Partner, except as otherwise provided in this Agreement. 2.5 Limited Liability. The Limited Partner shall not be liable for the debts, liabilities, contracts or any other obligations of the Partnership. Except as otherwise provided by applicable law, the Limited Partner shall be liable only to 2 make its capital contributions and shall not be required to lend any funds to the Partnership or, after its initial capital contribution has been made, to make any additional capital contributions to the Partnership. Except as otherwise provided in this Agreement, the General Partner shall not have any personal liability for the repayment of any capital contributions of the Limited Partner. The Limited Partner shall not participate in the control of the business of the Partnership. 2.6 Establishment of Capital Accounts. A capital account shall be established and maintained for each Partner in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the U.S. Treasury Regulations promulgated thereunder (the "Regulations") and this Agreement. ARTICLE 3. ALLOCATIONS AND DISTRIBUTIONS 3.1 Participation in Profits or Losses. Profits or losses of the Partnership, including all items of income, gain, loss, deduction, and credit, for each fiscal year shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. 3.2 Basis for Determining Profits or Losses. For purposes of determining the profits, losses, and each item thereof allocable to any period, profits, losses, and each item thereof shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Code Section 706 and the Regulations thereunder. 3.3 Distributions. Except as otherwise provided in Article 7 hereof, distributions of cash or other property shall be made, at such times as the General Partner may determine, one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. ARTICLE 4. MANAGEMENT 4.1 Management of the Partnership. The General Partner shall have full, exclusive and complete charge of all affairs and business of the Partnership and of the management and control of the Partnership, subject only to the limitations in this Agreement. The General Partner shall have all the rights and powers that may be possessed by a general partner under the Limited Partnership Act and such rights and powers as are otherwise conferred by law or it deems necessary, advisable or convenient in managing the business and affairs of the Partnership. 4.2 Limited Role of Limited Partner. Except as otherwise set forth in this Section 4.2, the Limited Partner shall not take part in, or interfere in any manner with, the conduct or control of the business or affairs of the Partnership or have any 3 authority to act for, or on behalf of, the Partnership; provided, however, at the sole and absolute discretion of the General Partner, the Limited Partner may possess and exercise any of the powers allowed to be possessed or exercised by a limited partner under the Limited Partnership Act without the Limited Partner being deemed to participate in the control of the Partnership's business. 4.3 Exculpation of General Partner. No act or omission by the Partnership or the General Partner, except gross negligence or willful misconduct, shall ever subject the General Partner or its parent corporation, their shareholders, officers, directors, employees, or agents to any liability to the Partnership or any Partner. The foregoing exculpation and exoneration expressly covers acts or omissions which constitute or are accompanied by simple, common or ordinary negligence. 4.4 Indemnification of General Partner. To the fullest extent provided by law, the Partnership shall indemnify the General Partner and its parent corporation, their shareholders, officers, directors, partners, agents and employees, and hold them harmless from and against all claims and liabilities arising from, or related to, any qualified act or omission of the Partnership and/or the General Partner under this Agreement, including all damages, judgments, fees, settlements, costs and attorneys' fees actually and reasonably paid or incurred by the General Partner or its parent corporation in connection with any action, claim, suit or proceeding covered by this indemnity. A "qualified act or omission" for purposes of this Section 4.4 is an act or omission done in good faith or in a manner the General Partner or its parent corporation reasonably believed to be in, or not opposed to, the best interest of the Partnership. ARTICLE 5. TRANSFERS OF INTERESTS 5.1 Voluntary Transfers by General Partner. The General Partner shall have the right to sell, assign, transfer, give or in any other way dispose of its entire interest as general partner of the Partnership. Prior to the effective date of such sale, assignment or transfer, such purchaser, assignee or transferee shall be admitted as an additional general partner of the Partnership and is hereby authorized to continue the business of the Partnership without dissolution. Upon such a sale or other disposition, the General Partner shall cease to be a general partner of the Partnership as provided in Article 6. Notwithstanding anything in this Agreement to the contrary, the General Partner may pledge, encumber, or otherwise give as collateral for loans or other indebtedness, its general partnership interest in the Partnership without notice to or the consent of the Limited Partner; upon any such pledge, encumbrance or grant of a security interest by the General Partner, the General Partner shall not cease to be a general partner of the Partnership. 4 5.2 Transfer by Limited Partner. No voluntary assignments, transfers, hypothecation or encumbrance of the Limited Partner's interest or any portion thereof shall be permitted unless (i) the prior written consent of the General Partner is obtained, and (ii) said assignment, transfer, hypothecation or encumbrance, in the opinion of counsel satisfactory to the General Partner, complies with all applicable securities laws, and does not dissolve the Partnership under the Limited Partnership Act. The requirement of said opinion may be waived in the sole discretion of the General Partner. Any such transfer, assignment, hypothecation or encumbrance of the Limited Partner's interest shall not require the dissolution, winding up and liquidation of the Partnership. Except to the extent otherwise specified in any such assignment, an assignee of any interest in the Partnership shall be entitled to receive allocations of profits or losses, including all items of income, gain, loss, deduction, and credit thereof, and distributions of cash or other property attributable to the assigned interest from and after the date on which such assignment is treated to have occurred under this Agreement. No assignee of all or any part of the Limited Partner's interest shall become a substituted Limited Partner with respect to such interest unless the General Partner shall consent thereto in writing, such consent to be in the sole discretion of the General Partner. A person who acquires an interest in the Partnership but who is not admitted as a substituted Limited Partner pursuant to this Section 5.2 shall be entitled only to allocations and distributions with respect to such interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books and records of the Partnership, and shall not have any of the rights, including but not limited to the right to vote, of a General Partner or a Limited Partner under the Limited Partnership Act or this Agreement. Accordingly, with respect to such rights, including but not limited to the right to vote, a Limited Partner shall be treated for purposes of this Agreement as the owner of any interest assigned by him with respect to which the assignee has not become a substituted Limited Partner. 5.3 Bankruptcy or Dissolution of the Limited Partner. Upon the bankruptcy, dissolution, or cessation to exist as a legal entity of the Limited Partner, the authorized representative or successor of such Limited Partner shall have all the rights of the Limited Partner for the purpose of effecting the orderly winding up and dissolution of the business and affairs of such Limited Partner and such power as the Limited Partner possessed to constitute a successor as an assignee and in making application to substitute such assignee as a Limited Partner. ARTICLE 6. RESIGNATION OF OR TERMINATION OF STATUS AS GENERAL PARTNER 6.1 Withdrawal of General Partner. The General Partner shall have the right to withdraw as and cease to be the General Partner at any time upon thirty 5 (30) days written notice to the Limited Partner. Prior to the effective date of the withdrawal of a General Partner, the Limited Partner may elect an additional general partner of the Partnership who is hereby authorized to and shall continue the business of the Partnership without dissolution. 6.2 Termination of Status As General Partner. The General Partner shall cease to be the General Partner upon the occurrence of any of the following events: (i) the transfer of its general interest in the Partnership pursuant to Section 5.1, (ii) the vote by the Limited Partner to remove such General Partner for good cause (which shall mean gross negligence or fraud in failure to comply with any material covenant or agreement contained in this Agreement), and delivery to the General Partner of written notice of such vote, (iii) the bankruptcy of the General Partner or the filing of a certificate of dissolution, or its equivalent, or (iv) the involuntary transfer by operation of law of the General Partner's interest in the Partnership. 6.3 Liability of the General Partner after Resignation or Termination. If the General Partner resigns or its status as a general partner is terminated in accordance with the provisions of this Article 6 or the Limited Partnership Act, the General Partner's liability as a general partner of the Partnership under the Limited Partnership Act and this Agreement shall cease and the Partnership shall promptly take all steps reasonably necessary under the Limited Partnership Act to cause such cessation of liability; provided, however, that if the General Partner resigns during dissolution and winding up the Partnership, the General Partner shall continue to be the General Partner for purposes of winding up the Partnership's affairs pursuant to Section 7.2 of this Agreement, unless a successor General Partner is elected. 6.4 Election of Successor General Partner. Upon the withdrawal or termination of general partnership status of a General Partner, the remaining General Partner, if any, is hereby authorized to and shall continue the Partnership without dissolution. If all of the General Partners withdraw or their status is terminated pursuant to this Agreement or the Limited Partnership Act, the Limited Partner may, within ninety (90) days of such withdrawal or termination of status, consent in writing to continue the business of the Partnership and to the election, to be effective as of the date of such withdrawal or termination of status, of one or more successor General Partners. Such election may occur before or after the effectiveness of such withdrawal or termination; provided, however, that if such election occurs before such effectiveness, the person so elected shall not become the General Partner until such withdrawal or termination is effective and such person has executed an amendment to this Agreement and has filed any and all such amendments to the Certificate and other documents necessary to comply with the Limited Partnership Act, and shall agree to accept all accompanying liabilities, duties and obligations hereunder. The successor General Partner or General Partners shall purchase from the terminated or withdrawing General Partner its interest as general partner in the Partnership for an amount equal to its then 6 capital account balance. If an additional or successor General Partner is admitted to the Partnership as provided in this Agreement, the additional or successor Genera] Partner, together with all remaining General Partners, are hereby authorized to and shall continue the business of the Partnership without dissolution (and if a successor General Partner is admitted at a time when the withdrawing General Partner is the sole remaining General Partner, such successor shall be admitted as a General Partner immediately prior to the effective date of the withdrawal from the Partnership of the withdrawing General Partner and such successor General Partner shall continue the business of the Partnership without dissolution). ARTICLE 7. DISSOLUTION AND WINDING UP OF THE PARTNERSHIP 7.1 Dissolution of the Partnership. The Partnership shall dissolve and commence winding up its affairs and liquidating its assets upon the occurrence of (i) the written consent of the Limited Partner to dissolve, wind up and liquidate the Partnership, (ii) the withdrawal, removal, bankruptcy, the filing of a certificate of dissolution, or its equivalent, of the General Partner, or any other event which under the Limited Partnership Act causes a general partner to cease to be a general partner of the Partnership, unless (a) at the time of the occurrence of such event there is a remaining general partner who agrees to continue the business of the Partnership without dissolution and does so, or (b) within ninety (90) days of such event, the Limited Partner agrees in writing to the continuation of the business of the Partnership and to the appointment (effective as of the date of such event) of one or more additional or successor general partners of the Partnership, (iii) the occurrence of any other event that makes it unlawful, impossible, or impractical to carry on the business of the Partnership, (iv) the bankruptcy of the Partnership, or (v) the entry of a decree of judicial dissolution of the Partnership pursuant to the Limited Partnership Act. 7.2 Winding Up and Liquidation of the Partnership. Upon the dissolution of the Partnership as described in Section 7.1, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The General Partner shall be responsible for overseeing the winding up and liquidation of the Partnership and shall take full account of the Partnership's liabilities and assets. Such assets shall be liquidated thereafter as promptly as is consistent with obtaining the fair market value thereof. The proceeds therefrom, to the extent sufficient, shall be applied and distributed (i) first to creditors, including Partners who are creditors to the extent otherwise permitted by law, in satisfaction of liabilities of the Partnership (whether by payment or the making of reasonable provisions for payment thereof), and (ii) the balance, if any, to the Partners in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods. 7 7.3 Certificate of Cancellation. Upon completing the winding up and liquidation of the Partnership, the General Partner shall execute, acknowledge, and cause to be filed a Certificate of Cancellation of the Partnership as provided by the Limited Partnership Act and such other documents as may be required by any state or other jurisdiction in which the Partnership engages in business to evidence the Partnership's dissolution and termination of existence. The Limited Partner shall join in executing such documents if such joinder is required by the Limited Partnership Act or deemed necessary or appropriate by the General Partner. Upon the filing of a Certificate of Cancellation of the Partnership and any other documents necessary to terminate the existence of the Partnership in the appropriate public office(s) as required under the Limited Partnership Act, the Partners shall cease to be such and the Partnership and this Agreement shall be terminated. ARTICLE 8. BOOKS OF ACCOUNT, ACCOUNTING, REPORTS, FISCAL YEAR AND BANKING 8.1 Books of Account. The Partnership's books and records and this Agreement, and all amendments hereto, shall be maintained at the office of the Partnership located at 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as required by the Limited Partnership Act, and the Limited Partner shall have reasonable access thereto for inspection and examination. The books and records shall reflect all Partnership transactions and shall be appropriate and adequate for the Partnership's business. 8.2 Accounting and Reports; Audit. As soon as reasonably practicable after the end of each fiscal year, each Partner shall be furnished with a copy of a statement of income or loss of the Partnership for such year, and a statement showing the amounts allocated to such Partner pursuant to this Agreement during or in respect of such year, and any items of income, expense or credit allocated to it for purposes of federal income taxation pursuant to this Agreement, all prepared in accordance with the accounting method adopted by the Partnership, all of which information will be reflected in the Partnership's federal income tax return; and delivery of a copy of such tax return to each Partner shall be sufficient to fulfill the obligation of the General Partner with respect to providing such information. In addition, the General Partner shall submit such other reports as it shall deem necessary to keep the Limited Partner advised of the status of Partnership operations. ARTICLE 9. MISCELLANEOUS PROVISIONS 9.1 Further Action. Each Partner shall execute and deliver such papers, documents and instruments, and perform such acts as are necessary or appropriate, 8 in the sole discretion of the General Partner, to implement the terms hereof and the intent of the Partners hereto. 9.2 Indemnity of Partners. Each Partner shall be liable to the extent of its respective interest in the Partnership. Subject to the foregoing limitation, each Partner shall indemnify and hold harmless the other Partners from and against any and all claims, losses, damages, costs or expenses of any kind or character in excess of such other Partners' interests arising out of any transaction contemplated by this Agreement or resulting therefrom. 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby, and in lieu of such illegal, invalid and unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.4 Right to Rely Upon the Authority of General Partner. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of any property or interest owned by the Partnership shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any such instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchaser shall have received written notice affecting the same. 9.5 Texas Law. The Partners intend that the laws of Texas govern the determination of the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. 9.6 Waiver of Action for Partition. Each of the Partners irrevocably waives, during the term of the Partnership, any right to maintain any action for partition with respect to the Partnership's property. 9.7 Parties in Interest. Subject to the provisions contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the respective parties hereto. (Remainder of page intentionally left blank) 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GENERAL PARTNER: PSI TEXAS HOSPITALS, LLC, a Texas limited liability company By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President PSI HOSPITALS, INC., a Delaware corporation By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President 10 EX-3.87 86 g83903exv3w87.txt EX-3.87 CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.87 CERTIFICATE OF LIMITED PARTNERSHIP PURSUANT TO ARTICLE 6132a-1 - -------------------------------------------------------------------------------- 1. Name of Limited Partnership - -------------------------------------------------------------------------------- The name of the limited partnership is as set forth below: - -------------------------------------------------------------------------------- Texas San Marcos Treatment Center, L.P. - -------------------------------------------------------------------------------- The name must contain the words "Limited Partnership," or "Limited," or the abbreviation "L.P.," or "Ltd." As the last words or letters of its name. The name must not be the same as, deceptively similar to or similar to that of an existing corporate, limited liability company, or limited partnership name on file with the secretary of state. A preliminary check for "name availability" is recommended. - -------------------------------------------------------------------------------- 2. Principal Office - -------------------------------------------------------------------------------- The address of the principal office in the United States where records of the partnership are to be kept or made available is set forth below: - -------------------------------------------------------------------------------- Address: 113 Seaboard Lane, Suite C-100 - -------------------------------------------------------------------------------- City: Franklin State: TN Zip Code 37067 Country USA - -------------------------------------------------------------------------------- 3. Registered Agent and Registered Office (Select and complete either A or B, then complete C.) - -------------------------------------------------------------------------------- [X] A. The initial registered agent is a corporation by the name set forth below: - -------------------------------------------------------------------------------- OR | National Registered Agents, Inc. - -------------------------------------------------------------------------------- [ ] B. The initial registered agent is an individual resident of the state whose name is set forth below: - -------------------------------------------------------------------------------- First Name Middle Initial Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C. The business address of the registered agent and the registered office address is: - -------------------------------------------------------------------------------- Street Address City Zip Code 1614 Sidney Baker Street Kerrville TX 78028 - -------------------------------------------------------------------------------- 4. General Partner Information - -------------------------------------------------------------------------------- The name, mailing address, and the street address of the business or residence of each general partner is as follows: - -------------------------------------------------------------------------------- General Partner 1 - -------------------------------------------------------------------------------- Legal Entity: The general partner is a legal entity named: - -------------------------------------------------------------------------------- PSI Texas Hospitals, LLC - -------------------------------------------------------------------------------- Individual: The general partner is an individual whose name is set forth below: - -------------------------------------------------------------------------------- First Name M.I. Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAILING ADDRESS OF GENERAL PARTNER 1 - -------------------------------------------------------------------------------- Mailing Address City State Zip Code 113 Seaboard Ln, Suite C-100 Franklin TN 37067 - -------------------------------------------------------------------------------- STREET ADDRESS OF GENERAL PARTNER 1 - -------------------------------------------------------------------------------- Street Address City State Zip Code 113 Seaboard Ln, Suite C-100 Franklin TN 37067 - -------------------------------------------------------------------------------- General Partner 2 - -------------------------------------------------------------------------------- LEGAL ENTITY: The general partner is a legal entity named: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Individual: The general partner is an individual whose name is set forth below: - -------------------------------------------------------------------------------- Partner 2 - First Name M.I. Last Name Suffix - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MAILING ADDRESS OF GENERAL PARTNER 2 - -------------------------------------------------------------------------------- Mailing Address City State Zip Code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STREET ADDRESS OF GENERAL PARTNER 2 - -------------------------------------------------------------------------------- Street Address City State Zip Code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. Supplemental Information - -------------------------------------------------------------------------------- Text Area: [The attached addendum are incorporated herein by reference.] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Effective Date of filing - -------------------------------------------------------------------------------- [X] A. This document will become effective when the document is filed by the secretary of state. - -------------------------------------------------------------------------------- OR - -------------------------------------------------------------------------------- [ ] B. This document will become effective at a later date, which is not more than ninety (90) days from the date of its filing by the secretary of state. The delayed effective date is - -------------------------------------------------------------------------------- Execution - -------------------------------------------------------------------------------- The undersigned sign this document subject to the penalties imposed by law for the submission of a false or fraudulent document. - -------------------------------------------------------------------------------- Name Name PSI Texas Hospitals, LLC - -------------------------------------------------------------------------------- /s/ Steven T. Davidson - -------------------------------------------------------------------------------- Signature of General Partner 1 Signature of General Partner 2 - -------------------------------------------------------------------------------- Steven T. Davidson, Vice President of Psychiatric Solutions, Inc., the sole member of PSI Texas Hospitals, LLC EX-3.88 87 g83903exv3w88.txt EX-3.88 LIMITED PARTNERSHIP AGREEMENT EXHIBIT 3.88 LIMITED PARTNERSHIP AGREEMENT OF TEXAS SAN MARCOS TREATMENT CENTER, L.P. This Limited Partnership Agreement is made and entered into this 24th day of February, 2003, by and between PSI TEXAS HOSPITALS, LLC, a Texas limited liability company, the principal place of business of which is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as the general partner (the "General Partner"), and PSI HOSPITALS, INC., a Delaware corporation, the principal place of business of which is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as the limited partner (the "Limited Partner"). (The General Partner and Limited Partner are collectively referred to herein as the "Partners.") The Partners hereby agree as follows: ARTICLE 1. GENERAL 1.1 Formation. The Partners hereby form Texas San Marcos Treatment Center, L.P. (the "Partnership") as a limited partnership under the Texas Revised Limited Partnership Act (the "Limited Partnership Act"). 1.2 Name. The name of the Partnership shall be "Texas San Marcos Treatment Center, L.P." and all business of the Partnership shall be conducted in such name; provided, however, the General Partner may change the name of the Partnership at any time and from time to time by notice to the Limited Partner, 1.3 Purpose. The purpose of the Partnership is to engage in any lawful act or activity in which a limited partnership may engage under the Limited Partnership Act including, without limitation, the acquisition, development, construction, owning, mortgaging, encumbering, leasing, disposition, improvement of and otherwise dealing with real property and related personal property. 1.4 Term. The term of the Partnership shall commence upon filing of the Certificate of Limited Partnership of Texas San Marcos Treatment Center, L.P. (the "Certificate") with the Texas Secretary of State and shall continue until the completion of the Partnership's dissolution, winding up, and liquidation as provided herein. 1.5 Place of Business. The Partnership may have such places of business within the United States of America as the General Partner determines to be appropriate from time to time. 1.6 Registered Agent. The registered agent for service of process on the Partnership in the State of Texas shall be National Registered Agents, Inc., 905 Congress Avenue, Austin, Texas 78701, or such other person as the General Partner may designate from time to time. 1.7 Filings. The General Partner has executed and shall cause to be filed the Certificate in the office of the Texas Secretary of State, in accordance with the provisions of the Limited Partnership Act, and shall execute and file such other certificates or documents required by any state or other jurisdiction in which the Partnership engages in business. The General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership and shall execute and file for public record any and all filings in all places and at such times as necessary for the continuation of and transaction of business by the Partnership. ARTICLE 2. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 2.1 General Partner. The General Partner shall contribute the sum of One Dollar ($1.00) as and for the General Partner's initial capital contribution for its general partnership interest in the Partnership. Except as provided in this Section 2.1, the General Partner shall not be required to make any other capital contributions to the Partnership. 2.2 Contribution of Limited Partner. The Limited Partner shall contribute the sum of Ninety-Nine Dollars ($99.00) to the Partnership as and for its initial capital contribution for its limited partnership interest in the Partnership. 2.3 No Right to Demand Capital Contributions; No Priorities. Except as otherwise provided in this Agreement and permitted by the Limited Partnership Act, the Limited Partner shall not demand or receive a return of all or a portion of its capital contributions or withdraw from the Partnership without the written consent of the General Partner. Under circumstances requiring a return of any capital contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. No Partner shall have priority over any other Partner, either with respect to the return of capital contributions or with respect to profits, losses or distributions. 2.4 No Interest on Capital Contributions. No Partner shall receive any interest, salary or drawing with respect to its capital contributions or its capital account or for services rendered to the Partnership or otherwise in its capacity as a Partner, except as otherwise provided in this Agreement. 2.5 Limited Liability. The Limited Partner shall not be liable for the debts, liabilities, contracts or any other obligations of the Partnership. Except as otherwise provided by applicable law, the Limited Partner shall be liable only to 2 make its capital contributions and shall not be required to lend any funds to the Partnership or, after its initial capital contribution has been made, to make any additional capital contributions to the Partnership. Except as otherwise provided in this Agreement, the General Partner shall not have any personal liability for the repayment of any capital contributions of the Limited Partner. The Limited Partner shall not participate in the control of the business of the Partnership. 2.6 Establishment of Capital Accounts. A capital account shall be established and maintained for each Partner in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the U.S. Treasury Regulations promulgated thereunder (the "Regulations") and this Agreement. ARTICLE 3. ALLOCATIONS AND DISTRIBUTIONS 3.1 Participation in Profits or Losses. Profits or losses of the Partnership, including all items of income, gain, loss, deduction, and credit, for each fiscal year shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. 3.2 Basis for Determining Profits or Losses. For purposes of determining the profits, losses, and each item thereof allocable to any period, profits, losses, and each item thereof shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Code Section 706 and the Regulations thereunder. 3.3 Distributions. Except as otherwise provided in Article 7 hereof, distributions of cash or other property shall be made, at such times as the General Partner may determine, one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. ARTICLE 4. MANAGEMENT 4.1 Management of the Partnership. The General Partner shall have full, exclusive and complete charge of all affairs and business of the Partnership and of the management and control of the Partnership, subject only to the limitations in this Agreement. The General Partner shall have all the rights and powers that may be possessed by a general partner under the Limited Partnership Act and such rights and powers as are otherwise conferred by law or it deems necessary, advisable or convenient in managing the business and affairs of the Partnership. 4.2 Limited Role of Limited Partner. Except as otherwise set forth in this Section 4.2, the Limited Partner shall not take part in, or interfere in any manner with, the conduct or control of the business or affairs of the Partnership or have any 3 authority to act for, or on behalf of, the Partnership; provided, however, at the sole and absolute discretion of the General Partner, the Limited Partner may possess and exercise any of the powers allowed to be possessed or exercised by a limited partner under the Limited Partnership Act without the Limited Partner being deemed to participate in the control of the Partnership's business. 4.3 Exculpation of General Partner. No act or omission by the Partnership or the General Partner, except gross negligence or willful misconduct, shall ever subject the General Partner or its parent corporation, their shareholders, officers, directors, employees, or agents to any liability to the Partnership or any Partner. The foregoing exculpation and exoneration expressly covers acts or omissions which constitute or are accompanied by simple, common or ordinary negligence. 4.4 Indemnification of General Partner. To the fullest extent provided by law, the Partnership shall indemnify the General Partner and its parent corporation, their shareholders, officers, directors, partners, agents and employees, and hold them harmless from and against all claims and liabilities arising from, or related to, any qualified act or omission of the Partnership and/or the General Partner under this Agreement, including all damages, judgments, fees, settlements, costs and attorneys' fees actually and reasonably paid or incurred by the General Partner or its parent corporation in connection with any action, claim, suit or proceeding covered by this indemnity. A "qualified act or omission" for purposes of this Section 4.4 is an act or omission done in good faith or in a manner the General Partner or its parent corporation reasonably believed to be in, or not opposed to, the best interest of the Partnership. ARTICLE 5. TRANSFERS OF INTERESTS 5.1 Voluntary Transfers by General Partner. The General Partner shall have the right to sell, assign, transfer, give or in any other way dispose of its entire interest as general partner of the Partnership. Prior to the effective date of such sale, assignment or transfer, such purchaser, assignee or transferee shall be admitted as an additional general partner of the Partnership and is hereby authorized to continue the business of the Partnership without dissolution. Upon such a sale or other disposition, the General Partner shall cease to be a general partner of the Partnership as provided in Article 6. Notwithstanding anything in this Agreement to the contrary, the General Partner may pledge, encumber, or otherwise give as collateral for loans or other indebtedness, its general partnership interest in the Partnership without notice to or the consent of the Limited Partner; upon any such pledge, encumbrance or grant of a security interest by the General Partner, the General Partner shall not cease to be a general partner of the Partnership. 4 5.2 Transfer by Limited Partner. No voluntary assignments, transfers, hypothecation or encumbrance of the Limited Partner's interest or any portion thereof shall be permitted unless (i) the prior written consent of the General Partner is obtained, and (ii) said assignment, transfer, hypothecation or encumbrance, in the opinion of counsel satisfactory to the General Partner, complies with all applicable securities laws, and does not dissolve the Partnership under the Limited Partnership Act. The requirement of said opinion may be waived in the sole discretion of the General Partner. Any such transfer, assignment, hypothecation or encumbrance of the Limited Partner's interest shall not require the dissolution, winding up and liquidation of the Partnership. Except to the extent otherwise specified in any such assignment, an assignee of any interest in the Partnership shall be entitled to receive allocations of profits or losses, including all items of income, gain, loss, deduction, and credit thereof, and distributions of cash or other property attributable to the assigned interest from and after the date on which such assignment is treated to have occurred under this Agreement. No assignee of all or any part of the Limited Partner's interest shall become a substituted Limited Partner with respect to such interest unless the General Partner shall consent thereto in writing, such consent to be in the sole discretion of the General Partner. A person who acquires an interest in the Partnership but who is not admitted as a substituted Limited Partner pursuant to this Section 5.2 shall be entitled only to allocations and distributions with respect to such interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books and records of the Partnership, and shall not have any of the rights, including but not limited to the right to vote, of a General Partner or a Limited Partner under the Limited Partnership Act or this Agreement. Accordingly, with respect to such rights, including but not limited to the right to vote, a Limited Partner shall be treated for purposes of this Agreement as the owner of any interest assigned by him with respect to which the assignee has not become a substituted Limited Partner. 5.3 Bankruptcy or Dissolution of the Limited Partner. Upon the bankruptcy, dissolution, or cessation to exist as a legal entity of the Limited Partner, the authorized representative or successor of such Limited Partner shall have all the rights of the Limited Partner for the purpose of effecting the orderly winding up and dissolution of the business and affairs of such Limited Partner and such power as the Limited Partner possessed to constitute a successor as an assignee and in making application to substitute such assignee as a Limited Partner. ARTICLE 6. RESIGNATION OF OR TERMINATION OF STATUS AS GENERAL PARTNER 6.1 Withdrawal of General Partner. The General Partner shall have the right to withdraw as and cease to be the General Partner at any time upon thirty 5 (30) days written notice to the Limited Partner. Prior to the effective date of the withdrawal of a General Partner, the Limited Partner may elect an additional general partner of the Partnership who is hereby authorized to and shall continue the business of the Partnership without dissolution. 6.2 Termination of Status As General Partner. The General Partner shall cease to be the General Partner upon the occurrence of any of the following events: (i) the transfer of its general interest in the Partnership pursuant to Section 5.1, (ii) the vote by the Limited Partner to remove such General Partner for good cause (which shall mean gross negligence or fraud in failure to comply with any material covenant or agreement contained in this Agreement), and delivery to the General Partner of written notice of such vote, (iii) the bankruptcy of the General Partner or the filing of a certificate of dissolution, or its equivalent, or (iv) the involuntary transfer by operation of law of the General Partner's interest in the Partnership. 6.3 Liability of the General Partner after Resignation or Termination. If the General Partner resigns or its status as a general partner is terminated in accordance with the provisions of this Article 6 or the Limited Partnership Act, the General Partner's liability as a general partner of the Partnership under the Limited Partnership Act and this Agreement shall cease and the Partnership shall promptly take all steps reasonably necessary under the Limited Partnership Act to cause such cessation of liability; provided, however, that if the General Partner resigns during dissolution and winding up the Partnership, the General Partner shall continue to be the General Partner for purposes of winding up the Partnership's affairs pursuant to Section 7.2 of this Agreement, unless a successor General Partner is elected. 6.4 Election of Successor General Partner. Upon the withdrawal or termination of general partnership status of a General Partner, the remaining General Partner, if any, is hereby authorized to and shall continue the Partnership without dissolution. If all of the General Partners withdraw or their status is terminated pursuant to this Agreement or the Limited Partnership Act, the Limited Partner may, within ninety (90) days of such withdrawal or termination of status, consent in writing to continue the business of the Partnership and to the election, to be effective as of the date of such withdrawal or termination of status, of one or more successor General Partners. Such election may occur before or after the effectiveness of such withdrawal or termination; provided, however, that if such election occurs before such effectiveness, the person so elected shall not become the General Partner until such withdrawal or termination is effective and such person has executed an amendment to this Agreement and has filed any and all such amendments to the Certificate and other documents necessary to comply with the Limited Partnership Act, and shall agree to accept all accompanying liabilities, duties and obligations hereunder. The successor General Partner or General Partners shall purchase from the terminated or withdrawing General Partner its interest as general partner in the Partnership for an amount equal to its then 6 capital account balance. If an additional or successor General Partner is admitted to the Partnership as provided in this Agreement, the additional or successor General Partner, together with all remaining General Partners, are hereby authorized to and shall continue the business of the Partnership without dissolution (and if a successor General Partner is admitted at a time when the withdrawing General Partner is the sole remaining General Partner, such successor shall be admitted as a General Partner immediately prior to the effective date of the withdrawal from the Partnership of the withdrawing General Partner and such successor General Partner shall continue the business of the Partnership without dissolution). ARTICLE 7. DISSOLUTION AND WINDING UP OF THE PARTNERSHIP 7.1 Dissolution of the Partnership. The Partnership shall dissolve and commence winding up its affairs and liquidating its assets upon the occurrence of (i) the written consent of the Limited Partner to dissolve, wind up and liquidate the Partnership, (ii) the withdrawal, removal, bankruptcy, the filing of a certificate of dissolution, or its equivalent, of the General Partner, or any other event which under the Limited Partnership Act causes a general partner to cease to be a general partner of the Partnership, unless (a) at the time of the occurrence of such event there is a remaining general partner who agrees to continue the business of the Partnership without dissolution and does so, or (b) within ninety (90) days of such event, the Limited Partner agrees in writing to the continuation of the business of the Partnership and to the appointment (effective as of the date of such event) of one or more additional or successor general partners of the Partnership, (iii) the occurrence of any other event that makes it unlawful, impossible, or impractical to carry on the business of the Partnership, (iv) the bankruptcy of the Partnership, or (v) the entry of a decree of judicial dissolution of the Partnership pursuant to the Limited Partnership Act. 7.2 Winding Up and Liquidation of the Partnership. Upon the dissolution of the Partnership as described in Section 7.1, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The General Partner shall be responsible for overseeing the winding up and liquidation of the Partnership and shall take full account of the Partnership's liabilities and assets. Such assets shall be liquidated thereafter as promptly as is consistent with obtaining the fair market value thereof. The proceeds therefrom, to the extent sufficient, shall be applied and distributed (i) first to creditors, including Partners who are creditors to the extent otherwise permitted by law, in satisfaction of liabilities of the Partnership (whether by payment or the making of reasonable provisions for payment thereof), and (ii) the balance, if any, to the Partners in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods. 7 7.3 Certificate of Cancellation. Upon completing the winding up and liquidation of the Partnership, the General Partner shall execute, acknowledge, and cause to be filed a Certificate of Cancellation of the Partnership as provided by the Limited Partnership Act and such other documents as may be required by any state or other jurisdiction in which the Partnership engages in business to evidence the Partnership's dissolution and termination of existence. The Limited Partner shall join in executing such documents if such joinder is required by the Limited Partnership Act or deemed necessary or appropriate by the General Partner. Upon the filing of a Certificate of Cancellation of the Partnership and any other documents necessary to terminate the existence of the Partnership in the appropriate public office(s) as required under the Limited Partnership Act, the Partners shall cease to be such and the Partnership and this Agreement shall be terminated. ARTICLE 8. BOOKS OF ACCOUNT, ACCOUNTING, REPORTS, FISCAL YEAR AND BANKING 8.1 Books of Account. The Partnership's books and records and this Agreement, and all amendments hereto, shall be maintained at the office of the Partnership located at 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, as required by the Limited Partnership Act, and the Limited Partner shall have reasonable access thereto for inspection and examination. The books and records shall reflect all Partnership transactions and shall be appropriate and adequate for the Partnership's business. 8.2 Accounting and Reports; Audit. As soon as reasonably practicable after the end of each fiscal year, each Partner shall be furnished with a copy of a statement of income or loss of the Partnership for such year, and a statement showing the amounts allocated to such Partner pursuant to this Agreement during or in respect of such year, and any items of income, expense or credit allocated to it for purposes of federal income taxation pursuant to this Agreement, all prepared in accordance with the accounting method adopted by the Partnership, all of which information will be reflected in the Partnership's federal income tax return; and delivery of a copy of such tax return to each Partner shall be sufficient to fulfill the obligation of the General Partner with respect to providing such information. In addition, the General Partner shall submit such other reports as it shall deem necessary to keep the Limited Partner advised of the status of Partnership operations. ARTICLE 9. MISCELLANEOUS PROVISIONS 9.1 Further Action. Each Partner shall execute and deliver such papers, documents and instruments, and perform such acts as are necessary or appropriate, 8 in the sole discretion of the General Partner, to implement the terms hereof and the intent of the Partners hereto. 9.2 Indemnity of Partners. Each Partner shall be liable to the extent of its respective interest in the Partnership. Subject to the foregoing limitation, each Partner shall indemnify and hold harmless the other Partners from and against any and all claims, losses, damages, costs or expenses of any kind or character in excess of such other Partners' interests arising out of any transaction contemplated by this Agreement or resulting therefrom. 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby, and in lieu of such illegal, invalid and unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.4 Right to Rely Upon the Authority of General Partner. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of any property or interest owned by the Partnership shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any such instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchaser shall have received written notice affecting the same. 9.5 Texas Law. The Partners intend that the laws of Texas govern the determination of the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. 9.6 Waiver of Action for Partition. Each of the Partners irrevocably waives, during the term of the Partnership, any right to maintain any action for partition with respect to the Partnership's property. 9.7 Parties in Interest. Subject to the provisions contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the respective parties hereto. (Remainder of page intentionally left blank) 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GENERAL PARTNER: PSI TEXAS HOSPITALS, LLC, a Texas limited liability company By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President PSI HOSPITALS, INC., a Delaware corporation By: /s/ Steven T. Davidson ---------------------------------- Steven T. Davidson, Vice President 10 EX-3.89 88 g83903exv3w89.txt EX-3.89 CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.89 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP OF TEXAS WEST OAKS HOSPITAL, L.P. The undersigned, a general partner of TEXAS WEST OAKS HOSPITAL, L.P., a limited partnership, pursuant to Section 2.02 of the Texas Revised Uniform Limited Partnership Act, as amended, hereby certifies that: 1. The name of the limited partnership is Texas West Oaks Hospital, L.P. 2. The Certificate of Limited Partnership is amended as follows: The Certificate of Limited Partnership of Texas West Oaks Hospital, L.P. is amended by striking Number 4 in its entirety and replacing therefore the following: 4. The name, the mailing address, and the street address of the business or resident of each general partner is as follows:
NAME MAILING ADDRESS STREET ADDRESS (include city, state, zip code) (include city, state, zip code) ~~PSI Texas Hospitals, LLC 310 25th Avenue North Same as Mailing Address Suite 209 Nashville, TN 37203~~
Executed on this 30th day of October, 2001. GENERAL PARTNER: PSI HOSPITALS, INC. By: /s/ Steven T. Davidson ----------------------- Steven T. Davidson Vice President CERTIFICATE OF LIMITED PARTNERSHIP 1. The name of the limited partnership is Texas West Oaks Hospital, L.P. 2. The street address of its proposed registered office in Texas is 905 Congress Avenue, Austin, TX 78701 and the name of its proposed registered agent in Texas at such address is National Registered Agents, Inc. 3. The address of the principal office in the United States where records of the partnership are to be kept or made available is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203 4. The name, the mailing address, and the street address of the business or residence of each general partner is as follows:
NAME MAILING ADDRESS STREET ADDRESS (include city, state, zip code) (include city, state, zip code) ~~PSI Hospitals, Inc. 310 25th Ave N., Suite 209 Same as Mailing Address Nashville, TN 37203~~
Date Signed: August 10,2001 PSI HOSPITALS, INC. /s/ Steven T. Davidson ---------------------------------- General Partner(s) Steven T. Davidson, Vice President EX-3.90 89 g83903exv3w90.txt EX-3.90 AMENDED AND RESTATED LIMITED PARTNERSHIP EXHIBIT 3.90 AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF TEXAS WEST OAKS HOSPITAL, L.P. This Amended and Restated Limited Partnership Agreement is made and entered into this 31st day of October, 2001, by and between PSI TEXAS HOSPITALS, LLC, a Texas limited liability company, the principal place of business of which is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as the general partner (the "General Partner"), and PSI HOSPITALS, INC., a Delaware corporation, the principal place of business of which is 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as the limited partner (the "Limited Partner"). (The General Partner and Limited Partner are collectively referred to herein as the "Partners.") The Partners hereby agree as follows: ARTICLE 1 GENERAL 1.1 Formation. The Partners hereby form Texas West Oaks Hospital, L.P. (the "Partnership") as a limited partnership under the Texas Revised Limited Partnership Act (the "Limited Partnership Act"). 1.2 Name. The name of the Partnership shall be "Texas West Oaks Hospital, L.P.," and all business of the Partnership shall be conducted in such name; provided, however, the General Partner may change the name of the Partnership at any time and from time to time by notice to the Limited Partner. 1.3 Purpose. The purpose of the Partnership is to engage in any lawful act or activity in which a limited partnership may engage under the Limited Partnership Act including, without limitation, the acquisition, development, construction, owning, mortgaging, encumbering, leasing, disposition, improvement of and otherwise dealing with real property and related personal property. 1.4 Term. The term of the Partnership shall commence upon filing of the Certificate of Limited Partnership of Texas West Oaks Hospital, L.P. (the "Certificate") with the Texas Secretary of State and shall continue until the completion of the Partnership's dissolution, winding up, and liquidation as provided herein. 1.5 Place of Business. The Partnership may have such places of business within the United States of America as the General Partner determines to be appropriate from time to time. 1.6 Registered Agent. The registered agent for service of process on the Partnership in the State of Texas shall be National Registered Agents, Inc., 905 Congress Avenue, Austin, Texas 78701, or such other person as the General Partner may designate from time to time. 1.7 Filings. The General Partner has executed and shall cause to be filed the Certificate in the office of the Texas Secretary of State, in accordance with the provisions of the Limited Partnership Act, and shall execute and file such other certificates or documents required by any state or other jurisdiction in which the Partnership engages in business. The General Partner shall take any and all other actions reasonably necessary to perfect and maintain the status of the Partnership as a limited partnership and shall execute and file for public record any and all filings in all places and at such times as necessary for the continuation of and transaction of business by the Partnership. ARTICLE 2 CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 2.1 General Partner. The General Partner shall contribute the sum of One Dollar ($1.00) as and for the General Partner's initial capital contribution for its general partnership interest in the Partnership. Except as provided in this Section 2.1, the General Partner shall not be required to make any other capital contributions to the Partnership. 2.2 Contribution of Limited Partner. The Limited Partner shall contribute the sum of Ninety-Nine Dollars ($99.00) to the Partnership as and for its initial capital contribution for its limited partnership interest in the Partnership. 2.3 No Right to Demand Capital Contributions; No Priorities. Except as otherwise provided in this Agreement and permitted by the Limited Partnership Act, the Limited Partner shall not demand or receive a return of all or a portion of its capital contributions or withdraw from the Partnership without the written consent of the General Partner. Under circumstances requiring a return of any capital contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. No Partner shall have priority over any other Partner, either with respect to the return of capital contributions or with respect to profits, losses or distributions. 2.4 No Interest on Capital Contributions. No Partner shall receive any interest, salary or drawing with respect to its capital contributions or its capital account or for services rendered to the Partnership or otherwise in its capacity as a Partner, except as otherwise provided in this Agreement. 2.5 Limited Liability. The Limited Partner shall not be liable for the debts, liabilities, contracts or any other obligations of the Partnership. Except as otherwise provided by applicable law, the Limited Partner shall be liable only to 2 make its capital contributions and shall not be required to lend any funds to the Partnership or, after its initial capital contribution has been made, to make any additional capital contributions to the Partnership. Except as otherwise provided in this Agreement, the General Partner shall not have any personal liability for the repayment of any capital contributions of the Limited Partner. The Limited Partner shall not participate in the control of the business of the Partnership. 2.6 Establishment of Capital Accounts. A capital account shall be established and maintained for each Partner in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), the U.S. Treasury Regulations promulgated thereunder (the "Regulations") and this Agreement. ARTICLE 3 ALLOCATIONS AND DISTRIBUTIONS 3.1 Participation in Profits or Losses. Profits or losses of the Partnership, including all items of income, gain, loss, deduction, and credit, for each fiscal year shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. 3.2 Basis for Determining Profits or Losses. For purposes of determining the profits, losses, and each item thereof allocable to any period, profits, losses, and each item thereof shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Code Section 706 and the Regulations thereunder. 3.3 Distributions. Except as otherwise provided in Article 7 hereof, distributions of cash or other property shall be made, at such times as the General Partner may determine, one percent (1%) to the General Partner and ninety-nine percent (99%) to the Limited Partner. ARTICLE 4 MANAGEMENT 4.1 Management of the Partnership. The General Partner shall have full, exclusive and complete charge of all affairs and business of the Partnership and of the management and control of the Partnership, subject only to the limitations in this Agreement. The General Partner shall have all the rights and powers that may be possessed by a general partner under the Limited Partnership Act and such rights and powers as are otherwise conferred by law or it deems necessary, advisable or convenient in managing the business and affairs of the Partnership. 4.2 Limited Role of Limited Partner. Except as otherwise set forth in this Section 4.2, the Limited Partner shall not take part in, or interfere in any manner with, the conduct or control of the business or affairs of the Partnership or have any 3 authority to act for, or on behalf of, the Partnership; provided, however, at the sole and absolute discretion of the General Partner, the Limited Partner may possess and exercise any of the powers allowed to be possessed or exercised by a limited partner under the Limited Partnership Act without the Limited Partner being deemed to participate in the control of the Partnership's business. 4.3 Exculpation of General Partner. No act or omission by the Partnership or the General Partner, except gross negligence or willful misconduct, shall ever subject the General Partner or its parent corporation, their shareholders, officers, directors, employees, or agents to any liability to the Partnership or any Partner. The foregoing exculpation and exoneration expressly covers acts or omissions which constitute or are accompanied by simple, common or ordinary negligence. 4.4 Indemnification of General Partner. To the fullest extent provided by law, the Partnership shall indemnify the General Partner and its parent corporation, their shareholders, officers, directors, partners, agents and employees, and hold them harmless from and against all claims and liabilities arising from, or related to, any qualified act or omission of the Partnership and/or the General Partner under this Agreement, including all damages, judgments, fees, settlements, costs and attorneys' fees actually and reasonably paid or incurred by the General Partner or its parent corporation in connection with any action, claim, suit or proceeding covered by this indemnity. A "qualified act or omission" for purposes of this Section 4.4 is an act or omission done in good faith or in a manner the General Partner or its parent corporation reasonably believed to be in, or not opposed to, the best interest of the Partnership. ARTICLE 5 TRANSFERS OF INTERESTS 5.1 Voluntary Transfers by General Partner. The General Partner shall have the right to sell, assign, transfer, give or in any other way dispose of its entire interest as general partner of the Partnership. Prior to the effective date of such sale, assignment or transfer, such purchaser, assignee or transferee shall be admitted as an additional general partner of the Partnership and is hereby authorized to continue the business of the Partnership without dissolution. Upon such a sale or other disposition, the General Partner shall cease to be a general partner of the Partnership as provided in Article 6. Notwithstanding anything in this Agreement to the contrary, the General Partner may pledge, encumber, or otherwise give as collateral for loans or other indebtedness, its general partnership interest in the Partnership without notice to or the consent of the Limited Partner; upon any such pledge, encumbrance or grant of a security interest by the General Partner, the General Partner shall not cease to be a general partner of the Partnership. 4 5.2 Transfer by Limited Partner. No voluntary assignments, transfers, hypothecation or encumbrance of the Limited Partner's interest or any portion thereof shall be permitted unless (i) the prior written consent of the General Partner is obtained, and (ii) said assignment, transfer, hypothecation or encumbrance, in the opinion of counsel satisfactory to the General Partner, complies with all applicable securities laws, and does not dissolve the Partnership under the Limited Partnership Act. The requirement of said opinion may be waived in the sole discretion of the General Partner. Any such transfer, assignment, hypothecation or encumbrance of the Limited Partner's interest shall not require the dissolution, winding up and liquidation of the Partnership. Except to the extent otherwise specified in any such assignment, an assignee of any interest in the Partnership shall be entitled to receive allocations of profits or losses, including all items of income, gain, loss, deduction, and credit thereof, and distributions of cash or other property attributable to the assigned interest from and after the date on which such assignment is treated to have occurred under this Agreement. No assignee of all or any part of the Limited Partner's interest shall become a substituted Limited Partner with respect to such interest unless the General Partner shall consent thereto in writing, such consent to be in the sole discretion of the General Partner. A person who acquires an interest in the Partnership but who is not admitted as a substituted Limited Partner pursuant to this Section 5.2 shall be entitled only to allocations and distributions with respect to such interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books and records of the Partnership, and shall not have any of the rights, including but not limited to the right to vote, of a General Partner or a Limited Partner under the Limited Partnership Act or this Agreement. Accordingly, with respect to such rights, including but not limited to the right to vote, a Limited Partner shall be treated for purposes of this Agreement as the owner of any interest assigned by him with respect to which the assignee has not become a substituted Limited Partner. 5.3 Bankruptcy or Dissolution of the Limited Partner. Upon the bankruptcy, dissolution, or cessation to exist as a legal entity of the Limited Partner, the authorized representative or successor of such Limited Partner shall have all the rights of the Limited Partner for the purpose of effecting the orderly winding up and dissolution of the business and affairs of such Limited Partner and such power as the Limited Partner possessed to constitute a successor as an assignee and in making application to substitute such assignee as a Limited Partner. ARTICLE 6 RESIGNATION OF OR TERMINATION OF STATUS AS GENERAL PARTNER 6.1 Withdrawal of General Partner. The General Partner shall have the right to withdraw as and cease to be the General Partner at any time upon thirty 5 (30) days written notice to the Limited Partner. Prior to the effective date of the withdrawal of a General Partner, the Limited Partner may elect an additional general partner of the Partnership who is hereby authorized to and shall continue the business of the Partnership without dissolution. 6.2 Termination of Status As General Partner. The General Partner shall cease to be the General Partner upon the occurrence of any of the following events: (i) the transfer of its general interest in the Partnership pursuant to Section 5.1, (ii) the vote by the Limited Partner to remove such General Partner for good cause (which shall mean gross negligence or fraud in failure to comply with any material covenant or agreement contained in this Agreement), and delivery to the General Partner of written notice of such vote, (iii) the bankruptcy of the General Partner or the filing of a certificate of dissolution, or its equivalent, or (iv) the involuntary transfer by operation of law of the General Partner's interest in the Partnership. 6.3 Liability of the General Partner after Resignation or Termination. If the General Partner resigns or its status as a general partner is terminated in accordance with the provisions of this Article 6 or the Limited Partnership Act, the General Partner's liability as a general partner of the Partnership under the Limited Partnership Act and this Agreement shall cease and the Partnership shall promptly take all steps reasonably necessary under the Limited Partnership Act to cause such cessation of liability; provided, however, that if the General Partner resigns during dissolution and winding up the Partnership, the General Partner shall continue to be the General Partner for purposes of winding up the Partnership's affairs pursuant to Section 7.2 of this Agreement, unless a successor General Partner is elected. 6.4 Election of Successor General Partner. Upon the withdrawal or termination of general partnership status of a General Partner, the remaining General Partner, if any, is hereby authorized to and shall continue the Partnership without dissolution. If all of the General Partners withdraw or their status is terminated pursuant to this Agreement or the Limited Partnership Act, the Limited Partner may, within ninety (90) days of such withdrawal or termination of status, consent in writing to continue the business of the Partnership and to the election, to be effective as of the date of such withdrawal or termination of status, of one or more successor General Partners. Such election may occur before or after the effectiveness of such withdrawal or termination; provided, however, that if such election occurs before such effectiveness, the person so elected shall not become the General Partner until such withdrawal or termination is effective and such person has executed an amendment to this Agreement and has filed any and all such amendments to the Certificate and other documents necessary to comply with the Limited Partnership Act, and shall agree to accept all accompanying liabilities, duties and obligations hereunder. The successor General Partner or General Partners shall purchase from the terminated or withdrawing General Partner its interest as general partner in the Partnership for an amount equal to its then 6 capital account balance. If an additional or successor General Partner is admitted to the Partnership as provided in this Agreement, the additional or successor General Partner, together with all remaining General Partners, are hereby authorized to and shall continue the business of the Partnership without dissolution (and if a successor General Partner is admitted at a time when the withdrawing General Partner is the sole remaining General Partner, such successor shall be admitted as a General Partner immediately prior to the effective date of the withdrawal from the Partnership of the withdrawing General Partner and such successor General Partner shall continue the business of the Partnership without dissolution). ARTICLE 7 DISSOLUTION AND WINDING UP OF THE PARTNERSHIP 7.1 Dissolution of the Partnership. The Partnership shall dissolve and commence winding up its affairs and liquidating its assets upon the occurrence of (i) the written consent of the Limited Partner to dissolve, wind up and liquidate the Partnership, (ii) the withdrawal, removal, bankruptcy, the filing of a certificate of dissolution, or its equivalent, of the General Partner, or any other event which under the Limited Partnership Act causes a general partner to cease to be a general partner of the Partnership, unless (a) at the time of the occurrence of such event there is a remaining general partner who agrees to continue the business of the Partnership without dissolution and does so, or (b) within ninety (90) days of such event, the Limited Partner agrees in writing to the continuation of the business of the Partnership and to the appointment (effective as of the date of such event) of one or more additional or successor general partners of the Partnership, (iii) the occurrence of any other event that makes it unlawful, impossible, or impractical to carry on the business of the Partnership, (iv) the bankruptcy of the Partnership, or (v) the entry of a decree of judicial dissolution of the Partnership pursuant to the Limited Partnership Act. 7.2 Winding Up and Liquidation of the Partnership. Upon the dissolution of the Partnership as described in Section 7.1, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The General Partner shall be responsible for overseeing the winding up and liquidation of the Partnership and shall take full account of the Partnership's liabilities and assets. Such assets shall be liquidated thereafter as promptly as is consistent with obtaining the fair market value thereof. The proceeds therefrom, to the extent sufficient, shall be applied and distributed (i) first to creditors, including Partners who are creditors to the extent otherwise permitted by law, in satisfaction of liabilities of the Partnership (whether by payment or the making of reasonable provisions for payment thereof), and (ii) the balance, if any, to the Partners in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods. 7 7.3 Certificate of Cancellation. Upon completing the winding up and liquidation of the Partnership, the General Partner shall execute, acknowledge, and cause to be filed a Certificate of Cancellation of the Partnership as provided by the Limited Partnership Act and such other documents as may be required by any state or other jurisdiction in which the Partnership engages in business to evidence the Partnership's dissolution and termination of existence. The Limited Partner shall join in executing such documents if such joinder is required by the Limited Partnership Act or deemed necessary or appropriate by the General Partner. Upon the filing of a Certificate of Cancellation of the Partnership and any other documents necessary to terminate the existence of the Partnership in the appropriate public office(s) as required under the Limited Partnership Act, the Partners shall cease to be such and the Partnership and this Agreement shall be terminated. ARTICLE 8 BOOKS OF ACCOUNT, ACCOUNTING, REPORTS, FISCAL YEAR AND BANKING 8.1 Books of Account. The Partnership's books and records and this Agreement, and all amendments hereto, shall be maintained at the office of the Partnership located at 310 25th Avenue North, Suite 209, Nashville, Tennessee 37203, as required by the Limited Partnership Act, and the Limited Partner shall have reasonable access thereto for inspection and examination. The books and records shall reflect all Partnership transactions and shall be appropriate and adequate for the Partnership's business. 8.2 Accounting and Reports: Audit. As soon as reasonably practicable after the end of each fiscal year, each Partner shall be furnished with a copy of a statement of income or loss of the Partnership for such year, and a statement showing the amounts allocated to such Partner pursuant to this Agreement during or in respect of such year, and any items of income, expense or credit allocated to it for purposes of federal income taxation pursuant to this Agreement, all prepared in accordance with the accounting method adopted by the Partnership, all of which information will be reflected in the Partnership's federal income tax return; and delivery of a copy of such tax return to each Partner shall be sufficient to fulfill the obligation of the General Partner with respect to providing such information. In addition, the General Partner shall submit such other reports as it shall deem necessary to keep the Limited Partner advised of the status of Partnership operations. ARTICLE 9 MISCELLANEOUS PROVISIONS 9.1 Further Action. Each Partner shall execute and deliver such papers, documents and instruments, and perform such acts as are necessary or appropriate, 8 in the sole discretion of the General Partner, to implement the terms hereof and the intent of the Partners hereto. 9.2 Indemnity of Partners. Each Partner shall be liable to the extent of its respective interest in the Partnership. Subject to the foregoing limitation, each Partner shall indemnify and hold harmless the other Partners from and against any and all claims, losses, damages, costs or expenses of any kind or character in excess of such other Partners' interests arising out of any transaction contemplated by this Agreement or resulting therefrom. 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby, and in lieu of such illegal, invalid and unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.4 Right to Rely Upon the Authority of General Partner. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, nor to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of any property or interest owned by the Partnership shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any such instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchaser shall have received written notice affecting the same. 9.5 Texas Law. The Partners intend that the laws of Texas govern the determination of the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. 9.6 Waiver of Action for Partition. Each of the Partners irrevocably waives, during the term of the Partnership, any right to maintain any action for partition with respect to the Partnership's property. 9.7 Parties in Interest. Subject to the provisions contained herein, each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the respective parties hereto. (Remainder of page intentionally left blank) 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. GENERAL PARTNER: PSI TEXAS HOSPITALS, LLC, a Texas limited liability company By: /s/ Steven T. Davidson ------------------------------------ Steven T. Davidson, Vice President LIMITED PARTNER: PSI HOSPITALS, INC., a Delaware corporation By: /s/ Steven T. Davidson ------------------------------------ Steven T. Davidson, Vice President 10 Signed Page to Amended and Restated Limited Partnership Agreement of Texas West Oaks Hospital, L.P. EX-3.91 90 g83903exv3w91.txt EX-3.91 AMENDED AND RESTATED CHARTER EXHIBIT 3.91 AMENDED AND RESTATED CHARTER OF THE COUNSELING CENTER OF MIDDLE TENNESSEE, P.C. Pursuant to the provisions of the Tennessee Business Corporation Act and the Tennessee Professional Corporation Act, the undersigned corporation adopts the following articles of amendment to its charter: 1. The name of the corporation is The Counseling Center of Middle Tennessee, P.C. 2. The Amended and Restated Charter restates and further amends the charter of the corporation. The Amended and Restated Charter was duly adopted by written consent of the Board of Directors of the corporation dated March 24, 1998 and by written consent of the shareholders of the corporation dated March 24, 1998. 3. The text of the Charter of the corporation shall be amended to recite that the Corporation elects to be governed by the provisions of the Tennessee Business Corporation Act, and is hereby restated and further amended to read in its entirety as follows: AMENDED AND RESTATED CHARTER OF THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. 1. The name of the corporation is The Counseling Center of Middle Tennessee, Inc. 2. The corporation's registered office is located at 315 Deaderick Street, 1800 First American Center, Nashville, County of Davidson, Tennessee 37238. The registered agent at that office is Glen Allen Civitts, Esq. 3. The address of the principal office of the corporation shall be 3401 West End Avenue, Suite 510, Nashville, County of Davidson, Tennessee 37203. 4. The corporation is for profit. 5. The corporation is authorized to issue One Thousand (1,000) shares of common stock, no par value. 1 6. The business and affairs of the corporation shall be managed by a Board of Directors: a. The number of directors and their term shall be specified in the Bylaws of the corporation; b. Whenever the Board of Directors is required or permitted to take any action by vote, such actions may be taken without a meeting on written consent setting forth the action so taken, signed by all of the directors, indicating each signing director's vote or abstention. The affirmative vote of the number of directors that would be necessary to authorize or to take such action at a meeting is an act of the Board of Directors. c. Any or all of the directors may be removed with cause by a majority vote of the entire Board of Directors. 7. To the fullest extent permitted by the Tennessee Business Corporation Act as the same may be amended from time to time, a director, officer or incorporator of the corporation shall not be liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty in such capacity. If the Tennessee Business Corporation Act is amended, after approval by the shareholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of a director, officer or incorporator or limited to the fullest extent permitted by the Tennessee Business Corporation Act, as so amended from time to time. Any repeal or modification of this Section 7 by the shareholders of the corporation shall not adversely affect any right or protection of a director, officer or incorporator of the corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. 8. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or incorporator of the corporation or is or was serving at the request of the corporation as a director, officer, manager or incorporator of another corporation, or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer or incorporator or in any other capacity while serving as a director, officer or incorporator, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Tennessee Business Corporation Act, as the same may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, 2 liability and loss (including but not limited to counsel fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer or incorporator and shall inure to the benefit of the Indemnitee's heirs, executors and administrators. The right to indemnification conferred in this Section 8 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, than an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 8 or otherwise, the Indemnitee furnishes the corporation with a written affirmation of his or her good faith belief that he or she has met the standards for indemnification under the Tennessee Business Corporation Act, and a determination is made that the facts then known to those making the determination would not preclude indemnification. The corporation may indemnify and advance expenses to an officer, employee or agent who is not a director to the same extent as to a director by specific action of the corporation's Board of Directors or by contract. The rights to indemnification and to the advancement of expenses conferred in this Section 8 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, this Charter, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, and the corporation is hereby permitted to grant additional rights to indemnification and advancement of expenses to the fullest extent permitted by law, by resolution of directors, or an agreement providing for such rights. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. Dated: March 24, 1998 THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. By: /s/ Joey A. Jacobs ----------------------------------- Joey A. Jacobs, President Attest: /s/ Steven T. Davidson - ----------------------------- Steven T. Davidson, Secretary 3 EX-3.92 91 g83903exv3w92.txt EX-3.92 BYLAWS EXHIBIT 3.92 BY-LAWS OF THE COUNSELING CENTER OF MIDDLE TENNESSEE, P.C. ARTICLE I - OFFICES The office of the Corporation shall be located in the City and State designated in the Articles of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF SHAREHOLDERS Section 1 - Annual Meetings: The annual meeting of the shareholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: Special meetings of the shareholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten per cent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Business Corporation Act. Section 3 - Place of Meetings: All meetings of shareholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: (a) Except as otherwise provided by Statute, written notice of each meeting of shareholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than fifty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle shareholders to receive payment for their shares pursuant to Statute, the notice of such meeting shall 1 include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears on the records of the shareholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of shareholders need not be given, unless otherwise required by statute. Section 5 - Quorum: (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of shareholders of the Corporation, the presence at the commencement of such meetings in person or by proxy of shareholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of shareholders, the shareholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted at the meeting as originally called if a quorum had been present. Section 6 - Voting: (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors, to be taken by vote of the shareholders, shall be authorized by a majority of votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of shareholders, each holder of record of stock of the Corporation entitled to vote thereat, shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. 2 (c) Each shareholder entitled to vote or to express, consent or dissent without a meeting, may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless the person executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. (d) Any resolution in writing, signed by all of the shareholders entitled to vote thereon, shall be and constitute action by such shareholders to the effect therein expressed, with the same force and effect as if the same had been duly passed by unanimous vote at a duly called meeting of shareholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS Section 1 - Number, Election and Term of Office: (a) The number of the directors of the Corporation shall be one (1), unless and until otherwise determined by vote of a majority of the entire Board of Directors. The number of Directors shall not be less than three, unless all of the outstanding shares are owned beneficially and of record by less than three shareholders, in which event the number of directors shall not be less than the number of shareholders permitted by statute. (b) Except as may otherwise be provided herein or in the Certificate of Incorporation, the members of the Board of Directors of the Corporation, who need not be shareholders, shall be elected by a majority of the votes cast at a meeting of shareholders, by the holders of shares, present in person or by proxy, entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the shareholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the shareholders, 3 Section 3 - Annual and Regular Meetings; Notice: (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders, at the place of such annual meeting of shareholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (c) of such Section 4. Section 4 - Special Meetings; Notice: (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required by statute, notice of special meetings shall be mailed directly to each director, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the directors shall preside. 4 Section 6 - Quroum and Adjournments: (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action authorized, in writing, by all of the directors entitled to vote thereon and filed with the minutes of the corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: Any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the shareholders shall be filled by the shareholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective. 5 Section 10 - Removal: Any director may be removed with or without cause at any time by the affirmative vote of shareholders holding of record in the aggregate at least a majority of the outstanding shares of the Corporation at a special meeting of the shareholders called for that purpose, and may be removed for cause by action of the Board. Section 11 - Salary: No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12 - Contracts: (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they may deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. 6 ARTICLE IV - OFFICERS Section 1 - Number, Qualifications, Election and Term of Office: (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including a Chairman of the Board of Directors, and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of shareholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified, or until his death, resignation or removal. Section 2 - Resignation: Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: Any officer may be removed, either with or without cause, and a successor elected by a majority vote of the Board of Directors at any time. Section 4 - Vacancies: A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by a majority vote of the Board of Directors. Section 5 - Duties of Officers: Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these by-laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The President shall be the chief executive officer of the Corporation. 7 Section 6 - Sureties and Bonds: In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: Whenever the Corporation is the holder of shares of any other Corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the President, any Vice President, or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK Section 1 - Certificate of Stock: (a) The certificates representing shares of the Corporation shall be in such form as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number of shares, and shall be signed by (i) the Chairman of the Board or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefor has been paid, except as otherwise permitted by law. (c) To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holdings; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. 8 Section 2 - Lost or Destroyed Certificates: The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the Corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. Section 3 - Transfers of Shares: (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only by the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such proof of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of shareholders entitled to receive notice of, or to vote at, any meeting of shareholders, or to consent to any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the 9 resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS Section 1 - By Shareholders: All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by the affirmative vote of shareholders holding of record in the aggregate at least a majority of the outstanding shares entitled to vote in the election of directors at any annual or special meeting of shareholders, provided that the notice or waiver of notice of such meeting shall have summarized or set forth in full therein, the proposed amendment. Section 2. - By Directors: The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the shareholders entitled to vote with respect thereto as in this Article IX above-provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of shareholders or of the Board of Directors, or to change any provisions of the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the shareholders. If any by-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders 10 for the election of directors, the by-law so adopted, amended or repealed, together with a concise statement of the changes made. ARTICLE X - INDEMNITY (a) Any person made a party to any action, suit or proceeding, by reason of the fact that he, his testator or intestate representative is or was a director, officer or employee of the Corporation, or of any Corporation in which he served as such at the request of the Corporation, shall be indemnified by the Corporation against the reasonable expenses, including attorney's fees, actually and necessarily incurred by him in connection with the defense of such action, suit or proceedings, or in connection with any appeal therein, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding, or in connection with any appeal therein that such officer, director or employee is liable for negligence or misconduct in the performance of his duties. (b) The foregoing right of indemnification shall not be deemed exclusive of any other rights to which any officer or director or employee may be entitled apart from the provisions of this section. (c) The amount of indemnity to which any officer or any director may be entitled shall be fixed by the Board of Directors, except that in any case where there is no disinterested majority of the Board available, the amount shall be fixed by arbitration pursuant to the then existing rules of the American Arbitration Association. The undersigned Incorporator certifies that he has adopted the foregoing by-laws as the first by-laws of the Corporation. Dated: July 11, 1990 /s/ Billy C. Jackson -------------------- Incorporator 11 EX-3.93 92 g83903exv3w93.txt EX-3.93 ARTICLES OF ORGANIZATION EXHIBIT 3.93 ARTICLES OF ORGANIZATION OF THERAPEUTIC SCHOOL SERVICES, L.L.C. I, the undersigned natural person of the age of eighteen (18) years or more, acting as the organizer of a limited liability company (the "Company") under the Oklahoma Limited Liability Company Act (the "Act"), do hereby adopt the following Articles of Organization for the Company; ARTICLE I The name of the Company is THERAPEUTIC SCHOOL SERVICES, L.L.C. ARTICLE II The period of duration of the Company is fifty (50) years from the date of filing of these Articles of Organization with the Secretary of State of Oklahoma, unless earlier dissolved in accordance with either the Act or the provisions of the Operating Agreement of the Company. ARTICLE III The Company is a limited liability company. ARTICLE IV The purpose for which the Company is organized is to transact any or all lawful business for which limited liability companies may be organized under the Act, including, but not limited to, providing billing, consulting and professional services to public school districts, but excluding the business of banking or insurance. ARTICLE V The address of the principal place of business of the Company in the State of Oklahoma is 6262 S. Sheridan, Tulsa, Oklahoma 74133-4099. ARTICLE VI The name and address of the initial registered agent of the Company in the State of Oklahoma is The Corporation Company, 735 First National Building, Oklahoma City, Oklahoma, 73102, 1 ARTICLE VII The Company is to be managed by the member(s). ARTICLE VIII The name and address of the organizer of the Company is as follows; Gregg Waddill Vice President and General Counsel The Brown Schools, Inc. 1407 West Stassney Lane Austin, Texas 78745 ARTICLE IX No person who is a member of the Company shall be liable to the Company or its members for monetary damages for an act or omission of that person in his or her capacity as a manager, except for liability of that person for (i) a breach by that person of a duty of loyalty of a member to the Company or its members, (ii) an act or omission not in good faith that constitutes a breach of duty of a member to the Company, (iii) an act or omission by that person that involves intentional misconduct or a knowing violation of the law, (iv) a transaction from which that person receives an improper benefit, whether or not the benefit results from an action taken within the scope of the position of that person as a member, or (v) an act or omission for which the liability of that person is expressly provided for by an applicable statute. If the Act or other applicable law is amended to authorize action further eliminating or limiting the liability of members, then the liability of a member of the Company shall be eliminated or limited to the fullest extent permitted by the Act, or other applicable law, as so amended. Any repeal or modification of the foregoing paragraph by the members shall not adversely affect any right or protection of a person that exists at the time of that repeal or modification. ARTICLE X No holder of membership interests or securities of the Company shall have the right of cumulative voting at any election of managers or upon any other matter. No holder of membership interests or securities of the Company shall be entitled as a matter of right, preemptive or otherwise, to subscribe for or purchase any membership interest or securities of the Company now or hereafter authorized 2 to be issued, whether issued or sold for cash or other consideration or as a distribution or otherwise. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of January, 1999. /s/ Greg Waddill --------------------------------- Gregg Waddill 3 EX-3.94 93 g83903exv3w94.txt EX-3.94 OPERATING AGREEMENT EXHIBIT 3.94 OPERATING AGREEMENT OF THERAPEUTIC SCHOOL SERVICES, L.L.C. (An Oklahoma Limited Liability Company) THE MEMBERSHIP INTERESTS REFERENCED HEREIN HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE MEMBERS OF THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE MEMBERS OF THE COMPANY OF OTHER EVIDENCE SATISFACTORY TO THE MEMBERS TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, ANY SALE OR OTHER TRANSFER OF MEMBERSHIP INTEREST IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THIS OPERATING AGREEMENT. TABLE OF CONTENT
Page ---- ARTICLE I. DEFINITIONS.............................................. 1 1.1 Definitions..................................................... 1 ARTICLE II. FORMATION OF THE COMPANY................................. 5 2.1 Name and Formation.............................................. 5 2.2 Principal Place of Business..................................... 5 2.3 Registered Office and Registered Agent.......................... 5 2.4 Term............................................................ 5 2.5 Purposes and Powers............................................. 5 2.6 No State-Law Partnership........................................ 5 ARTICLE III. RIGHTS AND DUTIES OF MANAGERS............................ 6 3.1 Management...................................................... 6 3.2 Restrictions on Authority of Managers........................... 6 3.3 Number and Qualifications....................................... 6 3.4 Election........................................................ 7 3.5 Vacancy......................................................... 7 3.6 Removal/Resignation............................................. 7 3.7 Place of Meetings............................................... 7 3.8 Annual Meetings of Managers..................................... 7 3.9 Regular Meetings of Managers.................................... 7 3.10 Special Meetings of Managers.................................... 7 3.11 Quorum.......................................................... 8 3.12 Attendance and Waiver of Notice................................. 8 3.13 Compensation of Managers........................................ 8 3.14 Officers........................................................ 8 3.15 Indemnification................................................. 8 3.16 Actions Without a Meeting and Telephone Meetings................ 9 ARTICLE IV. MEMBERSHIP; MEETINGS OF MEMBERS.......................... 9 4.1 Initial Members: Additional Members............................. 9 4.2 Representations and Warranties.................................. 9 4.3 Place of Meetings............................................... 11 4.4 Annual Meetings of Members...................................... 11 4.5 Regular/Special Meetings of Members............................. 11 4.6 Notice of Meetings of Members................................... 11 4.7 Quorum.......................................................... 11 4.8 Voting on Most Matters.......................................... 12 4.9 List of Members Entitled to Vote................................ 12 4.10 Registered Members.............................................. 12
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Page ---- 4.11 Actions Without a Meeting and Telephone Meetings................ 12 4.12 Non-Liability of Members........................................ 12 4.13 Action by Member................................................ 13 4.14 Lack of Authority............................................... 13 ARTICLE V. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS............... 13 5.1 Capital Contributions........................................... 13 5.2 Capital Accounts................................................ 14 5.3 Withdrawal or Reduction of Capital Contributions................ 14 ARTICLE VI. ALLOCATIONS AND DISTRIBUTIONS............................ 14 6.1 Allocations of Profits and Losses............................... 14 6.2 Distributions................................................... 15 6.3 Tax Distributions............................................... 15 6.4 Limitation Upon Distribution.................................... 15 6.5 Accounting Principles........................................... 15 6.6 Records and Reports............................................. 15 6.7 Returns and Other Elections..................................... 16 ARTICLE VII. DISSOLUTION AND TERMINATION.............................. 16 7.1 Dissolution..................................................... 16 7.2 Distribution of Assets Upon Dissolution......................... 17 7.3 Articles of Dissolution......................................... 18 7.4 Deficit Capital Accounts........................................ 18 ARTICLE VIII. TRANSFER OF MEMBERSHIP INTERESTS......................... 18 8.1 Restrictions on Transfers....................................... 18 8.2 Permitted Transfers............................................. 19 8.3 Right of First Refusal.......................................... 19 8.4 Conditions to and Restrictions on Permitted Transfers........... 20 (a) Execution of Agreements.................................. 20 (b) Opinion of Counsel....................................... 20 (c) Required Information..................................... 20 (d) Restrictions............................................. 21 8.5 Prohibited Transfers............................................ 21 8.6 Rights of Unadmitted Assignees.................................. 21 8.7 Admission of Assignees as Members............................... 22 8.8 Representations and Legend...................................... 22 (a) Representation........................................... 22 (b) Legend................................................... 23 8.9 Distributions and Allocations................................... 23 8.10 Tax Matters..................................................... 24 ARTICLE IX. BUY-OUT.................................................. 24 9.1 Buy-out Events.................................................. 24
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Page ---- 9.2 Procedure for Member-Related Buy-out Events..................... 25 9.3 Purchase Price.................................................. 26 9.4 Closing......................................................... 26 ARTICLE X. MISCELLANEOUS PROVISIONS................................. 27 10.1 Notices......................................................... 27 10.2 Application of Oklahoma Law..................................... 27 10.3 No Action for Partition......................................... 27 10.4 Headings and Sections........................................... 27 10.5 Amendments...................................................... 27 10.6 Number and Gender............................................... 27 10.7 Binding Effect.................................................. 27 10.8 Counterparts.................................................... 28 10.9 Checks.......................................................... 28 10.10 Accounts........................................................ 28 10.11 Invalid Provisions.............................................. 28 10.12 Entire Agreement................................................ 28 10.13 Effect of Waiver or Consent..................................... 28 10.14 Notice to Members of Provisions of this Agreement............... 28 10.15 Dispute Resolution.............................................. 29 (a) Discussions; Arbitration................................. 29 (b) Selection of Arbitrator(s)............................... 29 (c) Decisions................................................ 30 (d) Other.................................................... 30 (e) Expenses................................................. 30 (f) Confidentiality.......................................... 30
iii OPERATING AGREEMENT OF THERAPEUTIC SCHOOL SERVICES, L.L.C. This Operating Agreement (the "Agreement") of THERAPEUTIC SCHOOL SERVICES, L.L.C., an Oklahoma limited liability company, is hereby entered into as of the 15th day of January, 1999, by the Members (as defined below). ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein): "ACT" means the Oklahoma Limited Liability Company Act, as the same may be amended from time to time. "ADDITIONAL CAPITAL CONTRIBUTION" means, with respect to each Member, contributions of cash or the value of other assets contributed by that Member in accordance with Article V hereof. "BANKRUPTCY OR BANKRUPT" means, with respect to any Member, that (a) such Member (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Member a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Member in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of such Member's or of all or any substantial part of such Member's properties; or (b) against such Member, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law has been commenced and one hundred twenty (120) days have expired without dismissal thereof or with respect to which, without such Member's consent or acquiescence, a trustee, receiver, or liquidator of such Member or of all or any substantial part of such Member's properties has been appointed and ninety (90) days have expired without the appointment's having been vacated or stayed, or ninety (90) days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. 1 "BUSINESS DAY" means a day other than a Saturday, Sunday or other day which is a nationally recognized holiday. "CAPITAL ACCOUNT" means, with respect to any Member, the account maintained for such Member in a manner which the Members determine is in accordance with Treasury Regulations Section 1.704-1 (b)(2)(iv), and Section 5.2. "CAPITAL CONTRIBUTION" means, with respect to any Membership Interest, anything of value that a person contributes to the Company as a prerequisite for, or in connection with, membership, including cash, property, services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY" means THERAPEUTIC SCHOOL SERVICES, L.L.C, an Oklahoma limited liability company. "CONTROL" means the power, directly or indirectly, to direct or cause the direction of the Management and policies of a Person, whether by contract, voting securities, other equity interests or otherwise. "DEFAULT" means, with respect to any Member: (A) (i) the failure of such Member to contribute, within ten (10) days of the date required, all or any portion of the Initial Capital Contribution or any Additional Capital Contribution that such Member is required to make as provided in this Agreement; or (ii) the failure of a Member to comply in any material respect with any of its other agreements, covenants, or obligations under this Agreement or the failure of any representation or warranty made by a Member in this Agreement to have been true and correct in all material respects at the time it was made, and (B) if such default is not cured by the applicable Member within thirty (30) days of it receiving notice of such default from the Company (or, if such default is not capable of being cured within such 30-day period, if such Member fails to promptly commence substantial efforts to cure such default or to prosecute such curative efforts to completion with continuity and diligence). "DISTRIBUTABLE CASH" means all cash, revenues and funds received by the Company from Company operations, less the sum of the following to the extent paid or set aside by the Company: (i) all principal and interest payments on indebtedness of the Company and all other sums paid to lenders; (ii) all cash expenditures incurred incident to the normal operations of the Company's business; and (iii) such cash reserves as the Members deem reasonably necessary to the proper operation of the Company's business. 2 "FAMILY MEMBER" means, with respect to each Person at any time, that Person's spouse, any lineal ancestor, or any lineal descendant (by consanguinity or adoption) at that time. "FISCAL YEAR" means the Company's fiscal year, which shall be the calendar year. "INITIAL CAPITAL CONTRIBUTION" means, with respect to any Member, the initial contribution to the capital of the Company made by that Member pursuant to this Agreement. "LOSSES" means, for each Fiscal Year, the losses and deductions of the Company determined in accordance with accounting principles consistently applied from year to year employed under the accrual method of accounting and as reported, separately or in the aggregate, as appropriate, on the Company's information tax return filed for federal income tax purposes, plus any expenditures described in Section 705(a)(2)(B) of the Code. "MAJORITY" means, with respect to any referenced group of Managers, a combination of any of such Managers constituting more than fifty percent (50%) of the number of Managers of such referenced group who are then elected and qualified. "MAJORITY IN INTEREST" means, with respect to any referenced group of Members, a combination of any of such Members who, in the aggregate, own fifty-one percent (51%) or more of the Membership Interests owned by all of such referenced group of Members. "MANAGER" means Joey Fisher, Richard Desirey and Gary W. Gerber, or any other Person or Persons that succeed them in that capacity or are elected to act as an additional manager of the Company as provided herein. "Managers" means all such persons collectively in their capacity as managers of the Company. "MAXIMUM TAX LIABILITY" shall mean, with respect to any Membership Interest at any time, the excess of (i) an amount equal to the product of (A) the higher of (1) the highest applicable effective income tax rate for corporations in the United States and Oklahoma (for purposes of illustration, 37.925% at the date hereof) and (2) the highest applicable effective income tax-rate for individuals (for purposes of illustration, 39.6% at the date hereof) (in each case during such period that the Company's taxable income was reported not considering the effect of the alternative minimum tax), (B) the aggregate net taxable income of the Company on or by that time, and (C) the percentage equal to that Membership Interest over (ii) the total distributions with respect to that Membership Interest on or by that time. 3 "MEMBER" means each Person that is designated as a member on Schedule 1, attached hereto and hereby made as a member of the Company. "Member" means all such Persons collectively in their capacity as members of the Company. "MEMBERSHIP INTEREST" means, with respect to any Member at any time, the percentage of ownership interest of that Member at that time. "OFFER" shall have the meaning ascribed to such term in Section 8.3. "OFFER INTERESTS" shall have the meaning ascribed to such term in Section 8.3. "OFFEROR" shall have the meaning ascribed to such term in Section 8.3. "OPERATING AGREEMENT" means this Agreement of the Company as originally adopted and as amended from time to time. "PERMITTED TRANSFER" means a transfer designated under Section 8.2. "PERSON" means any individual, partnership, professional association, limited liability company, corporation, trust or other entity. "PRIME RATE" means the United States Prime Rate published in the Wall Street Journal on a particular day. "PRO RATA" means the ratio determined by dividing the Membership Interests of Members to whom a particular provision of this Agreement is stated to apply by the aggregate of the Membership Interests of all Members to whom that provision is stated to apply. "PROFITS" means, for each Fiscal Year, the income and gains of the Company determined in accordance with accounting principles consistently applied from year to year employed under the accrual method of accounting and as reported, separately or in the aggregate, as appropriate, on the Company's information tax return filed for federal income tax purposes, plus any income described in Section 705(a)(l)(B) of the Code. "SELLING MEMBER" shall have the meaning ascribed to such term in Section 83. "TRANSFER" means, as a noun, any voluntary or involuntary transfer, sale, pledge, hypothecation, or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge, hypothecate or otherwise dispose of. "UNANIMOUS CONSENT" means the affirmative vote or written approval of all of the Members or Managers, as applicable. 4 ARTICLE II. FORMATION OF THE COMPANY 1.2 Name and Formation. The name of the Company is "THERAPEUTIC SCHOOL SERVICES, L.L.C." The Articles of Organization of the Company were filed in the Office of the Secretary of State of Oklahoma on January 11, 1999. The Company was formed upon the issuance of the Certificate of Organization to the Company, dated January 11, 1999, pursuant to the Act. 1.3 Principal Place of Business. The principal place of business of the Company is 6262 S. Sheridan, Tulsa, Oklahoma, 74133-4.099. The Company may locate its place(s) of business and registered office at any other, place or places within the State of Oklahoma as the Members may from time to time deem necessary or advisable. 1.4 Registered Office and Registered Agent. The Company's registered office and name of registered office shall be as designated in the Company's Articles of Organization. 1.5 Term. The term of existence of the Company shall be fifty (50) years from the date its Articles of Organization were filed with the Secretary of State of Oklahoma, unless the Company is earlier dissolved in accordance with either the provisions of this Agreement or the Act. 1.6 Purposes and Powers. (a) The purpose for which the Company is organized is to transact any or all lawful business for which limited liability companies may be organized under the Act, including, but not limited to, providing billing, consulting and professional services to public school districts, and excluding the business of banking or insurance. (b) The Company shall have any and all powers which are necessary or desirable to carry out the purposes and business of the Company, to the extent the same may be legally exercised by limited liability companies under the Act. The Company shall carry out the foregoing activities pursuant to the arrangements set forth in the Articles of Organization of the Company and this Agreement. 1.7 No State-Law Partnership. The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member or Manager be a partner or joint venturer of any other Member or Manager, for any purposes other than federal and state tax purposes. It is intended that the Company will be considered a partnership for federal income tax purposes and the Members will be considered partners for federal income tax purposes only. No provision of this Agreement shall be deemed or construed to suggest otherwise: 5 ARTICLE III. RIGHTS AND DUTIES OF MANAGERS 1.8 Management. Subject to the limitations set forth herein, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed by the Members. Notwithstanding, the foregoing, the Members shall designate Managers who shall be responsible for overseeing the basic operational activities of the Company. The Managers are authorized to exercise only those powers and authorities expressly granted, in writing, to the Managers by a Majority in Interest of all the Members. 1.9 Restrictions on Authority of Managers. Without first obtaining the approval of the holders of a Majority in Interest of all the Members, the Managers shall not cause or permit the Company to take any of the following actions: (i) the authorization or sale of additional Membership Interests in the Company; (ii) the amendment of the Articles of Organization or to this Agreement; (iii) any merger, consolidation, acquisition, affiliation, sale of assets, share or interest exchange, or other transaction authorized by or subject to the provisions of Part Ten of the Act; (iv) authorization of any loans, guarantees or incurrence of debt or the sale, mortgage, or encumbrance of any real or personal property owned by the Company; (v) the commencement of any litigation or other legal proceeding, or the settlement, disposition of termination of any such litigation or other legal proceeding or of any claim or threat of litigation or other legal proceeding not fully covered by insurance; (vi) the adoption of or approval of amendments or changes to the Articles of Organization or this Agreement; or (vii) approval of any contracts to purchase or provide professional or billing and collection services. In addition, without first obtaining the Unanimous Consent of the Members, the Managers shall not cause or permit the Company to take any of the following actions: (i) a voluntary dissolution of the Company, or (ii) the authorization of any transaction, agreement or action on behalf of the Company that is unrelated to its purpose as set forth in this Agreement or the Articles of Organization or that otherwise contravenes this Agreement. 1.10 Number and Qualifications. The number of Managers of the Company shall initially be three (3) and thereafter shall be determined by the election process set forth in Section 3.4 below, but shall not be less than one (1). No decrease in the number of Managers shall have the effect of shortening the term of any incumbent Manager. Managers need not be residents of the State of Oklahoma. The Managers in their discretion may elect a chairman of the Managers who shall preside at meetings of the Managers. 1.11 Election. At the first annual meeting of the Members and at each annual meeting thereafter, The Brown Schools of Oklahoma, Inc. shall elect two (2) Managers and Therapeutic Educational Consultants, Inc. shall elect one (1) Manager to hold office until the next succeeding annual meeting. Unless removed in 6 accordance with this Agreement, each Manager shall hold office for the term for which he/she is elected and until his/her successor shall be elected and qualified. 1.12 Vacancy. Any vacancy occurring for any reason in the number of Managers shall be filled by the affirmative vote of the Member that originally elected the Manager whose absence created the vacancy. A Manager elected to fill a vacancy shall be elected for the unexpired term of the predecessor in office. 1.13 Removal/Resignation. At a meeting called expressly for such purpose, all or any lesser number of Managers may be removed at any time, with or without cause, by the affirmative vote of the Member that originally elected such Manager(s). Each Manager may resign at any time upon written notice thereof to the Members. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof, and the acceptance of such resignation shall not be necessary to make it effective. 1.14 Place of Meetings. All meetings of the Managers of the Company may be held either within or without the State of Oklahoma. 1.15 Annual Meetings of Managers. The annual meeting of Managers shall be held, without further notice, immediately following the annual meeting of Members, and at the same place, or at such other time and place as shall be fixed with the consent in writing of all the Managers. 1.16 Regular Meetings of Managers. Regular meetings of the Managers may be held with at least fifteen (15) days notice to each Manager, either personally or by mail, telephone or by telecopy, at such time and place either within or without the State of Oklahoma as shall from time to time be determined by the Managers. 1.17 Special Meetings of Managers. Special meetings of the Managers may be called by any Manager or a Majority in Interest of all the Members on at least ten (10) days' notice to each Manager, either personally or by mail, telephone or by telecopy. Such meetings shall be held at the Company's Principal Place of Business at such time as specified in the notice, or at such other time and place as shall be fixed by a Majority in Interest of the Members. 1.18 Quorum. At all meetings of the Managers, the presence of a Majority of the Managers shall be necessary and sufficient to constitute a quorum for the transaction of business unless a greater number is required by law. The act of a Majority of the Managers present at a meeting at which a quorum is present shall be the act of the Managers, except as otherwise provided by law, the Articles of Organization or this Agreement. If a quorum shall not be present at any meeting of the Managers, the Managers present at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 7 1.19 Attendance and Waiver of Notice. Attendance of a Manager at any meeting shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. The business to be transacted at, and the purpose of, any regular or special meeting of the Managers must be specified in the notice or waiver of notice of such meeting. 1.20 Compensation of Managers. Managers, as such, shall not receive any stated salary for their services, but shall receive such compensation for their services as may be from time to time agreed upon by a Majority in Interest of the Members. In addition, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Managers if approved by the affirmative vote of a Majority in Interest of the Members, provided that nothing contained in this Agreement shall be construed to preclude any Manager from serving the Company in any other capacity and receiving compensation for such service. 1.21 Officers. The Company shall have no officers. 1.22 Indemnification. The Managers shall be indemnified and held harmless by the Company, including advancement of expenses, but only to the extent that the Company's assets are sufficient therefor, from and against all claims, liabilities, and expenses arising out of any management of Company affairs, but excluding those caused by the gross negligence or willful misconduct of the Manager, subject to all limitations and requirements imposed by the Articles of Organization of the Company, as amended from time to time, and/or the Act. These indemnification rights are in addition to any rights that the Managers may have against third parties. Any indemnification of or advance of expenses to a person in accordance with this Article III shall be reported in writing to the Members with or before the notice or waiver of notice of the next Members meeting or with or before the next submission to Members of a Consent to Action Without a Meeting and, in any case, within the twelve (12) month period immediately following the date of the indemnification or advance. 1.23 Actions Without a Meeting and Telephone Meetings. Notwithstanding any provision contained in this Article III, all actions of the Managers provided for herein may be taken by written consent without a meeting, or any meeting thereof may be held by means of a conference telephone. Any such action which may be taken by the Managers without a meeting shall be effective only if the written consent or consents are in writing, set forth the action so taken, and are signed by the number of Managers constituting not less than the minimum number of Managers that would be necessary to take such action at a meeting at which all Managers were present and voted. 8 ARTICLE IV. MEMBERSHIP; MEETINGS OF MEMBERS 1.24 Initial Members; Additional Members. The Initial Members of the Company are the Persons executing this Agreement as of the date of this Agreement as Members, each of which is admitted to the Company as a Member effective contemporaneously with the execution by such Person of this Agreement. Additional Persons may be admitted to the Company as Members and Membership Interests may be created and issued to those Persons and to existing Members at the direction of the affirmative vote of a Majority in Interest of the Members, or by purchase of Membership Interests from existing Members in accordance with Section 8.2 of this Agreement. The admission terms, to be determined at the admission date by the affirmative vote of a Majority in Interest of the Members, may provide for the creation of different classes or groups of Members and/or different rights, powers, and duties. The creation of any new class or group must be reflected in an amendment to the Agreement and to the Articles of Organization indicating the different rights, powers, and duties. The admission of a new or substitute Member also must comply with the requirements described elsewhere in this Agreement and will be effective on the date described in Section 8.7 hereof only after the requirements of Section 8.4 have been satisfied. 1.25 Representations and Warranties. Each Member hereby represents and warrants to the Company and each other Member as follows: (a) (i) that Member is duly incorporated, organized, or formed (as applicable), validly existing, and (if applicable) in good standing under the law of the jurisdiction of its incorporation, organization, or formation; (ii) if required by applicable law, that Member is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation, organization, or formation; and (iii) that Member has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, managers, members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by that Member have been duly taken; (b) that Member has duly executed and delivered this Agreement, and they constitute the legal, valid, and binding obligation of that Member enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency, or similar laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity); 9 (c) that Member's authorization, execution, delivery, and performance of this Agreement do not and will not (i) conflict with, or result in a breach, default, or violation of, (A) the organizational documents of such Member, (B) any contract or agreement to which that Member is a party or is otherwise subject, or (C) any law, order, judgment, decree, writ, injunction, or arbitral award to which that Member is subject; or (ii) require any consent, approval, or authorization from, filing or registration with, or notice to, any governmental authority or other Person, unless such requirement has already been satisfied; (d) that Member is familiar with the existing or proposed business, financial condition, properties, operations, and prospects of the Company; it has asked such questions, and conducted such due diligence, concerning such matters and concerning its acquisition of Membership Interests as it has desired to ask and conduct, and all such questions have been answered to its full satisfaction; it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Company; it understands that owning Membership Interests involves various risks, the lack of any public market for Membership Interests, the risk of owning its Membership Interests for an indefinite period of time and the risk of losing its entire investment in the Company; it is able to bear the economic risk of such investment; it is acquiring its Membership Interests for investment, solely for its own beneficial account and not with a view to or any present intention of directly or indirectly selling, transferring, offering to sell or transfer, participating in any distribution, or otherwise disposing of all or a portion of its Membership Interests; and it acknowledges that the Membership Interests have not been registered under the Securities Act or any other applicable federal or state securities laws, and that the Company has no intention, and shall not have any obligation, to register or to obtain an exemption from registration for the Membership Interests or to take action so as to permit sales pursuant to the Securities Act (including Rules 144 and 144A thereunder). 1.26 Place of Meetings. All meetings of the Members shall be held at the principal office of the Company or at such other place within or without the State of Oklahoma as may be determined by the Members and set forth in the respective notice or waivers of notice of such meeting. 1.27 Annual Meetings of Members. The annual meeting of the Members of the Company for the election of Managers and the transaction of such other business as may properly come before the meeting, shall be held at such time and date as shall be determined by the Members from time to time and stated in the notice of the meeting. Such annual meeting shall be called in the same manner as provided in this Agreement for special meetings of the Members, except that the 10 purposes of such meeting must be enumerated in the notice of such meeting only to the extent required by law in the case of annual meetings. 1.28 Regular/Special Meetings of Members. The Members shall hold regular meetings on a quarterly basis at such time and place as determined by the Members. Special meetings of the Members may be called by the holders of not less than fifty percent (50%) of all the Membership Interests. Business transacted at all special meetings shall be confined to the purposes stated in the notice. 1.29 Notice of Meetings of Members. Written or printed notice stating the place, day and hour of the meeting and, in the case of special meetings, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Members or Person calling the meeting, to each Member of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the Member's address as it appears on the transfer records of the Company, with postage prepaid. 1.30 Quorum. A Majority in Interest of the Members shall constitute a quorum at all meetings of the Members, except as otherwise provided by law or the Articles of Organization. Once a quorum is present at the meeting of the Members, the subsequent withdrawal from the meeting of any Member prior to adjournment or the refusal of any Member to vote shall not affect the presence of a quorum at the meeting. If, however, such quorum shall not be present at any meeting of the Members, the Members entitled to vote at such meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the holders of the requisite amount of Membership Interests shall be present or represented. 1.31 Voting on Most Matters. For purposes of voting on matters other than a matter for which the affirmative vote of the holders of a specified portion of the Membership Interests entitled to vote is required by the Act or this Agreement, at any meeting of the Members at which a quorum is present, the act of Members shall be the affirmative vote of the holders of a Majority in Interest of all the Members. 1.32 List of Members Entitled to Vote. The Managers shall make, at least ten (10) days before each meeting of Members, a complete list of the Members entitled to vote at such meeting, or any adjournment of such meeting, arranged in alphabetical order, with the address of and the Membership Interest held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Company and shall be subject to inspection by any Member at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection of any Member during the whole time of the meeting. However, failure to 11 comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. 1.33 Registered Members. The Company shall be entitled to treat the holder of record of any Membership Interest as the holder in fact of such Membership Interest for all purposes, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such Membership Interest on the part of any other Person, whether or not it shall have express or other notice of such claim or interest, except as expressly provided by this Agreement or the laws of the State of Oklahoma. 1.34 Actions Without a Meeting and Telephone Meetings. Notwithstanding any provision contained in this Article IV, all actions of the Members provided for herein may be taken by written consent without a meeting, or any meeting thereof may be held by means of a conference telephone. Any such action which may be taken by the Members without a meeting shall be effective only if the written consent or consents are in writing, set forth the action so taken, and are signed by the holder or holders of Membership Interests constituting not less than the minimum amount of Membership Interests that would be necessary to take such action at a meeting at which the holders of all Membership Interests entitled to vote on the action were present and voted. 1.35 Non-Liability of Members. No Member shall be liable for the debts, liabilities or obligations of the Company beyond such Person's respective Initial Capital Contribution or Additional Capital Contribution. No Member shall be required to contribute to the capital of, or to loan, the Company any funds, except as otherwise required in this Agreement. 1.36 Action by Member. Any action which may be required by law, the Company's Articles of Organization or this Agreement to be taken by a Member as a member of the Company shall be evidenced in writing, signed by an authorized representative of such Member for and on behalf of such Member and shall be filed in the minute book of the Company as part of the permanent records of the Company. Unless the board of directors, or other body having an equivalent authority, of a Member entitled to vote has designated a different person to exercise the Member's voting rights, the president of such Member, or a person who is designated in a written instrument executed by such president and delivered to the Company, shall be entitled to exercise a voting right on behalf of such Member. In connection with this provision, the Company shall be entitled to rely upon any written instrument received by it purporting to be executed by the president of a Member. 1.37 Lack of Authority. No Member has the authority or power to act for or on behalf of the Company, to do any acts that would be binding on the Company or 12 to incur any expenditures on behalf of the Company, without the express written authorization of a Majority in Interest of the Members. ARTICLE V. CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS 1.38 Capital Contributions. (1) Upon the execution of this Agreement, each Member shall contribute capital to the Company in the amount set forth as the Initial Capital Contribution of such Member on Schedule 1, attached hereto. Such contribution shall be the Initial Capital Contribution of each such Member and, upon such contribution, each such Member shall receive the Membership Interest set forth opposite of such Member's name on Schedule 1. (2) If at any time the Members determine that the Company has insufficient funds to carry out the purposes of the Company, a Majority in Interest of the Members may notify the Members, in writing, to make Additional Capital Contributions to the Company. (3) In the event that any Member fails to make any Additional Capital Contributions within thirty (30) Business Days after receipt of written notice calling for such Additional Capital Contribution, the Member so failing to make such Additional Capital Contribution(s) shall be in Default, and the Company and each other, non-defaulting Member shall be entitled to offset against any payments to be made to such defaulting Member any amounts payable by the Company and such other Member plus interest thereon accrued at an annual rate equal to the Prime Rate plus two percent (2%) or, if less, the highest rate permitted by Oklahoma law. (4) No Member shall be paid interest on any Capital Contribution. 1.39 Capital Accounts. (1) A separate Capital Account shall be maintained for each Member in accordance with the requirements of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. (2) In the event of a Permitted Transfer, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the Transferred Membership Interest. 1.40 Withdrawal or Reduction of Capital Contributions. (1) A Member shall not receive out of the Company's property any part of its Capital Contribution until all liabilities of the Company, except the liabilities to 13 Members on account of their Capital Contributions, have been paid and there remains property of the Company sufficient to pay such liabilities. (2) No Member shall have the right to withdraw all or any part of its Capital Contribution or to receive any return on any portion of its Capital Contribution, except as may be otherwise specifically provided in this Agreement. Under circumstances involving a return of any Capital Contribution, no Member shall have the right to receive property other than cash. (3) No Member shall have priority over any other Member, either as to the return of Capital Contributions or as to Profits, Losses or distributions; provided that this subsection shall not apply to loans (as distinguished from Capital Contributions) which a Member has made to the Company, ARTICLE VI. ALLOCATIONS AND DISTRIBUTIONS 1.41 Allocations of Profits and Losses. Except as provided by any resolutions of the Members, or unless another allocation is required by Treasury Regulations issued under Section 704(b) of the Tax Code for purposes of determining the Member's Capital Accounts, the Profits and Losses of the Company for each Fiscal Year shall be allocated among the Members Pro Rata. Any credit available for federal income tax purposes shall be allocated among the Members in the same manner. For purposes of computing the amount of Profits and Losses, the determination, recognition and classification of each such item shall be the same as its determination, recognition and classification for federal income tax purposes, unless otherwise required by Treasury Regulations issued under Section 704(b) of the Code. 1.42 Distributions. All distributions of Distributable Cash or other property shall be made to the Members Pro Rata. Except as provided in Section 6.3 and Section 6.4, all distributions of Distributable Cash and property shall be made on a quarterly basis during the last week of each calendar quarter. All amounts withheld pursuant to the Code or any provisions of state or local tax laws with respect to any payment or distribution to the Members from the Company shall be treated as amounts distributed to the relevant Member or Members pursuant to this Section 6.2. 1.43 Tax Distributions. Subject to Section 6.4 and if approved by a Majority in Interest of the Members, the Company shall distribute to each Member an amount equal to the Maximum Tax Liability at such times so that the Members receive such distributions prior to the times that they would be required to pay taxes on their allocable share of the Company's taxable income; provided, that such date is not less than ten (10) days prior to the due date thereof. 14 1.44 Limitation Upon Distribution. No distribution shall be declared and paid unless (i) such distribution has been approved by a Majority in Interest of the Members, and (ii) if after the distribution is made, the value of assets of the Company would exceed the liabilities of the Company, except liabilities to Members on account of their Capital Contributions. 1.45 Accounting Principles. The Profits and Losses of the Company shall be determined in accordance with accounting principles applied on a consistent basis under the accrual method of accounting. 1.46 Records and Reports. At the expense of the Company, the Managers shall maintain records and accounts of all operations and expenditures of the Company, At a minimum, the Company shall keep at its principal place of business the following records: (1) A current list that states: (1) The name and mailing address of each Member; and (2) The Membership Interest owned by each Member; (2) Copies of the federal, state and local information or income tax returns for each of the Company's six most recent tax years; (3) A copy of the Articles of Organization and Operating Agreement, all amendments or restatements, executed copies of any powers of attorney, and copies of any document that creates, in the manner provided by the Articles of Organization or Operating Agreement, classes or groups of Members; (4) Correct and complete books and records of account of the Company; and (5) Any other books, records or documents required by the Act or other applicable law. Any Member may demand an accounting of the Company's records or inspect the books and records of the Company. The Managers shall provide financial statements, for the Company to the Members on a monthly basis. 1.47 Returns and Other Elections. The Managers shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Members within seventy-five (75) days after the end of each Fiscal Year. All, elections permitted to be made 15 by the Company under federal or state laws shall be made by the Managers with the consent of a Majority in Interest of the Members. The Members shall designate the "Tax Matters Partner" of the Company for purposes of the Code. ARTICLE VII. DISSOLUTION AND TERMINATION 1.48 Dissolution. (1) The Company shall be dissolved upon the first of the following to occur: (1) The expiration of the period fixed for the duration of the Company; (2) The election to dissolve the Company by the holders of all of the Membership Interests; (3) The expulsion, bankruptcy, withdrawal or dissolution of any Member, or the occurrence of any other event which terminates the continued membership of any Member, unless there is at least one remaining Member and the business of the Company is continued by the holders of the remaining Membership Interests within ninety (90) days; or (4) The entry of a decree of judicial dissolution under Section 2038 of the Act. (2) Upon dissolution of the Company, the business and affairs of the Company shall terminate, and the assets of the Company shall be liquidated under this Article VII. The Members shall act as liquidator. The cost of dissolution shall be borne as a Company expense. (3) Dissolution of the Company shall be effective as of the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until there has been a winding up of the Company's business and affairs, and the assets of the Company have been distributed as provided in Section 7.2. (4) Upon dissolution of the Company, the Members may cause any part or all of the assets of the Company to be sold in such manner as the Members shall determine in an effort to obtain the best prices for such assets; provided, however that the Members may distribute assets of the Company in kind to the Members to the extent practicable. 1.49 Distribution of Assets Upon Dissolution. In settling accounts after dissolution, the assets of the Company shall be paid in the following order: 16 (1) First, to creditors, in the order of priority as provided by applicable law, except those to Members on account of their Capital Contributions; (2) Second, an amount equal to the then remaining credit balances in the Capital Accounts of the Members shall be distributed to the Members in proportion to the amount of such balances; and (3) Third, any remainder shall be distributed to the Members Pro Rata. 1.50 Distributions in Kind. If any assets of the Company are distributed in kind, such assets shall be distributed to the Members entitled thereto as tenants common in the same proportions as the Members would have been entitled to cash distributions if such property had been sold for cash and the net proceeds thereof distributed to the Members. In the event that distributions, in kind are made to the Members upon dissolution and liquidation of the Company, the Capital Account balances of such Members shall be adjusted to reflect the Members' allocable share of gain or loss which would have resulted if the distributed property had been sold at its fair market value. All distributions in kind to the Members shall be made subject to the liability of each distributee for costs, expenses and liabilities theretofore incurred or for which the Company has committed prior to the date of termination and those costs, expenses and liabilities shall be allocated to the distributee pursuant to Section 7.3. The distribution of cash or property to a Member in accordance with the provisions of this Section 7.3 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company's property. To the extent that a Member returns funds to the Company, it has no claim against the other Members for those funds. 1.51 Articles of Dissolution. When all liabilities and obligations of the Company have been paid or discharged, or adequate provision has been made therefor, and all of the remaining property and assets of the Company have been distributed to the Members according to their respective rights and interests, the Articles of Dissolution shall be executed on behalf of the Company by an authorized Member and shall be filed with the Secretary of State of Oklahoma, and the Members shall execute, acknowledge and file any and all other instruments necessary or appropriate to reflect the dissolution and termination of the Company. 1.52 Deficit Capital Accounts. Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or rule of law to the contrary, no Member shall be required to restore to the Company or pay to any other Member any deficit that may exist in the Capital Account of the Member upon dissolution and liquidation of the Company. 17 ARTICLE VIII. TRANSFER OF MEMBERSHIP INTERESTS 1.53 Restrictions on Transfers. Except as expressly permitted or required by this Agreement, no Member shall Transfer all or any portion of its Membership Interests or any rights therein without the approval of a Majority in Interest of the Members. Any Transfer or attempted Transfer by any Member in violation of the preceding sentence shall be null and void and of no effect whatever. Each Member hereby acknowledges the reasonableness of the restrictions on Transfer imposed by this Agreement in view of the Company purposes and the relationship of the Members. Accordingly, the restrictions on Transfer contained herein shall be specifically enforceable. Each Member hereby further agrees to hold the Company and each Member (and each Member's successors and assigns) wholly and completely harmless from any cost, liability, or damage (including, without limitation, liabilities for income taxes and costs of enforcing this restriction or this indemnity) incurred by any of such indemnified Persons as a result of a Transfer or an attempted Transfer in violation of this Agreement 1.54 Permitted Transfers. Subject to the conditions and restrictions set forth in Section 8.4, a Member may at any time Transfer all or any portion of its Membership Interests to (i) any other Member, (ii) the transferor's administrator, trustee, or other legal representative to whom the Membership Interests are transferred involuntarily by operation of law, (iii) with the approval of a Majority in Interest of the Members, which consent may be withheld or granted for any reason, to any other Person that qualifies as a Member, or (iv) in compliance with the terms and provisions of Section 8.3 (any such Transfer being referred to in this Agreement as a "Permitted Transfer"). 1.55 Right of First Refusal. (a) No Member shall Transfer any Membership Interest to any other party by sale, gift or otherwise, unless it (the "Selling Member") has received from such other party (the "Offerer") a bona fide, noncollusive offer (the "Offer") to buy such Membership interest (the "Offer Interests") for all cash, which has been verified in writing by the Offeror. Before making such a transfer, the Selling Member shall first give notice in writing to the Company informing it of its right of first refusal to purchase such Membership Interest, upon the terms and conditions set out in the Offer. Such notice shall include a true and correct copy of the Offer and the financial statements of the Offeror or a bona fide lender's commitment in writing evidencing the Offerer's ability to pay. (b) Upon receipt of written notice from the Selling Member under this section, the Managers shall call a special meeting of the Members to be held within thirty (30) days from the date of receipt of such notice to determine whether a Majority in Interest of the Members (excluding the Selling Member) desires that the 18 Company purchase any portion or all of the Offer Interests. The Company shall have ninety (90) days from the date of the notice to the Company of the Offer to exercise, by written notice, the right of the Company to purchase any or all of the Offer Interests. If no written notice to the Selling Member is given, or the special meeting is not held within the prescribed time limits, the Company shall be deemed to have failed to exercise its option to purchase the Offer Interests. (c) Once the Company has exercised its option under this Section 8.3 or has failed or is deemed to have failed to exercise its option under this Section 8.3, the Selling Member shall give notice in writing to the Members informing them of their rights of first refusal to purchase all unpurchased Offer Interests (the "UNPURCHASED OFFER INTERESTS") upon the terms and conditions set out in the Offer. Such notice shall include a true and correct copy of the Offer and the financial statements of the Offeror or a bona fide lender's commitment in writing evidencing the Offerer's ability to pay. Within thirty (30) days of receipt of the notice from the Selling Member that the Company did not elect to purchase all of the Offer Interests in accordance with this Section 8.3, each of the Members (excluding the Selling Member) shall have the option to purchase, in accordance with the terms of the Offer, up to a portion of the Unpurchased Offer Interests equal to the number of Unpurchased Offer Interests multiplied by the ratio of the Membership Interest of such Member to the aggregate Membership Interests of all Members (excluding the Selling Member) who desire to purchase up to a portion of the Unpurchased Offer Interests. A Member desiring to exercise its option under this Section 8.3 shall give written notice thereof to the Selling Member, to be dated and sent no later than thirty (30) days after such Member's receipt of notice of the Offer and the Unpurchased Offer Interests. Failure to so notify the Selling Member proposing this Offer shall be deemed a failure to exercise such option. (d) Once the Company and all of the other Members have exercised their options under this Section 8.3 or have failed and are deemed to have failed to exercise their options under this Section 8.3, then the Selling Member may sell, within thirty (30) days after such date, to the Person or entity making the Offer such Membership Interest which the Company and the other Members have not elected to purchase pursuant to this Section 8.3 on the terms in the Offer. After the expiration of such 30-day period, the Selling Member's right to sell any of its Membership Interest pursuant to this Section 8.3 shall terminate, and the terms of Section 8.3 shall again become effective. 1.56 Conditions to and Restrictions on Permitted Transfers. A Transfer shall not be treated as a Permitted Transfer under Section 8.2 unless and until the following conditions are satisfied: (1) Execution of Agreements. Except in the case of a Transfer of Membership Interests involuntarily by operation of law, the transferor and transferee execute and deliver to the Company documents and instruments of 19 conveyance necessary or appropriate in the opinion of counsel to the Company to effect the Transfer and to confirm the agreement of the transferee to be bound by the provisions of this Article VIII. In any case not described in the preceding sentence, the Transfer must be confirmed by presentation to the Company of legal evidence of the Transfer, in form and substance satisfactory to counsel to the Company. In all cases, the Company shall be reimbursed by the transferor and/or transferee for all costs and expenses that if the Company reasonably incurs in connection with the Transfer. (2) Opinion of Counsel. Except in the case of a Transfer involuntarily by operation of law, the transferor shall furnish to the Company an opinion of counsel satisfactory to the Company that the Transfer shall not cause the Company to terminate as a partnership for federal income tax purposes. The Members may waive this requirement. (3) Required Information. The transferor and transferee shall furnish to the Company the transferee's taxpayer identification number and sufficient information to determine the transferee's initial tax basis in the Membership Interests Transferred, and any other information reasonably necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company is not required to make any distribution otherwise provided for in this Agreement with respect to any Transferred Membership Interests until it has received that information. (4) Restrictions. Except in the case of a Transfer of Membership Interests involuntarily by operation of law, either (i) the Membership Interests shall be registered under the Securities Act of 1933, as amended, and any applicable state securities laws, or (ii) the transferor shall provide an opinion of counsel satisfactory to the Company, to the effect that the Transfer is exempt from applicable registration requirements and will not violate any applicable laws regulating the Transfer of securities. 1.57 Prohibited Transfers. Any purported Transfer of Membership Interests that is not a Permitted Transfer is null and void and of no effect whatsoever, provided that, if the Company is required to recognize a Transfer that is not a Permitted Transfer (or if the Company, by the approval of a Majority in Interest of the Members and in its sole discretion, elects to recognize a Transfer that is not a Permitted Transfer), then the Membership Interest Transferred shall be strictly limited to the transferor's rights to allocations and distributions provided by this Agreement with respect to the Transferred Membership Interests, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy the debts, obligations, or liabilities for damages that the transferor or transferee of the Interests may have to the Company. In the case of a Transfer or attempted Transfer of Membership Interests 20 that is not a Permitted Transfer, the parties engaging or attempting to engage in the Transfer shall, indemnify and hold harmless the Company and the other Members from all cost, liability, and damage that any of the indemnified Persons incurs (including, without limitation, incremental tax liability and attorneys' fees and expenses) as a result of the Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby. 1.58 Rights of Unadmitted Assignees. A Person who acquires one or more Membership Interests but who is not admitted as a Member pursuant to Section 8.7 is entitled only to allocations and distributions with respect to the Membership Interests in accordance with this Agreement, but, unless otherwise required by the Act, (i) has no right to any information or accounting of the affairs of the Company, (ii) is not entitled to inspect the books or records of the Company, and (iii) has none of the rights of a Member under the Act or this Agreement. 1.59 Admission of Assignees as Members. Subject to the other provisions of this Article VIII, a transferee of Membership Interests may be admitted to the Company as a Member only on satisfaction of the conditions set forth below in this Section 8.7: (1) The admission is approved by a Majority in Interest of the Members, which consent may be withheld or granted in each Member's sole discretion; (2) The Membership Interests with respect to which the transferee is being admitted were acquired by means of a Permitted Transfer; (3) The transferee becomes a party to this Agreement as a Member and executes the documents and instruments reasonably required by the Managers as necessary or appropriate to confirm the transferee as a Member in the Company and the transferee's agreement to be bound by the terms and conditions hereof; (4) The transferee pays or reimburses the Company for all reasonable legal, filing, and publication costs that the Company incurs in connection with the admission of the transferee as a Member with respect to the Transferred Membership Interests; and (5) The transferee qualifies as a Member and provides the Company with evidence satisfactory to counsel for the Company of the power and authority of the transferee to become a Member and to be bound by the terms and conditions of this Agreement. The admission of any Person as an additional Member becomes effective on the first day of the month immediately following the date on which the name of the Person is recorded on the books and records of the Company and the admission has received the approval of a Majority in Interest of the Members. 21 1.60 Representations and Legend. (1) Representation. Each Member hereby represents and warrants, and covenants and agrees with the Company for the benefit of the Company and all Members, that (i) it is not currently making a market in Membership Interests, (ii) it will not transfer any Interest on an established securities market or a secondary market (or the substantial equivalent thereof) within the meaning of Code Section 7704(b) (and any regulations, proposed regulations, revenue rulings, or other official pronouncements of the Internal Revenue Service or Treasury Department that may be promulgated or published thereunder), and (iii) if such regulations, revenue rulings, or other pronouncements treat any or all arrangements which facilitate the selling of partnership interests and which are commonly referred to as "matching services" as being a secondary market or substantial equivalent thereof, it will not Transfer any Interest through a matching service that is not approved by a Majority in Interest. Each Member further agrees that it will not Transfer any Membership Interest to any Person unless the Person agrees to be bound by this Section 8.8(a) and to Transfer Interests only to Persons who agree to be similarly bound. (2) Legend. Each Member hereby represents and warrants to the Company that the Member's acquisition of Interests hereunder is made as a principal for the Member's own account and not for resale or distribution. Each Member hereby agrees that the following or a similar legend may be placed on any counterpart of this Agreement, the Certificate, or any other document or instrument evidencing ownership of Membership Interests: THE MEMBERSHIP INTERESTS REFERENCED HEREIN HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE MANAGERS OF THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE MANAGERS OF THE COMPANY OF OTHER EVIDENCE SATISFACTORY TO THE MANAGERS TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, 22 ANY SALE OR OTHER TRANSFER OF MEMBERSHIP INTEREST IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THIS AGREEMENT. 1.61 Distributions and Allocations. If a Membership Interest is Transferred, during any accounting period in compliance with the provisions of this Article VIII, Profits, Losses, each item thereof, and all other items attributable to the Membership Interest for the period shall be divided and allocated between the transferor and the transferee by taking, into account their varying interests during the period in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Members. All distributions on or before the date of the Transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes of making the allocations and distributions, the Company shall recognize the Transfer not later than the end of the calendar month during which it is given notice of the Transfer, but if the Company does not receive a notice stating the date the Interest was Transferred and the other information reasonably required by the Members within thirty (30) days after the end of the accounting period during which the Transfer occurs, then all of the items shall be allocated, and all distributions shall be made, to the Person who was the owner of the Membership Interest, according to the books and records of the Company, on the last day of the accounting period during which the Transfer occurs. Neither the Company nor any Member shall, incur any liability for making, allocations and distributions in accordance with the provisions of this Section 8.9, whether or not any Member or the Company has knowledge of any Transfer of ownership of any Membership Interest. 1.62 Tax Matters. On the Transfer of all or part of a Membership Interest in the Company, at the request of the transferee of the interest, the Members may cause the Company to elect, pursuant to Section 754 of the Code to adjust the tax basis of the Company's properties as provided by Sections 734 and 743 of the Code. ARTICLE IX. BUY-OUT 9.1 Buy-out Events. This Article IX shall apply to any of the following events (each a "Buy-out Event"): (a) Any (i) Bankruptcy of a Member, (ii) institution of legal proceedings because or by reason of the insolvency of a Member unless dismissed without a finding of insolvency, (iii) levy upon the shares of Interest held by a Member by a creditor or claimant, or any other seizure or sale by legal process, if it is determined by legal counsel for the Company that such levy is made in good faith and based upon a bona fide claim, (iv) the general assignment for the benefit of creditors, (v) the filing, or consent to the filing of, a petition under any federal or state insolvency, bankruptcy, reorganization or similar law (collectively "Bankruptcy Law") or 23 petition for, or consent to, the taking of possession by a trustee, receiver or similar official of any of his or her assets unless dismissed, terminated or lifted within sixty (60) days thereafter without impact on ownership of Interest, (vi) the adjudication as bankrupt or insolvent under any Bankruptcy Law by a judgment that has become final, or (vii) the attachment, sequestration, foreclosure, turnover order, writ of execution or garnishment, or any other method of seizure to be levied, against any Interest without such attachment, sequestration, foreclosure, turnover order, writ of execution, garnishment of other method of seizure having been terminated, annulled or reversed within thirty (30) days after the commencement or effectiveness thereof; or (b) Any proposed or attempted pledge, sale, exchange, gift or other disposition or transfer of all or any of the Membership Interest owned by a Member in any manner whatsoever unless authorized hereunder or approved by a Majority in Interest of the Members; or (c) The completion of divorce proceedings by or against a Member or a partner or owner of a Member, or the entering into any property settlement arrangement or agreement in connection therewith, pursuant to which such Member's or partner's or owner's interest in the Member is to be diluted, lessened or impaired; provided, however, that if the Member or partner or owner is able to produce evidence reasonably satisfactory to the remaining Members that his or her interest in the Membership Interest or the Member is not community property, including as a result of purchase of the spouse's interest in the interest, none of the events described in this paragraph (C) will be deemed to constitute a Buy-out Event; or (d) A Member shall withdraw from being a Member of the Company; or (e) A Member shall be removed from Membership; or (f) A Member shall commit a Default. In each case, the Member with respect to whom a Buy-out Event has occurred is referred to herein as the "Affected Member." The Affected Member shall automatically cease to be a Member upon the occurrence of a Buy-out Event. For purposes of this Article, any determination made by a Majority in Interest of the Members that a Buy-out Event has occurred shall be conclusive and binding upon the parties hereto and their respective successors or assigns; such determination shall, however, be subject to the standards of reasonableness and good faith, in accordance with the purposes of this Article concerning the desired continuation of management and control of the Company. It shall not be a requirement hereunder that the Members make a determination in every instance that a Buy-out Event has so occurred, but such determination shall be made in those instances in which there may be some question as to whether a Buy-out Event 24 did in fact occur. Upon such determination by the Members that a Buy-out Event has in fact occurred, in order to inform the Member of such occurrence, the Company shall deliver a written notice stating that such a Buy-out Event has occurred, the date thereof and the reasons for the determination, to the Member or his or her legal representative. 9.2 Procedure for Member-Related Buy-out Events. An Affected Member (or its representative) shall promptly give notice of the Buy-out Event to the Company and the other Members. Each of the other Members shall have the option to acquire the Membership Interests of the Affected Member by notifying the Affected Member (or its representative) of such exercise within thirty (30) days following such Member's receipt of the Affected Member's notice. Any Member that does not respond during the applicable period shall be deemed to have waived its right. If more than one Member exercises its right, each exercising Member shall participate in the purchase in the same proportion that its ownership bears to the aggregate ownership of all exercising Members (or on such other basis as the exercising Members may mutually agree). The Purchase Price (defined in accordance with Section 9.3) paid by a Member exercising the option hereunder shall be added to and deemed a part of the Member's Capital Contribution. The Company shall be obligated to buy the Affected Member's Memberships-Interests that are not the subject of exercise by Members of the option granted to Members (other than the Affected Member) under this Section 9.2 or that are not actually purchased by such Members. 9.3 Purchase Price. If a Member sells its Membership Interest pursuant to this Article IX, the Purchase Price of such Membership Interest shall be the lesser of (i) the amount of Capital Contribution made by the Member to purchase such interest, or (ii) the book value of such interest as determined by the Company's accountant. At the closing, the Persons who are purchasing the Membership Interest shall pay the Affected Member the Purchase Price in cash or, at the Company's election, the Company may execute a promissory note to the Affected Member with a term not to exceed one (1) year and accruing interest at the Prime Interest Rate. 9.4 Closing. If an option to purchase is exercised in accordance with the other provisions of this Article IX, the closing of such purchase shall occur at the principal place of business of the Company on the ninetieth (90th) day after the purchasers receive notice of the Buy-Out Event from the Affected Member unless the parties to such closing agree upon a different place or date. At the closing, (a) the Affected Member shall execute and deliver to the purchasers (i) an assignment of the Affected Member's Membership Interests (as applicable), in form and substance reasonably acceptable to the purchasers, containing a general warranty of title as to such Membership Interests (including that such Membership Interests are free and clear of any encumbrances), and (ii) any other instruments reasonably requested by the purchasers to give effect to the purchase; and (b) the purchasers 25 shall deliver to the Seller (i) the portion of the Purchase Price required to be paid at the closing, in immediately available funds, or (ii) an unsecured promissory note reflecting the payment terms established in Section 9.3. ARTICLE X. MISCELLANEOUS PROVISIONS 1.63 Notices. Any notice, demand or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally to the party or to an officer of the party to whom the same is directed or, if sent by registered or certified mail, postage and charges prepaid, addressed to the Member's and/or Company's address as it appears in the Company's records, as appropriate. Except as otherwise provided herein, any such notice shall be deemed to be given three (3) Business Days after the date on which the same was deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and sent as aforesaid. 1.64 Application of Oklahoma Law. This Agreement and the application or interpretation hereof, shall be governed exclusively by the laws of the State of Oklahoma and specifically the Act. 1.65 No Action for Partition. No Member shall have any right to maintain any action for partition with respect to the property of the Company. 1.66 Headings and Sections. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof. Unless the context requires otherwise, all references in this Agreement to Sections or Articles shall be deemed to mean and refer to Sections or Articles of this Agreement. 1.67 Amendments. The Articles of Organization of the Company and this Agreement may be amended, supplemented or restated only upon the written consent of a Majority in Interest of the Members. Upon obtaining the approval of any amendment to the Articles of Organization, the Managers shall cause Articles of Amendment in accordance with the Act to be prepared, and such Articles of Amendment shall be executed by no less than one Member and shall be filed in accordance with the Act. 1.68 Number and Gender. Where the context so indicates, the masculine shall include the feminine, the neuter, shall include the masculine and feminine, the singular shall include the plural. 1.69 Binding Effect. Except as herein otherwise provided to the contrary, this Agreement shall be binding upon and inure to the benefit of the Members, their legal representatives, successors and assigns. 26 1.70 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and shall be binding upon the Member who executed the same, but all of such counterparts shall constitute the same Agreement. 1.71 Checks. All checks and demands for money and notes of the Company shall be signed by such Managers or representatives of the Company as a Majority in Interest of the Members may from time to time designate. 1.72 Accounts. The Members shall establish and maintain one or more separate bank and investment accounts and arrangements for the Company funds in the Company name with financial institutions and firms that the Members may determine. The Managers may not commingle the Company's funds with the funds of any Member. 1.73 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. 1.74 Entire Agreement. This Agreement constitutes the entire agreement of the Members relating to the Company and supersedes all prior contracts or agreements with respect to the Company, whether oral or written. 1.75 Effect of Waiver or Consent. A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Company. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default until the applicable statute of limitations period has run. 1.76 Notice to Members of Provisions of this Agreement. By executing this Agreement each Member acknowledges that it has actual notice of (a) all of the provisions of this Agreement, including, without limitation, the restrictions on the transfer of Membership Interests set forth in Article VIII and (b) all of the 27 provisions of the Articles of Organization. Each Member hereby agrees that this Agreement constitutes adequate notice of all such provisions. 1.77 Dispute Resolution. (1) Discussions; Arbitration. In addition to any other applicable provision, in this Agreement, the Disputing Members will discuss resolution of any claim or controversy arising out of or relating to the performance, validity, construction or enforceability of this Agreement or an alleged breach hereof. If a satisfactory resolution does not arise from informal discussions, either party may submit to the other a written description of the claim or controversy and a proposed method for resolution. The party receiving the complaint must respond to the other party within thirty (30) days by either accepting, rejecting or modifying the proposed method of resolution. If the parties remain unable to resolve the claim or controversy, the parties shall submit the claim or controversy to binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrators) may be entered in any court having jurisdiction thereof. (2) Selection of Arbitrator(s). The selection of arbitrators shall be conducted pursuant to the rules for resolution of commercial disputes promulgated by the American Arbitration Association. The party or parties giving notice shall request a listing of available arbitrators from the American Arbitration Association and each party shall respond in the selection process within fifteen (15) days after receipt of such listings until a single arbitrator is chosen if the amount in controversy is equal to or less than Two Hundred Fifty Thousand Dollars ($250,000), or, if the amount in controversy exceeds Two Hundred Fifty Thousand Dollars ($250,000), a panel of three (3) arbitrators has been designated. If either party fails to respond within fifteen (15) days, it is agreed that the American Arbitration Association may make such selections as are necessary to complete the selection specified above. Within fifteen (15) days after the selection of the arbitrator(s), the arbitrator(s) shall give written notice to each party as to the time and the place of each meeting, which shall be held in Tulsa, Oklahoma, at which the parties may appear and be heard, which shall be no later than sixty (60) days after certification of the arbitration panel. The applicable rules shall be those in effect at the time for the resolution of commercial disputes promulgated by the American Arbitration Association. The arbitrators shall take such testimony and make such examination and investigations as the arbitrator(s) reasonably deem necessary. The decision of the arbitrator(s) shall be in writing signed by a majority of the panel which decision shall be final and binding upon the parties to the controversy; provided however, in rendering their decisions and making awards, the arbitrator(s) shall not add to, subtract from or otherwise modify the provisions of this Agreement and shall not award punitive damages. 28 (3) Decisions. The decision of the arbitrator(s) shall be final to the extent such decision complies with applicable state and federal law, including any requirement of Oklahoma law existing at such time for judicial review of arbitration proceedings. (4) Other. Except to determine errors of law, there shall be no appeal from the decision of the arbitrators, and upon the rendering of the award, any party thereto may file the arbitrator's decision in the United States District Court for the Northern District of Oklahoma for enforcement as provided by applicable law. No potential arbitrator may serve on the panel and serve as an arbitrator, on the panel unless he or she has agreed in writing to abide and be bound by the requirements of this Section 13.11.4. No discovery will be permitted unless it is expressly authorized by the arbitrator, or a panel upon a showing of undue hardship made by the party seeking discovery. (5) Expenses. The unsuccessful party to the arbitration shall pay to the successful party all costs and expenses, including reasonable attorney's fees, incurred therein by the successful party. The successful party shall be determined by the arbitrator(s) or, if no successful party is determined, each party shall bear its own costs or expenses. (6) Confidentiality. Any information respecting any matter submitted to arbitration in accordance with the foregoing or any documents used in connection with the arbitration proceeding itself shall be treated as confidential and will not be disclosed to anyone not employed or acting on behalf of any party in connection, with such arbitration or used at any time in any manner that is adverse to the interests of any party hereto. ***** The undersigned, being the Members of the Company, do hereby ratify, confirm and approve the adoption of this Agreement as the Operating Agreement of the Company, and do hereby assume and agree to be bound by and to perform all of the terms and provisions set forth in this Agreement. 29 THERAPEUTIC SCHOOL SERVICES, L.L.C (An Oklahoma Limited Liability Company) SCHEDULE I Names, Initial Capital Contributions and Membership Interest of the Members
Names and Addresses of Initial Capital Membership Initial Members Contribution Interest - ------------------------- ------------------------- ---------- The Brown Schools of Oklahoma, Inc. $125,000 90% Therapeutic Educational Goodwill associated with 10% Consultants, Inc. ("TEC") TEC's current operations under the contracts to be assumed by the Company (valued at approximately $14,000).
30 The Brown Schools of Oklahoma, Inc. By: /s/ Gregg C. Waddill, III --------------------------------- Name: Gregg C. Waddill, III --------------------------- Title: Vice President & Secretary -------------------------- Therapeutic Educational Consultants, Inc. By: --------------------------------- Name: --------------------------- Title: -------------------------- 31 EX-3.95 94 g83903exv3w95.txt EX-3.95 CERTIFICATE OF INCORPORATION EXHIBIT 3.95 CERTIFICATE OF INCORPORATION OF TRANSITIONAL CARE VENTURES, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is Transitional Care Ventures, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover, Delaware 19901, which address is located in the County of Kent, and the name of the Corporation's registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, $.01 par value per share. FIFTH: Subject to the provisions of the General Corporation Law of the State of Delaware, the number of Directors of the Corporation shall be determined as provided by the By-Laws. SIXTH: To the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify all persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he is or is threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or because he was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, except as specifically stated therein. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of ss. 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of ss. 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payment of dividends or unlawful stock purchases under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of Delaware is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the 2 fullest extent permitted by the General Corporation Law of Delaware, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of stock of the Corporation and entitled to vote in the election of directors, considered for the purposes of this Article ELEVENTH as one class, shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TWELFTH: The name and address of the incorporator is Joseph J. Romagnoli, Esq., 237 Park Avenue, New York, New York 10017. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 19th day of March, 1993. /s/ Joseph J. Romagnoli ----------------------------------------- Joseph J. Romagnoli Incorporator 3 EX-3.96 95 g83903exv3w96.txt EX-3.96 BYLAWS EXHIBIT 3.96 TRANSITIONAL CARE VENTURES, INC. BY-LAWS ARTICLE I OFFICES The registered office of the corporation shall be in the City of Dover, County of Kent, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II BOOKS The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III STOCKHOLDERS Section 1. ANNUAL MEETINGS. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Monday of October in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. SPECIAL MEETINGS. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as may be specified in the notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. LIST OF STOCKHOLDERS. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. QUORUM. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 5. ORGANIZATION. The President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. VOTING. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. When a quorum is present at any meeting of the stockholders of the Corporation, subject to the Stockholders Agreement (as defined in Article IV), the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. CONSENT. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the state of Delaware or of the certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. Section 8. JUDGES. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV DIRECTORS Section 1. NUMBER, ELECTION AND TERM OF OFFICE. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation and subject to the provisions of the Stockholders Agreement (the "Stockholders Agreement") dated as of April 5, 1993 by and among the Corporation, Ramsay Health Care, Inc., a Delaware corporation ("RHCI") and The Chi Group, Inc., a Delaware corporation ("CGI"). Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, subject to the terms of the Stockholders Agreement requiring stockholder approval for certain matters, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. Section 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Except as hereinafter provided and except as provided in the Stockholders Agreement, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. REMOVALS. Subject to the provisions of the Stockholders Agreement, at any meeting of stockholders of the Corporation called for the purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. ANNUAL MEETINGS. The first meeting of each newly elected Board of Director shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. NOTICE. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. QUORUM. At all meetings of the Board of Directors, the presence of a majority of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. CONSENT. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. COMPENSATION OF DIRECTORS. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. RESIGNATIONS. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V OFFICERS Section 1. NUMBER, ELECTION AND TERM OF OFFICE. The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. PRESIDENT. The President shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. VICE PRESIDENTS. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. SECRETARY. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. Section 5. ASSISTANT SECRETARIES. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. TREASURER. The Treasurer shall have charge of the funds and securities of the corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. ASSISTANT TREASURERS. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. TREASURER'S BOND. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. Section 9. TRANSFER OF DUTIES. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 10. VACANCIES. If the office of President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. REMOVALS. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. COMPENSATION OF OFFICERS. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. RESIGNATIONS. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE VI CONTRACTS, CHECKS AND NOTES Section 1. CONTRACTS. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President or a Vice President. Section 2. CHECKS AND NOTES. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII STOCK Section 1. CERTIFICATES OF STOCK. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. TRANSFER OF STOCK. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII REGISTERED STOCKHOLDERS The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE IX LOST CERTIFICATES Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. ARTICLE X FIXING OF RECORD DATE In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI DIVIDENDS Subject to the relevant provisions of the Certificate of Incorporation and the Stockholders Agreement, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII WAIVER OF NOTICE Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent thereto. ARTICLE XIII SEAL The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." ARTICLE XIV AMENDMENTS Subject to the provisions of the Certificate of Incorporation and subject to the provisions of the Stockholders Agreement, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. EX-3.97 96 g83903exv3w97.txt EX-3.97 CERTIFICATE OF INCORPORATION EXHIBIT 3.97 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF RAMSAY TEXAS, INC. After Receipt of Payment for Stock Pursuant to Section 242 of the General Corporation Law of the State at Delaware The undersigned, Vice President of Ramsay Texas, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: The Certificate of Incorporation of the Corporation is hereby amended by deleting Article FIRST of the Certificate of Incorporation in its present form and substituting therefor a new Article FIRST in the following form: "FIRST: The name of the corporation is Transitional Care Ventures (Texas), Inc. (the "Corporation")."; SECOND: The amendment to the Certificate of Incorporation of the Corporation set forth in this Certificate of Amendment has been duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation law of the State of Delaware, (a) the Board of Directors of the Corporation having duly adopted resolutions setting forth such amendment and declaring its advisability and submitting it to the stockholders of the Corporation for their approval in conformity with the By-laws of the Corporation, and (b) the holders of a majority of the outstanding stock of the Corporation entitled to vote thereon, having duly adopted resolutions setting forth such amendment by a written consent of the stockholders in conformity with the By-laws of the Corporation, there being only one class of stock of the Corporation outstanding. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Amendment to its Certificate of Incorporation to be signed by Bruce R. Soden, its Vice President, and attested by Wallace E. Smith, its Assistant Secretary, as of this l3th day of May, 1993. RAMSAY TEXAS, INC. BY /s/ Bruce R. Soden -------------------------------- Bruce R. Soden Vice President Attest: /s/ Wallace E. Smith - -------------------- Wallace S. Smith Assistant Secretary CERTIFICATE OP INCORPORATION OF RAMSAY TEXAS, INC. THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the corporation is Ramsay Texas, Inc, (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover, Delaware 19901, which address is located in the County of Kent, and the name of the Corporation's registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, $.01 par value per share. FIFTH: Subject to the provisions of the General Corporation Law of the State of Delaware, the number of Directors of the Corporation shall be determined as provided by the By-Laws. SIXTH: To the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or any comparable successor law, as the same may be amended and supplemented from time to time, the Corporation (i) may indemnify all persons whom it shall have power to indemnify thereunder from and against any and all of the expenses, liabilities or other matters referred to in or covered thereby, (ii) shall indemnify each such person if he is or is threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent, of the Corporation or because he was serving the Corporation or any other legal entity in any capacity at the request of the Corporation while a director, officer, employee or agent of the Corporation and (iii) shall pay the expenses of such a current or former director, officer, employee or agent incurred in connection with any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. The indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which those entitled to indemnification or advancement of expenses may be entitled under any by-law, agreement, contract or vote of stockholders or disinterested directors or pursuant to the direction (however embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: In furtherance and not in limitation of the general powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the corporation, except as specifically stated therein, EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the state of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of ss. 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of ss. 279 of Title 6 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. NINTH: Except as otherwise required by the laws of the State of Delaware, the stockholders and directors shall have the power to hold their meetings and to keep the books, documents and papers of the Corporation outside of the State of Delaware, and the Corporation shall have the power to have one or more offices within or without the State of Delaware, at such places as may be from time to time designated by the By-Laws or by resolution of the stockholders or directors. Elections of directors need not be by ballot unless the By-Laws of the Corporation shall so provide. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the unlawful payment of dividends or unlawful stock purchases under Section 174 of the General Corporation law of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of Delaware is amended to further eliminate or limit the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of Delaware, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall be by the affirmative vote of the holders of not less than eighty percent (80%) of the outstanding shares of stock of the Corporation and entitled to vote in the election of directors, considered for the purposes of this Article ELEVENTH as one class, shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. TWELFTH: The name and address of the incorporator is Sean M. Jones, 237 Park Avenue, New York, New York 10017. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 16th day of October, 1992. /s/ Sean M. Jones -------------------------------- Sean M. Jones Incorporator EX-3.98 97 g83903exv3w98.txt EX-3.98 BYLAWS EXHIBIT 3.98 TRANSITIONAL CARE VENTURES (TEXAS), INC. BY-LAWS ARTICLE I Offices The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware. The Corporation may also have offices at such other places, both within and without the State of Delaware, as may from time to time be designated by the Board of Directors. ARTICLE II Books The books and records of the Corporation may be kept (except as otherwise provided by the laws of the State of Delaware) outside of the State of Delaware and at such place or places as may from time to time be designated by the Board of Directors. ARTICLE III Stockholders Section 1. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Delaware as may be designated by the Board of Directors and stated in the notice of the meeting, on the first Monday of October in each year, if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday, at 10:00 o'clock in the forenoon, or such other day as shall be determined by the Board of Directors. Written notice of the place designated for the annual meeting of the stockholders of the Corporation shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days prior to said meeting, but at any meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. Section 2. Special Meetings. Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Delaware for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by the President, or by the holders of a majority of the outstanding shares of capital stock of the Corporation the holders of which are entitled to vote on matters that are to be voted on at such meeting. Any such special meeting of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as may be specified in the 2 notice thereof. Business transacted at any special meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. Except as otherwise expressly required by the laws of the State of Delaware, written notice of each special meeting, stating the day, hour and place, and in general terms the business to be transacted thereat, shall be delivered personally or mailed to each stockholder entitled to vote thereat not less than ten (10) and not more than sixty (60) days before the meeting. If mailed, said notice shall be directed to each stockholder at his address as the same appears on the stock ledger of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in said request. At any special meeting at which all stockholders shall be present, or of which all stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. Section 3. List of Stockholders. The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place 3 within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4. Quorum. At any meeting of the stockholders of the Corporation, except as otherwise expressly provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, there must be present, either in person or by proxy, in order to constitute a quorum, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock which is represented at such meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 5. Organization. The President, or in his absence any Vice President, shall call to order meetings of the stockholders and shall act as chairman 4 of such meetings. The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the Corporation to act as chairman of any meeting in the absence of the President and all of the Vice Presidents. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Voting. Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each stockholder of record of the Corporation shall, at every meeting of the stockholders of the Corporation, be entitled to one (1) vote for each share of stock standing in his name on the books of the Corporation on any matter on which he is entitled to vote, and such votes may be cast either in person or by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three (3) years from its date, unless said proxy provides for a longer period. If the Certificate of Incorporation provides for more or less than one (1) vote for any share of capital stock of the Corporation, on any matter, then any and every reference in these By-Laws to a majority or other proportion of capital stock shall refer to such majority or other proportion of the votes of such stock. The vote on all elections of Directors and on any other questions before the meeting need not be by ballot, except upon demand of any stockholder. 5 When a quorum is present at any meeting of the stockholders of the Corporation, subject to the Stockholders Agreement (as defined in Article IV), the vote of the holders of a majority of the capital stock entitled to vote at such meeting and present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, under any provision of the laws of the State of Delaware or of the Certificate of Incorporation, a different vote is required in which case such provision shall govern and control the decision of such question. Section 7. Consent. Except as otherwise provided by the Certificate of Incorporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the laws of the state of Delaware or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented thereto in writing. Section 8. Judges. At every meeting of the stockholders of the Corporation at which a vote by ballot is taken, the polls shall be opened and closed, the proxies 6 and ballots shall be received and taken in charge, and all questions touching the qualifications of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by, two (2) judges. Said judges shall be appointed by the Board of Directors before the meeting, or, if no such appointment shall have been made, by the presiding officer of the meeting. If for any reason any of the judges previously appointed shall fail to attend or refuse or be unable to serve, judges in place of any so failing to attend, or refusing or unable to serve, shall be appointed in like manner. ARTICLE IV Directors Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be between one (1) and eight (8). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation and subject to the provisions of the Stockholders Agreement (the "Stockholders Agreement") dated as of April 5, 1993 by and among Transitional Care Ventures, Inc., a Delaware Corporation, Ramsay Health Care, Inc., a Delaware corporation and The Chi Group, Inc., a Delaware corporation. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article, to serve until the next annual meeting of 7 stockholders and until their respective successors are duly elected and have qualified. In addition to the powers by these By-Laws expressly conferred upon them, subject to the terms of the Stockholders Agreement requiring stockholder approval for certain matters, the Board may exercise all such powers of the Corporation as are not by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws required to be exercised or done by the stockholders. Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided and except as provided in the Stockholders Agreement, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office or by a sole remaining Director. In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event that vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for the purpose. Directors chosen or elected as aforesaid shall hold office until the next annual meeting of stockholders and until their respective successors are duly elected and have qualified. Section 3. Removals. Subject to the provisions of the Stockholders Agreement, at any meeting of stockholders of the Corporation called for the 8 purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office, with or without cause, any or all of the Directors. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the President or any two Directors on notice given to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Delaware, as shall be specified in the notices thereof. Section 6. Annual Meetings. The first meeting of each newly elected Board of Director shall be held as soon as practicable after each annual election of Directors and on the same day, at the same place at which regular meetings of the Board of Directors are held, or at such other time and place as may be provided by resolution of the Board. Such meeting may be held at any other time or place which shall be specified in a notice given, as hereinafter provided, for special meetings of the Board of Directors. Section 7. Notice. Notice of any meeting of the Board of Directors requiring notice shall be given to each Director by mailing the same, addressed to him at his residence or usual place of business, at least forty-eight (48) hours, or shall be sent 9 to him at such place by facsimile transmission, courier, telegraph, cable or wireless, or shall be delivered personally or by telephone, at least twelve (12) hours, before the time fixed for the meeting. At any meeting at which every Director shall be present or at which all Directors not present shall waive notice in writing, any and all business may be transacted even though no notice shall have been given. Section 8. Quorum. At all meetings of the Board of Directors, the presence of a majority of the Directors constituting the Board shall constitute a quorum for the transaction of business. Except as may be otherwise specifically provided by the laws of the State of Delaware, the Certificate of Incorporation or these By-Laws, the affirmative vote of a majority of the Directors present at the time of such vote shall be the act of the Board of Directors if a quorum is present. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Section 10. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or 10 similar communications equipment by means of which all persons participating in such meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. ARTICLE V Officers Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and may at the discretion of the Board of Directors include one or more Assistant Treasurers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the annual meeting of the stockholders, and shall hold their respective offices 11 until their successors are duly elected and have qualified. Any number of offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interest of the Corporation may require and may fix their duties and terms of office. Section 2. President. The President shall be the chief executive officer of the Corporation and shall have general and active management of the business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of Delaware. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these By-Laws. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered. He may sign, with the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certificates of stock of the Corporation. He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly elected or appointed officers, subject to the 12 approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these By-Laws, he shall, except as otherwise specifically provided by the laws of the State of Delaware, have such other powers and duties as shall from time to time be assigned to him by the Board of Directors. Section 3. Vice Presidents. The Vice Presidents shall perform such duties as the President or the Board of Directors shall require. Any Vice President shall, during the absence or incapacity of the President, assume and perform his duties. Section 4. Secretary. The Secretary may sign all certificates of stock of the Corporation. He shall record all the proceedings of the meetings of the Board of Directors and of the stockholders of the Corporation in books to be kept for that purpose. He shall have custody of the seal of the Corporation and may affix the same to any instrument requiring such seal when authorized by the Board of Directors, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each; and he shall keep such stock and transfer books open daily during business hours to the inspection of every stockholder and for transfer of stock. He shall notify the Directors and stockholders of their respective meetings as required by law or by these By-Laws, and shall perform such other duties as may be required by law or by these By-Laws, or which may be assigned to him from time to time by the Board of Directors. 13 Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity. Section 6. Treasurer. The Treasurer shall have charge of the funds and securities of the Corporation. He may sign all certificates of stock. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation. Section 7. Assistant Treasurers. The Assistant Treasurers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity. Section 8. Treasurer's Bond. The Treasurer and Assistant Treasurers shall, if required so to do by the Board of Directors, each give a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as the Board of Directors may require. 14 Section 9. Transfer of Duties. The Board of Directors in its absolute discretion may transfer the power and duties, in whole or in part, of any officer to any other officer, or persons, notwithstanding the provisions of these By-Laws, except as otherwise provided by the laws of the State of Delaware. Section 10. Vacancies. If the office of President, Vice President, Secretary or Treasurer, or of any other officer or agent becomes vacant for any reason, the Board of Directors may choose a successor to hold office for the unexpired term. Section 11. Removals. At any meeting of the Board of Directors called for the purpose, any officer or agent of the Corporation may be removed from office, with or without cause, by the affirmative vote of a majority of the entire Board of Directors. Section 12. Compensation of Officers. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 13. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice to the Board of Directors or to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. 15 ARTICLE VI Contracts, Checks and Notes Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the name of the Corporation by the President or a Vice President. Section 2. Checks and Notes. All checks, drafts, bills of exchange and promissory notes and other negotiable instruments of the Corporation shall be signed by such officers or agents of the Corporation as may be designated by the Board of Directors. ARTICLE VII Stock Section 1. Certificates of Stock. The certificates for shares of the stock of the Corporation shall be in such form, not inconsistent with the Certificate of Incorporation, as shall be prepared or approved by the Board of Directors. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certifying the number of shares owned by him and the date of issue; and no certificate shall be valid unless so signed. All certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Where a certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or, (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any 16 officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates surrendered to the Corporation shall be cancelled and, except in the case of lost or destroyed certificates, no new certificates shall be issued until the former certificates for the same number of shares of the same class of stock shall have been surrendered and cancelled. Section 2. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VIII Registered Stockholders The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. 17 ARTICLE IX Lost Certificates Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of the fact and advertise the same in such manner as the Board of Directors may require, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in a sum sufficient, in the opinion of the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed may be issued without requiring any bond when, in the judgment of the Directors, it is proper so to do. ARTICLE X Fixing of Record Date In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a 18 meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE XI Dividends Subject to the relevant provisions of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE XII Waiver of Notice Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice whether before or after the time stated therein, shall be equivalent thereto. 19 ARTICLE XIII Seal The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." ARTICLE XIV Amendments Subject to the provisions of the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment or repeal of the By-Laws or of adoption of new By-Laws be contained in the notice of such special meeting. 20 EX-4.10 98 g83903exv4w10.txt EX-4.10 INDENTURE EXHIBIT 4.10 ================================================================================ PSYCHIATRIC SOLUTIONS, INC. $150,000,000 10-5/8% SENIOR SUBORDINATED NOTES DUE 2013 ------------------------------ INDENTURE Dated as of June 30, 2003 ------------------------------ Wachovia Bank, National Association, as Trustee ================================================================================ This INDENTURE, dated as of June 30, 2003, is by and among Psychiatric Solutions, Inc., a Delaware corporation, each Guarantor listed on the signature pages hereto, and Wachovia Bank, National Association, as trustee (the "Trustee"). The Company, each Guarantor and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 10-5/8% Senior Subordinated Notes due 2013 (the "Notes") issued under this Indenture: ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. DEFINITIONS For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: "144A Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee issued in a denomination equal to the outstanding principal amount of the Notes sold for initial resale in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person: (a) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (b) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Interest" has the meaning set forth in a Registration Rights Agreement relating to amounts to be paid in the event the Company fails to satisfy certain conditions set forth herein. For all purposes of this Indenture, the term "interest" shall include Additional Interest, if any, with respect to the Notes. "Additional Notes" means any Notes (other than Initial Notes, Exchange Notes and Notes issued under Sections 2.06, 2.07, 2.10 and 3.06 hereof) issued under this Indenture in accordance with Sections 2.02, 2.15 and 4.09 hereof, as part of the same series as the Initial Notes or as an additional series. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent. "Applicable Procedures" means, with respect to any transfer, redemption or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer, redemption or exchange. "Asset Sale" means the sale, lease, transfer, conveyance or other disposition of any assets or rights, other than sales, leases, transfers, conveyances or other dispositions of inventory in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Section 4.17 hereof and/or Section 5.01 hereof and not by Section 4.12 hereof. Notwithstanding the preceding, the following items will not be deemed to be Asset Sales: (a) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (b) a sale, lease, transfer, conveyance or other disposition of assets between or among the Company and its Restricted Subsidiaries; (c) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (d) a sale, lease, transfer, conveyance or other disposition effected in compliance with the provisions described in Article 5 hereof; (e) a Restricted Payment or Permitted Investment that is permitted by Section 4.10 hereof; (f) a transfer of property or assets that are obsolete, damaged or worn out equipment and that are no longer useful in the conduct of the Company's or its Subsidiaries' business and that is disposed of in the ordinary course of business; and (g) a Permitted Asset Swap. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors, or the law of any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. "Board of Directors" means: (a) with respect to a corporation, the board of directors of the corporation; (b) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (c) with respect to any other Person, the board or committee of such Person serving a similar function. 2 "Board Resolution" of a Person means a copy of a resolution certified by the secretary or an assistant secretary (or individual performing comparable duties) of the applicable Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (a) in the case of a corporation, corporate stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CapSource Warrant" means the Common Stock Purchase Warrant of the Company, dated August 5, 2002, in favor of CapitalSource Holdings LLC or its registered assigns. "CapSource Put Indebtedness" means Indebtedness of the Company incurred as a result of the failure of the Company to pay the redemption price (together with accrued interest) in the event the Company fails to purchase the CapSource Warrant in certain circumstances involving the acceleration or prepayment of the Credit Agreement, an initial public offering, or certain mergers, sales or changes of control involving the Company. "Cash Equivalents" means: (a) United States dollars; (b) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition; (c) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above; (e) commercial paper rated at least A-1 by Standard & Poor's Rating Services, or at least P-1 by Moody's Investors Service, Inc., and in each case maturing within six months after the date of acquisition; and 3 (f) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (e) of this definition. "Change of Control" means the occurrence of any of the following: (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act); (b) the adoption of a plan relating to the liquidation or dissolution of the Company; (c) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined in clause (a) above), other than the Permitted Group, becomes the Beneficial Owner, directly or indirectly, of more than 30% of the Voting Stock of the Company, measured by voting power rather than number of shares; (d) the consummation by the Company of any "going private" transaction that would constitute a "Rule 13e-3 transaction" as defined in the Exchange Act; (e) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (f) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance). "Clearstream" means Clearstream Banking S.A. and any successor thereto. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission. "Company" means Psychiatric Solutions, Inc., and any successor thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (a) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (b) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (c) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease 4 Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (d) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for expenses to be paid in cash in any future period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus (e) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (a) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; (b) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (c) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition will be excluded; and (d) the cumulative effect of a change in accounting principles will be excluded. "Consolidated Net Tangible Assets" means, as of any date of determination, the sum of the amounts that would appear on a consolidated balance sheet of the Company and its consolidated Restricted Subsidiaries as the total assets (less accumulated depreciation and amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of the Company and its Restricted Subsidiaries, after giving effect to purchase accounting, and after deducting therefrom consolidated current liabilities and, to the extent otherwise included, the amounts of (without duplication): (a) the excess of cost over fair market value of assets or businesses acquired; (b) any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Company immediately preceding the date of issuance of the notes as a result of a change in the method of valuation in accordance with GAAP; (c) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; (d) minority interests in consolidated subsidiaries held by Persons other than the Company or any Restricted Subsidiary; 5 (e) treasury stock; (f) cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and (g) Investments in and assets of Unrestricted Subsidiaries. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (a) was a member of such Board of Directors on the date of this Indenture; or (b) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 hereof, or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means the Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of the date hereof, by and among the Company, the guarantors party thereto, CapitalSource Finance LLC and the lenders from time to time party thereto, providing for up to $50.0 million of revolving credit borrowings and $17.0 million of term borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, restated, modified, renewed, refunded, replaced or refinanced (in whole or in part) from time to time, whether or not with the same lenders or agent. "Credit Facilities" means, one or more debt facilities or agreements (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced (including any agreement to extend the maturity thereof and adding additional borrowers or guarantors) in whole or in part from time to time under the same or any other agent, lender or group of lenders and including increasing the amount of available borrowings thereunder; provided that such increase is permitted by Section 4.09 hereof. "Custodian" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03(c) hereof as Custodian with respect to the Notes, and any and all successors thereto appointed as custodian hereunder and having become such pursuant to the applicable provisions of this Indenture. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 or 2.10 hereof, in substantially the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03(b) hereof as the Depositary with respect to the Notes, and any and all 6 successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provisions of this Indenture. "Designated Senior Debt" means (a) any Indebtedness outstanding under the Credit Agreement and (b) any other Senior Debt permitted hereunder the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the Section 4.10 hereof. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state or territory of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any private or public sale of common stock of the Company. "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the Euroclear systems, and any successor thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means notes issued in exchange for the Initial Notes or any Additional Notes pursuant to a Registration Rights Agreement. "Exchange Offer" has the meaning set forth in a Registration Rights Agreement relating to an exchange of Notes registered under the Securities Act for Notes not so registered. "Exchange Offer Registration Statement" has the meaning set forth in a Registration Rights Agreement. "Existing Indebtedness" means Indebtedness existing on the Issue Date (other than Indebtedness under this Indenture and the Credit Agreement). "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (a) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; 7 (b) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (c) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus (d) the product of (i) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (a) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect (calculated in accordance with Regulation S-X) as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period will be calculated without giving effect to clause (c) of the proviso set forth in the definition of Consolidated Net Income; (b) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP (other than the treatment of the termination and expiration of management contracts which shall be governed by Accounting Principles Board Opinion No. 30 as in effect before the adoption of Financial Accounting Standards No. 144), and operations or businesses disposed of prior to the Calculation Date, will be excluded; and (c) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP (other than the treatment of the termination and expiration of management contracts which shall be governed by Accounting Principles Board Opinion No. 30 as in effect before the adoption of Financial Accounting Standards No. 144), and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. 8 "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Note" means any global Note in the form of Exhibit A hereto issued in accordance with Article 2 hereof. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. The term "guarantee" used as a verb has a corresponding meaning. "Guarantors" means each of: (a) the Company's Domestic Subsidiaries (other than the HUD Financing Subsidiaries and PSI Surety, Inc.); and (b) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered in the Security Register. "HUD Financing" means Indebtedness of HUD Financing Subsidiaries in an aggregate principal amount at any time outstanding not to exceed the greater of $22.0 million or 12.5% of Consolidated Net Tangible Assets, that is insured by the Federal Housing Administration, an organizational unit of the United States Department of Housing and Urban Development. "HUD Financing Subsidiaries" means any Domestic Subsidiary formed solely for the purpose of holding assets pledged as security in connection with any HUD Financing, including Holly Hill Real Estate, LLC, PSI Cedar Springs Hospital Real Estate, Inc., Psychiatric Solutions of Oklahoma Real Estate, Inc., Neuro Rehab Real Estate, L.P., Texas Laurel Ridge Hospital Real Estate, L.P., Texas Oaks Psychiatric Hospital Real Estate, L.P., Texas San Marcos Treatment Center Real Estate, L.P., Cypress Creek Real Estate, L.P., West Oaks Real Estate, L.P. and Riveredge Real Estate, Inc.; provided that the designation of a Domestic Subsidiary as a HUD Financing Subsidiary shall be evidenced by an Officers' Certificate stating that such Domestic Subsidiary shall be designated as a HUD Financing Subsidiary and certifying that the sole purpose of such HUD Financing Subsidiary shall be to hold assets pledged as security in connection with HUD Financing and that the incurrence of the HUD Financing complies with the provisions of Section 4.09 hereof. "IAI Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors, if any, to the extent required by the Applicable Procedures. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: 9 (a) in respect of borrowed money; (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) in respect of banker's acceptances; (d) representing Capital Lease Obligations; (e) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (f) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date will be: (i) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and (ii) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this instrument, as originally executed or as it may from time to time be supplemented or amended in accordance with Article 9 hereof. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means $150,000,000 aggregate principal amount of Notes issued under this Indenture on the Issue Date. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Payment Dates" shall have the meaning set forth in paragraph 1 of any Note in the form of Exhibit A hereto issued in accordance with Article 2 hereof. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances, fees and compensation paid to officers, directors and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.10. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such 10 Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.10. "Issue Date" means June 30, 2003. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, the city in which the Corporate Trust Office of the Trustee is located or any other place of payment on the Notes are authorized by law, regulation or executive order to remain closed. "Letter of Transmittal" means the letter of transmittal, or its electronic equivalent in accordance with the Applicable Procedures, to be prepared by the Company and sent to all Holders of the Initial Notes or any Additional Notes for use by such Holders in connection with an Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business of Moody's Investors Service, Inc. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (a) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (i) any Asset Sale; or (ii) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (b) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-recourse Debt" means Indebtedness: (a) as to which neither the Company nor any of its Restricted Subsidiaries (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly or indirectly liable as a guarantor or otherwise, or (iii) constitutes the lender; (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time of both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and 11 (c) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means the Chief Executive Officer, the President, the Chief Financial Officer, any Executive Vice President or the Treasurer of the Company. "Officers' Certificate" means a certificate, in form and substance reasonably satisfactory to the Trustee, signed by two Officers of the Company, at least one of whom shall be the principal executive officer or principal financial officer of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion, in form and substance reasonably satisfactory to the Trustee, from legal counsel who is acceptable to the Trustee and which meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively, and, with respect to DTC, shall include Euroclear and Clearstream. "Permitted Asset Swap" means sales, transfers or other dispositions of assets, including all of the outstanding Capital Stock of a Restricted Subsidiary, for consideration at least equal to the fair market value of the assets sold or disposed of, but only if the consideration received consists of Capital Stock of a Person that becomes a Restricted Subsidiary engaged in, or property or assets (other than cash, except to the extent used as a bona fide means of equalizing the value of the property or assets involved in the swap transaction) of a nature or type or that are used in, a business having property or assets of a nature or type, or engaged in a business similar or related to the nature or type of the property and assets of, or business of, the Company and the Restricted Subsidiaries existing on the date of such sale or other disposition. "Permitted Business" means the lines of business conducted by the Company and its Restricted Subsidiaries on the Issue Date and the businesses reasonably related thereto, including the ownership, operation and/or management of a hospital, outpatient clinic or other facility or business that is used or useful in or related to the provision of health care services in connection with the ownership, operation and/or management of such hospital or outpatient clinic or ancillary to the provision health care services or information or the investment in or management, lease or operation of a hospital or outpatient clinic. "Permitted Group" means Acacia Venture Partners, L.P. and Oak Investment Partners, together with their respective Affiliates. "Permitted Investments" means: (a) any Investment in the Company or a Restricted Subsidiary; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary in a Person, if as a result of such Investment: (i) such Person becomes a Restricted Subsidiary; or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Subsidiary; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.12 hereof; 12 (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) any Investments received in compromise of obligations of such persons incurred in the ordinary course of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; (g) Hedging Obligations; (h) Investments the payment for which is Capital Stock (other than Disqualified Stock) of the Company; (i) Physician Support Obligations; (j) Investments in prepaid expenses, negotiable instruments held for collection, utility and workers compensation, performance and similar deposits made in the ordinary course of business; (k) Investments existing on the date of this Indenture; and (l) other Investments in any Person having an aggregate fair market value (measured on the date each such investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (l) that are at the time outstanding, not to exceed $10.0 million. "Permitted Junior Securities" means: (a) Equity Interests in the Company or any Guarantor; or (b) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the notes and the Subsidiary Guarantees are subordinated to Senior Debt under this Indenture. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided, however, that: (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith); (b) in the case of Indebtedness other than Senior Debt, such Permitted Refinancing Indebtedness has a final maturity date the same as or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (c) if Subordinated Obligations are being extended, refinanced, renewed, replaced, defeased or refunded, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Subordinated Obligations being extended, refinanced, renewed, replaced, defeased or refunded; and 13 (d) such Indebtedness is incurred either by the Company or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Physician Support Obligation" means a loan to or on behalf of, or a guarantee of indebtedness of a Qualified Physician made or given by the Company or any of its Subsidiaries, (a) in the ordinary course of its business, and (b) pursuant to a written agreement having a period not to exceed five years; provided, however, that any such guarantee of Indebtedness of a Qualified Physician shall be expressly subordinated in right of payment to the notes or the Subsidiary Guarantees, as the case may be. "Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same Debt as that evidenced by such particular Note; and any Note authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same Debt as the lost, destroyed or stolen Note. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) hereof to be placed on all Notes issued under this Indenture except as otherwise permitted by the provisions of this Indenture. "Put Price Notes" means those certain Put Price Notes contemplated by the Securities Purchase Agreement. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Physicians" means one or more physicians or health care professionals providing service to patients in a health care facility owned, operated or managed by the Company or any of its Restricted Subsidiaries. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, among the Company, the Guarantors, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Jefferies & Company, Inc. as such agreement may be amended, modified or supplemented from time to time and, with respect to any additional notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of additional notes to register such additional notes, or exchange such additional notes for registered notes, under the Securities Act. "Regular Record Date" for the interest payable on any Interest Payment Date means the applicable date specified as a "Record Date" on the face of any Note in the form of Exhibit A hereto issued in accordance with Article 2 hereof. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee issued in a denomination equal to the outstanding principal amount of the Notes sold for initial resale in reliance on Rule 904 of Regulation S. "Representative" means the Trustee, agent or representative expressly authorized to act in such capacity, if any, for an issue of Senior Debt. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee (or any successor group of the Trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. 14 "Restricted Definitive Note" means one or more Definitive Notes bearing the Private Placement Legend. "Restricted Global Notes" means 144A Global Notes, IAI Global Notes and Regulation S Global Notes. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard & Poor's Ratings Services, a division of McGraw Hill, Inc., or any successor to the rating agency business thereof. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase Agreement" means the Securities Purchase Agreement dated as of June 28, 2002 between the Company and The 1818 Mezzanine Fund II, L.P., as amended to the Issue Date. "Senior Debt" means: (a) all Indebtedness of the Company or any Guarantor outstanding under Credit Facilities and all Hedging Obligations with respect thereto; (b) all Indebtedness of the Company or any Guarantor outstanding under HUD Financing; (c) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the notes or any Subsidiary Guarantee; (d) all Obligations with respect to the items listed in the preceding clauses (a), (b) and (c); and (e) the CapSource Put Indebtedness. Notwithstanding anything to the contrary in the preceding, Senior Debt will not include: (i) any liability for federal, state, local or other taxes owed or owing by the Company; (ii) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (iii) any trade payables; or (iv) the portion of any Indebtedness that is incurred in violation of this Indenture. 15 "Senior Subordinated Indebtedness" means (a) with respect to the Company, the notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to have the same rank as the notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Debt and (b) with respect to any Guarantor, the Subsidiary Guarantees and any other Indebtedness of such Guarantor that specifically provides that such Indebtedness is to have the same rank as the Subsidiary Guarantees in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of such Guarantor which is not Senior Debt, and (c) the Put Price Notes. "Series A Preferred Stock" means the Series A Convertible Preferred Stock of the Company issued pursuant to a Certificate of Designation filed with the Secretary of State of Delaware on March 24, 2003. "Shelf Registration Statement" means the registration statement relating to the registration of the Notes under Rule 415 of the Securities Act, as may be set forth in a Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Obligations" means any Indebtedness of the Company (whether outstanding on the date hereof or thereafter incurred) that is subordinate or junior in right of payment to the notes pursuant to a written agreement to that effect. "Subsidiary" means, with respect to any specified Person: (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "Subsidiary Guarantee" means the Guarantee of the notes by each of the Guarantors pursuant to Article 10 hereof and in the form of the Guarantee endorsed on the form of note attached as Exhibit E hereto and any additional Guarantee of the notes to be executed by any Subsidiary of the Company pursuant to Section 4.19 hereof. "Surviving Person" means the surviving Person formed by a merger, consolidation or amalgamation and, for purposes of Section 5.01 hereof, a Person to whom all or substantially all of the properties or assets of the Company or any Guarantor is sold, assigned, transferred, conveyed or otherwise disposed of. "TIA" means the Trust Indenture Act of 1939, as amended, and the rules and regulations thereunder. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. 16 "Unrestricted Definitive Notes" means one or more Definitive Notes that do not and are not required to bear the Private Placement Legend. "Unrestricted Global Notes" means one or more Global Notes that do not and are not required to bear the Private Placement Legend and are deposited with and registered in the name of the Depositary or its nominee. "Unrestricted Subsidiary" means any Subsidiary of the Company or any successor to any of them) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. "U.S. Government Securities" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness. Section 1.02. OTHER DEFINITIONS.
Defined in Term Section ---- ------- "Acceleration Notice"......................................................6.02 "Affiliate Transaction"....................................................4.14 "Asset Sale Offer".........................................................4.12
17 "Authentication Order".....................................................2.02 "Benefited Party"..........................................................10.01 "Change of Control Offer"..................................................4.17 "Change of Control Purchase Price".........................................4.17 "Covenant Defeasance"......................................................8.03 "DTC"......................................................................2.03 "Event of Default".........................................................6.01 "Legal Defeasance".........................................................8.02 "losses"...................................................................7.07 "Offer Amount".............................................................3.09 "Offer Period".............................................................3.09 "Offer to Purchase"........................................................3.09 "Paying Agent".............................................................2.03 "Payment Blockage Notice"..................................................12.03 "Payment Blockage Period"..................................................12.03 "pay the Notes"............................................................12.03 "Purchase Date"............................................................3.09 "Purchase Price............................................................3.09 "Registrar"................................................................2.03 "Security Register"........................................................2.03

Section 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. (a) Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. (b) The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes and the Guarantees; "indenture security holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company and any successor obligor upon the Notes. (c) All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA and not otherwise defined herein have the meanings so assigned to them. Section 1.04. RULES OF CONSTRUCTION. (a) Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined herein has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; 18 (v) all references in this instrument to "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and subdivisions of this instrument as originally executed; (vi) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. (vii) "including" means "including without limitation;" (viii) provisions apply to successive events and transactions; and (ix) references to sections of or rules under the Securities Act, the Exchange Act or the TIA shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time thereunder. ARTICLE 2. THE NOTES Section 2.01. FORM AND DATING. (a) GENERAL. The Notes and the Trustee's certificate of authentication shall be substantially in the form included in Exhibit A hereto, which is hereby incorporated in and expressly made part of this Indenture. The Notes may have notations, legends or endorsements required by law, exchange rule or usage in addition to those set forth on Exhibit A. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. To the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) FORM OF NOTES. Notes shall be issued initially in global form and shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such aggregate principal amount of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions and transfers of interests therein. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) BOOK-ENTRY PROVISIONS. This Section 2.01(c) shall apply only to Global Notes deposited with the Trustee, as custodian for the Depositary. Participants and Indirect Participants shall have no rights under this Indenture or any Global Note with respect to any Global Note held on their behalf by the Depositary or by the Trustee as custodian for the Depositary, and the Depositary shall be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants or Indirect Participants, the Applicable Procedures or the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note. 19 (d) EUROCLEAR AND CLEARSTREAM PROCEDURES APPLICABLE. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clearstream, or any successor publications, shall be applicable to transfers of beneficial interests in Global Notes that are held by Participants through Euroclear or Clearstream. (e) CERTIFICATED SECURITIES. The Company shall exchange Global notes for Definitive Notes if: (i) at any time the Depositary notifies the Company that it is unwilling or unable to continue to act as Depositary for the Global Notes or if at any time the Depositary shall no longer be eligible to act as such because it ceases to be a clearing agency registered under the Exchange Act, and, in either case, the Company shall not have appointed a successor Depositary within 120 days after the Company receives such notice or becomes aware of such ineligibility, (ii) the Company, at its option, determines that the Global Notes shall be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) upon written request of a Holder or the Trustee if a Default or Event of Default shall have occurred and be continuing. Upon the occurrence of any of the events set forth in clauses (i), (ii) or (iii) above, the Company shall execute, and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver, Definitive Notes, in authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Notes in exchange for such Global Notes. Upon the exchange of a Global Note for Definitive Notes, such Global Note shall be cancelled by the Trustee or an agent of the Company or the Trustee. Definitive Notes issued in exchange for a Global Note pursuant to this Section 2.01 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its Participants or its Applicable Procedures, shall instruct the Trustee or an agent of the Company or the Trustee in writing. The Trustee or such agent shall deliver such Definitive Notes to or as directed by the Persons in whose names such Definitive Notes are so registered or to the Depositary. Section 2.02. EXECUTION AND AUTHENTICATION (a) One Officer shall execute the Notes on behalf of the Company by manual or facsimile signature. (b) If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated by the Trustee, the Note shall nevertheless be valid. (c) A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. (d) The Trustee shall, upon a written order of the Company signed by an Officer (an "AUTHENTICATION ORDER"), authenticate Notes for issuance. (e) The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless otherwise provided in such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as the Trustee to deal with Holders, the Company or an Affiliate of the Company. Section 2.03. REGISTRAR AND PAYING AGENT. (a) The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register (the "SECURITY REGISTER") of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall 20 notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. (b) The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as Registrar and Paying Agent and to act as Custodian with respect to the Global Notes, and the Trustee hereby agrees so to initially act. Section 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all funds held by it relating to the Notes to the Trustee. The Company at any time may require a Paying Agent to pay all funds held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for such funds. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all funds held by it as Paying Agent. Upon any Event of Default under Sections 6.01(i) and (j) hereof relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss.312(a). If the Trustee is not the Registrar, the Company shall furnish or cause to be furnished to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date or such shorter time as the Trustee may allow, as the Trustee may reasonably require of the names and addresses of the Holders and the Company shall otherwise comply with TIA ss.312(a). Section 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Upon the occurrence of any of the events set forth in Section 2.01(e) above, Definitive Notes shall be issued in denominations of $1,000 or integral multiples thereof and in such names as the Depositary shall instruct the Trustee in writing. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Except as provided above, every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), and beneficial interests in a Global Note may not be transferred and exchanged other than as provided in Section 2.06(b), (c) or (f) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either clause (i) or (ii) below, as applicable, as well as one or more of the other following clauses, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial 21 interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend and any Applicable Procedures. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. Except as may be required by any Applicable Procedures, no written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A)(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B)(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests in a Restricted Global Note to Another Restricted Global Note. A holder of a beneficial interest in a Restricted Global Note may transfer such beneficial interest to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof or, if permitted by the Applicable Procedures, item (3) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee is required by the Applicable Procedures to take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer or Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: 22 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with a Registration Rights Agreement and the holder of the beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications required in the applicable Letter of Transmittal (or is deemed to have made such certifications if delivery is made through the Applicable Procedures) as may be required by such Registration Rights Agreement; (B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with a Registration Rights Agreement; (C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with a Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer complies with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to clause (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to clause (B) or (D) above. (v) Transfer or Exchange of Beneficial Interests in an Unrestricted Global Note for Beneficial Interests in a Restricted Global Note Prohibited. Beneficial interests in an Unrestricted Global Note may not be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note. (c) Transfer and Exchange of Beneficial Interests in Global Notes for Definitive Notes. (i) Transfer or Exchange of Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. Subject to Section 2.06(a) hereof, if any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; 23 (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a "Non-U.S. Person" in an offshore transaction (as defined in Section 902(k) of Regulation S) in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in clauses (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; or (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof, the Trustee shall reduce or cause to be reduced in a corresponding amount pursuant to Section 2.06(h) hereof, the aggregate principal amount of the applicable Restricted Global Note, and the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver a Restricted Definitive Note in the appropriate principal amount to the Person designated by the holder of such beneficial interest in the instructions delivered to the Registrar by the Depositary and the applicable Participant or Indirect Participant on behalf of such holder. Any Restricted Definitive Note issued in exchange for beneficial interests in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall designate in such instructions. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Transfer or Exchange of Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.06(a) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with a Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal (or is deemed to have made such certifications if delivery is made through the Applicable Procedures) as may be required by such Registration Rights Agreement; (B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with a Registration Rights Agreement; 24 (C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with a Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer complies with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of any of the conditions of any of the clauses of this Section 2.06(c)(ii), the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver an Unrestricted Definitive Note in the appropriate principal amount to the Person designated by the holder of such beneficial interest in instructions delivered to the Registrar by the Depositary and the applicable Participant or Indirect Participant on behalf of such holder, and the Trustee shall reduce or cause to be reduced in a corresponding amount pursuant to Section 2.06(h), the aggregate principal amount of the applicable Restricted Global Note. (iii) Transfer or Exchange of Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.06(a) hereof, if any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the applicable conditions set forth in Section 2.06(b)(i) hereof, the Trustee shall reduce or cause to be reduced in a corresponding amount pursuant to Section 2.06(h) hereof, the aggregate principal amount of the applicable Unrestricted Global Note, and the Company shall execute, and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver an Unrestricted Definitive Note in the appropriate principal amount to the Person designated by the holder of such beneficial interest in instructions delivered to the Registrar by the Depositary and the applicable Participant or Indirect Participant on behalf of such holder. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall designate in such instructions. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests in the Global Notes. (i) Transfer or Exchange of Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any holder of a Restricted Definitive Note proposes to exchange such Restricted Definitive Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: 25 (A) if the holder of such Restricted Definitive Note proposes to exchange such Restricted Definitive Note for a beneficial interest in a Restricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a "non-U.S. Person" in an offshore transaction (as defined in Rule 902(k) of Regulation S) in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in clauses (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; or (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased in a corresponding amount pursuant to Section 2.06(h) hereof, the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, a 144A Global Note, in the case of clause (C) above, a Regulation S Global Note, and in all other cases, a IAI Global Note. (ii) Transfer or Exchange of Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A holder of a Restricted Definitive Note may exchange such Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with a Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal (or is deemed to have made such certifications if delivery is made through the Applicable Procedures) as may be required by such Registration Rights Agreement; (B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with a Registration Rights Agreement; (C) such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with a Registration Rights Agreement; or 26 (D) the Registrar receives the following: (1) if the holder of such Restricted Definitive Note proposes to exchange such Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the holder of such Restricted Definitive Note proposes to transfer such Restricted Definitive Note to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer shall be effected in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend shall no longer be required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the clauses in this Section 2.06(d)(ii), the Trustee shall cancel such Restricted Definitive Note and increase or cause to be increased in a corresponding amount pursuant to Section 2.06(h) hereof, the aggregate principal amount of the Unrestricted Global Note. (iii) Transfer or Exchange of Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A holder of an Unrestricted Definitive Note may exchange such Unrestricted Definitive Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased in a corresponding amount pursuant to Section 2.06(h) hereof the aggregate principal amount of one of the Unrestricted Global Notes. (iv) Transfer or Exchange of Unrestricted Definitive Notes to Beneficial Interests in Restricted Global Notes Prohibited. An Unrestricted Definitive Note may not be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note. (v) Issuance of Unrestricted Global Notes. If any such exchange or transfer of a Definitive Note for a beneficial interest in an Unrestricted Global Note is effected pursuant to clause (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a holder of Definitive Notes and such holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such holder. In addition, the requesting holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Transfer of Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A, a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; 27 (B) if the transfer will be made pursuant to Rule 903 or Rule 904, a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Transfer or Exchange of Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with a Registration Rights Agreement and the holder, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal (or is deemed to have made such certifications if delivery is made through the Applicable Procedures) as may be required by a Registration Rights Agreement; (B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with a Registration Rights Agreement; (C) any such transfer is effected by a broker-dealer pursuant to an Exchange Offer Registration Statement in accordance with a Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such Restricted Definitive Note proposes to exchange such Restricted Definitive Notes for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the holder of such Restricted Definitive Notes proposes to transfer such Restricted Definitive Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this clause (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer complies with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the clauses of this Section 2.06(e)(ii), the Trustee shall cancel the prior Restricted Definitive Note and the Company shall execute, and upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver an Unrestricted Definitive Note in the appropriate aggregate principal amount to the Person designated by the holder of such prior Restricted Definitive Note in instructions delivered to the Registrar by such holder. (iii) Transfer of Unrestricted Definitive Notes to Unrestricted Definitive Notes. A holder of Unrestricted Definitive Notes may transfer such Unrestricted Definitive Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a 28 transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the holder thereof. (f) EXCHANGE OFFER. Upon the occurrence of an Exchange Offer in accordance with a Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate (A) one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of the beneficial interests in the applicable Restricted Global Notes (1) tendered for acceptance by Persons that make any and all certifications in the applicable Letters of Transmittal (or are deemed to have made such certifications if delivery is made through the Applicable Procedures) as may be required by such Registration Rights Agreement and (2) accepted for exchange in such Exchange Offer and (B) Unrestricted Definitive Notes in an aggregate principal amount equal to the aggregate principal amount of the Restricted Definitive Notes tendered for acceptance by Persons who made the foregoing certifications and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall reduce or cause to be reduced in a corresponding amount the aggregate principal amount of the applicable Restricted Global Notes, and the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver to the Persons designated by the holders of Restricted Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate aggregate principal amount. (g) LEGENDS. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by clause (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE OF THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH 29 OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to clauses (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the aggregate principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, the aggregate principal amount of such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection 30 therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.12, 4.17 and 9.05 hereof). (ii) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. (iii) Neither the Registrar nor the Company shall be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the date of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date (including a Regular Record Date) and the next succeeding Interest Payment Date. (iv) Prior to due presentment for the registration of transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, and interest on such Note and for all other purposes, in each case regardless of any notice to the contrary. (v) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. (vi) The Trustee is hereby authorized and directed to enter into a letter of representation with the Depositary in the form provided by the Company and to act in accordance with such letter. (vii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restriction on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including transfers between or among beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Section 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate a replacement Note. If required by the Trustee or the Company, the Holder of such Note shall provide an affidavit of loss and indemnity that is sufficient, in the judgment of the Trustee or the Company, to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer in connection with such replacement. If required by the Company, such Holder shall reimburse the Company for its reasonable expenses in connection with such replacement. Every replacement Note issued in accordance with this Section 2.07 shall be the valid obligation of the Company, evidencing the same debt as the destroyed, lost or stolen Note, and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. 31 Section 2.08. OUTSTANDING NOTES. (a) The Notes outstanding at any time shall be the entire principal amount of Notes represented by all of the Global Notes and Definitive Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those subject to reductions in beneficial interests effected by the Trustee in accordance with Section 2.06 hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note shall not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; provided, however, that Notes held by the Company or a Subsidiary of the Company shall be deemed not to be outstanding for purposes of Section 3.07(c) hereof. (b) If a Note is replaced pursuant to Section 2.07 hereof, it shall cease to be outstanding unless the Trustee receives proof satisfactory to it that the replaced note is held by a bona fide purchaser. (c) If the principal amount of any Note is considered paid under Section 4.01 hereof, it shall cease to be outstanding and interest on it shall cease to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date, a Purchase Date or a maturity date, funds sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Affiliate of the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10. TEMPORARY NOTES. Until certificates representing Notes are ready for delivery, the Company may prepare and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Global Notes or Definitive Notes in exchange for temporary Notes, as applicable. After preparation of Definitive Notes, the Temporary Notes will be exchangeable for Definitive Notes upon surrender of the Temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. Upon sole direction of the Company, the Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirements of the Exchange Act or other applicable laws) unless by written order, signed by an Officer of the Company, the Company directs them to be returned to it. Certification of the destruction of all cancelled Notes shall be delivered to the Company from time to time upon request. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. 32 Section 2.12. PAYMENT OF INTEREST; DEFAULTED INTEREST If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related Interest Payment Date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related Interest Payment Date and the amount of such interest to be paid. Section 2.13. CUSIP OR ISIN NUMBERS. The Company in issuing the Notes may use "CUSIP" and/or "ISIN" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" and/or "ISIN" numbers in notices of redemption or Offers to Purchase as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption or notice of an Offer to Purchase and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption or Offer to Purchase shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" and/or "ISIN" numbers. Section 2.14. ADDITIONAL INTEREST If Additional Interest is payable by the Company pursuant to a Registration Rights Agreement and paragraph 1 of the Notes, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such interest is payable pursuant to Section 4.01 hereof. Unless and until a Responsible Officer of the Trustee receives such a certificate or instruction or direction from the Holders in accordance with the terms of this Indenture, the Trustee may assume without inquiry that no Additional Interest is payable. The foregoing shall not prejudice the rights of the Holders with respect to their entitlement to Additional Interest as otherwise set forth in this Indenture or the Notes and pursuing any action against the Company directly or otherwise directing the Trustee to take any such action in accordance with the terms of this Indenture and the Notes. If the Company has paid Additional Interest directly to the Persons entitled to it, the Company shall deliver to the Trustee an Officers' Certificate setting forth the details of such payment. Section 2.15. ISSUANCE OF ADDITIONAL NOTES The Company shall be entitled, subject to its compliance with Section 4.09 hereof, to issue Additional Notes under this Indenture which shall have identical terms as the Initial Notes issued on the date hereof, other than with respect to the date of issuance, issue price and rights under a related Registration Rights Agreement, if any. The Initial Notes issued on the date hereof, any Additional Notes and all Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture, including directions, waivers, amendments, consents, redemptions and Offers to Purchase. With respect to any Additional Notes, the Company shall set forth in a Board Resolution and an Officers' Certificate, a copy of each of which shall be delivered to the Trustee, the following information: (a) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture; (b) the issue price, the Issue Date and the CUSIP and/or ISIN number of such Additional Notes; provided, however, that no Additional Notes may be issued at a price that would cause such Additional Notes to 33 have "original issue discount" within the meaning of Section 1273 of the Code, other than a de minimis original issue discount within the meaning of Section 1273 of the Code; and (c) whether such Additional Notes shall be subject to the restrictions on transfer set forth in Section 2.06 hereof relating to Restricted Global Notes and Restricted Definitive Notes. Section 2.16. Record Date. The record date for purposes of determining the identity of Holders of Notes entitled to vote or consent to any action by vote or consent or permitted under this Indenture shall be determined as provided for in TIA Section 316(c). ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date (or such shorter period as allowed by the Trustee), an Officers' Certificate setting forth (a) the applicable section of this Indenture pursuant to which the redemption shall occur, (b) the redemption date, (c) the principal amount of Notes to be redeemed and (d) the redemption price. Section 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee deems fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples thereof; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days prior to a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at such Holder's registered address appearing in the Security Register, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance pursuant to Article 8 hereof or a satisfaction and discharge pursuant to Article 11 hereof. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; 34 (b) the appropriate method for calculation of the redemption price, but need not include the redemption price itself; the actual redemption price shall be set forth in an Officers' Certificate delivered to the Trustee no later than two (2) Business Days prior to the redemption date; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, if applicable, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the applicable section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness of the CUSIP and/or ISIN numbers, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days (or such shorter period allowed by the Trustee), prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice (in the name and at the expense of the Company) and setting forth the information to be stated in such notice as provided in this Section 3.03. Section 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption shall become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to 11:00 a.m. Eastern time on the Business Day prior to any redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and, if applicable, accrued and unpaid interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly, and in any event within two (2) Business Days after the redemption date, return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest, if any, on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for purchase or redemption in accordance with Section 2.08(d) hereof, whether or note such Notes are presented for payment. If a Note is redeemed on or after a Regular Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest, if any, shall be paid to the Person in whose name such Note was registered at the close of business on such Regular Record Date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. 35 Section 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this Section 3.07, the Notes shall not be redeemable at the option of the Company prior to June 15, 2008. Beginning on June 15, 2008, the Company may redeem all or a portion of the Notes, at once or over time, after giving the notice required pursuant to Section 3.03 hereof, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), if redeemed during the twelve-month period commencing on June 15 of the years indicated below:
Year Percentage ---- ---------- 2008...........................................................................105.313% 2009...........................................................................103.542% 2010...........................................................................101.771% 2011 and thereafter............................................................100.000%
(b) At any time and from time to time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the Notes (including Additional Notes) issued under this Indenture at a redemption price (expressed as a percentage of principal amount) equal to 110.625% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date) with the net cash proceeds of any Equity Offering of common stock of the Company; provided, however, that (i) at least 65% of the aggregate principal amount of the Notes initially issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after giving effect to such redemption and (ii) any such redemption shall be made within 90 days of such Equity Offering. (c) Any prepayment pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Section 3.08. MANDATORY REDEMPTION. Except as set forth in Sections 4.12 and 4.17 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to, or offer to purchase, the Notes. Section 3.09. OFFER TO PURCHASE. (a) In the event that, pursuant to Section 4.12 or 4.17 hereof, the Company shall be required to commence an Asset Sale Offer or a Change of Control Offer (each, an "OFFER TO PURCHASE"), it shall follow the procedures specified below. (b) The Company shall cause a notice of the Offer to Purchase to be sent at least once to the Dow Jones News Service or similar business news service in the United States. (c) The Company shall commence the Offer to Purchase by sending, by first-class mail, with a copy to the Trustee, to each Holder at such Holder's address appearing in the Security Register, a notice the terms of which shall govern the Offer to Purchase stating: (i) that the Offer to Purchase is being made pursuant to this Section 3.09 and Section 4.12 or Section 4.17, as the case may be, and, in the case of a Change of Control Offer, that a Change of Control 36 has occurred, the circumstances and relevant facts regarding the Change of Control and that a Change of Control Offer is being made pursuant to Section 4.17; (ii) the principal amount of Notes required to be purchased pursuant to Section 4.12 or Section 4.17, as the case may be (the "OFFER AMOUNT"), the purchase price set forth in Section 4.12 or Section 4.17 hereof, as applicable (the "PURCHASE PRICE"), the Offer Period and the Purchase Date (each as defined below); (iii) except as provided in clause (ix), that all Notes timely tendered and not withdrawn shall be accepted for payment; (iv) that any Note not tendered or accepted for payment shall continue to accrue interest; (v) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest after the Purchase Date; (vi) that Holders electing to have a Note purchased pursuant to an Offer to Purchase may elect to have Notes purchased in integral multiples of $1,000 only; (vii) that Holders electing to have a Note purchased pursuant to any Offer to Purchase shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, the Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice before the close of business on the third Business Day before the Purchase Date; (viii) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note (or portions thereof) the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (ix) that, in the case of an Asset Sale Offer, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or integral multiples thereof shall be purchased); (x) that Holders whose Notes were purchased in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer); and (xi) any other procedures the Holders must follow in order to tender their Notes (or portions thereof) for payment and the procedures that Holders must follow in order to withdraw an election to tender Notes (or portions thereof) for payment. (d) The Offer to Purchase shall remain open for a period of at least 30 days but no more than 60 days following its commencement, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five (5) Business Days (and in any event no later than the 60th day following the Change of Control) after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the Offer Amount or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Offer to Purchase. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. The Company shall publicly announce the results of the Offer to Purchase on the Purchase Date. (e) On or prior to the Purchase Date, the Company shall, to the extent lawful: 37 (i) accept for payment (on a pro rata basis to the extent necessary in connection with an Asset Sale Offer), the Offer Amount of Notes or portions of Notes properly tendered and not withdrawn pursuant to the Offer to Purchase, or if less than the Offer Amount has been tendered, all Notes tendered; (ii) deposit with the Paying Agent funds in an amount equal to the Purchase Price in respect of all Notes or portions of Notes properly tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company and that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. (f) The Paying Agent shall promptly (but in the case of a Change of Control not later than 60 days from the date of the Change of Control) execute and issue a new Note, and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver (or cause to be transferred by book-entry) such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered; provided, however, that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. (g) If the Purchase Date is on or after a Regular Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such Regular Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Offer to Purchase. (h) The Company shall comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with Sections 4.12 or 4.17, as applicable, this Section 3.09 or other provisions of this Indenture, the Company shall comply with applicable securities laws and regulations and shall not be deemed to have breached its obligations under Sections 4.12 or 4.17, as applicable, this Section 3.09 or such other provision by virtue of such compliance. (i) Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made in accordance with the provisions of Section 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS Section 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on, the Notes on the dates and in the manner provided in this Indenture and the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available United States dollars and designated for and sufficient to pay all principal, premium, if any, and interest then due. Such Paying Agent shall return to the Company promptly, and in any event, no later than five (5) Business Days following the date of payment, any money (including accrued interest) that exceeds such amount of principal, premium, if any, and interest paid on the Notes. The Company shall pay Additional Interest, if any, in the same manner, on the dates and in the amounts set forth in a Registration Rights Agreement, the Notes and this Indenture. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. 38 The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods), from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Section 4.02. MAINTENANCE OF OFFICE OR AGENCY. (a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office or drop facility of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be presented or surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. (b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (c) The Company hereby designates the Corporate Trust Office of the Trustee, as one such office, drop facility or agency of the Company in accordance with Section 2.03 hereof. Section 4.03. REPORTS. (a) Whether or not required by the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders, within the time periods specified in the Commission's rules and regulations: (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. (b) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and if the Company or any of its Restricted Subsidiaries has made an Investment of at least $0.1 million in such Unrestricted Subsidiary, in "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. (c) In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, the Company will file a copy of all of the information and reports referred to in clauses (a)(i) and (a)(ii) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In 39 addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (d) The Trustee shall not be under a duty to review or evaluate any report or information delivered to the Trustee pursuant to the provisions of this Section 4.03 for the purposes of making such reports available to it and to the Holders of Notes who may request such information. Delivery of such reports, information and documents to the Trustee as may be required pursuant to this Section 4.03 is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 4.04. COMPLIANCE CERTIFICATE. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company, the Guarantors and their respective Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company, the Guarantors and their respective Subsidiaries have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company, the Guarantors and their respective Subsidiaries have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of, premium, if any, or interest on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) The Company shall otherwise comply with TIA ss.314(a)(2). (c) The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any event that with the giving of notice and/or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. Section 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments and governmental levies, except such as are being contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders. Section 4.06. STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. 40 Section 4.07. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (a) its corporate existence, and the corporate, partnership or other existence of each Restricted Subsidiary, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (b) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any Restricted Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes, or that such preservation is not necessary in connection with any transaction not prohibited by this Indenture. Section 4.08. PAYMENTS FOR CONSENT. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.09. INCURRENCE OF ADDITIONAL DEBT AND ISSUANCE OF CAPITAL STOCK. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of preferred stock (including Disqualified Stock) other than to the Company; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, any of the Company's Restricted Subsidiaries that are Guarantors may incur Indebtedness (including Acquired Indebtedness) and the HUD Financing Subsidiaries may incur HUD Financing, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.00 to 1 for the period from the Issue Date through June 30, 2006 and 2.25 to 1 thereafter, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company or any Guarantor of additional Indebtedness and letters of credit under one or more Credit Facilities and Guarantees thereof by the Guarantors; provided that the aggregate principal amount of all Indebtedness and letters of credit of the Company and the Guarantors incurred pursuant to this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and the Guarantors thereunder) does not exceed the greater of (A) $85.0 million or (B) 85% of the net book value of receivables and 65% of the net book value of real property (other than real property pledged in connection with any HUD Financing) of the Company and the Restricted Subsidiaries on a consolidated basis at the time the Indebtedness is incurred, as determined in accordance with GAAP, less the aggregate amount of Net Proceeds from an Asset Sale applied by the Company and its Subsidiaries to repay Indebtedness thereunder, pursuant to Section 4.12 hereof; 41 (2) the incurrence by the Company and the Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the Initial Notes (and the related Exchange Notes to be issued pursuant to the Registration Rights Agreement) and the incurrence by the Guarantors of the Subsidiary Guarantees of those notes; (4) the incurrence by the Company or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4), not to exceed $15.0 million at any time outstanding; (5) the incurrence by the Company or any Restricted Subsidiary of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, defease, renew, refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was incurred under the first paragraph of this Section 4.09 or clauses (2), (3), (6) or (10) of this paragraph; (6) the incurrence by the Company or any Restricted Subsidiary of intercompany Indebtedness between or among the Company and any Restricted Subsidiary; provided, however, that: (i) if the Company or a Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes or the Subsidiary Guarantees, as the case may be; and; (ii) (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary and (B) any subsequent sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence of any Physician Support Obligations by the Company or any Restricted Subsidiary; (8) the incurrence of Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities, holdbacks or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including without limitation, shares of Capital Stock of Restricted Subsidiaries or contingent payment obligations incurred in connection with the acquisition of assets which are contingent on the performance of the assets acquired, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such assets or shares of Capital Stock of such Restricted Subsidiary for the purpose of financing such acquisition; (9) the incurrence of Indebtedness of the Company or any Restricted Subsidiary represented by (i) letters of credit for the account of the Company or any Restricted Subsidiary or (ii) other obligations to reimburse third parties pursuant to any surety bond or other similar arrangements, which letters of credit or other obligations, as the case may be, are intended to provide security for workers' compensation claims, payment obligations in connection with sales tax and insurance or other similar requirements in the ordinary course of business; 42 (10) the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations that are incurred in the normal course of business and consistent with past business practices for the purpose of fixing or hedging currency or interest rate risk (including with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding in connection with the conduct of their respective businesses) and not for speculative purposes; (11) the Guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this Section 4.09; (12) the incurrence by the Company's Unrestricted Subsidiaries of Non-recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (12); (13) the incurrence of the Put Price Notes or the CapSource Put Indebtedness; and (14) the incurrence by the Company or any Guarantor of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (14), not to exceed $15.0 million. For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, in each case, as of the date of incurrence thereof, the Company shall, in its sole discretion, classify (or later reclassify in whole or in part, in its sole discretion) such item of Indebtedness in any manner that complies with this Section 4.09 and such Indebtedness will be treated as having been incurred pursuant to such clauses or the first paragraph hereof, as the case may be, designated by the Company. Indebtedness under Credit Facilities outstanding on the date on which the notes are first issued and authenticated under this Indenture will be deemed to have been incurred on such date in reliance of the exception provided by clause (1) of the definition of Permitted Debt. Accrual of interest or dividends, the accretion of accreted value or liquidation preference and the payment of interest or dividends in the form of additional Indebtedness or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09. Section 4.10. RESTRICTED PAYMENTS. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution (A) on account of the Company's or any Restricted Subsidiary's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any Restricted Subsidiary) or (B) to the direct or indirect holders of the Company's or any Restricted Subsidiary's Equity Interests in their capacity as such (other than dividends or distributions (i) payable in Equity Interests (other than Disqualified Stock) of the Company or (ii) to the Company or a wholly owned Restricted Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligations, except a payment of interest or principal at the Stated Maturity thereof; or 43 (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (i) no Default or Event of Default has occurred and is continuing; and (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the most recently ended four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and the Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (2), (3) and (4) of the next succeeding paragraph), is less than the sum, without duplication, of: (A) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter after which the Notes are first issued to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (B) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company, in either case, that have been converted into or exchanged for such Equity Interests of the Company (other than Equity Interests or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus (C) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash proceeds with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus (D) in case, after the date hereof, any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary under the terms of this Indenture or has been merged, consolidated or amalgamated with or into, or transfers or conveys assets to, or is liquidated into the Company or a Restricted Subsidiary, an amount equal to the lesser of (1) the net book value at the date of the redesignation, combination or transfer of the aggregate Investments made by the Company and the Restricted Subsidiaries in the Unrestricted Subsidiary (or of the assets transferred or conveyed, as applicable), and (2) the fair market value of the Investments owned by the Company and the Restricted Subsidiaries in such Unrestricted Subsidiary at the time of the redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable). So long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture; 44 (2) the redemption, repurchase, retirement, defeasance or other acquisition of any Subordinated Obligations of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of the Company (other than Disqualified Stock); provided, however, that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (iii)(B) of the preceding paragraph; (3) the redemption, repurchase, retirement, defeasance or other acquisition of any Subordinated Obligations of the Company or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; provided, however, that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (iii)(B) of the preceding paragraph; (4) the redemption, repurchase or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary (i) held by any member of the Company's (or any Restricted Subsidiary's) management pursuant to any management equity subscription plan or agreement, stock option or stock purchase plan or agreement or employee benefit plan as may be adopted by the Company from time to time or pursuant to any agreement with any director or officer in existence on the date of this Indenture or (ii) from an employee of the Company upon the termination of such employee's employment with the Company; provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests in reliance on this clause (4) may not exceed $3.0 million in any twelve-month period; (5) repurchases, acquisitions or retirements of Capital Stock of the Company deemed to occur upon the exercise of stock options or similar rights under employee benefit plans of the Company or its Subsidiaries if such Capital Stock represents all or a portion of the exercise price thereof; (6) the repurchase or retirement of common stock of the Company purchased by The 1818 Mezzanine Fund II, L.P. pursuant to the Securities Purchase Agreement; provided, however, that notwithstanding that a Default or Event of Default shall have occurred and be continuing, the Company shall be permitted to issue the Put Price Notes in satisfaction of its obligations under the Securities Purchase Agreement; (7) the repurchase or retirement of common stock of the Company held by CapSource pursuant to the terms of the CapSource Warrant; and (8) other Restricted Payments in an aggregate amount since the Issue Date not to exceed $10.0 million. The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the assets, property or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined by the Board of Directors whose resolution with respect thereto will be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $7.5 million. Not later than the date of making any Restricted Payment, the Company will deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.10 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. If the Company or a Restricted Subsidiary makes a Restricted Payment which at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the provisions of this Indenture, such Restricted Payment shall be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company financial statements affecting Consolidated Net Income of the Company for any period. 45 Section 4.11. LIENS. The Company will not, and will not permit any Restricted Subsidiary to, create, incur or assume any consensual Liens of any kind against or upon any of their respective properties or assets, or any proceeds, income or profit therefrom that secure Senior Subordinated Indebtedness or Subordinated Obligations; provided that: (a) in the case of Liens securing Subordinated Obligations, the notes are secured by a Lien on such property, assets, proceeds, income or profit that is senior in priority to such Liens; and (b) in the case of Liens securing Senior Subordinated Indebtedness, the notes are equally and ratably secured by a Lien on such property, assets, proceeds, income or profit. Section 4.12. ASSET SALES. The Company will not, and will not permit any Restricted Subsidiary to, consummate an Asset Sale unless: (a) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets sold, leased, transferred, conveyed or otherwise disposed of or Equity Interests of any Restricted Subsidiary issued, sold, transferred, conveyed or otherwise disposed of; (b) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this clause (b), each of the following will be deemed to be cash: (i) any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; (ii) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 90 days, to the extent of the cash received in that conversion; and (iii) with respect to any sale of Capital Stock of a Restricted Subsidiary to one or more Qualified Physicians, promissory notes or similar obligations from such physicians or health care professionals; provided that the aggregate amount of such promissory notes or other similar obligations held by the Company and its Restricted Subsidiaries shall not exceed $2.5 million outstanding at any one time; and (c) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Sale complies with the foregoing clauses (a) and (b). Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply those Net Proceeds at its option: (1) to repay Senior Debt (other than Indebtedness owed to the Company, any Guarantor or any Affiliate of the Company) and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto if so required pursuant to the terms of the Credit Agreement governing such revolving credit Indebtedness; 46 (2) to acquire all or substantially all of the assets of, or all of the Voting Stock of, another Person engaged in a Permitted Business; or (3) to acquire other long-term assets or property that are used in a Permitted Business. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $7.5 million, the Company will make an offer to all Holders of Notes to purchase the maximum principal amount of Notes and, if the Company is required to do so under the terms of any other Indebtedness that is pari passu with the Notes, such other Indebtedness on a pro rata basis with the Notes, that may be purchased out of the Excess Proceeds (an "ASSET SALE OFFER"). The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of the purchase of all properly tendered and not withdrawn Notes pursuant to an Asset Sale Offer, the Company may use such remaining Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such conflict. Section 4.13. RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) pay dividends or make any other distributions on its Capital Stock to the Company or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any Restricted Subsidiary; (b) make loans or advances to the Company or any Restricted Subsidiary; or (c) transfer any of its properties or assets to the Company or any Restricted Subsidiary. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness, Credit Facilities (including the Credit Agreement) and other agreements relating to the Financing Transactions as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture; 47 (2) agreements governing the Series A Preferred Stock as in effect on the date of this Indenture; (3) this Indenture, the Notes and the Subsidiary Guarantees; (4) the Securities Purchase Agreement; (5) agreements related to HUD Financing and any amendments of those agreements; (6) applicable law; (7) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any Restricted Subsidiary as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (8) customary non-assignment provisions in leases and other contracts entered into in the ordinary course of business and consistent with industry practices; (9) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (c) of the first paragraph of this Section 4.13; (10) any agreement for the sale or other disposition of a Restricted Subsidiary or the assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition or the sale or other disposition of its assets; or (11) Permitted Refinancing Indebtedness; provided, however, that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (12) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of the covenant described above under Section 4.11 hereof; and (13) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business. Section 4.14. AFFILIATE TRANSACTIONS. The Company will not, and will not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an "AFFILIATE TRANSACTION"), unless: (a) the Affiliate Transaction (i) is evidenced in writing if it involves transactions of $1.0 million or more and (ii) is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (b) the Company delivers to the Trustee: 48 (i) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.5 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) transactions between or among the Company and/or any Restricted Subsidiary; (2) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (3) reasonable and customary directors' fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Company or a Restricted Subsidiary entered into in the ordinary course of business; (4) any transactions made in compliance with Section 4.10 hereof; (5) transactions pursuant to the Securities Purchase Agreement; (6) loans and advances to non-executive officers and employees of the Company or any Restricted Subsidiary in the ordinary course of business in accordance with the past practices of the Company or any Restricted Subsidiary; and (7) any agreement as in effect as of the date of this Indenture or any amendment thereto so long as any such amendment is not more disadvantageous to the holders in any material respect than the original agreement as in effect on the date of this Indenture. Section 4.15. ISSUANCE OR SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES The Company: (a) will not, and will not permit any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than to the Company or to any Restricted Subsidiary), unless: (i) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Restricted Subsidiary, and (ii) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.12 hereof; provided, however, that this clause (a) will not apply to any pledge of Capital Stock of any Restricted Subsidiary securing any Permitted Debt or any exercise of remedies in connection therewith; provided that the Lien securing such Permitted Debt is not prohibited by Section 4.11 hereof; 49 (b) will not permit any Restricted Subsidiary to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than the Company or any Restricted Subsidiary; provided, however, that clauses (a) and (b) shall not prohibit any issuance, sale or other disposition of Common Stock of a Restricted Subsidiary to one or more Qualified Physicians if, immediately after giving effect thereto, such Restricted Subsidiary would remain a Restricted Subsidiary and the Company will, directly or indirectly, retain at least 80% of the Capital Stock of such Restricted Subsidiary, and the Net Proceeds from such issuance, sale or other disposition are applied in accordance with Section 4.12 hereof. Section 4.16. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for (x) Restricted Payments under the first paragraph of Section 4.10 hereof, or (y) Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.10 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company will be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (ii) no Default or Event of Default would be in existence following such designation. Section 4.17. REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, the Company shall, within 10 days of a Change of Control, make an offer (the "CHANGE OF CONTROL OFFER") pursuant to the procedures set forth in Section 3.09. Each Holder shall have the right to accept such offer and require the Company to repurchase all or any portion (equal to $1,000 or an integral multiple of $1,000) of such Holder's Notes pursuant to the Change of Control Offer at a purchase price, in cash, equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest (the "CHANGE OF CONTROL PURCHASE PRICE") on the Notes repurchased, to the Purchase Date (subject to the right of Holders of record on the relevant Regular Record Date) to receive interest to, but excluding, the Purchase Date). (b) Prior to complying with any of the provisions of this "Change of Control" covenant, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance 50 with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all notes properly tendered and not withdrawn under the Change of Control Offer. Section 4.18. FUTURE SUBSIDIARY GUARANTORS If the Company or any Restricted Subsidiary acquires or creates another Subsidiary after the date of this Indenture that (1) is formed under the laws of the United States or any State of the United States or the District of Columbia and in which the Company or any Restricted Subsidiary has made an Investment of at least $0.1 million or (2) incurs, guarantees or otherwise provides direct credit support for any Indebtedness of the Company or any of the Company's domestic subsidiaries, then that newly acquired or created Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel satisfactory to the Trustee within 10 business days of the date on which it was acquired or created; provided, however, that the foregoing shall not apply to (i) HUD Financing Subsidiaries and (ii) Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture. The Subsidiary Guarantee of any such newly acquired or created Subsidiary that becomes a Guarantor will be subordinated to all Indebtedness under the Credit Agreement and all other Senior Debt of such Guarantor to the same extent as the Notes are subordinated to the Senior Debt of the Company. Section 4.19. BUSINESS ACTIVITIES. The Company will not, and will not permit any Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. Section 4.20. NO SENIOR SUBORDINATED DEBT. The Company will not incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes; provided, however, that no Indebtedness of the Company will be deemed to be contractually subordinated in right of payment solely by virtue of being unsecured. No Guarantor will incur, create, issue, assume, Guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee; provided, however, that no Indebtedness of a Guarantor will be deemed to be contractually subordinated in right of payment solely by virtue of being unsecured. ARTICLE 5. SUCCESSORS Section 5.01. MERGER, CONSOLIDATION AND SALE OF ASSETS. (a) Neither the Company nor any Guarantor may, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company or such Guarantor, as the case may be, is the surviving corporation) or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any Guarantor, in one or more related transactions, to another Person, unless: (i) either (A) the Company or such Guarantor, as the case may be, shall be the Surviving Person; or (B) the Person formed by or surviving any such consolidation or merger (if other than the Company or such Guarantor, as the case may be) or to which such sale, assignment, transfer, conveyance or other disposition has been 51 made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company or such Guarantor, as the case may be) or the Person to which such sale, assignment, transfer conveyance or other disposition has been made assumes, by supplemental indenture in form reasonably satisfactory to the Trustee, executed and delivered to the Trustee by such Person, the obligations of the Company or such Guarantor, as the case may be, under this Indenture, the Notes and the Subsidiary Guarantees; (iii) immediately after such transaction, no Default or Event of Default exists; and (iv) except with respect to a consolidation or merger of the Company with or into a Guarantor, or a Guarantor with or into another Guarantor, the Company or such Guarantor, as the case may be, or the Person formed by or surviving any such consolidation or merger (if other than the Company or such Guarantor), or to which such sale, assignment, transfer, conveyance or other disposition has been made will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09. (b) Notwithstanding the preceding clause (iv), any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company or a Guarantor, and notwithstanding the preceding clause (ii), any Guarantor may transfer real property that is the subject of a HUD Financing to a HUD Financing Subsidiary in connection with a HUD Financing permitted to be incurred pursuant to Section 4.09. (c) The Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. Section 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Except as described with respect to the release of Subsidiary Guarantees of Guarantors pursuant to Article 10, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of the Company or a Guarantor, as applicable, under this Indenture; provided, however, that the predecessor entity shall not be released from any of the obligations or covenants under this Indenture, including with respect to the payment of the Notes and obligations under the Subsidiary Guarantee, as the case may be, in the case of: (a) a sale, transfer, assignment, conveyance or other disposition (unless such sale, transfer, assignment, conveyance or other disposition is of all or substantially all of the assets of the Company, taken as a whole, or (b) a lease. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. EVENTS OF DEFAULT. Each of the following constitutes an "Event of Default" with respect to the Notes: (a) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes (whether or not prohibited by Article 12 hereof); 52 (b) default in the payment when due of the principal of, or premium, if any, on, any of the Notes when the same becomes due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, required repurchase or otherwise (whether or not prohibited by Article 12 hereof); (c) failure by the Company or any Restricted Subsidiary to comply with Section 4.09, Section 4.10 or Section 5.01 hereof; (d) failure by the Company or any Restricted Subsidiary to comply with Section 4.12 or Section 4.17 hereof, and such failure continues for 30 days after written notice is given to the Company as provided below ; (e) failure by the Company or any Restricted Subsidiary to comply with any other covenant or agreement in the Notes or in this Indenture (other than a failure that is the subject of the foregoing clause (a), (b), (c) or (d)), and such failure continues for 60 days after written notice is given to the Company as provided below; (f) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Restricted Subsidiary (or the payment of which is guaranteed by the Company or any Restricted Subsidiary) whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, if that default: (i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "PAYMENT DEFAULT"); or (ii) results in the acceleration of such Indebtedness prior to its express maturity and in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (g) failure by the Company or any Restricted Subsidiary to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (h) except as permitted by this Indenture, any Subsidiary Guarantee of a Guarantor shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee; (i) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or gives notice of intention to make a proposal under any Bankruptcy Law; (B) consents to the entry of an order for relief against it in an involuntary case or consents to its dissolution or winding up; (C) consents to the appointment of a receiver, interim receiver, receiver and manager, liquidator, Trustee or custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or 53 (E) admits in writing its inability to pay its debts as they become due or otherwise admits its insolvency; and (j) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary in an involuntary case; or (B) appoints a receiver, interim receiver, receiver and manager, liquidator, Trustee or custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary; or (C) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, when taken together, would constitute a Significant Subsidiary; and such order or decree remains unstayed and in effect for 60 consecutive days. Section 6.02. ACCELERATION. If any Event of Default (other than those of the type described in Section 6.01(i) or (j)) occurs and is continuing, the Trustee may, and the Trustee upon the request of Holders of 25% in principal amount of the outstanding Notes shall, or the Holders of at least 25% in principal amount of outstanding Notes may, declare the principal of all the Notes, together with all accrued and unpaid interest, premium, if any, to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that such notice is a notice of acceleration (the "ACCELERATION NOTICE"), and the same shall become immediately due and payable. In the case of an Event of Default specified in Section 6.01 (i) or (j), all outstanding Notes shall become due and payable immediately without any further declaration or other act on the part of the Trustee or the Holders. Holders may not enforce this Indenture or the Notes except as provided in this Indenture. At any time after a declaration of acceleration with respect to the Notes, the Holders of a majority in principal amount of the Notes then outstanding (by notice to the Trustee) may rescind and cancel such declaration and its consequences if: (a) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; (b) all existing Defaults and Events of Default have been cured or waived except nonpayment of principal of or interest on the Notes that has become due solely by reason of such declaration of acceleration; (c) to the extent the payment of such interest is lawful, interest (at the same rate specified in the Notes) on overdue installments of interest and overdue payments of principal which has become due otherwise than by such declaration of acceleration has been paid; (d) the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its reasonable expenses, disbursements and advances; and 54 (e) in the event of the cure or waiver of an Event of Default of the type described in Section 6.01(i) or (j), the Trustee has received an Officers' Certificate and Opinion of Counsel that such Event of Default has been cured or waived. In the case of an Event of Default with respect to the Notes occurring by reason of any willful action or inaction taken or not taken by the Company or on the Company's behalf with the intention of avoiding payment of the premium that the Company would have been required to pay if the Company had then elected to redeem the Notes pursuant to Section 3.07 hereof, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to June 15, 2008, by reason of any willful action or inaction taken or not taken by the Company or on the Company's behalf with the intention of avoiding the premium required upon a redemption of the Notes prior to June 15, 2008, then the premium specified in Section 3.07(a) shall also become immediately due and payable to the extent permitted by law upon acceleration of the Notes. Section 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies shall be cumulative to the extent permitted by law. Section 6.04. WAIVER OF DEFAULTS. The Holders of at least a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes, waive any existing Default or Event of Default, and its consequences, except a continuing Default or Event of Default (i) in the payment of the principal of, premium, if any, or interest, on the Notes and (ii) in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Note affected by such modification or amendment. In the event of any Event of Default specified in clause (f) of Section 6.01, such Event of Default and all consequences of that Event of Default, including without limitation any acceleration or resulting payment default, shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders of the Notes, if within 60 days after the Event of Default arose: (a) the Indebtedness that is the basis for the Event of Default has been discharged; (b) the holders of such Indebtedness have rescinded or waived the acceleration, notice or action, as the case may be, giving rise to the Event of Default; or (c) the default that is the basis for such Event of Default has been cured. Upon any waiver of a Default or Event of Default, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed cured for every purpose of this Indenture but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 6.05. CONTROL BY MAJORITY. Subject to Section 7.01, Section 7.02(f), Section 7.02(i) (including the Trustee's receipt of the security or indemnification described therein) and Section 7.07 hereof, in case an Event of Default shall occur and be continuing, the Holders of at least a majority in aggregate principal amount of the Notes then outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes. The Trustee shall be 55 entitled to take any other action deemed proper by the Trustee which is not inconsistent with such direction or this Indenture. Section 6.06. LIMITATION ON SUITS. No Holder shall have any right to institute any proceeding with respect to this Indenture, or for the appointment of a receiver or trustee, or for any remedy thereunder, unless: (a) such Holder has previously given to the Trustee written notice of a continuing Event of Default or the Trustee receives the notice from the Company, (b) Holders of at least 25% in aggregate principal amount of the Notes then outstanding have made written request and offered reasonable indemnity to the Trustee to institute such proceeding as Trustee, and (c) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Notes then outstanding a written direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. The preceding limitations shall not apply to a suit instituted by a Holder for enforcement of payment of principal of, and premium, if any, or interest on, a Note on or after the respective due dates for such payments set forth in such Note. A Holder may not use this Indenture to affect, disturb or prejudice the rights of another Holder or to obtain a preference or priority over another Holder. Section 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture (including Section 6.06) other than as set forth in Article 12 hereof, the right of any Holder to receive payment of principal, premium, if any, and interest on the Notes held by such Holder, on or after the respective due dates expressed in the Notes (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee shall be authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, and interest then due and owing (together with interest on overdue principal and, to the extent lawful, interest) and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee shall be authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and 56 advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee and its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, moneys, securities and any other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. PRIORITIES. Subject to Article 12 hereof, if the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. Section 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01. DUTIES OF TRUSTEE (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 57 (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregate from other funds except to the extent required by law. Section 7.02. RIGHTS OF TRUSTEE. Subject to TIA Section 315: (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in any such document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (d) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (e) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event 58 which is in fact such a Default or Event of Default is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee from the Company or the Holders of 25% in aggregate principal amount of the outstanding Notes, and such notice references the specific Default or Event of Default, the Notes and this Indenture. (f) The Trustee shall not be required to give any bond or surety in respect of the performance of its power and duties hereunder. (g) The Trustee shall have no duty to inquire as to the performance of the Company's covenants herein. (h) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (i) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (j) The rights, privileges, immunities and benefits given to the Trustee hereunder, including without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed by the Trustee consistent with the terms of this Indenture to act hereunder. (k) Any permissive right or authority granted to the Trustee shall not be construed as a mandatory duty. Section 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee shall also be subject to Sections 7.10 and 7.11 hereof. Section 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. 59 Section 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA ss.313(a) (but if no event described in TIA ss.313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss.313(b)(2) to the extent applicable. The Trustee shall also transmit by mail all reports as required by TIA ss.313(c). A copy of each report at the time of its mailing to the Holders shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA ss.313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange and any delisting thereof. Section 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee (in its capacity as Trustee) or any predecessor Trustee (in its capacity as Trustee) against any and all losses, claims, damages, penalties, fines, liabilities or expenses, including incidental and out-of-pocket expenses and reasonable attorneys fees (for purposes of this Article, "losses") incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent such losses may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder, to the extent the Company has not been prejudiced thereby. The Company shall defend the claim, and the Trustee shall cooperate in the defense. The Trustee may have separate counsel if the Trustee has been reasonably advised by counsel that there may be one or more legal defenses available to it that are different from or additional to those available to the Company and in the reasonable judgment of such counsel it is advisable for the Trustee to engage separate counsel, and the Company shall pay the reasonable fees and expenses of such separate counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture, the resignation or removal of the Trustee and payment in full of the Notes through the expiration of the applicable statute of limitations. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal, premium, if any, and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(i) or (j) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. 60 Section 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time upon 30 days' prior notice to the Company and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. Subject to the Lien provided for in Section 7.07 hereof, the retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided, however, that all sums owing to the Trustee hereunder shall have been paid. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. In the case of an appointment hereunder of a separate or successor Trustee with respect to the Notes, the Company, the Guarantors, any retiring Trustee and each successor or separate Trustee with respect to the Notes shall execute and deliver a supplemental indenture hereto (1) which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of any retiring Trustee with respect to the Notes as to which any such retiring Trustee is not retiring shall continue to be vested in such retiring Trustee and (2) that shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustee co-trustees of the same trust and that each such separate, retiring or successor Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any such other Trustee. 61 Section 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or banking association, the successor corporation or banking association without any further act shall, if such successor corporation or banking association is otherwise eligible hereunder, be the successor Trustee. Section 7.10. ELIGIBILITY; DISQUALIFICATION There shall at all times be a Trustee hereunder that is a Person organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million (or a wholly-owned subsidiary of a bank or trust company, or of a bank holding company, the principal subsidiary of which is a bank or trust company having a combined capital and surplus of at least $50.0 million) as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss.310(a)(1), (2) and (5). The Trustee is subject to TIA ss.310(b). Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA ss.311(a), excluding any creditor relationship listed in TIA ss.311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth in this Article 8. Section 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE") and each Guarantor shall be released from all of its obligations under its Guarantee. For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Debt represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under the Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive, solely from the trust fund described in Section 8.04, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, or interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Sections 4.01 and 4.02, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith and (d) this Article 8. If the Company exercises under Section 8.01 the option applicable to this Section 8.02, subject to the satisfaction of the conditions set forth in Section 8.04, payment of the Notes may not be accelerated because of an Event of Default. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03. 62 Section 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04, be released from its obligations under the covenants contained in Sections 4.08 through 4.20 hereof, and the operation of Section 5.01(a)(iv), with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "COVENANT DEFEASANCE") and each Guarantor shall be released from all of its obligations under its Guarantee with respect to such covenants in connection with such outstanding Notes and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. If the Company exercises under Section 8.01 the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04, payment of the Notes may not be accelerated because of an Event of Default specified in clause (c) (with respect to the covenants contained in Sections 4.09, 4.10 or 5.01(a)(iv)), clause (d) (with respect to the covenants contained in Sections 4.12 and 4.17), clause (e) (with respect to the covenants contained in Sections 4.08 and 4.11 through 4.20), (f), (g), (h) and (i) (but in the case of (h) and (i) of Section 6.01, with respect to Significant Subsidiaries only). Section 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 to the outstanding Notes. Legal Defeasance or Covenant Defeasance may be exercised only if: (a) the Company irrevocably deposits with the Trustee, in trust (the "DEFEASANCE TRUST"), for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination of cash in U.S. dollars and non-callable U.S. Government Securities, in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or premium, if any, and interest on the outstanding Notes on the Stated Maturity or on the next redemption date, as the case may be, and the Company shall specify whether the Notes are being defeased to maturity or to such particular redemption date; (b) in the case of Legal Defeasance under Section 8.02 hereof, the Company shall deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) subsequent to the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of Covenant Defeasance under Section 8.03 hereof, the Company shall deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; 63 (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound; (f) the Company shall deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over other creditors of the Company with the intent of defeating, hindering, delaying or defrauding such other creditors; and (g) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05. DEPOSITED CASH AND U.S. GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06, all cash and non-callable U.S. Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of all sums due and to become due thereon in respect of principal, premium, if any, and interest but such cash and securities need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any cash or non-callable U.S. Government Securities held by it as provided in Section 8.04 which, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee (which may be the certification delivered under Section 8.04(a)), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. REPAYMENT TO COMPANY. The Trustee shall promptly, and in any event, no later than five (5) Business Days, pay to the Company after request therefor, any excess money held with respect to the Notes at such time in excess of amounts required to pay any of the Company's Obligations then owing with respect to the Notes. Any cash or non-callable U.S. Government Securities deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal, premium, if any, or interest on any Note and remaining unclaimed for one year after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such cash and securities, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such cash and securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such 64 notification or publication, any unclaimed balance of such cash and securities then remaining shall be repaid to the Company. Section 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any cash or non-callable U.S. Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is permitted to apply all such cash and securities in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders to receive such payment from the cash and securities held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder to: (a) cure any ambiguity, omission, defect or inconsistency; (b) provide for the assumption by a Surviving Person of the obligations of the Company under this Indenture; (c) provide for uncertificated Notes in addition to or in place of certificated Notes; provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (d) add additional Guarantees or additional obligors with respect to the Notes or release Guarantors from Guarantees as permitted by the terms of this Indenture; (e) secure the Notes; (f) add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company; (g) make any other change that would provide additional rights or benefits to the Holders or that does not adversely affect the legal rights hereunder of any such Holder; (h) make any change to comply with any requirement of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; or (i) provide for or confirm the issuance of Additional Notes in accordance with this Indenture. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such 65 amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture and the Notes with the consent of the Holders of at least a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07, any existing Default or Event of Default (except a continuing Default or Event of Default in (i) the payment of principal, premium, if any, or interest on the Notes and (ii) in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Note affected by such modification or amendment) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid and the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of, or change the Stated Maturity of, any Note or alter the provisions with respect to the redemption or repurchase of the Notes relating to Section 4.17 (including the applicable definitions); (c) reduce the rate of, or change the time for payment of, interest, if any, on, any Note; (d) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on the Notes (except a recission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in currency other than that stated in the Note; (f) make any change in the provisions (including applicable definitions) of this Indenture relating to waivers of past defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on, such Holder's Notes; (g) waive a redemption or repurchase payment with respect to any Note (including the payment required by the provisions of Section 4.12 and Section 4.17 hereof); (h) make any change in any Subsidiary Guarantees that would adversely affect the Holders or release any Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture, except in accordance with the provisions of Article 10 hereof; 66 (i) make any change to Article 12 hereof (including applicable definitions) that would adversely affect the Holders; (j) make any change in this Section 9.02. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any supplemental indenture. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 120 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holder of each Note affected thereby to such Holder's address appearing in the Security Register a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Section 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental indenture that complies with the TIA as then in effect. Section 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion thereof that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion thereof if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver shall become effective in accordance with its terms and thereafter shall bind every Holder. Section 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. None of the Company nor any Guarantor may sign an amendment or supplemental indenture until its board of directors (or committee serving a similar function) approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in 67 relying upon an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that such amended or supplemental indenture is the legal, valid and binding obligations of the Company enforceable against it in accordance with its terms, subject to customary exceptions and that such amended or supplemental indenture complies with the provisions hereof (including Section 9.03). ARTICLE 10. GUARANTEES Section 10.01. GUARANTEE. Subject to this Article 10, the Guarantors hereby unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns: (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes, subject to any applicable grace period, whether at Stated Maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on the overdue principal of and premium, if any, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee under this Indenture, the Registration Rights Agreement or any other agreement with or for the benefit of the Holders or the Trustee, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration pursuant to Section 6.02, redemption or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. Each Guarantor hereby agrees that its obligations with regard to its Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the Notes or the Obligations of the Company under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (a) any right to require any of the Trustee, the Holders or the Company (each a "BENEFITED PARTY"), as a condition of payment or performance by such Guarantor, to (1) proceed against the Company, any other guarantor (including any other Guarantor) of the Obligations under the Guarantees or any other Person, (2) proceed against or exhaust any security held from the Company, any such other guarantor or any other Person, (3) proceed against or have resort to any balance of any deposit account or credit on the books of any Benefited Party in favor of the Company or any other Person, or (4) pursue any other remedy in the power of any Benefited Party whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Company including any defense based on or arising out of the lack of validity or the unenforceability of the Obligations under the Guarantees or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Company from any cause other than payment in full of the Obligations under the Guarantees; 68 (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Benefited Party's errors or omissions in the administration of the Obligations under the Guarantees, except behavior which amounts to bad faith; (e) (1) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms of the Guarantees and any legal or equitable discharge of such Guarantor's obligations hereunder, (2) the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (3) any rights to set-offs, recoupments and counterclaims and (4) promptness, diligence and any requirement that any Benefited Party protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentations, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of the Guarantees, notices of Default under the Notes or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Obligations under the Guarantees or any agreement related thereto, and notices of any extension of credit to the Company and any right to consent to any thereof; (g) to the extent permitted under applicable law, the benefits of any "One Action" rule and (h) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of the Guarantees. Except to the extent expressly provided herein, including Sections 8.02, 8.03 and 10.05, each Guarantor hereby covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in its Guarantee and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby and (y) in the event of any declaration of acceleration of such obligations as provided in Section 6.02 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 10.02. LIMITATION ON GUARANTOR LIABILITY. (a) Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that each Guarantor's liability shall be that amount 69 from time to time equal to the aggregate liability of such Guarantor under the guarantee, but shall be limited to the lesser of (a) the aggregate amount of the Company's obligations under the Notes and this Indenture or (b) the amount, if any, which would not have (1) rendered the Guarantor "insolvent" (as such term is defined in the Federal Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (2) left it with unreasonably small capital at the time its guarantee with respect to the Notes was entered into, after giving effect to the incurrence of existing Debt immediately before such time; provided, however, it shall be a presumption in any lawsuit or proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the guarantee with respect to the Notes is the amount described in clause (a) above unless any creditor, or representative of creditors of the Guarantor, or debtor in possession or Trustee in bankruptcy of the Guarantor, otherwise proves in a lawsuit that the aggregate liability of the Guarantor is limited to the amount described in clause (b). (b) In making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the proviso of Section 10.02(a), the right of each Guarantor to contribution from other Guarantors and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. Section 10.03. EXECUTION AND DELIVERY OF GUARANTEE. To evidence its Guarantee set forth in Section 10.01, each Guarantor hereby agrees that a notation of such Guarantee in substantially the form included in Exhibit E attached hereto shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Guarantee set forth in Section 10.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer whose signature is on this Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors. The Company hereby agrees that it shall cause each Person that becomes obligated to provide a Guarantee pursuant to Section 4.17 to execute a supplemental indenture in form and substance reasonably satisfactory to the Trustee, pursuant to which such Person provides the guarantee set forth in this Article 10 and otherwise assumes the obligations and accepts the rights of a Guarantor under this Indenture, in each case with the same effect and to the same extent as if such Person had been named herein as a Guarantor. The Company also hereby agrees to cause each such new Guarantor to evidence its guarantee by endorsing a notation of such guarantee on each Note as provided in this Section 10.03. Section 10.04. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Except as otherwise provided in Section 10.05, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the Surviving Person) another Person whether or not affiliated with such Guarantor unless: (a) subject to Section 10.05, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under this Indenture, the Guarantee and any Registration Rights Agreements on the terms set forth herein or therein; and (b) the Guarantor complies with the requirements of Article 5 hereof. 70 In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 10.05. RELEASES FOLLOWING MERGER, CONSOLIDATION OR SALE OF ASSETS, ETC. In the event of a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of any obligations under its Guarantee; provided that the net proceeds of such sale or other disposition shall be applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.12. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary in accordance with the provisions of Section 4.16, such Subsidiary shall be released and relieved of any obligations under its Subsidiary Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.12, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Guarantee. Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 10. ARTICLE 11. SATISFACTION AND DISCHARGE Section 11.01. SATISFACTION AND DISCHARGE. This Indenture shall be discharged and shall cease to be of further effect, except as to surviving rights of registration of transfer or exchange of the Notes, as to all Notes issued hereunder, when: (a) either: (i) all Notes that have been previously authenticated and delivered (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has previously been deposited in trust or segregated and held in trust by the Company and is thereafter repaid to the Company or discharged from the trust) have been delivered to the Trustee for cancellation; or 71 (ii) all notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year, and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable U.S. Government Securities, or a combination of cash in U.S. dollars and non-callable U.S. Government Securities, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the notes not delivered to the trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption; (b) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any other Guarantor is a party or by which the Company or any other Guarantor is bound; (c) the Company has paid or caused to be paid all sums payable by it hereunder; (d) the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at Stated Maturity or the redemption date, as the case may be; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and Opinion of Counsel stating that all conditions precedent relating to the satisfaction and discharge of this Indenture have been satisfied. Section 11.02. DEPOSITED CASH AND U.S. GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 11.03, all cash and non-callable U.S. Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 11.02, the "Trustee") pursuant to Section 11.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest but such cash and securities need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed or assessed against the Trustee with respect to money deposited with the Trustee pursuant to Section 11.01 hereof. Section 11.03. REPAYMENT TO COMPANY. Any cash or non-callable U.S. Government Securities deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on, any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such cash and securities, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such cash and securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such cash and securities then remaining shall be repaid to the Company. 72 ARTICLE 12. SUBORDINATION Section 12.01. AGREEMENT TO SUBORDINATE. The Company and each Guarantor agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by, and all "payments" on and "distributions" on or with respect to, the Notes (including any obligation to repurchase the Notes) and any Subsidiary Guarantees, is subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full in cash of all Senior Debt (including interest, fees and expenses after the commencement of any bankruptcy proceeding as specified in the documents evidencing the applicable Senior Debt, whether or not recoverable in such a proceeding, outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). This Article 12 shall constitute a continuing agreement with all Persons who become holders of, or continue to hold Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt. Section 12.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or distribution of the assets of the Company or a Guarantor to creditors of the Company or the relevant Guarantor (1) in a liquidation or dissolution of the Company or the Guarantor, (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or the Guarantor or its respective property, (3) in an assignment for the benefit of creditors of the Company or Guarantor or (4) any marshaling of assets and liabilities of the Issuer or any Guarantor, the holders of Senior Debt shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest, fees and expenses after the commencement of any such proceeding as specified in the documents evidencing the applicable Senior Debt, whether or not the claim for such interest, fees and expenses are allowed as a claim in such proceeding), before the Holders shall be entitled to receive any payment or distribution with respect to the Notes or Subsidiary Guarantees, and until all Obligations with respect to Senior Debt are paid in full in cash, any payment or distribution to which the Holders would be entitled but for this Article 12 shall be made to the holders of Senior Debt (except that Holders may receive and retain Permitted Junior Securities and payments made from the trust described under Article 8 or Section 11.02 if such funds were deposited in accordance with, and to the extent permitted by, this Article 12). Section 12.03. DEFAULT ON DESIGNATED SENIOR DEBT. (a) Neither the Company nor any Guarantor may make any payment in respect of the Notes (except in Permitted Junior Securities or from the trust described under Article 8 hereof) if: (1) a payment Default on Designated Senior Debt occurs and is continuing beyond any applicable grace period; or (2) any other default occurs and is continuing on any series of Designated Senior Debt that permits holders of that series of Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such other default (a "Payment Blockage Notice") from the Company or (i) with respect to Designated Senior Debt arising under the Credit Agreement, from the agent for the lenders thereunder, or (ii) with respect to any other Designated Senior Debt, from the holders of any such Designated Senior Debt. (b) Payments on the Notes or the guarantees may and shall be resumed: (1) in the case of a payment Default on Designated Senior Debt, upon the earlier of the date on which such default is cured or waived or such Designated Senior Debt has been discharged and paid in full; and 73 (2) in the case of a nonpayment Default on Designated Senior Debt, upon the earlier of (i) the date on which such nonpayment Default is cured or waived, (ii) 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated, (iii) the date on which such Payment Blockage Period shall have been terminated by written notice to the Trustee by the party initiating such Payment Blockage Period or (iv) the date on which such Designated Senior Debt has been discharged or paid in full. (c) No new Payment Blockage Notice shall be delivered unless and until (i) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, interest and premium on the Notes that have come due have been paid in full in cash. No nonpayment default on Designated Senior Debt that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 90 days. Following the expiration of any period during which the Company or the Guarantors are prohibited from making payments on the Notes pursuant to a Payment Blockage Notice, the Company or the Guarantors shall be obligated to resume making any and all required payments in respect of the Notes, including any missed payments, unless a payment default on Designated Senior Debt exists or the maturity of any Designated Senior Debt has been accelerated, and such acceleration remains in full force and effect. (d) The Company shall give prompt written notice to the Trustee of any default in the payment of any Senior Debt or any acceleration under any Senior Debt or under any agreement pursuant to which Senior Debt may have been issued. Failure to give such notice shall not affect the subordination of the Notes to the Senior Debt or the application of the other provisions provided in this Article 12. (e) So long as any Indebtedness is outstanding under the Credit Agreement, only the agent under such Credit Agreement shall be permitted to deliver a Payment Blockage Notice or to otherwise act as the Representative of the holders of Designated Senior Debt. Section 12.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt (including, without limitation, the agent under the Credit Agreement) or the Representative of the acceleration. Section 12.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee receives or is holding, or any Holder receives, any payment or distribution with respect to the Notes or any Subsidiary Guarantee of the Notes, and such payment is prohibited by Section 12.02 or 12.03 hereof, such payment or distribution shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Debt as their interests may appear or their Representative under the Credit Agreement or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to the Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in cash in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 12, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall mistakenly pay over or distribute to or on behalf of Holders or the Company, any Guarantor, or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 12, unless a Responsible Officer of the Trustee has received a Payment Blockage Notice and such payment is made as a result of the willful misconduct or gross negligence of the Trustee. 74 Section 12.06. NOTICE BY THE COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes or guarantees to violate this Article 12, but failure to give such notice shall not affect the subordination of the Notes or the guarantees to the Senior Debt as provided in Article 12. Section 12.07. SUBROGATION. After all Senior Debt is paid in full in cash and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt. A distribution made under this Article 12 to holders of Senior Debt that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article 12 shall have been applied, pursuant to the provisions of this Article 12, to the payment of all amounts payable under the Senior Debt, then and in such case the Holders shall be entitled to receive from the holders of such Senior Debt at the time outstanding any payments or distributions received by such holders of such Senior Debt in excess of the amount sufficient to pay all amounts payable under or in respect of such Senior Debt in full in cash; provided, however, that such payments or distributions shall be paid first pro rata to Holders that previously paid amounts and then pro rata to all Holders. Section 12.08. RELATIVE RIGHTS. This Article 12 defines the relative rights of Holders and holders of Senior Debt. Nothing in this Indenture shall: (a) impair, as between the Company and Holders, the Obligation of the Company, which is absolute and unconditional, to pay principal, premium and interest on the Notes in accordance with their terms; (b) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt; or (c) prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article 12 to pay principal, premium and interest on a Note on the due date, the failure is still a Default. Section 12.09. SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY. No right of any Holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or by the failure of the Company to comply with this Indenture. Subject to the other provisions of this Indenture, the holders of the Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders, and without impairing or releasing the subordination provided in this Article 12, or the obligations hereunder of the Holders to the holders of the Senior Debt, do any one or more of the following: (a) change in the manner, place, or terms of payment, or extend the time of payment of, or renew or alter, Senior Debt or any instrument evidencing the same or any agreement under which the Senior Debt is outstanding or secured; (b) sell, exchange, release, or otherwise deal with any property pledged, mortgaged, or otherwise securing the Senior Debt; 75 (c) release any Person liable in any manner for the collection of Senior Debt; and (d) exercise or refrain from exercising any rights against the Company, the Guarantor or any other Person; provided, however, that this provision shall not in any way permit the Company or any Guarantor to take any action otherwise prohibited by this Indenture. Section 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company or any Guarantor referred to in this Article 12, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of the Representative for the purpose of ascertaining the Persons entitled to participate in such distribution (so long as the existence of the subordination provisions of this Article 12 have been brought to the attention of such court or Representative), the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. Section 12.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 12 or any other provision of this Indenture, the Trustee shall not be charged with knowledge or notice of the existence of any facts that would prohibit the making of any payment to or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless and until the Trustee shall have received no later than three (3) Business Days prior to the due date of such payment written notice of facts that would cause the payment of any principal, premium and interest with respect to the Notes to violate this Article 12 and, prior to the receipt of any such written notice, the Trustee, shall be entitled in all respects conclusively to presume that no such fact exists. Unless the Trustee shall have received the notice provided for in the preceding sentence, the Trustee shall have full power and authority to receive such payment and to apply the same to the purpose for which it was received, and shall not be affected by any notice to the contrary which may be received by it on or after such date. Only the Company or a Representative may give the notice. Nothing in this Article 12 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 12.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to acknowledge and effectuate the subordination as provided in this Article 12, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, a Representative of Designated Senior Debt is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes and the Trustee shall have no liability therefor. Section 12.13. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything contained herein to the contrary, payments from cash or the proceeds of U.S. Government Securities held in trust under Article 8 or Section 11.02 hereof by the Trustee (or other qualifying trustee) not in violation of Section 12.03 hereof for the payment of principal of (and premium, if any) and interest on the Notes shall not be subordinated to the prior payment of any Senior Debt or subject to the restrictions set forth in this Article 12, and none of the Holders shall be obligated to pay over any such amount to the Issuers or any Holder of Senior Debt or any other creditor of the Company. 76 Section 12.14. PAYMENT AND DISTRIBUTION. For purposes of this Article 12, the term "payment" and/or "distribution" means any payment or distribution (whether direct or indirect, whether in cash, property, securities, or otherwise, and whether obtained or distributed by set-off, liquidation, bankruptcy distribution, settlement, or otherwise) made by any Person (including, without limitation, any payments or distributions made pursuant to Section 4.17 or by any court or governmental body or agency, any trustee in bankruptcy, or any liquidating trustee) with respect to any Note or any guarantees or otherwise under this Indenture, including, without limitation, payment of principal, premium or interest, on the Notes or any payments under or with respect to any note guarantees, any depositing of funds with the Trustee or any Paying Agent (including, without limitation, a deposit in respect of defeasance or redemption, any payment on account of any optional or mandatory redemptions or repurchase provisions, any payment or recovery on any claim under this Indenture, any note guarantees, any Note, or relating to or arising out of the offer, sale, or purchase of any Note (whether for rescission or damages and whether based on contract, tort, duty imposed by law, or any other theory of liability); provided that, for the purposes of this Article 12, all Obligations now or hereafter existing under any Senior Debt, (including, without limitation, the Credit Agreement, any Hedging Obligations or agreements with respect to the issuance of letters of credit) shall not be deemed to have been paid in full unless the holders thereof shall have received payment in full and all commitments thereunder and all letters of credit issued thereunder have expired. Section 12.15. NO CLAIMS. No holder of Subordinated Obligations shall have any claim to any property or assets of the Company, any Guarantor, or any Subsidiary of the Company or any Guarantor, unless and until the Senior Debt shall have been fully paid in cash. Section 12.16. ACKNOWLEDGEMENT OF HOLDERS. Each holder of Subordinated Obligations by accepting a Note or a guarantee acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and consideration to each holder of Senior Debt, whether such Senior Debt was created or acquired before or after the issuance of the Notes or the guarantees, to acquire and continue to hold, or to continue to hold, such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt. ARTICLE 13. MISCELLANEOUS Section 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. Section 13.02. NOTICES. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next-day delivery, to the other's address: If to the Company: Psychiatric Solutions, Inc. 113 Seaboard Lane, Suite C-100 Franklin, Tennessee 37067 Attention: Brent Turner Telecopier No.: (615) 312-5711 77 With a copy to: Waller Lansden Dortch & Davis, PLLC 511 Union Street, Suite 2100 Nashville, Tennessee 37219-8966 Attention: Gerald Mace, Esq. Telecopier No.: (615) 244- If to the Trustee: Wachovia Bank, National Association NC5780 2525 West End Avenue, Suite 1200 Nashville, Tennessee 37203 Attention: Corporate Trust Administration Telecopier No.: (615) 341-3927 The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to the Trustee or Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if sent by facsimile transmission; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next-day delivery. All notices and communications to the Trustee or Holders shall be deemed duly given and effective only upon receipt. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next-day delivery to its address shown on the Security Register. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss.312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss.312(c). Section 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions 78 precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with. Section 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss.314(a)(4)) shall comply with the provisions of TIA ss.314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. With respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate, certificates of public officials or reports or opinions of experts. Section 13.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or of the Guarantors under the Notes, this Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver and release may not be effective to waive or release liabilities under the federal securities laws. Section 13.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 79 Section 13.10. SUCCESSORS. All covenants and agreements of the Company in this Indenture and the Notes shall bind its successors. All covenants and agreements of the Trustee in this Indenture shall bind its successors. Section 13.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 13.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings in this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. Section 13.14. QUALIFICATION OF THIS INDENTURE The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of any Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys' fees and expenses for the Company, the Trustee and the Holders) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Notes and printing this Indenture and the Notes. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA. [Signatures on following page] 80 SIGNATURES Dated as of June 30, 2003 PSYCHIATRIC SOLUTIONS, INC. By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President and Chief Executive Officer PSYCHIATRIC SOLUTIONS HOSPITALS, INC. INFOSCRIBER CORPORATION COLLABORATIVE CARE CORPORATION PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. SOLUTIONS CENTER OF LITTLE ROCK, INC. PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. PSYCHIATRIC MANAGEMENT RESOURCES, INC. PSI-EAP, INC. SUNSTONE BEHAVIORAL HEALTH, INC. THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. PSI CEDAR SPRINGS HOSPITAL, INC. PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. AERIES HEALTHCARE CORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. PSI HOSPITALS, INC. PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION GREAT PLAINS HOSPITAL, INC. GULF COAST TREATMENT CENTER, INC. HAVENWYCK HOSPITAL INC. H.C. CORPORATION HSA HILL CREST CORPORATION HSA OF OKLAHOMA, INC. MICHIGAN PSYCHIATRIC SERVICES, INC. RAMSAY MANAGED CARE, INC. RAMSAY TREATMENT SERVICES, INC. PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. RAMSAY YOUTH SERVICES OF ALABAMA, INC. RAMSAY YOUTH SERVICES OF FLORIDA, INC. RAMSAY YOUTH SERVICES OF GEORGIA, INC. RAMSAY YOUTH SERVICES PUERTO RICO, INC. RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC. RHCI SAN ANTONIO, INC. TRANSITIONAL CARE VENTURES, INC. TRANSITIONAL CARE VENTURES (TEXAS), INC. By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President THERAPEUTIC SCHOOL SERVICES, LLC BY: PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ------------------------------------------------ Name: Joey A. Jacobs Title: President PSI TEXAS HOSPITALS, LLC BY: PSYCHIATRIC SOLUTIONS HOSPITALS, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ------------------------------------------------ Name: Joey A. Jacobs Title: President H.C. PARTNERSHIP BY: H.C. CORPORATION, AS GENERAL PARTNER By: /s/ Joey A. Jacobs ------------------------------------------------ Name: Joey A. Jacobs Title: President BY: HSA HILL CREST CORPORATION, AS GENERAL PARTNER By: /s/ Joey A. Jacobs ------------------------------------------------ Name: Joey A. Jacobs Title: President TEXAS CYPRESS CREEK HOSPITAL, L.P. TEXAS WEST OAKS HOSPITAL, L.P. NEURO INSTITUTE OF AUSTIN, L.P. TEXAS LAUREL RIDGE HOSPITAL, L.P. TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P. TEXAS SAN MARCOS TREATMENT CENTER, L.P. BY: PSI TEXAS HOSPITALS, LLC, AS GENERAL PARTNER BY: PSYCHIATRIC SOLUTIONS HOSPITAL, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ---------------------------------------------- Name: Joey A. Jacobs Title: President TRUSTEE: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Greta Wright ------------------------------------------------ Name: Greta Wright Title: Vice President EXHIBIT A ================================================================================ (Face of Note) 10-5/8% SENIOR SUBORDINATED NOTES DUE 2013 CUSIP _____________ NO.______ $_____________ PSYCHIATRIC SOLUTIONS, INC. promises to pay to CEDE & CO., INC. or registered assigns, the principal sum of _________________ Dollars ($______________) on June 15, 2013. Interest Payment Dates: June 15 and December 15, commencing December 15, 2003. Record Dates: June 1 and December 1. Dated: ______________, 20[ ]. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer. PSYCHIATRIC SOLUTIONS, INC. By: -------------------------------------------------- Name: Title: This is one of the [Global] Notes referred to in the within-mentioned Indenture: WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By: --------------------------------- Authorized Signatory Dated _____________, 20__ (Back of Note) 10-5/8% SENIOR SUBORDINATED NOTES DUE 2013 [Insert the Global Note Legend, if applicable pursuant to the terms of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the terms of the Indenture] [Insert the following legend if the Notes are issued with original issue discount: FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT: FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS NOTE, THE ISSUE PRICE IS $[ ], THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $[ ], THE ISSUE DATE IS [ ] AND THE YIELD TO MATURITY IS [ ]% PER ANNUM.] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Note at 10-5/8% per annum until maturity and shall pay Additional Interest, if any, as provided in Section 5 of the Registration Rights Agreement. The Company shall pay interest semi-annually on June 15 and December 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from June 30, 2003; provided, however, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be the first of June 15 or December 15 to occur after the date of issuance, unless such June 15 or December 15 occurs within one calendar month of such date of issuance, in which case the first Interest Payment Date shall be the second of June 15 and December 15 to occur after the date of issuance. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time at a rate that is 1% per annum in excess of the interest rate then in effect under the Indenture and this Note; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable grace periods), from time to time at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) to the Persons in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the June 1 or December 1 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium, if any, and interest and Additional Interest, if any, at the office or agency of the Company maintained for such purpose, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the Security Register; provided, however, that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest and Additional Interest, if any, and premium, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Wachovia Bank, National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 30, 2003 ("INDENTURE") among the Company, the guarantors party thereto (the "GUARANTORS") and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. 5. OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this Paragraph 5, the Notes will not be redeemable at the option of the Company prior to June 15, 2008. Starting on that date, the Company may redeem all or a portion of the Notes, at once or over time, after giving the required notice under the Indenture at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), if redeemed during the twelve-month period commencing on June 15 of the years indicated below:
Year Percentage ---------- 2008.............................................. 105.313% 2009.............................................. 103.542% 2010.............................................. 101.771% 2011 and thereafter............................... 100.000%
(b) At any time and from time to time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the Notes (including Additional Notes) issued under this Indenture at a redemption price (expressed as a percentage of principal amount) equal to 110.625% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date) with the net cash proceeds of any Equity Offering of common stock of the Company; provided, however, that (i) at least 65% of the aggregate principal amount of the Notes initially issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after giving effect to such redemption and (ii) any such redemption shall be made within 90 days of such Equity Offering. (c) Any prepayment pursuant to this paragraph shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture. 6. MANDATORY REDEMPTION. Except as set forth in Sections 4.12 and 4.17 of the Indenture, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to, or Offer to Purchase, the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of such Holder's Notes (a "CHANGE OF CONTROL OFFER") at a purchase price, in cash, equal to 101% of the aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to the purchase date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest to, but excluding, the Purchase Date). (b) If the Company or one of its Restricted Subsidiaries consummates any Asset Sales, any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 4.12 of the Indenture will constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $7.5 million, the Company will make an offer to all Holders of Notes to purchase the maximum principal amount of Notes and, if the Company is required to do so under the terms of any other Indebtedness that is pari passu with the Notes, such other Indebtedness on a pro rata basis with the Notes, that may be purchased out of the Excess Proceeds (an "ASSET SALE OFFER"). The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of the purchase of all properly tendered and not withdrawn Notes pursuant to an Asset Sale Offer, the Company may use such remaining Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. This Note shall represent the aggregate principal amount of outstanding Notes from time to time endorsed hereon and the aggregate principal amount of Notes represented hereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption, or during the period between a record date (including a Regular Record Date) and the next succeeding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Company, the Guarantors and the Trustee may amend or supplement the Indenture and the Notes with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes, including Additional Notes, if any, then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing Default or Event of Default (except a continuing Default or Event of Default in (i) the payment of principal, premium, if any, or interest on the Notes and (ii) in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the Holder of each Note affected by such modification or amendment) or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the Notes, including Additional Notes, if any, then outstanding voting as a single class (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes). Without the consent of any Holder, the Company, the Guarantors and the Trustee may amend or supplement the Indenture or the Notes to (a) cure any ambiguity, omission, defect or inconsistency, (b) provide for the assumption by a Surviving Person of the obligations of the Company under the Indenture, (c) provide for uncertificated Notes in addition to or in place of certificated Notes, provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (d) add additional Guarantees or additional obligors with respect to the Notes or release Guarantors from Guarantees as permitted by the terms of the Indenture, (e) secure the Notes, (f) add to the covenants of the Company for the benefit of the Holders or surrender any right or power conferred upon the Company, (g) make any other change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, (h) make any change to comply with any requirement of the Commission in order to effect or maintain the qualification of the Indenture under the TIA, or (i) provide for or confirm the issuance of Additional Notes. 12. DEFAULTS AND REMEDIES. Each of the following is an Event of Default under the Indenture: (a) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes; (b) default in the payment when due of the principal of, or premium, if any, on, any of the Notes when the same becomes due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, required repurchase or otherwise (whether or not prohibited by Article 12 of the Indenture); (c) failure by the Company or any Restricted Subsidiary to comply with Section 4.09, Section 4.10 or Section 5.01 of the Indenture; (d) failure by the Company or any Restricted Subsidiary to comply with Section 4.12 or Section 4.17 of the Indenture, and such failure continues for 30 days after written notice is given to the Company as provided in the Indenture; (e) failure by the Company or any Restricted Subsidiary to comply with any other covenant or agreement in the Notes or in the Indenture (other than a failure that is the subject of the foregoing clause (a), (b), (c) or (d)), and such failure continues for 60 days after written notice is given to the Company as provided in the Indenture; (f) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Restricted Subsidiary (or the payment of which is guaranteed by the Company or any Restricted Subsidiary) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if that default (i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "PAYMENT DEFAULT"), or (ii) results in the acceleration of such Indebtedness prior to its express maturity, and in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (g) failure by the Company or any Restricted Subsidiary to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (h) except as permitted by the Indenture, any Subsidiary Guarantee of a Guarantor shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (i) certain events of bankruptcy, insolvency or reorganization affecting the Company or any of its Significant Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency described in the Indenture, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Additional Interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture, except a continuing Default or Event of Default (i) in the payment of the principal of, premium, if any, or interest on, the Notes and (ii) in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the Holder of each Note affected by such modification or amendment. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. SUBORDINATION. Payment of principal, interest and premium and Additional Interest, if any, on the Notes is subordinated to the prior payment of Senior Debt on the terms provided in the Indenture. 14. TRUSTEE DEALINGS WITH COMPANY. Subject to certain limitations, the Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. 15. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Indenture, the Notes, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes that are Initial Notes shall have all the rights set forth in the Registration Rights Agreement, dated as of June 30, 2003, between the Company and the parties named on the signature pages thereto or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreement, if any, among the Company and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes. 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Psychiatric Solutions, Inc. 113 Seaboard Lane, Suite C-100 Franklin, Tennessee 37067 Attention: Brent Turner Telecopier No.: (615) 312-5711 20. GOVERNING LAW. The internal law of the State of New York shall govern and be used to construe this Note without giving effect to applicable principals of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Company pursuant to Section 4.12 or 4.17 of the Indenture, check the box below: [ ] Section 4.12 [ ] Section 4.17 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.12 or Section 4.17 of the Indenture, state the amount you elect to have purchased: $_____________________ Date:_________________ Your Signature:________________________________ (Sign exactly as your name appears on the Note) Tax Identification No.: ----------------------------------------------- SIGNATURE GUARANTEE: ----------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's social security or other tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ as agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ______________ Your Signature:_______________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: * -------------------------- * Participant in a recognized Signature Guarantee Medallion Program. SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of of this Global Note Signature of decrease in Amount of increase following such authorized signatory Principal Amount in Principal Amount decrease (or of Trustee or Date of Exchange of this Global Note of this Global Note increase) Note Custodian ---------------- ------------------- ------------------- ------------------- --------------------
EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Psychiatric Solutions, Inc. 113 Seaboard Lane Suite C-100 Franklin, Tennessee 37067 Attention: Brent Turner Wachovia Bank, National Association 2525 West End Avenue, Suite 1200 Nashville, Tennessee 37203 Attention: Corporate Trust Department Telecopier No.: (615) 341-3927 Re: 10-5/8% Senior Subordinated Notes due 2013 Reference is hereby made to the Indenture, dated as of June 30, 2003 (the "Indenture"), among Psychiatric Solutions, Inc., as issuer (the "Company"), the Guarantors party thereto and Wachovia Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(a) of Regulation S under the Securities Act, and (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the B-1 Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not B-2 required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------------------- [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: ----------------------------------- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] IAI Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE OF (a), (b) OR (c)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] IAI Global Note (CUSIP _________); or (iv) [ ] Unrestricted Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Psychiatric Solutions, Inc. 113 Seaboard Lane Suite C-100 Franklin, Tennessee 37067 Attention: Brent Turner Wachovia Bank, National Association 2525 West End Avenue, Suite 1200 Nashville, Tennessee 37203 Attention: Corporate Trust Department Telecopier No.: (615) 341-3927 Re: 10-5/8% Senior Subordinated Notes due 2013 Reference is hereby made to the Indenture, dated as of June 30, 2003 (the "Indenture"), among Psychiatric Solutions, Inc., as issuer (the "Company"), the Guarantors party thereto and Wachovia Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. [ ] Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Note and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Note and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the C-1 Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CIRCLE ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Definitive Note and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. -------------------------------------- [Insert Name of Transferor] By: ---------------------------------- Name: Title: Dated: -------------------------------- C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Psychiatric Solutions, Inc. 113 Seaboard Lane Suite C-100 Franklin, Tennessee 37067 Attention: Brent Turner Wachovia Bank, National Association 2525 West End Avenue, Suite 1200 Nashville, Tennessee 37203 Attention: Corporate Trust Department Telecopier No.: (615) 341-3927 Re: 10-5/8% Senior Subordinated Notes due 2013 Reference is hereby made to the Indenture, dated as of June 30, 2003 (the "Indenture"), among Psychiatric Solutions, Inc., as issuer (the "Company"), the Guarantors party thereto and Wachovia Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for D-1 which we are acting are each able to bear the economic risk of our or its investment. We have had access to such financial and other information and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase the Notes. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion and are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act of the securities laws of any state of the United States or any other applicable jurisdiction. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. This letter shall be governed by, and construed in accordance with, the laws of the State of New York. ------------------------------------------ [Insert Name of Accredited Investor] By: -------------------------------------- Name: Title: Dated: ---------------- D-2 EXHIBIT E FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture), jointly and severally, unconditionally guarantees, to the extent set forth in the Indenture and subject to the provisions in the Indenture, dated as of June 30, 2003 (the "Indenture"), among Psychiatric Solutions, Inc., as issuer (the "Company"), the Guarantors listed on the signature pages thereto and Wachovia Bank, National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest and Additional Interest, if any, on the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, if any, and, to the extent permitted by law, interest and Additional Interest, if any, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. This Guarantee is subject to release as and to the extent set forth in Sections 8.02, 8.03 and 10.05 of the Indenture. Each Holder of a Note, by accepting the same agrees to and shall be bound by such provisions. Capitalized terms used herein and not defined are used herein as so defined in the Indenture. PSYCHIATRIC SOLUTIONS HOSPITALS, INC. INFOSCRIBER CORPORATION COLLABORATIVE CARE CORPORATION PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. SOLUTIONS CENTER OF LITTLE ROCK, INC. PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. PSYCHIATRIC MANAGEMENT RESOURCES, INC. PSI-EAP, INC. SUNSTONE BEHAVIORAL HEALTH, INC. THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. PSI CEDAR SPRINGS HOSPITAL, INC. PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. AERIES HEALTHCARE CORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. PSI HOSPITALS, INC. PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION GREAT PLAINS HOSPITAL, INC. GULF COAST TREATMENT CENTER, INC. HAVENWYCK HOSPITAL INC. H.C. CORPORATION HSA HILL CREST CORPORATION HSA OF OKLAHOMA, INC. MICHIGAN PSYCHIATRIC SERVICES, INC. RAMSAY MANAGED CARE, INC. RAMSAY TREATMENT SERVICES, INC. PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. RAMSAY YOUTH SERVICES OF ALABAMA, INC. RAMSAY YOUTH SERVICES OF FLORIDA, INC. RAMSAY YOUTH SERVICES OF GEORGIA, INC. RAMSAY YOUTH SERVICES PUERTO RICO, INC. RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC. RHCI SAN ANTONIO, INC. TRANSITIONAL CARE VENTURES, INC. TRANSITIONAL CARE VENTURES (TEXAS), INC. By: ----------------------------------------------- Name: Title: THERAPEUTIC SCHOOL SERVICES, LLC BY: PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., AS SOLE MEMBER By: ----------------------------------------------- Name: Title: PSI TEXAS HOSPITALS, LLC BY: PSYCHIATRIC SOLUTIONS HOSPITALS, INC., AS SOLE MEMBER By: ----------------------------------------------- Name: Title: H.C. PARTNERSHIP BY: H.C. CORPORATION, AS GENERAL PARTNER By: ----------------------------------------------- Name: Title: 4 BY: HSA HILL CREST CORPORATION, AS GENERAL PARTNER By: ---------------------------------------------- Name: Title: TEXAS CYPRESS CREEK HOSPITAL, L.P. TEXAS WEST OAKS HOSPITAL, L.P. NEURO INSTITUTE OF AUSTIN, L.P. TEXAS LAUREL RIDGE HOSPITAL, L.P. TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P. TEXAS SAN MARCOS TREATMENT CENTER, L.P. BY: PSI TEXAS HOSPITALS, LLC, AS GENERAL PARTNER BY: PSYCHIATRIC SOLUTIONS HOSPITAL, INC., AS SOLE MEMBER By: ---------------------------------------------- Name: Title: 5 TABLE OF CONTENTS
PAGE ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................................1 Section 1.01. Definitions.........................................................1 Section 1.02. Other Definitions..................................................17 Section 1.03. Incorporation by Reference of Trust Indenture Act..................18 Section 1.04. Rules of Construction..............................................18 ARTICLE 2. THE NOTES........................................................................19 Section 2.01. Form and Dating....................................................19 Section 2.02. Execution and Authentication.......................................20 Section 2.03. Registrar and Paying Agent.........................................20 Section 2.04. Paying Agent to Hold Money in Trust................................21 Section 2.05. Holder Lists.......................................................21 Section 2.06. Transfer and Exchange..............................................21 Section 2.07. Replacement Notes..................................................31 Section 2.08. Outstanding Notes..................................................32 Section 2.09. Treasury Notes.....................................................32 Section 2.10. Temporary Notes....................................................32 Section 2.11. Cancellation.......................................................32 Section 2.12. Payment of Interest; Defaulted Interest............................33 Section 2.13. CUSIP or ISIN Numbers..............................................33 Section 2.14. Additional Interest................................................33 Section 2.15. Issuance of Additional Notes.......................................33 Section 2.16. Record Date........................................................34 ARTICLE 3. REDEMPTION AND PREPAYMENT........................................................34 Section 3.01. Notices to Trustee.................................................34 Section 3.02. Selection of Notes to Be Redeemed..................................34 Section 3.03. Notice of Redemption...............................................34 Section 3.04. Effect of Notice of Redemption.....................................35 Section 3.05. Deposit of Redemption Price........................................35 Section 3.06. Notes Redeemed in Part.............................................36 Section 3.07. Optional Redemption................................................36 Section 3.08. Mandatory Redemption...............................................36 Section 3.09. Offer To Purchase..................................................36 ARTICLE 4. COVENANTS........................................................................38 Section 4.01. Payment of Notes...................................................38
i TABLE OF CONTENTS (CONTINUED)
PAGE Section 4.02. Maintenance of Office or Agency....................................39 Section 4.03. Reports............................................................39 Section 4.04. Compliance Certificate.............................................40 Section 4.05. Taxes..............................................................40 Section 4.06. Stay, Extension and Usury Laws.....................................40 Section 4.07. Corporate Existence................................................41 Section 4.08. Payments for Consent...............................................41 Section 4.09. Incurrence of Additional Debt and Issuance of Capital Stock........41 Section 4.10. Restricted Payments................................................43 Section 4.11. Liens..............................................................46 Section 4.12. Asset Sales........................................................46 Section 4.13. Restrictions on Distributions from Restricted Subsidiaries.........47 Section 4.14. Affiliate Transactions.............................................49 Section 4.15. Issuance or Sale of Capital Stock of Restricted Subsidiaries.......49 Section 4.16. Designation of Restricted and Unrestricted Subsidiaries............50 Section 4.17. Repurchase at the Option of Holders Upon a Change of Control.......50 Section 4.18. Future Subsidiary Guarantors.......................................51 Section 4.19. Business Activities................................................51 Section 4.20. No Senior Subordinated Debt........................................51 ARTICLE 5. SUCCESSORS.......................................................................52 Section 5.01. Merger, Consolidation and Sale of Assets...........................52 Section 5.02. Successor Corporation Substituted..................................52 ARTICLE 6. DEFAULTS AND REMEDIES............................................................53 Section 6.01. Events of Default..................................................53 Section 6.02. Acceleration.......................................................54 Section 6.03. Other Remedies.....................................................55 Section 6.04. Waiver of Defaults.................................................55 Section 6.05. Control by Majority................................................56 Section 6.06. Limitation on Suits................................................56 Section 6.07. Rights of Holders to Receive Payment...............................56 Section 6.08. Collection Suit by Trustee.........................................56 Section 6.09. Trustee May File Proofs of Claim...................................57 Section 6.10. Priorities.........................................................57 Section 6.11. Undertaking for Costs..............................................57
ii TABLE OF CONTENTS (CONTINUED)
PAGE ARTICLE 7. TRUSTEE..........................................................................58 Section 7.01. Duties of Trustee..................................................58 Section 7.02. Rights of Trustee..................................................58 Section 7.03. Individual Rights of Trustee.......................................59 Section 7.04. Trustee's Disclaimer...............................................60 Section 7.05. Notice of Defaults.................................................60 Section 7.06. Reports by Trustee to Holders......................................60 Section 7.07. Compensation and Indemnity.........................................60 Section 7.08. Replacement of Trustee.............................................61 Section 7.09. Successor Trustee by Merger, etc...................................62 Section 7.10. Eligibility; Disqualification......................................62 Section 7.11. Preferential Collection of Claims Against Company..................62 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................................62 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...........62 Section 8.02. Legal Defeasance and Discharge.....................................62 Section 8.03. Covenant Defeasance................................................63 Section 8.04. Conditions to Legal or Covenant Defeasance.........................63 Section 8.05. Deposited Cash and U.S. Government Securities to be Held in Trust; Other Miscellaneous Provisions..............................64 Section 8.06. Repayment to Company...............................................65 Section 8.07. Reinstatement......................................................65 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................................65 Section 9.01. Without Consent of Holders of Notes................................65 Section 9.02. With Consent of Holders of Notes...................................66 Section 9.03. Compliance with Trust Indenture Act................................67 Section 9.04. Revocation and Effect of Consents..................................67 Section 9.05. Notation on or Exchange of Notes...................................68 Section 9.06. Trustee to Sign Amendments, etc....................................68 ARTICLE 10. GUARANTEES.......................................................................68 Section 10.01. Guarantee..........................................................68 Section 10.02. Limitation on Guarantor Liability..................................70 Section 10.03. Execution and Delivery of Guarantee................................70 Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.................71 Section 10.05. Releases Following Merger, Consolidation or Sale of Assets, etc....71
iii TABLE OF CONTENTS (CONTINUED)
PAGE ARTICLE 11. SATISFACTION AND DISCHARGE.......................................................72 Section 11.01. Satisfaction and Discharge.........................................72 Section 11.02. Deposited Cash and U.S. Government Securities to be Held in Trust; Other Miscellaneous Provisions.............................72 Section 11.03. Repayment to Company...............................................73 ARTICLE 12. SUBORDINATION....................................................................73 Section 12.01. Agreement to Subordinate...........................................73 Section 12.02. Liquidation; Dissolution; Bankruptcy...............................73 Section 12.03. Default on Designated Senior Debt..................................73 Section 12.04. Acceleration of Notes..............................................74 Section 12.05. When Distribution Must Be Paid Over................................74 Section 12.06. Notice by the Company..............................................75 Section 12.07. Subrogation........................................................75 Section 12.08. Relative Rights....................................................75 Section 12.09. Subordination May Not Be Impaired by the Company...................76 Section 12.10. Distribution or Notice to Representative...........................76 Section 12.11. Rights of Trustee and Paying Agent.................................76 Section 12.12. Authorization to Effect Subordination..............................76 Section 12.13. Trust Moneys Not Subordinated......................................77 Section 12.14. Payment and Distribution...........................................77 Section 12.15. No Claims..........................................................77 Section 12.16. Acknowledgement of Holders.........................................77 ARTICLE 13. MISCELLANEOUS....................................................................77 Section 13.01. Trust Indenture Act Controls.......................................77 Section 13.02. Notices............................................................78 Section 13.03. Communication by Holders of Notes with Other Holders of Notes......79 Section 13.04. Certificate and Opinion as to Conditions Precedent.................79 Section 13.05. Statements Required in Certificate or Opinion......................79 Section 13.06. Rules by Trustee and Agents........................................79 Section 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders.......................................................79 Section 13.08. Governing Law......................................................80 Section 13.09. No Adverse Interpretation of Other Agreements......................80 Section 13.10. Successors.........................................................80
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PAGE Section 13.11. Severability.......................................................80 Section 13.12. Counterpart Originals..............................................80 Section 13.13. Table of Contents, Headings, etc...................................80 Section 13.14. Qualification of this Indenture....................................80
v CROSS-REFERENCE TABLE
TIA SECTION INDENTURE REFERENCE SECTION 310(a)(1)............................................................................... 7.10 (a)(2).................................................................................. 7.10 (a)(3).................................................................................. N.A. (a)(4).................................................................................. N.A. (a)(5).................................................................................. 7.10 (b)..................................................................................... 7.08, 7.10 (c)..................................................................................... N.A. 311(a).................................................................................. 7.11 (b)..................................................................................... 7.11 (c)..................................................................................... N.A. 312(a).................................................................................. 2.05 (b)..................................................................................... 12.03 (c)..................................................................................... 12.03 313(a).................................................................................. 7.06 (b)(1).................................................................................. N.A. (b)(2).................................................................................. 7.06, 7.07 (c)..................................................................................... 7.06, 12.02 (d)..................................................................................... 7.06 314(a).................................................................................. 4.03, 4.04, 12.02 (b)..................................................................................... N.A. (c)(1).................................................................................. 12.04 (c)(2).................................................................................. 12.04 (c)(3).................................................................................. N.A. (d)..................................................................................... N.A. (e)..................................................................................... 12.05 315(a).................................................................................. 7.01 (b)..................................................................................... 7.05, 12.02 (c)..................................................................................... 7.01 (d)..................................................................................... 7.01 (e)..................................................................................... 6.11 316(a) (last sentence).................................................................. 2.09 (a)(1)(A)............................................................................... 6.05 (a)(1)(B)............................................................................... 6.04 (a)(2).................................................................................. N.A. (b)..................................................................................... 6.07 317(a)(1)............................................................................... 6.08 (a)(2).................................................................................. 6.09 (b)..................................................................................... 2.04 318(a).................................................................................. 12.01
N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. EX-4.12 99 g83903exv4w12.txt EX-4.12 PURCHASE AGREEMENT EXHIBIT 4.12 $150,000,000 PSYCHIATRIC SOLUTIONS, INC. 10-5/8% SENIOR SUBORDINATED NOTES DUE 2013 PURCHASE AGREEMENT June 19, 2003 Lehman Brothers Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Jefferies & Company, Inc. c/o Lehman Brothers, Inc. 745 Seventh Avenue New York, New York 10019 Ladies and Gentlemen: Psychiatric Solutions, Inc., a Delaware corporation (the "COMPANY"), proposes, upon the terms and conditions set forth herein, to issue and sell to you, Lehman Brothers Inc. ("LEHMAN"), Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH") and Jefferies & Company, Inc., as the initial purchasers (the "INITIAL PURCHASERS"), $150,000,000 in aggregate principal amount of its 10-5/8% Senior Subordinated Notes due 2013 (the "NOTES"). The Notes (i) will have terms and provisions that are summarized in the Offering Memorandum (as defined below) and (ii) are to be issued pursuant to an Indenture (the "INDENTURE") to be entered into among the Company, the Guarantors (as defined below) and Wachovia Bank, National Association, as trustee (the "TRUSTEE"). The Company's obligations under the Notes, including the due and punctual payment of interest on the Notes, will be unconditionally guaranteed (the "Guarantees") by (1) each of the Company's current and future domestic subsidiaries in which the Company has made an investment of at least $0.1 million, other than certain subsidiaries listed on Schedule II hereto which were formed solely for the purpose of holding assets pledged as security in connection with any HUD financing (collectively, the "HUD FINANCING SUBSIDIARIES"), and PSI Surety, Inc., and (2) any subsidiary that incurs, guarantees or otherwise provides direct credit support for any indebtedness of the Company or any of the Company's domestic subsidiaries (collectively, the "GUARANTORS"). As used herein, the term "Notes" shall include the Guarantees, unless the context otherwise requires. This is to confirm the agreement concerning the purchase of the Notes from the Company by the Initial Purchasers. 1. Preliminary Offering Memorandum and Offering Memorandum. The Notes will be offered and sold to the Initial Purchasers without registration under the Securities Act of 1933, as amended (the "ACT"), in reliance on an exemption pursuant to Section 4(2) under the Act. The Company and the Guarantors have prepared a preliminary offering memorandum, dated June 9, 2003 (the "PRELIMINARY OFFERING MEMORANDUM"), and an offering memorandum, dated June 19, 2003 (the "OFFERING MEMORANDUM"), setting forth information regarding the Company, the Guarantors, the Notes, and the Exchange Notes (as defined herein), the Guarantees and the Exchange Guarantees (as defined herein). The Company and the Guarantors hereby confirm that they have authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Notes by the Initial Purchasers. Any reference to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include the financial statements incorporated by reference into the Preliminary Offering Memorandum or the Offering Memorandum, as the case may be, set forth under the caption "Incorporation of Documents by Reference" in the Preliminary Offering Memorandum or the Offering Memorandum, as the case may be. It is understood and acknowledged that upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Act, the Notes (and all securities issued in exchange therefor, in substitution thereof) shall bear the following legend (along with such other legends as the Initial Purchasers and their counsel deem necessary): THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF 2 ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. You have advised the Company that you will make offers (the "EXEMPT RESALES") of the Notes purchased by you hereunder on the terms set forth in the Offering Memorandum, as amended or supplemented, solely to (i) persons whom you reasonably believe to be "qualified institutional buyers" as defined in Rule 144A under the Act ("QIBS") and (ii) outside the United States to certain persons in offshore transactions in reliance on Regulation S under the Act ("REGULATION S") (such persons specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). As used herein, the terms "offshore transaction," "United States" and "U.S. Person" have the respective meanings given to them in Regulation S. You will offer the Notes to Eligible 3 Purchasers initially at a price equal to 100.00% of the principal amount thereof. Such price may be changed at any time without notice. In connection with the offering of the Notes, the Company will (i) consummate the transactions contemplated by the purchase agreement, dated as of April 8, 2003 (the "ACQUISITION AGREEMENT"), with Ramsay Youth Services, Inc. ("RAMSAY"), relating to the acquisition by the Company of all of the outstanding capital stock of Ramsay (the "ACQUISITION"), (ii) consummate the transactions contemplated by the Stock Purchase Agreement, dated as of January 6, 2003 (the "STOCK PURCHASE AGREEMENT"), among the Company and the purchasers named therein, relating to the second private placement of $12,500,000 of the Company's Series A Convertible Preferred Stock (the "SERIES A PREFERRED"), and (iii) enter into the Second Amended and Restated Revolving Credit and Term Loan Agreement, to be dated as of June 30, 2003, among the Company, the subsidiary borrowers party thereto, the subsidiary guarantors party thereto, and CapitalSource Finance LLC, as administrative agent and lender, to provide for a new senior secured term loan of $17.0 million and a new senior secured revolving credit facility of up to $50.0 million (the "SECOND AMENDED AND RESTATED CREDIT FACILITY"). The net proceeds from the sale of the Notes, together with the proceeds from the private placement of the Series A Preferred, will be used to finance the Acquisition and repay certain indebtedness of the Company and Ramsay, as described in the "Use of Proceeds" section of the Offering Memorandum. The Acquisition, the private placement of the Series A Preferred, the entering into of the Second Amended and Restated Credit Facility and the offering of the Notes are collectively referred to herein as the "TRANSACTIONS." Holders (including subsequent transferees) of the Notes will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT") among the Company, the Guarantors and the Initial Purchasers, to be dated as of the Closing Date (as defined below), substantially in the form of Exhibit A hereto, for so long as such Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company and the Guarantors will agree to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein, (i) a registration statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to a separate series of the Company's 10-5/8% Senior Subordinated Notes due 2013, unconditionally guaranteed by the Guarantors, with substantially identical terms to the Notes and the Guarantees (except for transfer restrictions) (the "EXCHANGE NOTES" and the "EXCHANGE GUARANTEES") to be offered in exchange for the Notes and the Guarantees (such offer to exchange being referred to collectively as the "REGISTERED EXCHANGE OFFER") and (ii) if required by the terms of the Registration Rights Agreement, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain holders of the Notes, and to use their best efforts to cause such Registration Statements to be declared effective. This is to confirm the agreements concerning the purchase of the Notes from the Company by the Initial Purchasers. 4 2. Representations, Warranties and Agreements of the Company and the Guarantors. The Company and each of the Guarantors, jointly and severally, represent, warrant and agree as follows (it being understood and agreed that for purposes of this Section 2, the terms "subsidiary" and "subsidiaries" will include all entities that will become subsidiaries of the Company following consummation of the transactions contemplated hereby): (a) The Preliminary Offering Memorandum and Offering Memorandum have been prepared by the Company and the Guarantors for use by the Initial Purchasers in connection with the Exempt Resales. No order or decree preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Act has been issued and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company or any of the Guarantors is contemplated. (b) The Preliminary Offering Memorandum and the Offering Memorandum as of their respective dates did not, and the Offering Memorandum as of the Closing Date will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that this representation and warranty does not apply to statements in or omissions from the Preliminary Offering Memorandum and Offering Memorandum made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Company in writing by or on behalf of the Initial Purchasers expressly for use therein. (c) The market-related and customer-related data and estimates included under the captions "Summary" and "Business" in the Preliminary Offering Memorandum and the Offering Memorandum are based on or derived from sources that the Company believes to be reliable and accurate. (d) The Company and each of its subsidiaries have been duly incorporated, organized or formed, as the case may, and are validly existing as a corporation, limited liability company, partnership or limited liability partnership, as the case may be, in good standing under the laws of their respective jurisdictions of incorporation, organization or formation, as the case may be, are duly qualified to do business and are in good standing as a foreign corporation, limited liability company, partnership or limited liability partnership, as the case may be, in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification (except such failures to qualify as are not, either individually or in the aggregate, material to the Company and its subsidiaries taken as a whole), and have all corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged. 5 (e) The Company has an authorized capitalization as set forth in the Offering Memorandum, and all of the issued shares of capital stock of the Company and its subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company or each Guarantor, free and clear of all liens, encumbrances, equities or claims, other than liens, encumbrances, equities or claims under the Company's Second Amended and Restated Credit Facility, described in the Offering Memorandum, and none of such shares of capital stock were issued in violation of preemptive or other similar rights arising by operation of law, under the charter and bylaws (or similar organizational documents) of the Company or any of its subsidiaries or under any agreement to which the Company or any of its subsidiaries is a party or otherwise. (f) The Company and each Guarantor have all requisite corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority to enter into the Indenture. The Indenture has been duly and validly authorized by the Company and the Guarantors, and upon its execution and delivery and, assuming due authorization, execution and delivery by the Trustee, will constitute the valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; no qualification of the Indenture under the Trust Indenture Act of 1939 (the "1939 ACT") is required in connection with the offer and sale of the Notes contemplated hereby or in connection with the Exempt Resales. The Indenture will conform to the description thereof in the Offering Memorandum. (g) The Company has all requisite corporate power and authority to issue and sell the Notes. The Notes have been duly authorized by the Company and, when duly executed by the Company in accordance with the terms of the Indenture, assuming due authentication of the Notes by the Trustee, upon delivery to the Initial Purchasers against payment therefor in accordance with the terms hereof, will be validly issued and delivered, and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. The Notes will conform to the description thereof in the Offering Memorandum. (h) The Company has all requisite corporate power and authority to issue the Exchange Notes. The Exchange Notes have been duly and validly authorized by the Company and if and when duly issued and authenticated in accordance with the terms of the Indenture and delivered in accordance with the Registered Exchange Offer provided for in the Registration Rights Agreement, will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be 6 limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. (i) Each Guarantor has all requisite corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority to issue the Guarantees. The Guarantees have been duly and validly authorized by the Guarantors and when duly executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution, authentication and delivery of the Notes in accordance with the Indenture and the issuance of the Notes in the sale to the Initial Purchasers contemplated by this Agreement, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. The Guarantees will conform to the description thereof in the Offering Memorandum. (j) Each Guarantor has all requisite corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority to issue the Exchange Guarantees. The Exchange Guarantees have been duly and validly authorized by the Guarantors and if and when duly executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution and authentication of the Exchange Notes in accordance with the Indenture and the issuance and delivery of the Exchange Notes in the Registered Exchange Offer contemplated by the Registration Rights Agreement, will constitute valid and binding obligations of the Guarantors, entitled to the benefits of the Indenture, enforceable against the Guarantors in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. (k) The Company and each Guarantor has all requisite corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority to enter into the Registration Rights Agreement. The Registration Rights Agreement has been duly authorized by the Company and each Guarantor and, when executed and delivered by the Company and each Guarantor in accordance with the terms hereof and thereof, will be validly executed and delivered and (assuming the due authorization, execution and delivery thereof by you) will be the legally valid and binding obligation of the Company and each Guarantor in accordance with the terms thereof, enforceable against the Company and each Guarantor in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditor's rights generally, by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and, as to rights of indemnification and contribution, by principles of public policy. The Registration Rights Agreement will conform to the description thereof in the Offering Memorandum. 7 (l) The Company and each Guarantor has all requisite corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority to enter into this Agreement. This Agreement has been duly authorized, executed and delivered by the Company and the Guarantors. (m) The Company and its subsidiaries have all requisite corporate, limited liability company, partnership or limited liability partnership, as the case may be, power and authority to consummate the Transactions and all agreements related to the Transactions (collectively, the "TRANSACTION DOCUMENTS") to which they are a party. Each of the Transaction Documents has been duly and validly authorized by the Company and its subsidiaries, as applicable, and when executed and delivered by the Company and its subsidiaries, as applicable, will (assuming due authorization, execution and delivery by the other parties thereto) constitute a legal, valid and binding agreement of each of the Company and such subsidiaries, enforceable against the Company and each of such subsidiaries in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). All representations and warranties made by the Company and its subsidiaries, as applicable, in the Transaction Documents are true and correct in all material respects as of the date hereof or as of the Closing Date. (n) The issue and sale of the Notes and the Guarantees and the compliance by the Company and the Guarantors with all of the provisions of the Notes, the Guarantees, the Exchange Notes, the Exchange Guarantees, the Indenture, the Registration Rights Agreement, the Transaction Documents and this Agreement and the consummation of the transactions contemplated hereby and thereby (i) will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except for such conflicts, breaches, violations or defaults that do not have a Material Adverse Effect (as defined below) (ii) will not result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or (iii) will not violate any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, except for such conflicts, breaches, violations or defaults that do not have a Material Adverse Effect; and no consent, approval, authorization or order of, or filing, registration or qualification with any such court or governmental agency or body is required for the issue and sale of the Notes and the Guarantees or the consummation by the Company and the Guarantors of the transactions contemplated by this Agreement, the Registration Rights Agreement, the Indenture or the Transaction Documents, except for the filing of a registration statement by the Company with the Commission pursuant to the Act as required by the Registration Rights Agreement and such consents, approvals, authorizations, orders, filings, 8 registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Notes by the Initial Purchasers. (o) There are no contracts, agreements or understandings between the Company, any Guarantor and any person granting such person the right to require the Company or any Guarantor to file a registration statement under the Act with respect to any securities of the Company or any Guarantor (other than the Registration Rights Agreement) owned or to be owned by such person or to require the Company or any Guarantor to include such securities in the securities registered pursuant to the Registration Rights Agreement or in any securities being registered pursuant to any other registration statement filed by the Company or any Guarantor under the Act. (p) During the six-month period preceding the date of the Offering Memorandum, none of the Company, the Guarantors or any other person acting on behalf of the Company or any Guarantor has offered or sold to any person any Notes or Guarantees, or any securities of the same or a similar class as the Notes or Guarantees, other than Notes or Guarantees offered or sold to the Initial Purchasers hereunder. The Company and the Guarantors will take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Act), of any Notes or any substantially similar security issued by the Company or any Guarantor, within six months subsequent to the date on which the distribution of the Notes has been completed (as notified to the Company by the Initial Purchasers), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Notes in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Act, including any sales pursuant to Rule 144A under, or Regulations D or S of, the Act. (q) Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included in the Offering Memorandum, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Memorandum; and, since such date, there has not been any change in the stockholders' equity or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the management, condition, financial or otherwise, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT") otherwise than as set forth or contemplated in the Offering Memorandum. (r) The historical financial statements of the Company (including the related notes and supporting schedules) included in the Offering Memorandum present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. 9 (s) The historical financial statements of the six facilities acquired from The Brown Schools, Inc. in April 2003 (including the related notes and supporting schedules) included in the Offering Memorandum present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. (t) The historical financial statements of Ramsay (including the related notes and supporting schedules) included in the Offering Memorandum present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. (u) The other financial data, operating data and statistical information and data included in the Offering Memorandum is presented fairly in all material respects and, to the extent derived therefrom, has been prepared on a basis consistent with such financial statements and the books and records of the Company and its subsidiaries. (v) The pro forma data included in the Offering Memorandum include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial data. (w) The historical financial statements (including the related notes and supporting schedules) of (1) Cypress Creek Hospital Inc., West Oaks Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc., (2) Holly Hill/Charter Behavioral Health System, LLC, (3) Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital), and (4) PMR Corporation, included in and/or incorporated by reference in the Offering Memorandum present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. (x) The historical interim financial statements of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) for the three-month period ended June 30, 2002 (including the related notes and supporting schedules) included in and incorporated by reference in the Offering Memorandum present fairly the financial condition and results of operations of the entity purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. (y) Ernst & Young LLP who have certified certain historical and pro forma financial statements of (i) the Company, (ii) the five facilities acquired from The Brown Schools, Inc. in April 2003, including The Brown Schools of Virginia, Inc., Cedar 10 Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc., (iii) Cypress Creek Hospital Inc., West Oaks Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc., (iv) Holly Hill/Charter Behavioral Health System, LLC, and (v) PMR Corporation, whose reports appear or are incorporated by reference in the Offering Memorandum and who have delivered (a) the initial letter referred to in Section 7(f)(i) hereof, and (b) the consent letters referred to in Section 7(h) hereof, are independent public accountants as required by the Act and the rules and regulations promulgated thereunder (the "RULES AND REGULATIONS") during the periods covered by the financial statements on which they reported contained or incorporated by reference in the Offering Memorandum. (z) Deloitte & Touche LLP who have certified certain historical financial statements of Ramsay, whose report appears in the Offering Memorandum and who have delivered the initial letter referred to in Section 7(f)(ii) hereof, are independent public accountants as required by the Act and the Rules and Regulations during the periods covered by the financial statements on which they reported contained in the Offering Memorandum. (aa) BDO Seidman, LLP who have certified certain historical financial statements of (i) The Brown Schools of Oklahoma, Inc., and (ii) Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital), whose reports appear or are incorporated by reference in the Offering Memorandum and who have delivered (a) the initial letter referred to in Section 7(f)(iii) hereof, and (b) the consent letter referred to in Section 7(i) hereof, are independent public accountants as required by the Act and the Rules and Regulations promulgated thereunder during the periods covered by the financial statements on which they reported contained or incorporated by reference in the Offering Memorandum. (bb) The Company and each of its subsidiaries have good and marketable title to all real property and good title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Offering Memorandum and such as do not materially affect the value of the property of the Company and its subsidiaries taken as a whole and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and all real property and buildings held under lease by the Company or any of its subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its subsidiaries. (cc) The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is customary for companies engaged in similar businesses in similar industries. (dd) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses 11 necessary for the conduct of their respective businesses and have no reason to believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others, except for such conflicts that do not or would not have a Material Adverse Effect. (ee) There are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject that, if determined adversely to the Company or any of its subsidiaries, could have a Material Adverse Effect, and to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (ff) There are no contracts or other documents which would be required to be described in a prospectus included in or filed as an exhibit to a registration statement on Form S-1 under the Securities Act that have not been described in the Offering Memorandum or filed with the Commission. (gg) No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any its subsidiaries on the other hand, which would be required to be described in a prospectus included in a registration statement on Form S-1 under the Securities Act that is not described in the Offering Memorandum. (hh) Except for the HUD Financing Subsidiaries, no subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company or any other subsidiary of the Company. (ii) No labor disturbance by the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company or any of its subsidiaries, is imminent that could be expected to have a Material Adverse Effect. (jj) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or any Guarantor would have any liability; neither the Company nor any Guarantor has incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "CODE"); and each "pension plan" for which the Company or any Guarantor would have any liability that is intended to be qualified under Section 401(a) 12 of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (kk) The Company and each of its subsidiaries has filed all federal, state and local income and franchise tax returns required to be filed through the date hereof and has paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries that has had (nor does the Company or any subsidiary have any knowledge of any tax deficiency that, if determined adversely to the Company or any of its subsidiaries, might have) a Material Adverse Effect. (ll) Since the date as of which information is given in the Preliminary Offering Memorandum through the date hereof, and except as may otherwise be disclosed in the Offering Memorandum, neither the Company nor any subsidiary has (i) issued or granted any securities, (ii) incurred any liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (iii) entered into any transaction not in the ordinary course of business or (iv) declared or paid any dividend on its capital stock. (mm) The Company and each subsidiary (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls that provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. (nn) Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, except for such violations or defaults that do not have a Material Adverse Effect, or (iii) is in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain or maintain any license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, except for such violations or defaults that do not have a Material Adverse Effect. (oo) Neither the Company nor any of its subsidiaries, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. 13 (pp) Except for such matters as would not, individually or in the aggregate, either result in a Material Adverse Effect or require disclosure in the Offering Memorandum, the Company, the Guarantors and any of their respective subsidiaries (or, to the knowledge of the Company, any of their respective predecessors in interest) (1) are conducting and have conducted their businesses, operations and facilities in compliance with Environmental Laws (as defined below); (2) possess, and are in compliance with, any and all permits, licenses or registrations required under Environmental Law ("ENVIRONMENTAL PERMITS"); (3) will not require material expenditures to maintain such compliance with Environmental Law or their Environmental Permits or to remediate, clean up, abate or remove any Hazardous Substance (as defined below); and (4) are not subject to any pending or, to the best knowledge of the Company, the Guarantors or any of their respective subsidiaries, threatened claim or other legal proceeding under any Environmental Laws against the Company or its subsidiaries, and have not been named as a "potentially responsible party" under or pursuant to any Environmental Law. As used in this paragraph, "ENVIRONMENTAL LAWS" means any and all applicable federal, state, local, and foreign laws, ordinances, regulations and common law, or any administrative or judicial order, consent, decree or judgment thereof, relating to pollution or the protection of human health or the environment, including, without limitation, those related to (i) emissions, discharges, releases or threatened releases of, or exposure to, Hazardous Substances, (ii) the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, or (iii) the investigation, remediation or cleanup of any Hazardous Substances. As used in this paragraph, "HAZARDOUS SUBSTANCES" means pollutants, contaminants or hazardous, dangerous, toxic, biohazardous or infectious substances, materials or wastes, or any other chemical substance regulated under Environmental Laws. (qq) Except as set forth in the Offering Memorandum, neither the Company nor any of the Guarantors nor, to the knowledge of the Company, any other person who has a direct or indirect ownership or control interest in the Company or any of the Guarantors or who is an officer, director, agent or managing employee of the Company or any Guarantor: (1) has engaged in any activities which are prohibited, or are cause for criminal or civil penalties and/or mandatory or permissive exclusion from Medicare or Medicaid, under Section 1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States Code, the federal TRICARE statute, the Federal False Claims Act 31 U.S.C. ss. 3729-3733, or the regulations promulgated pursuant to such statutes or regulations or related state or local statutes or by generally recognized professional standards of care or conduct, except for such activities as would not, individually or in the aggregate, result in a Material Adverse Effect; (2) has had a civil monetary penalty assessed against it under Section 1128A of the Social Security Act ("SSA"); (3) is currently excluded from participation under the Medicare program or a Federal Health Care Program (as that term is defined in SSA Section 1128(B)(f)); or (4) has been convicted (as that term is defined in 42 C.F.R. ss. 1001.2) of any of the categories of offenses described in SSA Section 1128(a) and (b)(1), (2) and (3). (rr) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Notes), will violate or result in a violation of Section 7 of the Exchange Act, or any regulation 14 promulgated thereunder, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System. (ss) The statements set forth in the Offering Memorandum under the caption "Description of Notes," insofar as they purport to constitute a summary of the terms of the Notes and the Guarantees and under the captions "Certain U.S. Federal Income Tax Considerations," "Certain Relationships and Related Party Transactions" and "Description of Other Indebtedness and Preferred Stock," insofar as they relate solely to factual matters, are accurate in all material respects. (tt) Prior to the date hereof, neither the Company and its subsidiaries nor any of their respective affiliates nor any person acting on its or their behalf (other than you, as to whom the Company and its subsidiaries make no representation) has taken any action that is designed to or that has constituted or that might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company or its subsidiaries in connection with the offering of the Notes. (uu) The minute books and records of the Company relating to proceedings of its shareholders, board of directors, and committees of its board of directors made available to Weil, Gotshal & Manges LLP, counsel for the Initial Purchasers, are the original minute books and records or are true, correct and complete copies thereof, with respect to all proceedings of said shareholders, board of directors and committees since January 1, 1999 through the date hereof. In the event that definitive minutes have not been prepared with respect to any proceedings of such shareholders, board of directors or committees, the Company has provided Weil, Gotshal & Manges LLP with originals or true, correct and complete copies of draft minutes or written agendas relating thereto, which drafts and agendas, if any, reflect all events that occurred in connection with such proceedings; all existing minute books and records of the Guarantors relating to proceedings of their respective boards of directors and committees of their respective board of directors have been made available to Weil, Gotshal & Manges LLP, counsel for the Initial Purchasers, and such minute books are the original minute books and records or are true, correct and complete copies thereof, with respect to all proceedings of said board of directors and committees since January 1, 1999 through the date hereof. (vv) The Company is subject to and in full compliance with the reporting requirements of Section 13 or 15(d) of the Exchange Act. All reports filed by the Company with the Commission pursuant to Section 13 or 15(d) of the Exchange Act comply as to form in all material respects with the Exchange Act and the rules and regulations of the Commission thereunder and when filed did not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (ww) The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-14 under the Exchange Act), which (i) are designed to ensure that material information relating to the Company, including its 15 consolidated subsidiaries, is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; (ii) have been evaluated for effectiveness as of a date within 90 days of the filing date of the Company's most recent annual or quarterly report; and (iii) are effective in all material respects to perform the functions for which they were established. (xx) Based on the evaluation of its disclosure controls and procedures, the Company is not aware of (i) any significant deficiency in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or any material weaknesses in internal controls; or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls. (yy) Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. (zz) Immediately after the consummation of the Transactions, the fair value and present fair saleable value of the assets of the Company and the Guarantors on a consolidated basis will exceed the sum of stated liabilities and identified contingent liabilities; the Company and the Guarantors on a consolidated basis are and will not be, after giving effect to the execution, delivery and performance of this Agreement and the Transaction Documents and the consummation of the Transactions, (A) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (B) unable to pay its debts (contingent or otherwise) as they mature or (C) otherwise insolvent. (aaa) When the Notes and Guarantees are issued and delivered pursuant to this Agreement, such Notes and Guarantees will not be of the same class (within the meaning of Rule 144A under the Act) as securities of the Company or the Guarantors that are listed on a national securities exchange registered under Section 6 of the Exchange Act or that are quoted in a United States automated inter-dealer quotation system. (bbb) Neither the Company nor any of its subsidiaries is, or after giving effect to the offering and sale of the Notes and upon application of the proceeds as described under the caption "Use of Proceeds" in the Offering Memorandum will be, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (ccc) Assuming that your representations and warranties in Section 3(b) are true, the purchase and resale of the Notes pursuant hereto (including pursuant to the Exempt Resales) is exempt from the registration requirements of the Act. No form of general solicitation or general advertising within the meaning of Regulation D (including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any 16 seminar or meeting whose attendees have been invited by any general solicitation or general advertising) was used by the Company, the Guarantors or any of their respective representatives (other than you, as to whom the Company and the Guarantors make no representation) in connection with the offer and sale of the Notes. (ddd) No form of general solicitation or general advertising was used by the Company, the Guarantors or any of their respective representatives (other than you, as to whom the Company and the Guarantors make no representation) with respect to Notes sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act, and the Company, any affiliate of the Company and any person acting on its or their behalf (other than you, as to when the Company and the Guarantors make no representation) has complied with and will implement the "offering restrictions" required by Rule 902. (eee) Set forth on Exhibit B hereto is a list of each employee pension or benefit plan with respect to which the Company or any corporation considered an affiliate of the Company within the meaning of Section 407(d)(7) of ERISA is a party in interest or disqualified person. 3. Purchase of the Notes by the Initial Purchasers, Agreements to Sell, Purchase and Resell. (a) The Company and the Guarantors, jointly and severally hereby agree, on the basis of the representations, warranties and agreements of the Initial Purchasers contained herein and subject to all the terms and conditions set forth herein, to issue and sell to the Initial Purchasers and, upon the basis of the representations, warranties and agreements of the Company and the Guarantors herein contained and subject to all the terms and conditions set forth herein, each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 97.25% of the principal amount thereof, the principal amount of Notes set forth opposite the name of such Initial Purchaser in Schedule I hereto. The Company and the Guarantors shall not be obligated to deliver any of the securities to be delivered hereunder except upon payment for all of the securities to be purchased as provided herein.(b) Each of the Initial Purchasers, severally and not jointly hereby represents and warrants to the Company that it will offer the Notes for sale upon the terms and conditions set forth in this Agreement and in the Offering Memorandum. Each of the Initial Purchasers hereby represents and warrants to, and agrees with, the Company that such Initial Purchaser: (i) is a QIB with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Notes; (ii) is purchasing the Notes pursuant to a private sale exempt from registration under the Act; (iii) in connection with the Exempt Resales, will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, the Eligible Purchasers in accordance with this Agreement and on the terms contemplated by the Offering Memorandum; and (iv) will not offer or sell the Notes, nor has it offered or sold the Notes by, or otherwise engaged in, any form of general solicitation or general advertising (within the meaning of Regulation D, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by 17 any general solicitation or general advertising) and will not engage in any directed selling efforts within the meaning of Rule 902 under the Act, in connection with the offering of the Notes. The Initial Purchasers have advised the Company that they will offer the Notes to Eligible Purchasers at a price initially equal to 100.00% of the principal amount thereof, plus accrued interest, if any, from the date of issuance of the Notes. Such price may be changed by the Initial Purchasers at any time without notice. Each of the Initial Purchasers understands that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 7(c), (d) and (e) hereof, counsel to the Company and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations, warranties and agreements and the Initial Purchasers hereby consent to such reliance. 4. Delivery of the Notes and Payment Therefor. Delivery to the Initial Purchasers of and payment for the Notes shall be made at the office of Waller Lansden Dortch & Davis PLLC, at 9:00 A.M., New York City time, on June 30, 2003 (the "CLOSING DATE"). The place of closing for the Notes and the Closing Date may be varied by agreement between the Initial Purchasers and the Company. The Notes will be delivered to the Initial Purchasers, or the Trustee as custodian for The Depository Trust Company ("DTC"), against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer in immediately available funds, by causing DTC to credit the Notes to the account of the Initial Purchasers at DTC. The Notes will be evidenced by one or more global securities in definitive form (the "GLOBAL NOTES") and will be registered, in the case of the Global Notes, in the name of Cede & Co. as nominee of DTC. The Notes to be delivered to the Initial Purchasers shall be made available to the Initial Purchasers in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date. 5. Agreements of the Company and the Guarantors. The Company and the Guarantors, jointly and severally agree with each of the Initial Purchasers as follows: (a) The Company and the Guarantors will furnish to the Initial Purchasers, without charge, as of the date of the Offering Memorandum, such number of copies of the Offering Memorandum as may then be amended or supplemented as they may reasonably request. (b) The Company and the Guarantors will not make any amendment or supplement to the Preliminary Offering Memorandum or to the Offering Memorandum of which the Initial Purchasers shall not previously have been advised or to which they shall reasonably object after being so advised. (c) The Company and each of the Guarantors consents to the use, in accordance with the securities or Blue Sky laws of the jurisdictions in which the Notes are offered by the Initial Purchasers and by dealers, prior to the date of the Offering Memorandum, of each Preliminary Offering Memorandum so furnished by the Company 18 and the Guarantors. The Company and each of the Guarantors consent to the use of the Offering Memorandum in accordance with the securities or Blue Sky laws of the jurisdictions in which the Notes are offered by the Initial Purchasers and by all dealers to whom Notes may be sold, in connection with the offering and sale of the Notes. (d) If, at any time prior to completion of the distribution of the Notes by the Initial Purchasers to Eligible Purchasers, any event occurs or information becomes known that, in the judgment of the Company, any of the Guarantors or in the opinion of counsel for the Initial Purchasers, should be set forth in the Offering Memorandum so that the Offering Memorandum does not include any untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Offering Memorandum in order to comply with any law, the Company and the Guarantors will forthwith prepare an appropriate supplement or amendment thereto, and will expeditiously furnish to the Initial Purchasers and dealers a reasonable number of copies thereof. (e) The Company and each of the Guarantors will cooperate with the Initial Purchasers and with their counsel in connection with the qualification of the Notes for offering and sale by the Initial Purchasers and by dealers under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such qualification; provided that in no event shall the Company or any of the Guarantors be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Notes, in any jurisdiction where it is not now so subject. (f) For a period of 90 days from the date of the Offering Memorandum, the Company and the Guarantors agree not to, directly or indirectly, sell, offer to sell, contract to sell, grant any option to purchase, issue any instrument convertible into or exchangeable for, or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition in the future of), any debt securities of the Company, the Guarantors or any of their respective subsidiaries, except (i) in exchange for the Exchange Notes and the Exchange Guarantees in connection with the Exchange Offer, (ii) with the prior consent of Lehman Brothers and Merrill Lynch, or (iii) debt instruments issued pursuant to the Second Amended and Restated Credit Facility or any HUD financing permitted by the Indenture. (g) So long as any of the Notes are outstanding, the Company will furnish to the holders of the Notes, within the time periods specified in the Commission's rules and regulations, (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, will cause the Company's certified independent accountants to deliver a report on the annual financial statements, and (ii) all current reports that would 19 be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. (h) So long as any of the Notes are outstanding, the Company and the Guarantors will furnish to the Initial Purchasers (i) as soon as available, a copy of each report of the Company or any Guarantor mailed to stockholders generally or filed with any stock exchange or regulatory body and (ii) from time to time such other information concerning the Company or the Guarantors as the Initial Purchasers may reasonably request. (i) The Company and the Guarantors will apply the net proceeds from the sale of the Notes to be sold by it hereunder, together with the proceeds from the private placement of the Series A Preferred, substantially in accordance with the description set forth in the Offering Memorandum under the caption "Use of Proceeds." (j) Except as stated in this Agreement and in the Preliminary Offering Memorandum and Offering Memorandum, neither the Company, the Guarantors nor any of their respective affiliates has taken, nor will any of them take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company or any of the Guarantors to facilitate the sale or resale of the Notes and the Guarantees. Except as permitted by the Act, the Company and the Guarantors will not distribute any offering material in connection with the Exempt Resales. (k) The Company and the Guarantors will use their best efforts to permit the Notes to be designated Private Offerings, Resales and Trading through Automated Linkages (PORTAL(R)) Market (the "PORTAL(R) MARKET") securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. relating to trading in the PORTAL(R) Market and to permit the Notes to be eligible for clearance and settlement through DTC. (l) During the period of two years after the Closing Date, the Company and the Guarantors will not, and will not permit any of their "affiliates" (as defined in Rule 144 under the Act), to, resell any of the Notes that constitute "restricted securities" under Rule 144 that have been reacquired by any of them. (m) The Company and the Guarantors agree not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Notes in a manner that would require the registration under the Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Notes. (n) The Company and the Guarantors agree to comply with all the terms and conditions of the Registration Rights Agreement and all agreements set forth in the representation letter of the Company and the Guarantors to DTC relating to the approval of the Notes by DTC for "book entry" transfer. 20 (o) The Company and the Guarantors will take such steps as shall be necessary to ensure that neither the Company nor any of the Company's subsidiaries becomes an "investment company" within the meaning of such term under the Investment Company Act of 1940, as amended. (p) The Company and the Guarantors will do and perform all things required or necessary to be done and performed under this Agreement by them prior to the Closing Date, and to satisfy all conditions precedent to the Initial Purchasers' obligations hereunder to purchase the Notes. 6. Expenses. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement becomes effective or is terminated, the Company and the Guarantors, jointly and severally, agree, to pay all costs, expenses, fees and taxes incident to and in connection with: (i) the preparation, printing, filing and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including, without limitation, financial statements and exhibits) and all amendments and supplements thereto (including the fees, disbursements and expenses of the Company's accountants and counsel, but not, however, legal fees and expenses of the Initial Purchasers' counsel incurred in connection therewith); (ii) the preparation, printing (including, without limitation, word processing and duplication costs) and delivery of this Agreement, the Indenture, the Registration Rights Agreement, all Blue Sky Memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection therewith and with the Exempt Resales (but not, however, legal fees and expenses of your counsel incurred in connection with any of the foregoing other than fees of such counsel plus reasonable disbursements incurred in connection with the preparation, printing and delivery of such Blue Sky Memoranda); (iii) the issuance and delivery by the Company of the Notes and by the Guarantors of the Guarantees and any taxes payable in connection therewith; (iv) the qualification of the Notes and Exchange Notes for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the reasonable fees and disbursements of your counsel relating to such registration or qualification); (v) the furnishing of such copies of the Preliminary Offering Memorandum and the Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for use in connection with the Exempt Resales; (vi) the preparation of certificates for the Notes (including, without limitation, printing and engraving thereof); (vii) the application for quotation of the Notes in the PORTAL(R) Market (including all disbursements and listing fees); (viii) the approval of the Notes by DTC for "book-entry" transfer (including fees and expenses of counsel); (ix) the rating of the Notes and the Exchange Notes; (x) the obligations of the Trustee, any agent of the Trustee and the counsel for the Trustee in connection with the Indenture, the Notes, the Guarantees, the Exchange Notes and the Exchange Guarantees; (xi) the performance by the Company and the Guarantors of their other obligations under this Agreement; and (xii) 50% of all travel expenses (including 50% of all expenses related to chartered aircraft) of each Initial Purchaser and the Company's officers and employees and 50% of any other expenses of each Initial Purchaser and the Company in connection with attending or hosting meetings with prospective purchasers of the Notes. 21 7. Conditions to Initial Purchasers' Obligations. The respective obligations of the Initial Purchasers hereunder are subject to the accuracy, when made and on and as of the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, to the performance by the Company and the Guarantors of their respective obligations hereunder, and to each of the following additional terms and conditions: (a) The Initial Purchasers shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact that, in the opinion of Weil, Gotshal & Manges LLP, is material or omits to state a fact that, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (b) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Notes, the Guarantees, the Exchange Notes, the Exchange Guarantees, the Registration Rights Agreement, the Indenture, the transaction Documents and the Offering Memorandum, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Initial Purchasers, and the Company and the Guarantors shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (c) Waller Lansden Dortch & Davis PLLC shall have furnished to the Initial Purchasers its written opinion, as counsel to the Company and the Guarantors, addressed to the Initial Purchasers and dated the Closing Date, substantially in the form of Exhibit C hereto. (d) The Initial Purchasers shall have received from Weil, Gotshal & Manges LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Notes, the Offering Memorandum and other related matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they reasonably request for the purpose of enabling them to pass upon such matters. (e) At the time of execution of this Agreement, the Initial Purchasers shall have received from: (i) Ernst & Young LLP, a letter with respect to the financial information of the Company and the five facilities acquired from The Brown Schools, Inc. in April 2003, including The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc. included in the Offering Memorandum, in form and substance satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and dated the date hereof (A) confirming that they are independent public accountants under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants, and its rulings and interpretations and (B) 22 stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to initial purchasers; (ii) Deloitte & Touche LLP, a letter with respect to the financial information of Ramsay, in form and substance satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and dated the date hereof (A) confirming that they are independent public accountants under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants, and its rulings and interpretations and (B) stating, as of the date hereof, the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to initial purchasers; (iii) BDO Seidman, LLP, a letter with respect to the financial information of The Brown Schools of Oklahoma, Inc., included in the Offering Memorandum in form and substance satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and dated the date hereof (A) confirming that they are independent public accountants under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants, and its rulings and interpretations and (B) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to initial purchasers. (f) With respect to the letters referred to in the immediately preceding paragraph and delivered to the Initial Purchasers concurrently with the execution of this Agreement (each, an "INITIAL LETTER"), the Initial Purchasers shall have received a letter (each, a "BRING-DOWN LETTER") addressed to the Initial Purchasers and dated as of the Closing Date from: (i) Ernst & Young LLP, with respect to the financial information of the Company and the five facilities acquired from The Brown Schools, Inc. in April 2003, including The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc. included in the Offering Memorandum, (A) confirming that they are independent public accountants under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants, and its rulings and interpretations, (B) stating, as of the date of their bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date of their bring-down letter), the conclusions and findings of such firm with respect to the financial information 23 and other matters covered by their initial letter and (C) confirming in all material respects the conclusions and findings set forth in their initial letter; (ii) Deloitte & Touche LLP, with respect to the financial information of Ramsay, included in the Offering Memorandum, (A) confirming that they are independent public accountants under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants, and its rulings and interpretations, (B) stating, as of the date of their bring-down letter, the conclusions and findings of such firm with respect to the financial information and other matters covered by their initial letter and (C) confirming in all material respects the conclusions and findings set forth in their initial letter; and (iii) BDO Seidman, LLP, with respect to the financial information of The Brown Schools of Oklahoma, Inc., included in the Offering Memorandum, (A) confirming that they are independent public accountants under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants, and its rulings and interpretations, (B) stating, as of the date of their bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date of their bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by their initial letter and (C) confirming in all material respects the conclusions and findings set forth in their initial letter. (g) At the time of execution of this Agreement and the Closing Date, the Company shall have requested and caused Ernst & Young LLP, to furnish to the Initial Purchasers letters in form and substance satisfactory to the Initial Purchasers consenting to the incorporation by reference in the Offering Memorandum of the audited and interim, as applicable, financial statements of each of (i) Cypress Creek Hospital Inc., West Oaks Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc., (ii) Holly Hill/Charter Behavioral Health System, LLC, and (iii) PMR Corporation, dated respectively as of the time of execution of this Agreement and as of the Closing Date, in form and substance satisfactory to the Initial Purchasers, confirming that (A) they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable rules and regulations adopted by the Commission thereunder, (B) in their opinion the audited financial statements incorporated by reference in the Offering Memorandum comply in form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC, (C) nothing has come to their attention as a result of performing the procedures as described in SAS No. 71, Interim Financial Information, that causes them to believe that the interim financial statements incorporated by reference in the Offering Memorandum do not comply in form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC, and consenting to the incorporation by reference in the Offering Memorandum of their report with respect to the audited financial statements for the relevant periods. 24 (h) At the time of execution of this Agreement and the Closing Date, the Company shall have requested and caused BDO Seidman, LLP, to furnish to the Initial Purchasers a letter in form and substance satisfactory to the Initial Purchasers consenting to the incorporation by reference in the Offering Memorandum of the audited and interim, as applicable, financial statements of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital), dated as of the time of execution of this Agreement and as of the Closing Date, in form and substance satisfactory to the Initial Purchasers, confirming that (A) they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable rules and regulations adopted by the Commission thereunder, (B) in their opinion the audited financial statements incorporated by reference in the Offering Memorandum comply in form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC, (C) nothing has come to their attention as a result of performing the procedures as described in SAS No. 71, Interim Financial Information, that causes them to believe that the interim financial statements incorporated by reference in the Offering Memorandum do not comply in form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC, and consenting to the incorporation by reference in the Offering Memorandum of their report with respect to the audited financial statements for the relevant periods. (i) All consents required for the consummation of the Transactions shall have been obtained. (j) The Initial Purchasers and their representatives shall have been provided the opportunity to review execution copies of the Transaction Documents, with all schedules, exhibits and amendments thereto, and such Transaction Documents shall be in form and substance satisfactory to the Initial Purchasers. (k) Prior to or concurrently with the purchase of the Notes by the Initial Purchasers, the other Transactions shall have been consummated. (l) The Initial Purchasers shall have received (i) a certificate from the Company, dated as of the Closing Date, signed by its Chief Executive Officer and Chief Accounting Officer and (ii) a certificate from each Guarantor, dated the Closing Date, signed by its Chief Executive Officer and Chief Financial Officer or Chief Accounting Officer, as the case may be, stating, as applicable, that: (1) The representations and warranties of the Company and the Guarantors contained herein, as applicable, are true and correct (after giving effect to all materiality qualifiers herein) as if made on and as of the Closing Date (other than to the extent any such representation or warranty is made expressly to a certain date), and the Company and the Guarantors, as applicable, have performed all covenants and agreements and satisfied all conditions (after giving effect to all materiality qualifiers herein) on their part to be performed or satisfied hereunder, to the extent a party hereto, at or prior to the Closing Date; 25 (2) At the Closing Date, since the date hereof or since the date of the most recent financial statements in the Offering Memorandum, except as described in the Offering Memorandum, no event or events have occurred, nor has any information become known that, individually or in the aggregate, would have a Material Adverse Effect; and (3) The issuance and sale of the Notes and Guarantees by the Company and the Guarantors hereunder has not been enjoined (temporarily or permanently) by any court or governmental body or agency. (m) The Initial Purchasers shall have received a certificate from the Company and Aeries Healthcare of Illinois, Inc., at the time of the execution of this Agreement and the Closing Date, signed by the Chief Accounting Officer of the Company and the Chief Financial Officer of Aeries Healthcare of Illinois, Inc., in respect of the unaudited condensed consolidated statement of income of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) ("RIVEREDGE HOSPITAL") for the quarterly period ended June 30, 2002, stating, as applicable, that: (1) The financial statement attached to the certificate is, in fact, a true and accurate copy of the unaudited condensed consolidated statement of income of Riveredge Hospital for the quarterly period ended June 30, 2002; (2) As members of management of the Riveredge Hospital, they are responsible for the fair presentation of its financial statements and they believe the statements of financial position and results of operations are fairly presented in conformity with accounting principles generally accepted in the United States applied on a basis consistent with that of the preceding periods; (3) There are no unadjusted audit differences identified during the current audit and pertaining to the period presented; (4) No plans or intentions exist that may materially affect the carrying value or classification of assets and liabilities; (5) There are no material transactions that have not been properly recorded in the accounting records underlying the financial statement; (6) There are no material weaknesses in internal control, including any for which they believe the cost of corrective actions exceeds the benefits and there have been no significant changes in internal control since March 31, 2002; (7) Except for the acquisition of Riveredge Hospital by the Company on July 1, 2002, no events or transactions have occurred since March 31, 2002 or are pending that would have a material effect on the financial statements at that date or for the period then ended, or that are of such significance in relation to Riveredge Hospital's affairs to require mention in a 26 note to the financial statement in order to make them not misleading regarding the financial position, results of operations, or cash flows of the Riveredge Hospital. (n) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Offering Memorandum (exclusive of any amendment or supplement thereto after the date hereof) any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Memorandum or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, shareholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or (ii), is, in the reasonable judgment of Lehman Brothers and Merrill Lynch, so material and adverse as to make it impracticable or inadvisable to proceed with the offering or the delivery of the Notes and the Guarantees being delivered on such Closing Date on the terms and in the manner contemplated herein and in the Offering Memorandum. (o) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities. (p) The Notes shall have been designated for trading on the PORTAL(R) Market and shall be eligible for clearance and settlement through DTC. (q) The Company and the Guarantors shall have executed and delivered the Registration Rights Agreement, and the Initial Purchasers shall have received an original copy thereof, duly executed by the Company and the Guarantors. (r) The Company, the Guarantors and the Trustee shall have executed and delivered the Indenture, and the Initial Purchasers shall have received an original copy thereof, duly executed by the Company, the Guarantors and the Trustee. (s) Prior to or concurrently with the purchase of the Notes by the Initial Purchasers, the Acquisition, the private placement of the Series A Preferred and the entering into of the Second Amended and Restated Credit Facility shall have been consummated and the Initial Purchasers shall have received an original copy of each of the Transaction Documents, duly executed by the Company, its subsidiaries, as applicable, and the other parties thereto. (t) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the 27 New York Stock Exchange, the Nasdaq National Market or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, has been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction; (ii) a material disruption in securities settlement, payment or clearance services in the United States; (iii) a banking moratorium has been declared by Federal or state authorities; (iv) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity, crisis or emergency if, in the judgment of Lehman Brothers and Merrill Lynch, the effect of any such attack, outbreak, escalation, act, declaration, calamity, crisis or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Notes; or (v) the occurrence of any other calamity, crisis (including without limitation as a result of terrorist activities), or material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of Lehman Brothers and Merrill Lynch, impracticable or inadvisable to proceed with offering or delivery of the Notes being delivered on the Closing Date or that, in the judgment of Lehman Brothers and Merrill Lynch, would materially and adversely affect the financial markets or the markets for the Notes and other debt securities. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. 8. Indemnification and Contribution. (a) The Company and each Guarantor, hereby agree, jointly and severally, to indemnify and hold harmless each Initial Purchaser, its directors, officers and employees and each person, if any, who controls any Initial Purchaser within the meaning of the Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Notes), to which that Initial Purchaser, director, officer, employee or controlling person may become subject, under the Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto, (B) in any Blue Sky application or other document prepared or executed by the Company or any Guarantor (or based upon any written information furnished by the Company or any Guarantor) specifically for the purpose of qualifying any or all of the Notes under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "BLUE SKY APPLICATION") or (C) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Notes ("MARKETING MATERIALS"), including any roadshow or investor 28 presentations made to investors by the Company (whether in person or electronically or (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials, any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser and each such director, officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser, director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Offering Memorandum or Offering Memorandum, or in any such amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials, in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company through the Initial Purchasers by or on behalf of any Initial Purchaser specifically for inclusion therein. The foregoing indemnity agreement is in addition to any liability that the Company or the Guarantors may otherwise have to any Initial Purchaser or to any director, officer, employee or controlling person of that Initial Purchaser. (b) Each Initial Purchaser, severally and not jointly, hereby agrees to indemnify and hold harmless the Company, each Guarantor, their respective officers and employees, each of their respective directors, and each person, if any, who controls the Company or any Guarantor within the meaning of the Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, any Guarantor or any such director, officer, employee or controlling person may become subject, under the Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto, (B) in any Blue Sky Application, or (C) in any Marketing Materials or (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company by or on behalf of that Initial Purchaser specifically for inclusion therein, and shall reimburse the Company, any Guarantor and any such director, officer, employee or controlling person for any legal or other expenses reasonably incurred by the Company, any Guarantor or any such director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability 29 that any Initial Purchaser may otherwise have to the Company, any Guarantor or any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Initial Purchasers shall have the right to employ counsel to represent jointly the Initial Purchasers and those Initial Purchasers and their respective directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Initial Purchasers against the Company or any Guarantor under this Section 8 if, in the reasonable judgment of the Initial Purchasers, it is advisable for the Initial Purchasers and those directors, officers, employees and controlling persons to be jointly represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Company or any Guarantor. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such 30 indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchasers on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes purchased under this Agreement (before deducting expenses) received by the Company and the Guarantors on the one hand, and the total underwriting discounts and commissions received by the Initial Purchasers with respect to the Notes purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the Notes under this Agreement as set forth on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Guarantors or the Initial Purchasers, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. For purposes of the preceding two sentences, the net proceeds deemed to be received by the Company shall be deemed to be also for the benefit of the Guarantors and information supplied by the Company shall also be deemed to have been supplied by the Guarantors. The Company, the Guarantors, and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Notes initially purchased by it were offered to the Eligible Purchasers exceeds the amount of any damages that such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint. (e) The Initial Purchasers severally confirm and the Company and the Guarantors acknowledge that the statements with respect to the offering of the Notes by the Initial Purchasers set forth on the second to last paragraph on the front cover of the 31 Offering Memorandum and the first sentence of the fifth and sixth paragraphs and the sixth sentence of the tenth paragraph under the section entitled "Plan of Distribution" in the Offering Memorandum constitute the only information concerning the Initial Purchasers furnished in writing to the Company by or on behalf of the Initial Purchasers specifically for inclusion in the Offering Memorandum. 9. Defaulting Initial Purchasers. If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the remaining non-defaulting Initial Purchasers shall be obligated to purchase the Notes that the defaulting Initial Purchaser agreed but failed to purchase on the Closing Date in the respective proportions that the number of Notes set opposite the name of each remaining non-defaulting Initial Purchaser in Schedule I hereto bears to the total number of Notes set opposite the names of all the remaining non-defaulting Initial Purchasers in Schedule I hereto; provided, however, that the remaining non-defaulting Initial Purchasers shall not be obligated to purchase any of the Notes on the Closing Date if the total number of Notes that the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on such date exceeds 9.09% of the total number of Notes to be purchased on the Closing Date, and any remaining non-defaulting Initial Purchasers shall not be obligated to purchase more than 110% of the number of Notes that it agreed to purchase on the Closing Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded, the remaining non-defaulting Initial Purchasers, or those other Initial Purchasers satisfactory to the Initial Purchasers who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the Notes to be purchased on the Closing Date. If the remaining Initial Purchasers or other Initial Purchasers satisfactory to the Initial Purchasers do not elect to purchase the Notes that the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on the Closing Date, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser or the Company or the Guarantors, except that the Company and the Guarantors will continue to be liable for the payment of expenses to the extent set forth in Sections 6 and 11. Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company or any Guarantor for damages caused by its default. If other Initial Purchasers are obligated or agree to purchase the Notes of a defaulting or withdrawing Initial Purchaser, either the remaining Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement. 10. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers by notice given to and received by the Company prior to delivery of and payment for the Notes if, prior to that time, any of the events described in Sections 7(n), 7(o) or 7(t) shall have occurred or if the Initial Purchasers shall decline to purchase the Notes for any reason expressly permitted under this Agreement. 32 11. Reimbursement of Initial Purchasers' Expenses. If the Company fails to tender the Notes for delivery to the Initial Purchasers by reason of any failure, refusal or inability on the part of the Company or any Guarantor to perform any agreement on their part to be performed, or because any other condition of the obligations hereunder required to be fulfilled by the Company or any Guarantor is not fulfilled, the Company and the Guarantors shall reimburse the Initial Purchasers for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase of the Notes, and upon demand the Company and the Guarantors shall pay the full amount thereof to the Initial Purchasers. If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Initial Purchasers, the Company and the Guarantors shall not be obligated to reimburse any defaulting Initial Purchaser on account of those expenses. 12. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to any Initial Purchasers, shall be delivered or sent by hand delivery, mail, telex, overnight courier or facsimile transmission to Lehman Brothers, 745 Seventh Avenue, New York, New York 10019, Attention: John C. Cokinos (Fax: (646) 758-1124) and Merrill Lynch, 4 World Financial Center, New York, New York 10080, Attention: Sarang Gadkari (Fax: (212) 449-7750, with a copy to Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attention: Rod Miller (Fax: (212) 310-8007), and with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 399 Park Avenue, New York, New York 10022, Fax: (212) 526-2648; (b) if to the Company or any Guarantor, shall be delivered or sent by mail, telex, overnight courier or facsimile transmission to Psychiatric Solutions, Inc., 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067, Attention: Brent Turner (Fax: (615) 312-5711), with a copy to Waller Lansden Dortch & Davis PLLC, 511 Union Street, Suite 2100, Nashville, Tennessee 37219, Attention: Christopher L. Howard (Fax: (615) 244-6804); provided, however, that any notice to an Initial Purchaser pursuant to Section 8(c) shall be delivered or sent by hand delivery, mail, telex or facsimile transmission to such Initial Purchaser at its address set forth in its acceptance telex, overnight courier to Lehman Brothers and Merrill Lynch, which address will be supplied to any other party hereto by Lehman Brothers and Merrill Lynch upon request. Any such statements, requests, notices or agreements shall take effect at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by Lehman Brothers and Merrill Lynch. 33 13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company, the Guarantors and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (A) the representations, warranties, indemnities and agreements of the Company and the Guarantors contained in this Agreement shall also be deemed to be for the benefit of directors of the Initial Purchasers, officers of the Initial Purchasers and any person or persons controlling any Initial Purchaser within the meaning of Section 15 of the Act and (B) the indemnity agreement of the Initial Purchasers contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of directors of the Company and the Guarantors, officers of the Company and the Guarantors and any person controlling the Company or the Guarantors within the meaning of Section 15 of the Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 14. Survival. The respective indemnities, representations, warranties and agreements of the Company, the Guarantors and the Initial Purchasers contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Notes and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. 15. Definition of the Terms "Business Day" and "Subsidiary." For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK. 17. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 18. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 34 If the foregoing correctly sets forth the agreement among the Company, the Subsidiary Guarantors and the Initial Purchasers, please indicate your acceptance in the space provided for that purpose below. Very truly yours, PSYCHIATRIC SOLUTIONS, INC. By: /s/ Joey A. Jacobs ------------------------------------------ Name: Joey A. Jacobs Title: President and Chief Executive Officer PSYCHIATRIC SOLUTIONS HOSPITALS, INC. INFOSCRIBER CORPORATION COLLABORATIVE CARE CORPORATION PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. SOLUTIONS CENTER OF LITTLE ROCK, INC. PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. PSYCHIATRIC MANAGEMENT RESOURCES, INC. PSI-EAP, INC. SUNSTONE BEHAVIORAL HEALTH, INC. THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. PSI CEDAR SPRINGS HOSPITAL, INC. PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. AERIES HEALTHCARE CORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. PSI HOSPITALS, INC. PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. By: /s/ Joey A. Jacobs ------------------------------------------ Name: Joey A. Jacobs Title: President 35 THERAPEUTIC SCHOOL SERVICES, LLC BY: PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ------------------------------------------ Name: Joey A. Jacobs Title: President PSI TEXAS HOSPITALS, LLC BY: PSYCHIATRIC SOLUTIONS HOSPITALS, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ------------------------------------------ Name: Joey A. Jacobs Title: President TEXAS CYPRESS CREEK HOSPITAL, LP TEXAS WEST OAKS HOSPITAL, LP NEURO INSTITUTE OF AUSTIN, LP TEXAS LAUREL RIDGE HOSPITAL, LP TEXAS OAKS PSYCHIATRIC HOSPITAL, LP TEXAS SAN MARCOS TREATMENT CENTER, LP BY: PSI TEXAS HOSPITALS, LLC, AS GENERAL PARTNER BY: PSYCHIATRIC SOLUTIONS HOSPITAL, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ------------------------------------------ Name: Joey A. Jacobs Title: President 36 Accepted: LEHMAN BROTHERS INC. By: /s/ Michael Konigsberg ---------------------------------- Authorized Representative MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Sarang P. Gadkari ---------------------------------- Authorized Representative JEFFERIES & COMPANY, INC. By: /s/ Catherine Gemmato-Smith ---------------------------------- Authorized Representative 37 SCHEDULE I
PRINCIPAL AMOUNT OF NOTES TO BE INITIAL PURCHASERS PURCHASED ------------------ ----------- Lehman Brothers Inc.............................................. $67,500,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated............... 67,500,000 Jefferies & Company, Inc......................................... 15,000,000 ----------- Total....................................................... 150,000,000 ===========
38 SCHEDULE II HUD Financing Subsidiaries Holly Hill Real Estate, LLC PSI Cedar Springs Hospital Real Estate, Inc. Psychiatric Solutions of Oklahoma Real Estate, Inc. Riveredge Real Estate, Inc. Cypress Creek Real Estate, LP West Oaks Real Estate, LP Neuro Rehab Real Estate, LP Texas Laurel Ridge Hospital Real Estate, LP Texas Oaks Psychiatric Hospital Real Estate, LP Texas San Marcos Treatment Center Real Estate, LP A-1 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT EXCHANGE AND REGISTRATION RIGHTS AGREEMENT Dated as of June 30, 2003 among Psychiatric Solutions, Inc., The Subsidiary Guarantors from time to time party hereto, and Lehman Brothers Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Jefferies & Company, Inc. EXCHANGE AND REGISTRATION RIGHTS AGREEMENT This Exchange and Registration Rights Agreement (this "AGREEMENT") is made and entered into as of June 30, 2003 by and among Psychiatric Solutions, Inc., a Delaware corporation (the "COMPANY"), the Subsidiary Guarantors (as defined herein) and Lehman Brothers Inc. on behalf of Merrill Lynch & Co. and Jefferies & Company Inc. (collectively, the "INITIAL PURCHASERS"). This Agreement is made pursuant to the Purchase Agreement, dated June 19, 2003 (the "PURCHASE AGREEMENT"), by and among the Company, the Existing Subsidiary Guarantors (as defined herein) and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of $150,000,000 aggregate principal amount of the Company's 10-5/8% Senior Subordinated Notes due 2013 (the "NOTES"). The Notes are, and the Exchange Notes (as defined herein) will be, guaranteed on a senior subordinated basis by the Subsidiary Guarantors (as defined herein). In order to induce the Initial Purchasers to purchase the Notes, the Company and the Existing Subsidiary Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ADDITIONAL INTEREST: As defined in Section 5(a) hereof. ADDITIONAL SUBSIDIARY GUARANTOR: Any subsidiary of the Company that executes a Guarantee under the Indenture after the date of this Agreement. ADVICE: As defined in Section 6(e) hereof. AGREEMENT: As defined in the preamble hereto. BLACKOUT PERIOD: As defined in Section 5(a) hereof. BLUE SKY APPLICATION: As defined in Section 8(a) hereof. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CLOSING DATE: The date of this Agreement. COMMISSION: The U.S. Securities and Exchange Commission. COMPANY: As defined in the preamble hereto. 3 CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment Date. EFFECTIVENESS TARGET DATE: As defined in Section 5(a) hereof. EXCHANGE ACT: The U.S. Securities Exchange Act of 1934, as amended. EXCHANGE NOTES: The Company's 10-5/8% Senior Subordinated Notes due 2013 to be issued pursuant to the Indenture in the Exchange Offer, together with the related Guarantees. EXCHANGE OFFER: The registration by the Company under the Securities Act of the Exchange Notes on a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities validly tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXISTING SUBSIDIARY GUARANTORS: The various Subsidiary Guarantors signatory to the Indenture as of the date hereof. GUARANTEES: Guarantees by the Subsidiary Guarantors of the Company's obligations under the Notes, the Exchange Notes and the Indenture. HOLDER: As defined in Section 2(b) hereof. INDENTURE: The Indenture, dated as of the date hereof, among the Company, the Existing Subsidiary Guarantors and Wachovia Bank, National Association, as trustee (the "Trustee"), pursuant to which the Notes and the Exchange Notes are to be issued, as such Indenture may be amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASERS: As defined in the preamble hereto. 4 INTEREST PAYMENT DATE: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. NOTES: As defined in the preamble hereto. PERSON: An individual, partnership, corporation, limited liability company, unincorporated organization, association, joint-stock company, trust, joint venture, government or any agency or political subdivision thereof or any other entity. PROSPECTUS: The prospectus included in a Registration Statement as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. PURCHASE AGREEMENT: As defined in the preamble hereto. RECORD HOLDER: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5(a) hereof. REGISTRATION STATEMENT: Any Registration Statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. SECURITIES ACT: The U.S. Securities Act of 1933, as amended. SHELF FILING DEADLINE: As defined in Section 4(a) hereof. SHELF REGISTRATION PERIOD: As defined in Section 4(a) hereof. SHELF REGISTRATION STATEMENT: As defined in Section 4(a) hereof. SUBSIDIARY GUARANTORS: The Additional Subsidiary Guarantors and the Existing Subsidiary Guarantors. TIA: The U.S. Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Note or Exchange Note (including the related Guarantees), as applicable, until the earliest to occur of (a) the date on which 5 such Note is exchanged by a person other than a Broker-Dealer in the Exchange Offer in exchange for an Exchange Note, so long as such person is not prohibited from reselling such Exchange Notes to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not sufficient for such purpose, (b) following the exchange by a Broker-Dealer in the Exchange Offer of a Note for an Exchange Note, the date on which that Exchange Note is sold to a purchaser who receives from that Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement and (d) the date on which such Note is eligible to be distributed to the public pursuant to Rule 144 under the Securities Act. UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or one of the events set forth in Section 4(a)(ii) has occurred, the Company and the Subsidiary Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 90 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use their reasonable best efforts to cause such Registration Statement to be declared effective on or prior to 180 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the blue sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Exchange Notes held by Broker-Dealers as contemplated by Section 3(c) below. 6 (b) The Company and the Subsidiary Guarantors shall use their reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable U.S. federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable U.S. federal and state securities laws. No securities other than the Exchange Notes and the Guarantees shall be included in the Exchange Offer Registration Statement. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to cause the Exchange Offer to be Consummated 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission. (c) The Company and the Subsidiary Guarantors shall indicate in a "Plan of Distribution" section of the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a Prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which Prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Exchange Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least 90 days after the Consummation of the Exchange Offer. The Company and the Subsidiary Guarantors shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 90-day period in order to facilitate such resales. 7 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company and the Subsidiary Guarantors are not required to file an Exchange Offer Registration Statement or cannot Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable U.S. law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company prior to the 20th day following the Consummation of the Exchange Offer that such Holder (A) is prohibited by applicable U.S. law or Commission policy from participating in the Exchange Offer, (B) may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) is a Broker-Dealer and holds Notes acquired directly from the Company or one of its affiliates, then the Company and the Subsidiary Guarantors shall: (x) use their reasonable best efforts to cause to be filed a Registration Statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement if permitted by the rules and regulations of the Commission (in either event, the "SHELF REGISTRATION STATEMENT") on or prior to the earliest to occur of (1) the 30th day after the date on which the Company determines that they are not required to file the Exchange Offer Registration Statement, or permitted to Consummate the Exchange Offer and (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) of paragraph (a) above (such earliest date being the "SHELF FILING DEADLINE"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities by the Holders which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 90th day after the Shelf Filing Deadline. Subject to Section 5(b), the Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes or Exchange Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the Closing Date or such shorter period that will terminate when all Notes or Exchange Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (such period being the "SHELF REGISTRATION PERIOD"). 8 (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Additional Interest pursuant to Section 5 hereof unless and until such Holder shall have used its reasonable best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. 5. ADDITIONAL INTEREST (a) If (i) any of the Registration Statements required by this Agreement are not filed with the Commission on or prior to the date specified for such filing in Sections 3(a) and 4(a), as applicable, (ii) any of such required Registration Statements have not been declared effective by the Commission on or prior to the date specified for such effectiveness in Sections 3(a) and 4(a), as applicable, (each, an "EFFECTIVENESS TARGET Date"), (iii) the Exchange Offer has not been Consummated within 30 business days, or longer, if required by federal securities laws, after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement has been declared effective or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Securities without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (except as permitted in paragraph (b); such period of time during which any such Registration Statement is not effective or any such Registration Statement or the related Prospectus is not usable being referred to as a "BLACKOUT PERIOD") (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Company and the Subsidiary Guarantors, jointly and severally, agree to pay additional interest ("ADDITIONAL INTEREST") to each Holder of Transfer Restricted Securities adversely affected by such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder with respect to the first 90-day period immediately following the occurrence of such Registration Default. The amount of Additional Interest shall increase by an additional $.05 per week per $1,000 principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period (or portion thereof) until all Registration Defaults have been cured, up to a maximum amount of Additional Interest of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Additional Interest shall be paid to Record Holders by the Company and the Subsidiary Guarantors in the same manner as interest is paid under the Notes. Following the cure of all Registration Defaults relating to any particular Transfer Restricted 9 Securities, the accrual of Additional Interest with respect to such Transfer Restricted Securities will cease. (b) A Registration Default referred to in Section 5(a)(iv) shall be deemed not to have occurred and be continuing in relation to a Registration Statement or the related Prospectus if (i) the Blackout Period has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (y) the occurrence of other material events with respect to the Company that would need to be described in such Registration Statement or the related Prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement (including by way of filing documents under the Exchange Act which are incorporated by reference into the Registration Statement) such Registration Statement and the related Prospectus to describe such events; provided, however, that in any case if such Blackout Period occurs for a continuous period in excess of 30 days, a Registration Default shall be deemed to have occurred on the 31st day of such Blackout Period and Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured or until the Company is no longer required pursuant to this Agreement to keep such Registration Statement effective or such Registration Statement or the related Prospectus usable; provided, further, that in no event shall the total of all Blackout Periods exceed 45 days in the aggregate of any 12-month period. All payment obligations of the Company and the Subsidiary Guarantors set forth in this section that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such payment obligations with respect to such security shall have been satisfied in full. 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their reasonable best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company and the Subsidiary Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) 10 it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's and the Subsidiary Guarantors' preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters, and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective Registration Statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired by such Holder directly from the Company. (ii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Subsidiary Guarantors shall state to the Commission that the Company and the Subsidiary Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991) and shall represent to the Commission that neither the Company nor any Subsidiary Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Subsidiary Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer; and (iii) The Company and the Subsidiary Guarantors shall issue, upon the request of any Holder of Notes covered by the Exchange Offer, Exchange Notes (including the related guarantees), having an aggregate principal amount equal to the aggregate principal amount of Notes surrendered to the Company by such Holder in exchange therefor; such Exchange Notes (including the related guarantees) to be registered in the name of such Holder or in the name of the purchaser(s) of such Exchange Notes (including the related guarantees), as the case may be; in return, the Notes held by such Holder shall be surrendered to the Company for cancellation. 11 (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Subsidiary Guarantors shall comply with all the provisions of Section 6(c) below and shall use their reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company and the Subsidiary Guarantors will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes and Exchange Notes by Broker-Dealers), the Company and the Subsidiary Guarantors shall: (i) use their reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Securities Act or any regulation thereunder, financial statements of any Subsidiary Guarantors), unless such financial statements are publicly available, for the period specified in Sections 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Subsidiary Guarantors shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use their reasonable best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter. Notwithstanding the foregoing, the Company and the Subsidiary Guarantors may allow the Shelf Registration Statement to cease to become effective and usable if (x) the board of directors of the Company determines in good faith that it is in the best interests of the Company not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company or the Subsidiary Guarantors, and the Company notifies the Holders within two business days after such boards of directors make such determination or (y) the Prospectus contained in the Shelf Registration Statement contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided that the two-year period referred to in Section 4(a) hereof during which the Shelf Registration Statement is required to be effective and usable shall be extended by the number of days during which such Registration 12 Statement was not effective or usable pursuant to the foregoing provisions; and provided further that Additional Interest shall accrue on the Notes as provided in Section 5 hereof; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Sections 3 or 4 hereof, as applicable; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) cooperate with the selling Holders of Transfer Restricted Securities and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (iv) use their reasonable best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities; (v) if any fact or event contemplated by clause (d)(i)(D) below shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (vi) provide a CUSIP, CINS or ISIN number, as applicable, for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the depositary; 13 (vii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD; (viii) otherwise use their reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to their security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (ix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes and Exchange Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (x) provide promptly to any Holder upon such Holder's written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act to the extent such documents are not otherwise filed with the Commission and available to the public free of cost. (d) Additional Provisions Applicable to Shelf Registration Statements. In connection with each Shelf Registration Statement, during the Shelf Registration Period, the Company and the Subsidiary Guarantors shall: (i) advise the underwriter(s), if any, and selling Holders of Transfer Restricted Securities promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Shelf Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act, of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for any of 14 the preceding purposes and (D) of the existence of any fact or the happening of any event that requires the making of any additions to or changes in the Shelf Registration Statement or the Prospectus in order that the Shelf Registration Statement and the Prospectus do not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Shelf Registration Statement, or any U.S. state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under U.S. state securities or blue sky laws, the Company and the Subsidiary Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (ii) if requested in writing, furnish to each of the selling Holders of Transfer Restricted Securities and each of the underwriter(s), if any, before filing with the Commission, copies of any Shelf Registration Statement or any Prospectus included therein or any amendments or supplements to any such Shelf Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Shelf Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least five business days, and the Company and the Subsidiary Guarantors will not file any such Shelf Registration Statement or Prospectus or any amendment or supplement to any such Shelf Registration Statement or Prospectus (including all such documents incorporated by reference) if a selling Holder of Transfer Restricted Securities covered by such Shelf Registration Statement or the underwriter(s), if any, shall not have had an opportunity to review the Shelf Registration Statement as set forth above; such Holders and underwriter(s) shall be deemed to have reasonably objected to such filing if such Shelf Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or fails to comply with the applicable requirements of the Securities Act; (iii) promptly prior to the filing of any document that is to be incorporated by reference into a Shelf Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Company's and the Subsidiary Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request in writing; 15 (iv) make available for inspection at reasonable times at each of the Company's principal places of business by the selling Holders of Transfer Restricted Securities, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s) who shall certify to the Company and the Subsidiary Guarantors that they have a current intention to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement, such relevant financial and other records, pertinent corporate documents and properties of the Company and the Subsidiary Guarantors as reasonably requested and cause the Company's and the Subsidiary Guarantors' officers, directors and employees to respond to such inquiries as shall be reasonably necessary, in the reasonable judgment of counsel to such Holders, to conduct a reasonable investigation; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the selling Holders by one counsel designated by and on behalf of such Holders and, provided, further, that each such party shall be required to maintain in confidence and not disclose to any other Person any information or records reasonably designated by the Company in writing as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such Shelf Registration Statement or otherwise), (B) such Person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such Person shall have given the Company prompt prior written notice of such requirement) or (C) such information is required to be set forth in such Shelf Registration Statement or the Prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such Prospectus in order that such Shelf Registration Statement, Prospectus, amendment or supplement, as the case may be, does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading; (v) if requested by any selling Holders of Transfer Restricted Securities or the underwriter(s), if any, promptly incorporate in any Shelf Registration Statement or Prospectus pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company 16 shall not be required to take any action pursuant to this Section 6(d)(v) that would, in the opinion of counsel for the Company reasonably satisfactory to the Initial Purchasers, violate applicable law; (vi) deliver to each selling Holder of Transfer Restricted Securities and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Subsidiary Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (vii) furnish to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference) to the extent such documents are not otherwise filed with the Commission and available to the public free of cost; (viii) enter into an underwriting agreement on not more than one occasion in the case of an offering pursuant to a Shelf Registration, and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder or Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of Transfer Restricted Securities; provided that the Company and the Subsidiary Guarantors shall not be required to enter into any such agreement more than once with respect to all of the Transfer Restricted Securities and may delay entering into such agreement if the board of directors of each of the Company and the Subsidiary Guarantors determines in good faith that it is in the best interests of the Company and the Subsidiary Guarantors not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company and the Subsidiary Guarantors; and in connection with an Underwritten Registration, the Company and the Subsidiary Guarantors shall: (1) furnish to the Initial Purchasers, the Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of Transfer Restricted Securities and each underwriter, if any, in such substance and scope as they may reasonably request and as are customarily made in connection with an offering of debt securities pursuant to a Shelf Registration Statement upon the effective 17 date of the Shelf Registration Statement (and if such Shelf Registration Statement contemplates an Underwritten Offering of Transfer Restricted Securities upon the date of the closing under the underwriting agreement related thereto): (A) a certificate, dated the date of effectiveness of the Shelf Registration Statement signed by (y) the respective chief executive officer, the respective President or any Vice President and (z) the respective chief financial officer of each of the Company and each of the Subsidiary Guarantors confirming, as of the date thereof, the matters set forth in Section 7(l) of the Purchase Agreement and such other matters as such parties may reasonably request; (B) an opinion, dated the date of effectiveness of such Shelf Registration Statement, of securities counsel for the Company covering matters similar to those set forth in Section 7(c) of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Shelf Registration Statement and the related Prospectus although such counsel has not independently verified the accuracy, completeness or fairness of such statements in such Shelf Registration Statement; and that such counsel advises that, on the basis of the foregoing, such counsel's work in connection with this work did not disclose information that gave such counsel reason to believe that the Shelf Registration Statement, at the time such Shelf Registration Statement or any post-effective amendment thereto became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Shelf Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Such counsel may state further that such counsel expresses no view with respect to, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules, the financial projections and other financial, statistical and accounting data included or incorporated 18 by reference in the Shelf Registration Statement contemplated by this Agreement or the related Prospectus; and (C) a customary comfort letter, dated as of the date of effectiveness of the Shelf Registration Statement from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Sections 7(e) and 7(f) of the Purchase Agreement; (2) set forth in full or incorporated by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (3) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Subsidiary Guarantors pursuant to this clause (viii), if any. If at any time during the Shelf Registration Period the representations and warranties of the Company or the Subsidiary Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Subsidiary Guarantors shall so advise the Initial Purchasers and the underwriters, if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; and (ix) prior to any public offering of Transfer Restricted Securities cooperate with the selling Holders of Transfer Restricted Securities the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or blue sky laws of such jurisdictions as the selling Holders of Transfer Restricted Securities or underwriter(s) may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement filed pursuant to Section 4 hereof; provided, however, that the Company and the Subsidiary Guarantors shall not be obligated to qualify as a foreign corporation in any jurisdiction in which they are not now so qualified or to take any action that would subject them to general consent to service of process, other than as to matters and transactions relating to the Shelf Registration Statement, in any jurisdiction where they are not now so subject. (e) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(d)(i) hereof, such Holder will forthwith discontinue 19 disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Shelf Registration Statement set forth in Section 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(d)(i) hereof to and including the date when each selling Holder covered by such Shelf Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof or shall have received the Advice. (f) The Company and the Subsidiary Guarantors may require each Holder of Transfer Restricted Securities as to which any registration is being effected to furnish to the Company such information regarding such Holder and such Holder's intended method of distribution of the applicable Transfer Restricted Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act. Each such Holder agrees to notify the Company as promptly as practicable of (i) any inaccuracy or change in information previously furnished by such Holder to the Company or (ii) the occurrence of any event, in either case, as a result of which any Prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder's intended method of distribution of the applicable Transfer Restricted Securities or omits to state any material fact regarding such Holder or such Holder's intended method of distribution of the applicable Transfer Restricted Securities required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the distribution of the applicable Transfer Restricted Securities 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 not misleading. 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Subsidiary Guarantors' performance of or compliance with this Agreement will be borne by the Company regardless of whether a Registration Statement becomes effective, including without limitation and as applicable: (i) all Commission, securities exchange or NASD registration and filing fees and expenses (including filings made by any Initial Purchasers or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified 20 independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with U.S. federal securities and state blue sky or securities laws and compliance with the rules of the NASD (including reasonable fees and disbursements of one counsel for Holders in connection with blue sky and/or NASD qualification of the Exchange Notes); (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services; (iv) all fees and disbursements of counsel for the Company and the Subsidiary Guarantors; (v) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance) and (vi) the reasonable fees and disbursements of one counsel designated by the Holders of a majority in principal amount of Transfer Restricted Securities covered by the Shelf Registration Statement to act as counsel for the Holders of those Transfer Restricted Securities in connection therewith. The Company will, in any event, bear its and the Subsidiary Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Subsidiary Guarantors. (b) Each Holder of Transfer Restricted Securities will pay all underwriting discounts, if any, and commissions and transfer taxes, if any, relating to the disposition of such Holder's Transfer Restricted Securities. 8. INDEMNIFICATION (a) The Company and each Subsidiary Guarantor shall, jointly and severally, indemnify and hold harmless each Holder of Transfer Restricted Securities, its officers and employees and each Person, if any, who controls any such Holders, within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases, sales and registration of the Notes, the Guarantees and the Exchange Notes), to which that Holder, officer, employee or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement or preliminary Prospectus or Prospectus or in any amendment or supplement thereto, (B) in any Blue Sky Application (as defined below) or other document prepared or executed by any Company or any Subsidiary Guarantor (or based upon any written information furnished by any Company or any Subsidiary Guarantor) specifically for the purpose of qualifying any or all of the Notes under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "Blue Sky Application") or (C) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Exchange Notes ("Marketing Materials"), including any 21 roadshow or investor presentations made to investors by the Company (whether in person or electronically); (ii) the omission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application or Marketing Materials any 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, or (iii) any act or failure to act or any alleged act or failure to act by any Holder of Transfer Restricted Securities in connection with, or relating in any manner to, the Notes, the Guarantees or the Exchange Notes or the offering contemplated by any Registration Statement, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company and the Subsidiary Guarantors shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Holder through its gross negligence or willful misconduct); and shall reimburse each Holder and each such officer, employee or controlling Person promptly upon demand for any legal or other expenses reasonably incurred by that Holder, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Subsidiary Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement, preliminary Prospectus or Prospectus, or in any such amendment or supplement, or in any Blue Sky Application or Marketing Materials, in reliance upon and in conformity with written information concerning such Holder furnished to the Company by or on behalf of any Holder specifically for inclusion therein; provided, further, that with respect to any such untrue statement or omission made in any preliminary Prospectus or Prospectus, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of the Holder from whom the Person asserting any such losses, claims, damages or liabilities purchased the Notes, Guarantees or Exchange Notes concerned if, to the extent that such sale was a sale by the Holder and any such loss, claim, damage or liability of such Holder is a result of the fact that both (A) a copy of the Prospectus (or the Prospectus as then amended or supplemented) was not sent or given to such Person at or prior to written confirmation of the sale of such Notes or Exchange Notes to such Person and (B) the untrue statement or omission in the preliminary Prospectus or Prospectus was corrected in the Prospectus (or the Prospectus as then amended or supplemented) unless such failure to deliver the Prospectus was a result of noncompliance by the Company with Section 6(d)(vi) hereof. The foregoing indemnity agreement is in addition to any liability which the Company and the Subsidiary Guarantors may otherwise have to any Holder or to any officer, employee or controlling Person of that Holder. (b) Each Holder, severally and not jointly, shall indemnify and hold harmless each of the Company, each of the Subsidiary Guarantors, their respective 22 directors, officers and employees, and each Person, if any, who controls either of the Company or any of the Subsidiary Guarantors within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Subsidiary Guarantors or any such director, officer or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Holders furnished to the Company by or on behalf of that Holder specifically for inclusion therein, and shall reimburse the Company, each of the Subsidiary Guarantors and each such director, officer, employee and controlling Person for any legal or other expenses reasonably incurred by the Company, each such Subsidiary Guarantor or each such director, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Holder may otherwise have to the Company, any of the Subsidiary Guarantors or any such director, officer, employee or controlling Person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the 23 indemnified party unless (i) the employment of such counsel has been specifically authorized by the indemnifying party in writing, or (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to local counsel) at any time for all such indemnified parties, which firm shall be designated in writing by (x) Lehman Brothers Inc. if the indemnified parties under this Section 8 consist of the Initial Purchasers or any of their respective officers, employees or controlling Persons or (y) by the Company, if the indemnified parties under this Section 8 consist of any of the Company, any of the Subsidiary Guarantors or any of their respective directors, officers, employees or controlling Persons. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Holders on the other, from the sale of the Transfer Restricted Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand and the Holders on the other with respect to the statements or omissions which 24 resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or any of the Subsidiary Guarantors, on the one hand, or the Holders, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Subsidiary Guarantors and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by it in connection with its sale of Notes exceeds the amount of any damages which such Holder has otherwise paid or become liable to pay by reason of the untrue or alleged untrue statement or 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. The Holders' obligations to contribute as provided in this Section 8(d) are several and not joint. 9. RULE 144A The Company and each Subsidiary Guarantor hereby agrees with each Holder of Transfer Restricted Securities, during any period in which the Company or such Subsidiary Guarantor is not subject to Section 13 or 15(d) of the Exchange Act within the two-year period following the Closing Date, to make available to any Holder or beneficial owner of Transfer Restricted Securities, in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. 25 11. SELECTION OF UNDERWRITERS Subject to Section 6(d)(i), the Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering at such Holders' expense. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided that such investment bankers and managers must be reasonably satisfactory to the Company. 12. MISCELLANEOUS (a) Remedies. The Company and the Subsidiary Guarantors agree that monetary damages (including Additional Interest) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any Subsidiary Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in the Offering Memorandum (as such term is defined in the Purchase Agreement), neither the Company nor any Subsidiary Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or any Subsidiary Guarantor's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Notes. The Company and the Subsidiary Guarantors will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of the Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or consent. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. 26 (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, facsimile or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and if to the Company or the Subsidiary Guarantors to: Psychiatric Solutions, Inc. 113 Seaboard Lane, Suite C-100 Franklin, Tennessee 37067 Attention: Joey A. Jacobs Fax: (615) 312-5700 with a copy to: Waller Lansden Dortch & Davis PLLC 511 Union Street, Suite 2100 Nashville, Tennessee 37219 Attention: Christopher L. Howard, Esq. Fax: (615) 244-6804 Any such notices and communications shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any notice or communication given or made by the Initial Purchasers. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the 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. 27 (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED, IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Transaction Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company and the Subsidiary Guarantors with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature pages follow.] 28 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Very truly yours, PSYCHIATRIC SOLUTIONS, INC. By: ------------------------------------------ Name: Joey A. Jacobs Title: President and Chief Executive Officer PSYCHIATRIC SOLUTIONS HOSPITALS, INC. INFOSCRIBER CORPORATION COLLABORATIVE CARE CORPORATION PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. SOLUTIONS CENTER OF LITTLE ROCK, INC. PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. PSYCHIATRIC MANAGEMENT RESOURCES, INC. PSI-EAP, INC. SUNSTONE BEHAVIORAL HEALTH, INC. THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. PSI CEDAR SPRINGS HOSPITAL, INC. PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. AERIES HEALTHCARE CORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. PSI HOSPITALS, INC. PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. By: ------------------------------------------ Name: Joey A. Jacobs Title: President 1 THERAPEUTIC SCHOOL SERVICES, LLC BY: PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., AS SOLE MEMBER By: ------------------------------------------ Name: Joey A. Jacobs Title: President PSI TEXAS HOSPITALS, LLC BY: PSYCHIATRIC SOLUTIONS HOSPITALS, INC., AS SOLE MEMBER By: ------------------------------------------ Name: Joey A. Jacobs Title: President TEXAS CYPRESS CREEK HOSPITAL, LP TEXAS WEST OAKS HOSPITAL, LP NEURO INSTITUTE OF AUSTIN, LP TEXAS LAUREL RIDGE HOSPITAL, LP TEXAS OAKS PSYCHIATRIC HOSPITAL, LP TEXAS SAN MARCOS TREATMENT CENTER, LP BY: PSI TEXAS HOSPITALS, LLC, AS GENERAL PARTNER BY: PSYCHIATRIC SOLUTIONS HOSPITAL, INC., AS SOLE MEMBER By: ------------------------------------------ Name: Joey A. Jacobs Title: President 2 Accepted: LEHMAN BROTHERS INC. By: ---------------------------------------- Authorized Representative MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: ---------------------------------------- Authorized Representative JEFFERIES & COMPANY, INC. By: ---------------------------------------- Authorized Representative 3 EX-4.13 100 g83903exv4w13.txt EX-4.13 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.13 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT Dated as of June 30, 2003 among Psychiatric Solutions, Inc., The Subsidiary Guarantors from time to time party hereto, and Lehman Brothers Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Jefferies & Company, Inc. EXCHANGE AND REGISTRATION RIGHTS AGREEMENT This Exchange and Registration Rights Agreement (this "AGREEMENT") is made and entered into as of June 30, 2003 by and among Psychiatric Solutions, Inc., a Delaware corporation (the "COMPANY"), the Subsidiary Guarantors (as defined herein) and Lehman Brothers Inc. on behalf of Merrill Lynch & Co. and Jefferies & Company Inc. (collectively, the "INITIAL PURCHASERS"). This Agreement is made pursuant to the Purchase Agreement, dated June 19, 2003 (the "PURCHASE AGREEMENT"), by and among the Company, the Existing Subsidiary Guarantors (as defined herein) and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of $150,000,000 aggregate principal amount of the Company's 10-5/8% Senior Subordinated Notes due 2013 (the "NOTES"). The Notes are, and the Exchange Notes (as defined herein) will be, guaranteed on a senior subordinated basis by the Subsidiary Guarantors (as defined herein). In order to induce the Initial Purchasers to purchase the Notes, the Company and the Existing Subsidiary Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ADDITIONAL INTEREST: As defined in Section 5(a) hereof. ADDITIONAL SUBSIDIARY GUARANTOR: Any subsidiary of the Company that executes a Guarantee under the Indenture after the date of this Agreement. ADVICE: As defined in Section 6(e) hereof. AGREEMENT: As defined in the preamble hereto. BLACKOUT PERIOD: As defined in Section 5(a) hereof. BLUE SKY APPLICATION: As defined in Section 8(a) hereof. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CLOSING DATE: The date of this Agreement. COMMISSION: The U.S. Securities and Exchange Commission. COMPANY: As defined in the preamble hereto. 2 CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment Date. EFFECTIVENESS TARGET DATE: As defined in Section 5(a) hereof. EXCHANGE ACT: The U.S. Securities Exchange Act of 1934, as amended. EXCHANGE NOTES: The Company's 10-5/8% Senior Subordinated Notes due 2013 to be issued pursuant to the Indenture in the Exchange Offer, together with the related Guarantees. EXCHANGE OFFER: The registration by the Company under the Securities Act of the Exchange Notes on a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities validly tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXISTING SUBSIDIARY GUARANTORS: The various Subsidiary Guarantors signatory to the Indenture as of the date hereof. GUARANTEES: Guarantees by the Subsidiary Guarantors of the Company's obligations under the Notes, the Exchange Notes and the Indenture. HOLDER: As defined in Section 2(b) hereof. INDENTURE: The Indenture, dated as of the date hereof, among the Company, the Existing Subsidiary Guarantors and Wachovia Bank, National Association, as trustee (the "Trustee"), pursuant to which the Notes and the Exchange Notes are to be issued, as such Indenture may be amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASERS: As defined in the preamble hereto. 3 INTEREST PAYMENT DATE: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. NOTES: As defined in the preamble hereto. PERSON: An individual, partnership, corporation, limited liability company, unincorporated organization, association, joint-stock company, trust, joint venture, government or any agency or political subdivision thereof or any other entity. PROSPECTUS: The prospectus included in a Registration Statement as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. PURCHASE AGREEMENT: As defined in the preamble hereto. RECORD HOLDER: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5(a) hereof. REGISTRATION STATEMENT: Any Registration Statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. SECURITIES ACT: The U.S. Securities Act of 1933, as amended. SHELF FILING DEADLINE: As defined in Section 4(a) hereof. SHELF REGISTRATION PERIOD: As defined in Section 4(a) hereof. SHELF REGISTRATION STATEMENT: As defined in Section 4(a) hereof. SUBSIDIARY GUARANTORS: The Additional Subsidiary Guarantors and the Existing Subsidiary Guarantors. TIA: The U.S. Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Note or Exchange Note (including the related Guarantees), as applicable, until the earliest to occur of (a) the date on which 4 such Note is exchanged by a person other than a Broker-Dealer in the Exchange Offer in exchange for an Exchange Note, so long as such person is not prohibited from reselling such Exchange Notes to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not sufficient for such purpose, (b) following the exchange by a Broker-Dealer in the Exchange Offer of a Note for an Exchange Note, the date on which that Exchange Note is sold to a purchaser who receives from that Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement and (d) the date on which such Note is eligible to be distributed to the public pursuant to Rule 144 under the Securities Act. UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or one of the events set forth in Section 4(a)(ii) has occurred, the Company and the Subsidiary Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 90 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use their reasonable best efforts to cause such Registration Statement to be declared effective on or prior to 180 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the blue sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Exchange Notes held by Broker-Dealers as contemplated by Section 3(c) below. 5 (b) The Company and the Subsidiary Guarantors shall use their reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable U.S. federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable U.S. federal and state securities laws. No securities other than the Exchange Notes and the Guarantees shall be included in the Exchange Offer Registration Statement. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to cause the Exchange Offer to be Consummated 30 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission. (c) The Company and the Subsidiary Guarantors shall indicate in a "Plan of Distribution" section of the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a Prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which Prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission. The Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Exchange Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least 90 days after the Consummation of the Exchange Offer. The Company and the Subsidiary Guarantors shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 90-day period in order to facilitate such resales. 6 SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company and the Subsidiary Guarantors are not required to file an Exchange Offer Registration Statement or cannot Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable U.S. law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company prior to the 20th day following the Consummation of the Exchange Offer that such Holder (A) is prohibited by applicable U.S. law or Commission policy from participating in the Exchange Offer, (B) may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) is a Broker-Dealer and holds Notes acquired directly from the Company or one of its affiliates, then the Company and the Subsidiary Guarantors shall: (x) use their reasonable best efforts to cause to be filed a Registration Statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement if permitted by the rules and regulations of the Commission (in either event, the "SHELF REGISTRATION STATEMENT") on or prior to the earliest to occur of (1) the 30th day after the date on which the Company determines that they are not required to file the Exchange Offer Registration Statement, or permitted to Consummate the Exchange Offer and (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) of paragraph (a) above (such earliest date being the "SHELF FILING DEADLINE"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities by the Holders which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 90th day after the Shelf Filing Deadline. Subject to Section 5(b), the Company and the Subsidiary Guarantors shall use their reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes or Exchange Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the Closing Date or such shorter period that will terminate when all Notes or Exchange Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (such period being the "SHELF REGISTRATION PERIOD"). 7 (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Additional Interest pursuant to Section 5 hereof unless and until such Holder shall have used its reasonable best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. ADDITIONAL INTEREST (a) If (i) any of the Registration Statements required by this Agreement are not filed with the Commission on or prior to the date specified for such filing in Sections 3(a) and 4(a), as applicable, (ii) any of such required Registration Statements have not been declared effective by the Commission on or prior to the date specified for such effectiveness in Sections 3(a) and 4(a), as applicable, (each, an "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer has not been Consummated within 30 business days, or longer, if required by federal securities laws, after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement has been declared effective or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Securities without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (except as permitted in paragraph (b); such period of time during which any such Registration Statement is not effective or any such Registration Statement or the related Prospectus is not usable being referred to as a "BLACKOUT PERIOD") (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Company and the Subsidiary Guarantors, jointly and severally, agree to pay additional interest ("ADDITIONAL INTEREST") to each Holder of Transfer Restricted Securities adversely affected by such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder with respect to the first 90-day period immediately following the occurrence of such Registration Default. The amount of Additional Interest shall increase by an additional $.05 per week per $1,000 principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period (or portion thereof) until all Registration Defaults have been cured, up to a maximum amount of Additional Interest of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued Additional Interest shall be paid to Record Holders by the Company and the Subsidiary Guarantors in the same manner as interest is paid under the Notes. Following the cure of all Registration Defaults relating to any particular Transfer Restricted 8 Securities, the accrual of Additional Interest with respect to such Transfer Restricted Securities will cease. (b) A Registration Default referred to in Section 5(a)(iv) shall be deemed not to have occurred and be continuing in relation to a Registration Statement or the related Prospectus if (i) the Blackout Period has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (y) the occurrence of other material events with respect to the Company that would need to be described in such Registration Statement or the related Prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement (including by way of filing documents under the Exchange Act which are incorporated by reference into the Registration Statement) such Registration Statement and the related Prospectus to describe such events; provided, however, that in any case if such Blackout Period occurs for a continuous period in excess of 30 days, a Registration Default shall be deemed to have occurred on the 31st day of such Blackout Period and Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured or until the Company is no longer required pursuant to this Agreement to keep such Registration Statement effective or such Registration Statement or the related Prospectus usable; provided, further, that in no event shall the total of all Blackout Periods exceed 45 days in the aggregate of any 12-month period. All payment obligations of the Company and the Subsidiary Guarantors set forth in this section that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such payment obligations with respect to such security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their reasonable best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company and the Subsidiary Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) 9 it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's and the Subsidiary Guarantors' preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters, and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective Registration Statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired by such Holder directly from the Company. (ii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Subsidiary Guarantors shall state to the Commission that the Company and the Subsidiary Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991) and shall represent to the Commission that neither the Company nor any Subsidiary Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Subsidiary Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer; and (iii) The Company and the Subsidiary Guarantors shall issue, upon the request of any Holder of Notes covered by the Exchange Offer, Exchange Notes (including the related guarantees), having an aggregate principal amount equal to the aggregate principal amount of Notes surrendered to the Company by such Holder in exchange therefor; such Exchange Notes (including the related guarantees) to be registered in the name of such Holder or in the name of the purchaser(s) of such Exchange Notes (including the related guarantees), as the case may be; in return, the Notes held by such Holder shall be surrendered to the Company for cancellation. 10 (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Subsidiary Guarantors shall comply with all the provisions of Section 6(c) below and shall use their reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company and the Subsidiary Guarantors will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes and Exchange Notes by Broker-Dealers), the Company and the Subsidiary Guarantors shall: (i) use their reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Securities Act or any regulation thereunder, financial statements of any Subsidiary Guarantors), unless such financial statements are publicly available, for the period specified in Sections 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Subsidiary Guarantors shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use their reasonable best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter. Notwithstanding the foregoing, the Company and the Subsidiary Guarantors may allow the Shelf Registration Statement to cease to become effective and usable if (x) the board of directors of the Company determines in good faith that it is in the best interests of the Company not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company or the Subsidiary Guarantors, and the Company notifies the Holders within two business days after such boards of directors make such determination or (y) the Prospectus contained in the Shelf Registration Statement contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided that the two-year period referred to in Section 4(a) hereof during which the Shelf Registration Statement is required to be effective and usable shall be extended by the number of days during which such Registration 11 Statement was not effective or usable pursuant to the foregoing provisions; and provided further that Additional Interest shall accrue on the Notes as provided in Section 5 hereof; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Sections 3 or 4 hereof, as applicable; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) cooperate with the selling Holders of Transfer Restricted Securities and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (iv) use their reasonable best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities; (v) if any fact or event contemplated by clause (d)(i)(D) below shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (vi) provide a CUSIP, CINS or ISIN number, as applicable, for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the depositary; 12 (vii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD; (viii) otherwise use their reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to their security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (ix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes and Exchange Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (x) provide promptly to any Holder upon such Holder's written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act to the extent such documents are not otherwise filed with the Commission and available to the public free of cost. (d) Additional Provisions Applicable to Shelf Registration Statements. In connection with each Shelf Registration Statement, during the Shelf Registration Period, the Company and the Subsidiary Guarantors shall: (i) advise the underwriter(s), if any, and selling Holders of Transfer Restricted Securities promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Shelf Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act, of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction or of the initiation of any proceeding for any of 13 the preceding purposes and (D) of the existence of any fact or the happening of any event that requires the making of any additions to or changes in the Shelf Registration Statement or the Prospectus in order that the Shelf Registration Statement and the Prospectus do not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Shelf Registration Statement, or any U.S. state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under U.S. state securities or blue sky laws, the Company and the Subsidiary Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (ii) if requested in writing, furnish to each of the selling Holders of Transfer Restricted Securities and each of the underwriter(s), if any, before filing with the Commission, copies of any Shelf Registration Statement or any Prospectus included therein or any amendments or supplements to any such Shelf Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Shelf Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least five business days, and the Company and the Subsidiary Guarantors will not file any such Shelf Registration Statement or Prospectus or any amendment or supplement to any such Shelf Registration Statement or Prospectus (including all such documents incorporated by reference) if a selling Holder of Transfer Restricted Securities covered by such Shelf Registration Statement or the underwriter(s), if any, shall not have had an opportunity to review the Shelf Registration Statement as set forth above; such Holders and underwriter(s) shall be deemed to have reasonably objected to such filing if such Shelf Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or fails to comply with the applicable requirements of the Securities Act; (iii) promptly prior to the filing of any document that is to be incorporated by reference into a Shelf Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Company's and the Subsidiary Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request in writing; 14 (iv) make available for inspection at reasonable times at each of the Company's principal places of business by the selling Holders of Transfer Restricted Securities, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s) who shall certify to the Company and the Subsidiary Guarantors that they have a current intention to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement, such relevant financial and other records, pertinent corporate documents and properties of the Company and the Subsidiary Guarantors as reasonably requested and cause the Company's and the Subsidiary Guarantors' officers, directors and employees to respond to such inquiries as shall be reasonably necessary, in the reasonable judgment of counsel to such Holders, to conduct a reasonable investigation; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the selling Holders by one counsel designated by and on behalf of such Holders and, provided, further, that each such party shall be required to maintain in confidence and not disclose to any other Person any information or records reasonably designated by the Company in writing as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such Shelf Registration Statement or otherwise), (B) such Person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such Person shall have given the Company prompt prior written notice of such requirement) or (C) such information is required to be set forth in such Shelf Registration Statement or the Prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such Prospectus in order that such Shelf Registration Statement, Prospectus, amendment or supplement, as the case may be, does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading; (v) if requested by any selling Holders of Transfer Restricted Securities or the underwriter(s), if any, promptly incorporate in any Shelf Registration Statement or Prospectus pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company 15 shall not be required to take any action pursuant to this Section 6(d)(v) that would, in the opinion of counsel for the Company reasonably satisfactory to the Initial Purchasers, violate applicable law; (vi) deliver to each selling Holder of Transfer Restricted Securities and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Subsidiary Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (vii) furnish to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference) to the extent such documents are not otherwise filed with the Commission and available to the public free of cost; (viii) enter into an underwriting agreement on not more than one occasion in the case of an offering pursuant to a Shelf Registration, and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Holder or Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of Transfer Restricted Securities; provided that the Company and the Subsidiary Guarantors shall not be required to enter into any such agreement more than once with respect to all of the Transfer Restricted Securities and may delay entering into such agreement if the board of directors of each of the Company and the Subsidiary Guarantors determines in good faith that it is in the best interests of the Company and the Subsidiary Guarantors not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company and the Subsidiary Guarantors; and in connection with an Underwritten Registration, the Company and the Subsidiary Guarantors shall: (A) furnish to the Initial Purchasers, the Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of Transfer Restricted Securities and each underwriter, if any, in such substance and scope as they may reasonably request and as are customarily made in connection with an offering of debt securities pursuant to a Shelf Registration Statement upon the effective date of the Shelf Registration 16 Statement (and if such Shelf Registration Statement contemplates an Underwritten Offering of Transfer Restricted Securities upon the date of the closing under the underwriting agreement related thereto): (1) a certificate, dated the date of effectiveness of the Shelf Registration Statement signed by (y) the respective chief executive officer, the respective President or any Vice President and (z) the respective chief financial officer of each of the Company and each of the Subsidiary Guarantors confirming, as of the date thereof, the matters set forth in Section 7(l) of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of effectiveness of such Shelf Registration Statement, of securities counsel for the Company covering matters similar to those set forth in Section 7(c) of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Shelf Registration Statement and the related Prospectus although such counsel has not independently verified the accuracy, completeness or fairness of such statements in such Shelf Registration Statement; and that such counsel advises that, on the basis of the foregoing, such counsel's work in connection with this work did not disclose information that gave such counsel reason to believe that the Shelf Registration Statement, at the time such Shelf Registration Statement or any post-effective amendment thereto became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Shelf Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Such counsel may state further that such counsel expresses no view with respect to, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules, the financial projections and other financial, statistical and accounting data included or incorporated by reference in the Shelf Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of effectiveness of the Shelf Registration Statement from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in 17 connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Sections 7(e) and 7(f) of the Purchase Agreement; (B) set forth in full or incorporated by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Subsidiary Guarantors pursuant to this clause (viii), if any. If at any time during the Shelf Registration Period the representations and warranties of the Company or the Subsidiary Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Subsidiary Guarantors shall so advise the Initial Purchasers and the underwriters, if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; and (ix) prior to any public offering of Transfer Restricted Securities cooperate with the selling Holders of Transfer Restricted Securities the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or blue sky laws of such jurisdictions as the selling Holders of Transfer Restricted Securities or underwriter(s) may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement filed pursuant to Section 4 hereof; provided, however, that the Company and the Subsidiary Guarantors shall not be obligated to qualify as a foreign corporation in any jurisdiction in which they are not now so qualified or to take any action that would subject them to general consent to service of process, other than as to matters and transactions relating to the Shelf Registration Statement, in any jurisdiction where they are not now so subject. (e) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(d)(i) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such 18 Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Shelf Registration Statement set forth in Section 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(d)(i) hereof to and including the date when each selling Holder covered by such Shelf Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof or shall have received the Advice. (f) The Company and the Subsidiary Guarantors may require each Holder of Transfer Restricted Securities as to which any registration is being effected to furnish to the Company such information regarding such Holder and such Holder's intended method of distribution of the applicable Transfer Restricted Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act. Each such Holder agrees to notify the Company as promptly as practicable of (i) any inaccuracy or change in information previously furnished by such Holder to the Company or (ii) the occurrence of any event, in either case, as a result of which any Prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder's intended method of distribution of the applicable Transfer Restricted Securities or omits to state any material fact regarding such Holder or such Holder's intended method of distribution of the applicable Transfer Restricted Securities required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the distribution of the applicable Transfer Restricted Securities 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 not misleading. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Subsidiary Guarantors' performance of or compliance with this Agreement will be borne by the Company regardless of whether a Registration Statement becomes effective, including without limitation and as applicable: (i) all Commission, securities exchange or NASD registration and filing fees and expenses (including filings made by any Initial Purchasers or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with U.S. federal securities and state blue sky or securities laws and compliance with the rules of the NASD (including reasonable fees and disbursements of one counsel for Holders in connection with blue sky and/or NASD qualification of the Exchange Notes); (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services; 19 (iv) all fees and disbursements of counsel for the Company and the Subsidiary Guarantors; (v) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance) and (vi) the reasonable fees and disbursements of one counsel designated by the Holders of a majority in principal amount of Transfer Restricted Securities covered by the Shelf Registration Statement to act as counsel for the Holders of those Transfer Restricted Securities in connection therewith. The Company will, in any event, bear its and the Subsidiary Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Subsidiary Guarantors. (b) Each Holder of Transfer Restricted Securities will pay all underwriting discounts and commissions, if any, and agency fees, commissions and transfer taxes, if any, relating to the disposition of such Holder's Transfer Restricted Securities and the fees and disbursements of any counsel or other advisors or experts retained by such Holder, other than the counsel and experts specifically referred to in clause (a) above. SECTION 8. INDEMNIFICATION (a) The Company and each Subsidiary Guarantor shall, jointly and severally, indemnify and hold harmless each Holder of Transfer Restricted Securities, its officers and employees and each Person, if any, who controls any such Holders, within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases, sales and registration of the Notes, the Guarantees and the Exchange Notes), to which that Holder, officer, employee or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement or preliminary Prospectus or Prospectus or in any amendment or supplement thereto, (B) in any Blue Sky Application (as defined below) or other document prepared or executed by any Company or any Subsidiary Guarantor (or based upon any written information furnished by any Company or any Subsidiary Guarantor) specifically for the purpose of qualifying any or all of the Notes under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "Blue Sky Application") or (C) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Exchange Notes ("Marketing Materials"), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically); (ii) the omission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application or Marketing Materials any material fact required 20 to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (iii) any act or failure to act or any alleged act or failure to act by any Holder of Transfer Restricted Securities in connection with, or relating in any manner to, the Notes, the Guarantees or the Exchange Notes or the offering contemplated by any Registration Statement, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company and the Subsidiary Guarantors shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Holder through its gross negligence or willful misconduct); and shall reimburse each Holder and each such officer, employee or controlling Person promptly upon demand for any legal or other expenses reasonably incurred by that Holder, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Subsidiary Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement, preliminary Prospectus or Prospectus, or in any such amendment or supplement, or in any Blue Sky Application or Marketing Materials, in reliance upon and in conformity with written information concerning such Holder furnished to the Company by or on behalf of any Holder specifically for inclusion therein; provided, further, that with respect to any such untrue statement or omission made in any preliminary Prospectus or Prospectus, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of the Holder from whom the Person asserting any such losses, claims, damages or liabilities purchased the Notes, Guarantees or Exchange Notes concerned if, to the extent that such sale was a sale by the Holder and any such loss, claim, damage or liability of such Holder is a result of the fact that both (A) a copy of the Prospectus (or the Prospectus as then amended or supplemented) was not sent or given to such Person at or prior to written confirmation of the sale of such Notes or Exchange Notes to such Person and (B) the untrue statement or omission in the preliminary Prospectus or Prospectus was corrected in the Prospectus (or the Prospectus as then amended or supplemented) unless such failure to deliver the Prospectus was a result of noncompliance by the Company with Section 6(d)(vi) hereof. The foregoing indemnity agreement is in addition to any liability which the Company and the Subsidiary Guarantors may otherwise have to any Holder or to any officer, employee or controlling Person of that Holder. (b) Each Holder, severally and not jointly, shall indemnify and hold harmless each of the Company, each of the Subsidiary Guarantors, their respective directors, officers and employees, and each Person, if any, who controls either of the Company or any of the Subsidiary Guarantors within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Subsidiary Guarantors or any such director, 21 officer or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Holders furnished to the Company by or on behalf of that Holder specifically for inclusion therein, and shall reimburse the Company, each of the Subsidiary Guarantors and each such director, officer, employee and controlling Person for any legal or other expenses reasonably incurred by the Company, each such Subsidiary Guarantor or each such director, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Holder may otherwise have to the Company, any of the Subsidiary Guarantors or any such director, officer, employee or controlling Person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel has been specifically authorized by the indemnifying party in writing, or (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in 22 the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to local counsel) at any time for all such indemnified parties, which firm shall be designated in writing by (x) Lehman Brothers Inc. if the indemnified parties under this Section 8 consist of the Initial Purchasers or any of their respective officers, employees or controlling Persons or (y) by the Company, if the indemnified parties under this Section 8 consist of any of the Company, any of the Subsidiary Guarantors or any of their respective directors, officers, employees or controlling Persons. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Holders on the other, from the sale of the Transfer Restricted Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand and the Holders on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the 23 Company or any of the Subsidiary Guarantors, on the one hand, or the Holders, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Subsidiary Guarantors and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by it in connection with its sale of Notes exceeds the amount of any damages which such Holder has otherwise paid or become liable to pay by reason of the untrue or alleged untrue statement or 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. The Holders' obligations to contribute as provided in this Section 8(d) are several and not joint. SECTION 9. RULE 144A The Company and each Subsidiary Guarantor hereby agrees with each Holder of Transfer Restricted Securities, during any period in which the Company or such Subsidiary Guarantor is not subject to Section 13 or 15(d) of the Exchange Act within the two-year period following the Closing Date, to make available to any Holder or beneficial owner of Transfer Restricted Securities, in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS Subject to Section 6(d)(i), the Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering at such Holders' expense. In any such 24 Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Subsidiary Guarantors agree that monetary damages (including Additional Interest) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any Subsidiary Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in the Offering Memorandum (as such term is defined in the Purchase Agreement), neither the Company nor any Subsidiary Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or any Subsidiary Guarantor's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Notes. The Company and the Subsidiary Guarantors will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of the Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or consent. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, facsimile or air courier guaranteeing overnight delivery: 25 (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and if to the Company or the Subsidiary Guarantors to: Psychiatric Solutions, Inc. 113 Seaboard Lane, Suite C-100 Franklin, Tennessee 37067 Attention: Joey A. Jacobs Fax: (615) 312-5700 with a copy to: Waller Lansden Dortch & Davis, PLLC 511 Union Street, Suite 2100 Nashville, Tennessee 37219 Attention: Christopher L. Howard, Esq. Fax: (615) 244-6804 Any such notices and communications shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any notice or communication given or made by the Initial Purchasers. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the 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. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 26 (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED, IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Transaction Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company and the Subsidiary Guarantors with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature pages follow.] 27 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Very truly yours, PSYCHIATRIC SOLUTIONS, INC. By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President and Chief Executive Officer PSYCHIATRIC SOLUTIONS HOSPITALS, INC. INFOSCRIBER CORPORATION COLLABORATIVE CARE CORPORATION PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. SOLUTIONS CENTER OF LITTLE ROCK, INC. PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. PSYCHIATRIC MANAGEMENT RESOURCES, INC. PSI-EAP, INC. SUNSTONE BEHAVIORAL HEALTH, INC. THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. PSI CEDAR SPRINGS HOSPITAL, INC. PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. AERIES HEALTHCARE CORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. PSI HOSPITALS, INC. PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION GREAT PLAINS HOSPITALS, INC. GULF COAST TREATMENT CENTER, INC. HAVENWYCK HOSPITAL INC. H.C. CORPORATION HSA HILL CREST CORPORATION HSA OF OKLAHOMA, INC. MICHIGAN PSYCHIATRIC SERVICES, INC. RAMSAY MANAGED CARE, INC. RAMSAY TREATMENT SERVICES, INC. PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. RAMSAY YOUTH SERVICES OF ALABAMA, INC. RAMSAY YOUTH SERVICES OF FLORIDA, INC. RAMSAY YOUTH SERVICES OF GEORGIA, INC. RAMSAY YOUTH SERVICES PUERTO RICO, INC. RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC. RHCI SAN ANTONIO, INC. TRANSITIONAL CARE VENTURES, INC. TRANSITIONAL CARE VENTURES (TEXAS), INC. By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President THERAPEUTIC SCHOOL SERVICES, LLC BY: PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President PSI TEXAS HOSPITALS, LLC BY: PSYCHIATRIC SOLUTIONS HOSPITALS, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President TEXAS CYPRESS CREEK HOSPITAL, LP TEXAS WEST OAKS HOSPITAL, LP NEURO INSTITUTE OF AUSTIN, LP TEXAS LAUREL RIDGE HOSPITAL, LP TEXAS OAKS PSYCHIATRIC HOSPITAL, LP TEXAS SAN MARCOS TREATMENT CENTER, LP BY: PSI TEXAS HOSPITALS, LLC, AS GENERAL PARTNER BY: PSYCHIATRIC SOLUTIONS HOSPITAL, INC., AS SOLE MEMBER By: /s/ Joey A. Jacobs ----------------------------------------------- Name: Joey A. Jacobs Title: President Accepted: LEHMAN BROTHERS INC. By: /s/ Michael Konigsberg -------------------------------------------------- Authorized Representative MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Sarang R. Gadkari -------------------------------------------------- Authorized Representative JEFFERIES & COMPANY, INC. By: /s/ Catherine Gemmato-Smith -------------------------------------------------- Authorized Representative EX-10.27 101 g83903exv10w27.txt EX-10.27 SECOND AMENDED AND RESTATED REVOLVING EXHIBIT 10.27 SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT (the "AGREEMENT") dated as of June 30, 2003, is entered into among PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation f/k/a PMR Corporation ("PSI"), PSYCHIATRIC SOLUTIONS OF ALABAMA, INC., a Tennessee corporation ("PS ALABAMA"), PSYCHIATRIC SOLUTIONS OF FLORIDA, INC., a Tennessee corporation ("PS FLORIDA"), PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC., a Tennessee corporation ("PS TENNESSEE"), SOLUTIONS CENTER OF LITTLE ROCK, INC., a Tennessee corporation ("LITTLE ROCK"), PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC., a Tennessee corporation ("PS NORTH CAROLINA"), PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC., a Tennessee corporation ("PSI COMMUNITY"), PSI-EAP, INC., a Delaware corporation ("PSI-EAP"), SUNSTONE BEHAVIORAL HEALTH, INC., a Tennessee corporation ("SUNSTONE"), THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC., a Tennessee corporation ("COUNSELING CENTER"), PSI HOSPITALS, INC., a Delaware corporation ("PSI HOSPITALS"), PSI TEXAS HOSPITALS, LLC, a Texas limited liability company ("TEXAS HOSPITALS"), PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC., a Tennessee corporation ("PPM ARKANSAS"), TEXAS CYPRESS CREEK HOSPITAL, L.P., a Texas limited partnership ("CYPRESS CREEK"), TEXAS WEST OAKS HOSPITAL, L.P., a Texas limited partnership ("WEST OAKS"), NEURO INSTITUTE OF AUSTIN, L.P., a Texas limited partnership ("NEURO INSTITUTE"), AERIES HEALTHCARE CORPORATION, a Delaware corporation ("AERIES"), AERIES HEALTHCARE OF ILLINOIS, INC., an Illinois corporation ("AERIES ILLINOIS"), INFOSCRIBER CORPORATION, a Delaware corporation ("INFOSCRIBER"), COLLABORATIVE CARE CORPORATION, a Tennessee corporation ("COLLABORATIVE CARE"), PSYCHIATRIC SOLUTIONS HOSPITALS, INC., a Delaware corporation ("HOSPITALS"), PSYCHIATRIC MANAGEMENT RESOURCES, INC., a California corporation ("PMR"), PSI CEDAR SPRINGS HOSPITAL, INC., a Delaware corporation ("PSI CEDAR SPRINGS"), PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., a Delaware corporation ("PS OKLAHOMA"), TEXAS LAUREL RIDGE HOSPITAL, L.P., a Texas limited partnership ("LAUREL RIDGE"), TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P., a Texas limited partnership ("TEXAS OAKS"), TEXAS SAN MARCOS TREATMENT CENTER, L.P., a Texas limited partnership ("SAN MARCOS"), and THERAPEUTIC SCHOOL SERVICES, LLC, an Oklahoma limited liability company ("THERAPEUTIC") (individually and collectively, the "EXISTING BORROWER"); PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC., a Delaware corporation "PS CORAL GABLES"), BOUNTIFUL PSYCHIATRIC HOSPITAL, INC., a Utah corporation ("BOUNTIFUL"), EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION, a North Carolina corporation ("EAST CAROLINA"), GREAT PLAINS HOSPITAL, INC., a Missouri corporation ("GREAT PLAINS"), GULF COAST TREATMENT CENTER, INC., a Florida corporation ("GULF COAST"), HAVENWYCK HOSPITAL INC., a Michigan corporation ("HAVENWYCK"), H.C. CORPORATION, an Alabama corporation ("H.C."), H.C. PARTNERSHIP, an Alabama general partnership ("H.C. PARTNERSHIP"), HSA HILL CREST CORPORATION, an Alabama corporation ("HSA HILL CREST"), HSA OF OKLAHOMA, INC., an Oklahoma corporation ("HSA OKLAHOMA"), MICHIGAN PSYCHIATRIC SERVICES, INC., a Michigan corporation ("MICHIGAN"), RAMSAY MANAGED CARE, INC., a Delaware corporation ("MANAGED CARE"), RAMSAY TREATMENT SERVICES, INC., a Delaware corporation ("TREATMENT SERVICES"), RAMSAY YOUTH SERVICES OF ALABAMA, INC., a Delaware corporation ("RY ALABAMA"), RAMSAY YOUTH SERVICES OF FLORIDA, INC., a Delaware corporation ("RY FLORIDA"), RAMSAY YOUTH SERVICES OF GEORGIA, INC., a Delaware corporation ("RY GEORGIA"), RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC., a Delaware corporation ("RY SOUTH CAROLINA"), RHCI SAN ANTONIO, INC., a Delaware corporation ("RHCI"), TRANSITIONAL CARE VENTURES, INC., a Delaware corporation ("TRANSITIONAL CARE"), TRANSITIONAL CARE VENTURES (TEXAS), INC., a Delaware corporation ("TRANSITIONAL CARE TEXAS") (individually and collectively, the "NEW BORROWER", and individually and collectively with the Existing Borrower, the "BORROWER"), CAPITALSOURCE FINANCE LLC, a Delaware limited liability company ("CAPITALSOURCE"), as administrative agent and collateral agent for Lenders (in such capacities, the "AGENT"), and the Lenders. A. WHEREAS, Existing Borrower, Agent and Lenders are party to that certain Revolving Credit and Term Loan Agreement, dated as of November 30, 2001, as amended by that certain First Amendment to Revolving Credit and Term Loan Agreement, dated April 30, 2002, that certain Second Amendment to Revolving Credit and Term Loan Agreement dated as of June 28, 2002, and that certain Third Amendment to Revolving Credit and Term Loan Agreement dated as of December 31, 2002 (such Revolving Credit and Term Loan Agreement, as the same has been amended and restated, being hereinafter referred to as the "ORIGINAL LOAN AGREEMENT"); B. WHEREAS, Existing Borrower, Agent and Lenders are party to that certain Amended and Restated Revolving Credit and Term Loan Agreement, dated April 1, 2003 (such Amended and Restated Revolving Credit and Term Loan Agreement, being hereinafter referred to as the "AMENDED AND RESTATED LOAN AGREEMENT"); C. WHEREAS, Borrower has requested, among other things, Agent and the Lenders to amend and restate the Amended and Restated Loan Agreement in certain respects, including, but not limited to, modifying the amount of the Obligations to provide credit facilities for Borrower's working capital needs and acquisitions in connection with its behavioral health business; and D. WHEREAS, in furtherance of the foregoing and to evidence the agreements of the parties hereto in relation thereto, the parties hereto desire to amend and restate the Amended and Restated Loan Agreement as herein provided. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, Borrower, Agent and Lenders hereby agree as follows: 2 I. DEFINITIONS 1.1 GENERAL TERMS For purposes of this Agreement, in addition to the definitions above and elsewhere in this Agreement, the terms listed in Appendix A or Annex I hereto shall have the meanings given such terms in Appendix A and Annex I, respectively, which are incorporated herein and made a part hereof. All capitalized terms used which are not specifically defined shall have meanings provided in Article 9 of the UCC in effect on the date hereof to the extent the same are used or defined therein. Unless otherwise specified herein or in Appendix A or Annex I, any agreement or contract referred to herein or in Appendix A or Annex I shall mean such agreement as modified, amended or supplemented from time to time. Unless otherwise specified, as used in the Loan Documents or in any certificate, report, instrument or other document made or delivered pursuant to any of the Loan Documents, all accounting terms not defined in Appendix A or elsewhere in this Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP. II. ADVANCES, PAYMENT AND INTEREST 2.1 THE REVOLVING FACILITY Subject to the provisions of this Agreement, each Lender agrees to make available its Pro Rata Share of Advances to Borrower under the Revolving Facility from time to time during the Revolving Facility Term; provided, that (i) the Pro Rata Share of the Advances of any Lender shall not at any time exceed its separate Commitment, and (ii) the aggregate amount of all Advances at any one time outstanding under the Revolving Facility shall not exceed the lesser of (A) the Facility Cap and (B) the Availability. The obligations of Lenders hereunder shall be several and not joint up to the amount of the Commitments. The Revolving Facility is a revolving credit facility, which may be drawn, repaid and redrawn, from time to time as permitted under this Agreement. Any determination as to whether there is Availability for Advances shall be made by Agent in its sole discretion and is final and binding upon Borrower. Unless otherwise permitted by Agent, each Advance shall be in an amount of at least $1,000. Subject to the provisions of this Agreement, Borrower may request Advances under the Revolving Facility up to and including the value, in Dollars, of (x) the greater of (A) Borrowing Base Availability, and (B) the amount such that the Total Leverage Ratio, after giving effect to the requested Advance, does not exceed the maximum Total Leverage Ratio then allowed under Annex I for the immediately preceding Leverage Test Period, minus, (y) if applicable, amounts reserved by Agent from time to time in its sole credit judgment (such calculated amount being referred to herein as the "AVAILABILITY"). Advances under the Revolving Facility automatically shall be made for the payment of interest on the Revolving Notes and other Obligations on the date when due to the extent available and as provided for herein. 2.2 THE REVOLVING NOTES; MATURITY (a) All Advances under the Revolving Facility shall be evidenced by the Revolving Notes, payable to the order of each appropriate Lender in the aggregate principal amount of the Commitment of such Lender, duly executed and delivered by Borrower. As of the Closing Date, Borrower has issued (i) Second Amended and Restated Revolving Note A-1, in the original principal amount of $4,240,000.00, payable to the order of CapitalSource, duly executed 3 and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE A-1"), (ii) Second Amended and Restated Revolving Note A-2, in the original principal amount of $10,760,000.00 payable to the order of CapitalSource, duly executed and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE A-2"), (iii) Second Amended and Restated Revolving Note B, in the original principal amount of $20,000,000.00 payable to the order of CapitalSource, duly executed and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE B") and (iv) Amended and Restated Revolving Note C, in the original principal amount of $15,000,000.00 payable to the order of CapitalSource, duly executed and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE C" and collectively with Revolving Note A-1, Revolving Note A-2, and Revolving Note B, the "REVOLVING NOTES"). The Revolving Notes shall evidence the aggregate Indebtedness of Borrower to Lenders resulting from Advances under the Revolving Facility, from time to time. Each Lender hereby is authorized, but is not obligated, to enter the amount of such Lender's Pro Rata Share of each Advance under the Revolving Facility and the amount of each payment or prepayment of principal or interest thereon in the appropriate spaces on the reverse of or on an attachment to such Lender's Revolving Note(s). Agent will account to Borrower monthly with a statement of Advances under the Revolving Facility and charges and payments made pursuant to this Agreement, and in the absence of manifest error, such accounting rendered by Agent shall be deemed final, binding and conclusive unless Agent is notified by Borrower in writing to the contrary within 15 calendar days of Receipt of each accounting, which notice shall be deemed an objection only to items specifically objected to therein. (b) All amounts outstanding under the Revolving Notes and other Obligations under the Revolving Facility shall be due and payable in full, if not earlier in accordance with this Agreement, on the earlier of (i) the occurrence of an Event of Default if required pursuant hereto or Agent's demand upon an Event of Default, and (ii) the last day of the Revolving Facility Term. 2.3 INTEREST Interest on outstanding Advances under the Revolving Notes shall be payable monthly in arrears on the first day of each calendar month at an annual rate of Prime Rate plus 2%, provided, however, that, notwithstanding any provision of any Loan Document, the interest on outstanding Advances under the Revolving Notes shall be not less than 6.25%, in each case calculated on the basis of a 360-day year and for the actual number of calendar days elapsed in each interest calculation period. Interest accrued on each Advance under the Revolving Notes shall be due and payable on the first day of each calendar month, in accordance with the procedures provided for in Section 2.5 and Section 2.9, and continuing until the later of the expiration of the Revolving Facility Term and the full performance and irrevocable payment in full in cash of the Obligations and termination of this Agreement. Only for purposes of calculating interest and fees, Advances under the Revolving Facility shall not be less than $17,500,000. 2.4 FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER BORROWING CERTIFICATE So long as no Default or Event of Default shall have occurred and be continuing, Borrower may give Agent irrevocable written notice requesting an Advance under the Revolving 4 Facility by delivering to Agent not later than 11:00 a.m. (New York City Time) at least two but not more than four Business Days before the proposed borrowing date of such requested Advance (the "BORROWING DATE"), a completed Borrowing Certificate and relevant supporting documentation satisfactory to Agent, which shall (a) specify the proposed Borrowing Date of such Advance which shall be a Business Day, (b) specify the principal amount of such requested Advance, (c) certify the matters contained in Section 4.2, and (d) specify the amount of any Medicare or Medicaid recoupments and/or recoupments of any third-party payor being sought, requested or claimed, or, to Borrower's knowledge, threatened against Borrower or Borrower's affiliates. Each time a request for an Advance is made, and, in any event and regardless of whether an Advance is being requested, on the second Business Day of each month during the Revolving Facility Term (and more frequently if Agent shall so request) until the Obligations are indefeasibly paid in cash in full and this Agreement is terminated, Borrower shall deliver to Agent a Borrowing Certificate accompanied by such other documentation as Agent shall reasonably request from a credit or security perspective or otherwise. On each Borrowing Date, Borrower irrevocably authorizes Agent to disburse the proceeds of the requested Advance to the appropriate Borrower's account(s) as set forth on Schedule 2.4, in all cases for credit to the appropriate Borrower (or to such other account as to which the appropriate Borrower shall instruct Agent) via Federal funds wire transfer no later than 4:00 p.m. New York City Time. 2.5 COLLECTIONS; REPAYMENT; BORROWING AVAILABILITY AND LOCKBOX Each Borrower shall maintain one or more lockbox accounts (individually and collectively, the "LOCKBOX ACCOUNT") with one or more banks acceptable to Agent (each, a "LOCKBOX BANK"), and shall execute with each Lockbox Bank one or more agreements acceptable to Agent (individually and collectively, the "LOCKBOX AGREEMENT"), and such other agreements related thereto as Agent may require. Each Borrower shall ensure that all collections of its respective Accounts and all other cash payments received by such Borrower are paid and delivered directly from Account Debtors and other Persons into the appropriate Lockbox Account. The Lockbox Agreements shall provide that the Lockbox Banks immediately will transfer all funds paid into the Lockbox Accounts into a depository account or accounts maintained by Agent or an affiliate of Agent at such bank as Agent may communicate to Borrower from time to time (the "CONCENTRATION ACCOUNT"), except, with respect only to Accounts payable by Medicaid/Medicare Account Debtors, the Lockbox Banks will immediately transfer such funds to the appropriate Account as instructed by the applicable Borrower to whom such Accounts are payable as permitted pursuant to the applicable Lockbox Agreement. Notwithstanding and without limiting any other provision of any Loan Document, Agent shall apply, on a daily basis, all funds transferred into the Concentration Account pursuant to the Lockbox Agreement and this Section 2.5 in such order and manner as determined by Agent. To the extent that any Accounts collections of any Borrower or any other cash payments received by any Borrower, are not sent directly to the appropriate Lockbox Account but are received by any Borrower or any of their affiliates, such collections and proceeds shall be held in trust for the benefit of Agent and Lenders and immediately remitted (and in any event within two Business Days), in the form received, to the appropriate Lockbox Account, and if a Default or Event of Default exists, for immediate transfer to the Concentration Account (except for Accounts payable by Medicaid/Medicare Account Debtors). Borrower acknowledges and agrees that compliance with the terms of this Section 2.5 is an essential term of this Agreement, and that, in addition to and notwithstanding any other rights Agent may have hereunder, under any other 5 Loan Document, under applicable law or at equity, upon each and every failure by any Borrower or any of their affiliates to comply with any such terms, Agent shall be entitled to assess a non-compliance fee which shall operate to increase the Applicable Rate by 2.0% per annum during any period of non-compliance, whether or not a Default or an Event of Default occurs or is declared; provided, that nothing shall prevent Agent from considering any failure to comply with the terms of this Section 2.5 to be a Default or an Event of Default. All funds transferred to the Concentration Account for application to the Obligations under the Revolving Facility shall be forwarded to Borrower promptly thereafter, or if a Default or Event of Default exists or a condition in Section 4.2 is not then satisfied, such funds shall be applied to reduce the Obligations under the Revolving Facility (as Agent shall determine in its sole discretion), but, for purposes of calculating interest hereunder, all such funds shall be subject to a four Business Day clearance period, whether or not the Obligations are paid. If as the result of collections of Accounts and/or any other cash payments received by any Borrower pursuant to this Section 2.5 a credit balance exists with respect to the Concentration Account, such credit balance shall not accrue interest in favor of a Borrower, but shall be available to the appropriate Borrower in accordance with the terms of this Agreement. If applicable, at any time prior to the execution of all or any of the Lockbox Agreements and operation of all or any of the Lockbox Accounts, each Borrower and its affiliates shall direct all collections or proceeds it receives on Accounts or from other Collateral to the accounts and in the manner specified by Agent in its sole discretion. 2.6 TERM LOAN (a) The Term Loan shall be evidenced by Term Notes, payable to the order of each appropriate Lender in the aggregate principal amount of the Commitment of the applicable Lender, duly executed and delivered by Borrower. As of the Closing Date, Borrower has issued (i) Second Amended and Restated Term Note A, in the original principal amount of $8,224,361.69 payable to the order of CapitalSource, duly executed and delivered by Borrower and dated the Closing Date (the "TERM NOTE A") (ii) Second Amended and Restated Term Note B, in the original principal amount of $8,595,840.63 payable to the order of CapitalSource, duly executed and delivered by Borrower and dated the Closing Date (the "TERM NOTE B"), and (iii) Second Amended and Restated Term Note C, in the original principal amount of $179,797.68 payable to the order of CapitalSource, duly executed and delivered by Borrower and dated the Closing Date (the "TERM NOTE C", and collectively with Term Note A and Term Note B, as amended or restated, the "TERM NOTES"). Subject to the terms and conditions set forth in this Agreement, each Lender agrees to loan to Borrower on the Closing Date, the amount necessary to make the aggregate principal amount of the Term Notes equal to $17,000,000, each in an amount not to exceed its Pro Rata Share, as a Term Loan to be disbursed to the appropriate Borrower's account(s) as set forth on Schedule 2.4. The Term Loan is not a revolving credit facility, and any repayments of principal shall be applied to permanently reduce the Term Loan. The Term Loan shall be evidenced by the Term Notes. (b) On the Closing Date, Borrower has repaid the principal, interest and fees due under the New Term Notes (as defined in the Amended and Restated Loan Agreement). 6 2.7 INTEREST ON THE TERM NOTES Interest on the outstanding balance of the Term Loan under the Term Notes shall be payable monthly in arrears on the first day of each calendar month at an annual rate of Prime Rate plus 4.5%; provided, however, that, notwithstanding any other provision of any Loan Document, the interest on the outstanding principal balance of the Term Loan under the Term Notes shall be not less than 8.75%, in each case calculated on the basis of a 360-day year and for the actual number of calendar days elapsed in each interest calculation period. Interest accrued on the Term Loan under the Term Notes shall be due and payable on the first day of each calendar month commencing August 1, 2003, and continuing until the later of the expiration of the Term Notes Term and the full performance and irrevocable payment in full in cash of the Obligations and termination of this Agreement. Advances under the Revolving Facility shall be made automatically for the payment of interest on the Term Loan and other Obligations on the date when due to the extent available and as provided for herein. 2.8 REPAYMENT OF TERM LOAN; MATURITY Payment of principal (in addition to the interest payments in Section 2.7) and all Obligations under the Term Loan shall be due and payable in full, and the Term Notes shall mature, if not earlier in accordance with this Agreement, on the earlier of (i) the occurrence of an Event of Default if required pursuant hereto or Agent's demand upon an Event of Default, and (ii) the last day of the Term Notes Term (such earlier date being the "TERM LOAN MATURITY DATE"). 2.9 MANNER OF PAYMENT Any payments made by Borrower (other than payments automatically paid through Advances under the Revolving Facility as provided herein), shall be made only by wire transfer on the date when due, without offset or counterclaim, in Dollars, in immediately available funds to such account as may be indicated in writing by Agent to Borrower from time to time. Any such payment received after 2:00 p.m. New York City Time on the date when due shall be deemed received on the following Business Day. Whenever any payment hereunder shall be stated to be due or shall become due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during such extension) and/or fees, as the case may be. 2.10 REPAYMENT OF EXCESS ADVANCES Any balance of Advances under the Revolving Facility outstanding at any time in excess of the lesser of the Facility Cap or the Availability shall be immediately due and payable by Borrower without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred or is continuing and shall be paid in the manner specified in Section 2.9. 7 2.11 OTHER MANDATORY PREPAYMENTS In addition to and without limiting any provision of any Loan Document: (a) if a Change of Control occurs, on or prior to the first Business Day following the date of such Change of Control, Borrower shall prepay the Loans, including, without limitation, all outstanding Advances and all other Obligations, in full in cash together with accrued interest thereon to the date of prepayment and all other amounts owing to Agent and the Lenders under the Loan Documents; and (b) if any Borrower sells any of its assets or properties, receives any property damage insurance award which is not used to repair or replace the property covered thereby or incurs any Indebtedness, except for Permitted Indebtedness, then it shall apply 100% of the proceeds thereof to the prepayment of the Loans together with accrued interest thereon and all other Obligations owing to Agent and the Lenders under the Loan Documents, such payment to be applied at such time and in such manner and order as Agent shall decide in its sole discretion. 2.12 PAYMENTS BY AGENT Should any amount required to be paid under any Loan Document be unpaid, such amount may be paid by Agent, for the account of Lenders, which payment shall be deemed a request for an Advance under the Revolving Facility as of the date such payment is due, and Borrower irrevocably authorizes disbursement of any such funds to Agent, for the benefit of Lenders, by way of direct payment of the relevant amount, interest or Obligations. No payment or prepayment of any amount by Agent, Lenders or any other Person shall entitle any Person to be subrogated to the rights of Agent and/or Lenders under any Loan Document unless and until the Obligations have been fully performed and paid irrevocably in cash and this Agreement has been terminated. Any sums expended by Agent and/or Lenders as a result of Borrower's or any Guarantor's failure to pay, perform or comply with any Loan Document or any of the Obligations may be charged to Borrower's account as an Advance under the Revolving Facility and added to the Obligations. 2.13 COLLATERAL; SECURITY INTEREST To secure the payment and performance of the Obligations, each Borrower has granted to Agent, for the benefit of itself and Lenders, a valid, continuing perfected first priority security interest in and lien upon its respective Collateral pursuant to the Security Documents to which each is a party and PSI, PS Tennessee, PSI Hospitals, PS Oklahoma, Aeries, Texas Hospitals, PS Coral Gables, Michigan, Transitional Care, East Carolina, H.C. and HSA Hill Crest have pledged to Agent, for the benefit of itself and Lenders, certain securities pursuant to Stock Pledge Agreements. 2.14 COLLATERAL ADMINISTRATION (a) All Collateral (except Deposit Accounts) will at all times be kept by Borrower at the locations set forth on Schedule 5.18B hereto and shall not, without 30 calendar days prior written notice to Agent, be moved therefrom, and in any case shall not be moved 8 outside the continental United States or, in the case of Ramsay Youth Services Puerto Rico, Inc., a Puerto Rico corporation ("RY PUERTO RICO"), Puerto Rico. (b) Borrower shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to Agent on such periodic bases as Agent may request. In addition, if Accounts of Borrower in an aggregate face amount in excess of $10,000 become ineligible because they fall within one of the specified categories of ineligibility set forth in the definition of Eligible Receivables, Borrower shall notify Agent of such occurrence on the first Business Day following such occurrence and the Borrowing Base shall thereupon be adjusted to reflect such occurrence. If requested by Agent, Borrower shall execute and deliver to Agent formal written assignments of all of its Accounts weekly or daily as Agent may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from such assigned accounts exceed the amount of the Obligations, such excess amount shall not accrue interest in favor of Borrower but shall be available to Borrower upon Borrower's written request. (c) Whether or not an Event of Default has occurred, any of the Agent's officers, employees, representatives or agents shall have the right, at any time during normal business hours, in the name of Agent, any designee of Agent or Borrower, to verify the validity, amount or any other matter relating to any Accounts of Borrower. Borrower shall cooperate fully with Agent in an effort to facilitate and promptly conclude such verification process. (d) To expedite collection, Borrower shall endeavor in the first instance to make collection of its Accounts for Agent, for the account of Lenders. Agent shall have the right at all times after the occurrence of an Event of Default to notify (i) Account Debtors owing Accounts to Borrower, other than Medicaid/Medicare Account Debtors, that their Accounts have been assigned to Agent, for the benefit of itself and Lenders, and to collect such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorney's fees, to Borrower, and (ii) Medicaid/Medicare Account Debtors that Borrower has waived any and all defenses and counterclaims it may have or could interpose in any such action or procedure brought by Agent to obtain a court order recognizing the assignment or security interest and lien of Agent, for the benefit of itself and Lenders, in and to any Account or other Collateral and that Agent is seeking or may seek to obtain a court order recognizing the assignment or security interest and lien of Agent, for the benefit of itself and Lenders, in and to all Accounts and other Collateral payable by Medicaid/Medicare Account Debtors. (e) As and when determined by Agent in its sole discretion, Agent will perform the searches described in clauses (i) and (ii) below against Borrower and Guarantors (the results of which are to be consistent with Borrower's representations and warranties under this Agreement), all at Borrower's expense: (i) UCC searches with the Secretary of State and local filing offices of each jurisdiction where Borrower and/or any Guarantors (A) are organized and (B) own or lease any real or personal property; and (ii) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (i) above. (f) Borrower (i) shall, during an Event of Default, provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration 9 Account, (ii) shall provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that Agent has been granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and Borrower hereby authorizes Agent and/or Lenders, upon any failure to send such notices and directions within 10 calendar days after the date of this Agreement (or 10 calendar days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and (iii) shall do anything further that may be lawfully required by Agent and/or any Lender to secure Agent, for the benefit of itself and Lenders, and effectuate the intentions of the Loan Documents. At Agent's request, Borrower shall immediately deliver to Agent all items for which Agent must receive possession to obtain a perfected security interest and all notes, certificates, and documents of title, chattel paper, warehouse receipts, instruments, and any other similar instruments constituting Collateral. 2.15 POWER OF ATTORNEY Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring any of them to act as such) with full power of substitution to do the following: (a) endorse the name of any Borrower upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to Borrower and constitute collections on its or their Accounts; (b) execute and file in the name of Borrower any financing statements, schedules, assignments, instruments, documents, and statements that it is or they are obligated to give Agent under any of the Loan Documents; and (c) do such other and further acts and deeds in the name of Borrower that Agent may deem necessary or desirable to enforce any Account or other Collateral or to perfect Agent's, for the benefit of itself and Lenders, security interest or lien in any Collateral. In addition, if any Borrower breaches its obligation hereunder to direct payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, Agent, as the irrevocably made, constituted and appointed true and lawful attorney for Borrower pursuant to this paragraph, may, by the signature or other act of any of Agent's officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account. III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE 3.1 COMMITMENT AND MODIFICATION FEES On or before the Closing Date, Borrower shall pay to Agent, for the ratable benefit of Lenders, $325,000, as a nonrefundable commitment fee. On the Closing Date, Borrower shall pay to Agent a modification and waiver fee of $1,850,000 in connection with the execution of this Agreement. 3.2 UNUSED LINE FEE Borrower shall pay to Agent, for the ratable benefit of Lenders, an unused line fee (the "UNUSED LINE FEE") in an amount equal to 0.5% (per annum) of the difference of (a) the Facility Cap minus (b) the daily average outstanding loan balance under the Revolving Facility 10 outstanding during the month. The Unused Line Fee shall be payable monthly in arrears on the first day of each successive calendar month. 3.3 COLLATERAL MANAGEMENT FEE Borrower shall pay to Agent, for the ratable benefit of Lenders, as additional interest, a collateral management fee equal to 0.125% (per month) on the outstanding balance of the Revolving Facility. The collateral management fee shall be payable monthly in arrears on the first day of each successive calendar month. 3.4 EARLY TERMINATION/ FINANCE FEES (a) If (i) Borrower terminates the Revolving Facility under Section 11.1 hereof, (ii) Agent demands or Borrower is otherwise required to make payment in full of the Revolving Facility and/or Obligations relating to the Revolving Facility upon the occurrence of an Event of Default, (iii) a voluntary or involuntary Change of Control or payment pursuant to Section 2.11 occurs, (iv) any other voluntary or involuntary prepayment of the Revolving Facility and/or Obligations relating to the Revolving Facility by Borrower or any other Person occurs (other than reductions to zero of the outstanding balance of the Revolving Facility resulting from the ordinary course operation of the provisions of Section 2.5), whether by virtue of Agent's exercising its right of set-off or otherwise, (v) any Lender accelerates any Revolving Note or makes any demand on any Revolving Note, or (vi) any payment or reduction of the outstanding balance of any Revolving Note and/or the Revolving Facility is made during a bankruptcy, reorganization or other proceeding or is made pursuant to any plan of reorganization or liquidation or any Debtor Relief Law, then, at the effective date of any such termination, Borrower shall pay Agent, for the account of Lenders (in addition to the then outstanding principal, accrued interest and other Obligations pursuant to the terms of this Agreement and any other Loan Document), as yield maintenance for the loss of bargain and not as a penalty, an amount equal to the applicable Minimum Termination Fee. (b) If (i) Borrower terminates the Term Loan under Section 11.1 hereof, (ii) Agent demands or Borrower is otherwise required to make payment in full of the Obligations relating to the Term Loan upon the occurrence of an Event of Default, (iii) a voluntary or involuntary Change of Control or payment pursuant to Section 2.11 occurs, (iv) any other voluntary or involuntary prepayment of the Obligations relating to the Term Loan by Borrower or any other Person occurs, whether by virtue of Agent's exercising its right of set-off or otherwise, (v) any Lender accelerates any Term Note or makes any demand on any Term Note, (vi) any payment or reduction of the outstanding balance of any Term Note and/or the Term Loan is made during a bankruptcy, reorganization or other proceeding or is made pursuant to any plan of reorganization or liquidation or any Debtor Relief Law or (vii) the unpaid principal of the Term Loan and all other Obligations under the Term Loan shall become due and payable in full on the Term Loan Maturity Date (each, a "TERM TERMINATION"), then, at the effective date of any such termination, Borrower shall pay Agent, for the account of Lenders (in addition to the then outstanding principal, accrued interest and other Obligations relating to the Term Loan owing under the Term Loan pursuant to the terms of this Agreement and any other Loan Document), as yield maintenance for the loss of bargain and not as a penalty, an amount equal to the Term Finance Fee; 11 (c) Additionally, upon any Term Termination (as defined in Section 3.4(b)) other than the occurrence of the last day of the Term Notes Term (in connection with a prepayment of the Term Notes), Borrower shall pay Agent, for the account of Lenders the Early Termination Fee; provided, that Borrower shall not be required to pay an Early Termination Fee on the amount that Borrower pays or reduces the outstanding balance of any Term Note as a result of a HUD Financing obtained through an affiliate of CapitalSource. 3.5 COMPUTATION OF FEES; LAWFUL LIMITS All fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed in each calculation period, as applicable. In no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges paid or agreed to be paid to Agent, for the benefit of Lenders, for the use, forbearance or detention of money hereunder exceed the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If, due to any circumstance whatsoever, fulfillment of any provision hereof, at the time performance of such provision shall be due, shall exceed any such limit, then, the obligation to be so fulfilled shall be reduced to such lawful limit, and, if Lenders shall have received interest or any other charges of any kind which might be deemed to be interest under applicable law in excess of the maximum lawful rate, then such excess shall be applied first to any unpaid fees and charges hereunder, then to unpaid principal balance owed by Borrower hereunder, and if the then remaining excess interest is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. The terms and provisions of this Section 3.5 shall control to the extent any other provision of any Loan Document is inconsistent herewith. 3.6 DEFAULT RATE OF INTEREST Upon the occurrence and during the continuation of an Event of Default, the Applicable Rate of interest in effect at such time with respect to the Obligations shall be increased by 5.0% per annum (the "DEFAULT RATE"). 3.7 ACKNOWLEDGEMENT OF JOINT AND SEVERAL LIABILITY, CROSS-GUARANTY AND CONTRIBUTION RIGHTS; GUARANTY ENFORCEMENT. (a) Each Borrower acknowledges that it is jointly and severally liable for all of the Obligations under the Loan Documents. Each Borrower expressly understands, agrees and acknowledges that (i) Borrowers are all entities affiliated by common ownership, (ii) each Borrower desires to have the availability of one common credit facility instead of separate credit facilities, (iii) each Borrower has requested that each Lender extend such a common credit facility on the terms herein provided, (iv) each Lender will be lending against, and relying on a lien upon, all of Borrowers' assets even though the proceeds of any particular loan made hereunder may not be advanced directly to a particular Borrower, (v) each Borrower will nonetheless benefit by the making of all such loans by each Lender and the availability of a single credit facility of a size greater than each could independently warrant, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms 12 contained in the Loan Documents shall be applicable to and shall be binding upon each Borrower. (b) Each Borrower hereby guarantees the prompt payment and performance in full of all Obligations. Such guarantee constitutes a guarantee of payment and not of collection. Each Borrower's obligations under this Agreement shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity or enforceability, avoidance, or subordination of the Obligations of any other Borrower or of any promissory note or other document evidencing all or any part of the Obligations of any other Borrower, (ii) the absence of any attempt to collect the Obligations from any other Borrower, any Guarantor, if any, or any other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance, or granting of any indulgence by the Agent and/or any Lender with respect to any provision of any instrument evidencing the Obligations of any other Borrower or Guarantor, if any, or any part thereof, or any other agreement now or hereafter executed by any other Borrower or Guarantor, if any, and delivered to the Agent and/or any Lender, (iv) the failure by the Agent and/or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations of any other Borrower or Guarantor, if any, (v) the Agent's and/or any Lender's election, in any proceeding instituted under the United States Bankruptcy Code (the "BANKRUPTCY CODE"), of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any portion of the Agent's and/or any Lender's claim(s) for the repayment of the Obligations of any other Borrower under Section 502 of the Bankruptcy Code, or (viii) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any other Borrower (other than actual indefeasible payment in full in cash). With respect to any Borrower's Obligations arising as a result of the joint and several liability of the Borrowers hereunder with respect to Advances or other extensions of credit made to any of the other Borrowers hereunder, such Borrower waives, until the Obligations (other than indemnity obligations under the Loan Documents not then due and payable for any events of claims that would give rise thereto that are not then pending) shall have been indefeasibly paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which the Agent and/or any Lender now has or may hereafter have against any other Borrower, any endorser or any Guarantor, if any, of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to the Agent and/or any Lender to secure payment of the Obligations or any other liability of any Borrower to the Agent and/or any Lender. During any Event of Default, the Agent may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against any other Borrower or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that the Agent shall be under no obligation to marshal any assets in favor of any Borrower or against or in payment of any or all of the Obligations. (c) Each Borrower is obligated to repay the Obligations as joint and several obligors under this Agreement. To the extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Advances made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an "ACCOMMODATION PAYMENT"), then the Borrower making such Accommodation Payment 13 shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Borrowers in an amount, for each of such other Borrowers, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers. As of any date of determination, the "ALLOCABLE AMOUNT" of each Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Borrower hereunder without (i) rendering such Borrower "insolvent" within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (ii) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (iii) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution, indemnification, and reimbursement under this Section 3.7 shall be subordinate in right of payment to the prior payment in full of the Obligations. The provisions of this Section 3.7 shall, to the extent inconsistent with any provision in any Loan Document, supersede such inconsistent provision. (d) If (i) any court holds that the Borrowers are guarantors and not jointly and severally liable or (ii) bankruptcy or reorganization proceedings at any time are instituted by or against any Borrower under any Debtor Relief Law, each Borrower hereby: (A) until indefeasible payment in full of the Obligations, expressly and irrevocably waives, to the fullest extent possible, on behalf of such Borrower, any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to contribution, to indemnification, to set-off or to any other rights that could accrue to a surety against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, to a holder or transferee against a maker, or to the holder of a claim against any Person, and which such Borrower may have or hereafter acquire against any Person in connection with or as a result of such Borrower's execution, delivery and/or performance of this Agreement, or any other documents to which such Borrower is a party or otherwise; (B) until indefeasible payment in full of the Obligations, expressly and irrevocably waives any "claim" (as such term is defined in the Bankruptcy Code) of any kind against any other Borrower, and further agrees that it shall not have or assert any such rights against any Person (including any surety), either directly or as an attempted set-off to any action commenced against such Borrower by the Agent or a Lender or any other Person; and (C) acknowledges and agrees (I) that this waiver is intended to benefit the Agent and the Lenders and shall not limit or otherwise affect such Borrower's liability hereunder or the enforceability of this Agreement, and (II) that the Agent and the Lenders and their successors and assigns are intended beneficiaries of this waiver, and agreements set forth in this Section 3.7 and their rights under this Section 3.7 shall survive payment in full of the Obligations. (e) This Agreement shall in all respects be continuing, absolute and unconditional, and shall remain in full force and effect with respect to each Borrower until all Obligations created or existing before receipt of such notice shall have been indefeasibly fully paid. No compromise, settlement, release or discharge of, or indulgence with respect to, or failure, neglect or omission to enforce or exercise any right against, any one or more Borrowers shall release or discharge the other Borrowers. 14 (f) EACH BORROWER WAIVES THE FILING OF A CLAIM WITH A COURT IN THE EVENT OF RECEIVERSHIP OR BANKRUPTCY OF ANY OTHER BORROWER, AND WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH ANY BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE AGENT OR ANY LENDER IN ENFORCING THIS AGREEMENT UNTIL THE OBLIGATIONS ARE INDEFEASIBLY PAID IN FULL AND LENDERS HAVE NO COMMITMENT TO LEND HEREUNDER, INCLUDING, WITHOUT LIMITATION, EVERY DEFENSE, COUNTERCLAIM OR SETOFF WHICH SUCH BORROWER MAY NOW HAVE, OR HEREAFTER MAY HAVE, AGAINST ANY OTHER BORROWER OR ANY OTHER PARTY LIABLE TO THE AGENT OR ANY LENDER IN ANY MANNER. AS FURTHER SECURITY, ANY AND ALL DEBTS AND LIABILITIES NOW OR HEREAFTER ARISING AND OWING TO ANY BORROWER BY ANY OTHER BORROWER, OR TO ANY OTHER PARTY LIABLE TO THE AGENT OR ANY LENDER, ARE HEREBY SUBORDINATED TO THE AGENT'S AND ANY SUCH LENDER'S CLAIMS AND UPON THE OCCURRENCE OF AN EVENT OF DEFAULT ARE ASSIGNED TO THE AGENT FOR THE BENEFIT OF THE LENDERS. EACH BORROWER HEREBY AGREES THAT IT MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING (INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY THE AGENT OR ANY LENDER AGAINST ANY OTHER BORROWER. (g) Should a claim be made upon the Agent or any Lender at any time for repayment of any amount rightfully received by the Agent or any Lender in payment of the Obligations, or any part thereof, whether received from any Borrower or received by the Agent or any Lender as the proceeds of Collateral, by reason of: (1) any judgment, decree or order of any court or administrative body having jurisdiction over the Agent or any Lender or any of their property, or (2) any settlement or compromise of any such claim effected by the Agent or any Lender, in its sole discretion, with the claimant (including a Borrower), each Borrower shall remain liable to the Agent or any such Lender for the amount so repaid to the same extent as if such amount had never originally been received by the Agent or any such Lender, notwithstanding any termination hereof or the cancellation of any note or other instrument evidencing any of the indebtedness. To the extent the Agent is required to repay any such amount, each Lender shall, to the extent the Agent previously paid to such Lender a portion of the amount which must be repaid, upon demand of the Agent, return to the Agent the amount which had previously been paid by the Agent to such Lender. (h) To the extent that any payment to, or realization by, the Lender or the Agent on the Obligations exceeds the limitations of this Section 3.7 and is otherwise subject to avoidance and recovery in any such proceeding, the amount subject to avoidance shall in all events be limited to the amount by which such actual payment or realization exceeds such limitation, and this Agreement as limited shall in all events remain in full force and effect and be fully enforceable against such Borrower. This Section 3.7 is intended solely to reserve the rights of the Lenders and the Agent hereunder against each Borrower, in such proceeding to the maximum extent permitted by applicable Debtor Relief Laws and neither the Borrowers, any guarantor of the Obligations nor any other Person shall have any right, claim or defense under this Section 3.7 that would not otherwise be available under applicable Debtor Relief Laws in such proceeding. 15 3.8 WARRANTS As additional consideration for the extensions of credit under the Original Loan Agreement and as more fully described in the Warrant Agreement, PSI has issued and delivered previously to CapitalSource Holdings LLC on the Original Closing Date, the Warrant. The Warrant and number of securities purchasable upon exercise of the Warrant shall be subject to adjustment and shall be subject to various rights in favor of CapitalSource Holdings LLC as set forth in the Warrant Agreement. 3.9 ALLOCATION OF PURCHASE PRICE Under both GAAP consistently applied and the regulations of the Internal Revenue Service, the issuance to Lenders of Term Notes A, B and C and to CapitalSource Holdings LLC of the Warrant for an aggregate purchase price equal to the aggregate principal amount of Term Notes A, B and C being so purchased results in the creation of "original issue discount" on each Original Term Note (which original issue discount may also be deemed to constitute the value of any Warrant issued in connection with the issuance of such Term Notes A, B and C), and such regulations require the determination of the value of any warrant so delivered. Pursuant to GAAP consistently applied and applicable Treasury Regulations, Borrower, Agent and Lenders agree to allocate $16,940,000 of the purchase price to Term Notes A, B and C and the remaining $60,000 of the purchase price to the Warrant and that such allocation reflects the relative fair market values of Term Notes A, B and C and the Warrant as of their issue date. As a result, Term Notes A, B and C will be issued with original issue discount of $60,000. Borrower, Agent and Lenders agree to recognize and adhere to the determinations and allocations of original issue discount and valuation of the Warrant set forth herein for all federal and state income tax purposes. In the event of any proposed transfer of any of Term Note A, B or C by any Lender, such Lender shall, prior to such transfer, mark such Term Note A, B or C with a legend pertaining to the original issue discount in the form required by Treasury Regulation Section 1.1275-3(b)(1). IV. CONDITIONS PRECEDENT 4.1 CONDITIONS TO INITIAL ADVANCE, FUNDING OF TERM LOAN AND CLOSING The obligations of Lenders to consummate the transactions contemplated herein and to make the initial Advance under the Revolving Facility (the "INITIAL ADVANCE") and to fund the Term Loan are subject to the satisfaction, in the sole judgment of Agent, of the following: (a) Borrower shall have delivered to Agent (i) the Loan Documents to which it is a party, each duly executed by an authorized officer of Borrower and the other parties thereto and (ii) a Borrowing Certificate for the Initial Advance under the Revolving Facility executed by an authorized officer of Borrower; (b) all in form and substance satisfactory to Agent in its sole discretion, Agent shall have received (i) a report of UCC financing statement, tax and judgment lien searches performed with respect to each Borrower and Guarantor in each jurisdiction determined by Agent in its sole discretion, and such report shall show no Liens on the Collateral (other than 16 Permitted Liens), (ii) each document (including, without limitation, any UCC financing statement) required by any Loan Document or under law or requested by Agent to be filed, registered or recorded to create, in favor of Agent, for the benefit of itself and the Lenders, a perfected first priority security interest upon the Collateral, and (iii) evidence of each such filing, registration or recordation and of the payment by Borrower of any necessary fee, tax or expense relating thereto; (c) Agent shall have received (i) the Charter and Good Standing Documents, all in form and substance acceptable to Agent, (ii) a certificate of the corporate secretary, assistant secretary or holder of equivalent office of each Borrower and Guarantor dated the Closing Date, as to the incumbency and signature of the Persons executing the Loan Documents, in form and substance acceptable to Agent, (iii) the written legal opinion of counsel for Borrower, in form and substance satisfactory to Agent and its counsel; and (iv) a certificate executed by an authorized officer of each Borrower and Guarantor, which shall constitute a representation and warranty by such Borrower as of the Closing Date and the applicable Borrowing Date and the date of funding of the Term Loan that the conditions contained in this Agreement have been satisfied; (d) Agent shall have received a certificate of the chief financial officer (or, in the absence of a chief financial officer, the chief executive officer) of each Borrower, in form and substance satisfactory to Agent (each, a "SOLVENCY CERTIFICATE"), certifying (i) the solvency of such Borrower after giving effect to the transactions and the Indebtedness contemplated by the Loan Documents, and (ii) as to such Borrower's financial resources and ability to meet its obligations and liabilities as they become due, to the effect that as of the Closing Date, the Borrowing Date for the Initial Advance and the date of funding of the Term Loan and after giving effect to such transactions and Indebtedness: (A) the assets of such Borrower, at a Fair Valuation, exceed the total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Borrower, and (B) no unreasonably small capital base with which to engage in its anticipated business exists with respect to such Borrower; (e) Agent shall have completed examinations, the results of which shall be satisfactory in form and substance to Agent, of the Collateral, the financial statements and the books, records, business, obligations, financial condition and operational state of each Borrower and each such Borrower shall have demonstrated to Agent's satisfaction that (i) its operations comply, in all respects deemed material by Agent, in its sole judgment, with all applicable federal, state, foreign and local laws, statutes and regulations, (ii) its operations are not the subject of any governmental investigation, evaluation or any remedial action which could result in any expenditure or liability deemed material by Agent, in its sole judgment, and (iii) it has no liability (whether contingent or otherwise) that is deemed material by Agent, in its sole judgment; (f) Agent shall have received all fees, charges and expenses payable to Agent and Lenders on or prior to the Closing Date pursuant to the Loan Documents; (g) all in form and substance satisfactory to Agent in its sole discretion, Agent shall have received such consents, approvals and agreements, including, without limitation, any applicable Landlord Waivers and Consents with respect to any and all leases set forth on 17 Schedule 5.4 (except as indicated thereon), from such third parties as Agent and its counsel shall determine are necessary or desirable with respect to (i) the Loan Documents and/or the transactions contemplated thereby, and/or (ii) claims against any Borrower or the Collateral; (h) Borrower shall be in compliance with Section 5.17 and Section 6.5, and Agent shall have received (i) certified copies of all such insurance policies, and (ii) original certificates of such insurance policies confirming that they are in effect and that the premiums due and owing with respect thereto have been paid in full and naming Agent, for the benefit of itself and Lenders, as sole beneficiary or loss payee and additional insured, as appropriate; (i) all corporate and other proceedings, documents, instruments and other legal matters in connection with the transactions contemplated by the Loan Documents (including, but not limited to, those relating to corporate and capital structures of Borrower) shall be satisfactory to Agent; (j) Agent shall have received a Guaranty in form and substance acceptable to Agent, duly executed by an authorized officer of RY Puerto Rico; (k) no default exists beyond applicable cure periods pursuant to any of Borrower's obligations under any material contract or compliance with applicable laws and there will exist no fact or circumstance which, with the passage of time, the giving of notice, or both, could constitute a default under any material contract to which Borrower is a party or any law to which Borrower is subject; (l) Borrower shall have established a Lockbox Account pursuant to Section 2.5; (m) Agent shall have received a mortgagee title insurance policy or appropriate endorsements reflecting all amendments to each previously issued mortgagee title insurance policy on the Real Property (or binding commitment therefor) in form and substance and from Fidelity National Title Insurance Company or such other title insurer reasonably acceptable to Agent, on an A.L.T.A. 1970 form designated by Agent, which title insurance policy shall (i) specifically contain no exception as to survey matters or creditors rights, (ii) contain affirmative coverage against mechanics', contractors', suppliers' and/or materialmen's liens, which may be filed or unfiled, (iii) must affirmatively insure that the mortgage or deed of trust is a valid first lien against the fee simple, marketable estate, insuring Agent and Lenders for a sum not less than the maximum principal amount of the Term Loan, (iv) insure any easements or leases necessary to access the Real Property and such easements or leases shall not be subject to any prior liens, encumbrances, covenants or restrictions and (v) contain such endorsements as may be reasonably required by Agent; provided, however, that such mortgagee title insurance policy may contain the usual "pending disbursements" clause, if applicable; (n) Agent shall have received evidence that Borrower has a fee simple title to the Real Property and to the material fixtures, equipment, furniture and personal property encumbered by the Loan Documents, and such title shall be marketable, and free and clear of all defects, liens, encumbrances, security interests, assessments, restrictions and easements, unless otherwise approved in writing by Agent; 18 (o) if access to the Real Property is by means of easements or leases, said easements or leases shall be satisfactory in form and substance to Agent, shall be covered by the mortgagee title insurance policy pursuant to subsection (m)(iv) above; (p) all streets necessary to serve the Real Property for the use represented by Borrower shall have been completed and shall be serviceable and all streets to be dedicated shall have been dedicated and accepted for public use and maintenance; (q) Agent shall have received, in form and substance reasonably satisfactory to Agent, evidence that the Real Property and all improvements (to the extent required) (i) comply with applicable codes, regulations and ordinances, (ii) are zoned for their current use, (iii) are adequately served by public utilities, (iv) are completed free of mechanics' and materialmens' liens, (v) are not the subject to any pending or threatened litigation, (vi) are not the subject of any pending or threatened condemnation proceeding, (vii) have not been damaged by fire or other casualty and (viii) are not within a special flood hazard area or, if within a special flood hazard area, Borrower has obtained flood insurance under the U.S. Flood Disaster Protection Act of 1973, as amended, or such other flood insurance which in Agent's reasonable opinion adequately protects against the risk of damage by flood; (r) Agent shall have received, in form and substance reasonably satisfactory to Agent, evidence that all taxes and assessments on all real property owned by Borrower have currently been paid, settlement copies of all recent real estate tax bills, with proof of payment, together with evidence that the mortgaged premises is a separately identifiable tax lot; (s) Agent shall have received, in form and substance reasonably satisfactory to Agent, a report of a search of the public records performed against the Real Property and Borrower in each state and local jurisdiction, and such report shall show no conditional sales contracts, chattel mortgages, leases of personalty, financing statements or title retention agreements filed and/or recorded against the Real Property and Borrower, other than liens which are specifically permitted under this Agreement; (t) Agent shall have received, each in form and substance satisfactory to Agent, any and all property as-built A.L.T.A. surveys, environmental reports and other third party reports as Agent shall deem necessary or appropriate; provided, that the environmental report must address such matters as Agent shall request in its sole and absolute discretion, including, without limitation, confirmation of the absence of asbestos in any form that is or could become friable and confirmation of the absence of underground storage tanks; (u) Agent shall have received copies of all licenses and permits required for Borrower to conduct the business in which it is currently engaged or is contemplated pursuant to the Loan Documents or shall have received an opinion from licensure counsel verifying that all approvals for licensure have been granted; (v) Agent shall have received copies of all material agreements between Borrower and any healthcare management consultants and/or agents, including documents relating to borrowed money, capital leases and occupancy leases; 19 (w) Agent shall have received copies of all participation agreements relating to medical plans of Borrower; (x) Agent shall have completed its due diligence examinations of Borrower and each Subsidiary, the results of which shall be satisfactory in form and substance to Agent; (y) Borrower shall have delivered the Agreement and Plan of Merger, duly executed by PSI, PSI Acquisition Sub, Inc., and Ramsay Youth Services, Inc., and in form and substance satisfactory to Agent; (z) Agent shall have received the Collateral Assignment of the Agreement and Plan of Merger, duly executed by PSI and PSI Acquisition Sub, Inc.; (aa) Agent shall have received copies of all leases and subleases entered into by Borrower for the use and occupancy by Borrower of any real property; (bb) Agent shall have received, copies of the High Yield Documents, duly executed by the appropriate parties thereto, and in form and substance satisfactory to Agent; and (cc) Borrower shall pay or cause to be paid and discharged the 1818 Mezzanine Fund Subordinated Indebtedness, other than the Put Price Notes (as defined in the Securities Purchase Agreement). 4.2 CONDITIONS TO EACH ADVANCE AND FUNDING OF THE TERM LOAN The obligations of Lenders to make any Advance (including, without limitation, the Initial Advance) and to fund the Term Loan are subject to the satisfaction, in the sole judgment of Agent, of the following additional conditions precedent: (a) Borrower shall have delivered to Agent a Borrowing Certificate for the Advance executed by an authorized officer of Borrower, which shall constitute a representation and warranty by Borrower as of the Borrowing Date of such Advance that the conditions contained in this Section 4.2 have been satisfied; provided, however, that any determination as to whether to fund Advances or extensions of credit shall be made by Agent in its sole discretion; (b) each of the representations and warranties made by Borrower in or pursuant to this Agreement shall be accurate, before and after giving effect to such Advance and/or funding the Term Loan, and no Default or Event of Default shall have occurred or be continuing or would exist after giving effect to the Advance or the funding of the Term Loan on such date; (c) immediately after giving effect to the requested Advance, the aggregate outstanding principal amount of Advances under the Revolving Facility shall not exceed the lesser of the Availability and the Facility Cap and the aggregate outstanding principal amount of the Term Loan shall not exceed the Maximum Loan Amount; 20 (d) except as disclosed in the historical financial statements, there shall be no liabilities or obligations with respect to Borrower of any nature whatsoever which, either individually or in the aggregate, would reasonably be likely to have a Material Adverse Effect; (e) Agent shall have received all fees, charges and expenses payable to Agent on or prior to such date pursuant to the Loan Documents; and (i) there shall not have occurred any Material Adverse Change or Material Adverse Effect or Liability Event. V. REPRESENTATIONS AND WARRANTIES Each Borrower, jointly and severally, represents and warrants as of the date hereof, the Closing Date, each Borrowing Date and, if applicable, the date of funding of the Term Loan as follows: 5.1 ORGANIZATION AND AUTHORITY Each Borrower is an entity duly organized, validly existing and in good standing under the laws of its state of formation. Borrower (a) has all requisite corporate power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, (b) is duly qualified to do business in every jurisdiction in which failure so to qualify could reasonably be expected to have a Material Adverse Effect, and (c) has all requisite power and authority (i) to execute, deliver and perform the Loan Documents to which it is a party, (ii) to borrow hereunder, (iii) to consummate the transactions contemplated under the Loan Documents, and (iv) to grant the Liens with regard to the Collateral pursuant to the Security Documents to which it is a party. No Borrower is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is controlled by such an "investment company." 5.2 LOAN DOCUMENTS The execution, delivery and performance by Borrower of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, (a) have been duly authorized by all requisite action of each such Person and have been duly executed and delivered by or on behalf of each such Person; (b) do not violate any provisions of (i) any applicable law, statute, rule, regulation, ordinance or tariff, (ii) any order of any Governmental Authority binding on any Borrower or any of their respective properties, or (iii) the certificate of incorporation or bylaws (or any other equivalent governing agreement or document) of any Borrower, or any agreement between any Borrower and its respective shareholders, members, partners or equity owners or among any such shareholders, members, partners or equity owners; (c) are not in conflict with, and do not result in a breach or default of or constitute an event of default, or an event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, any indenture, agreement or other instrument to which any Borrower is a party, or by which the properties or assets of Borrower are bound, the effect of which could reasonably be expected to have a Material Adverse Effect; (d) except as set forth therein, will not result in the creation or imposition of any Lien of any nature upon any of the properties or assets of any Borrower, and 21 (e) except as set forth on Schedule 5.2, do not require the consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person. When executed and delivered, each of the Loan Documents to which Borrower is a party will constitute the legal, valid and binding obligation of each Borrower, as applicable, enforceable against such Borrower in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity). 5.3 SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS Borrower has no Subsidiaries other than those persons listed as Subsidiaries on Schedule 5.3, and each of such Subsidiaries (except for the HUD Financing Subsidiaries or as otherwise indicated thereon) have executed this Agreement and such other Security Documents as required by Agent. Schedule 5.3 states the authorized and issued capitalization of Borrower, the number and class of equity securities and/or ownership, voting or partnership interests issued and outstanding of Borrower and the record and beneficial owners thereof (including options, warrants and other rights to acquire any of the foregoing). The outstanding equity securities and/or ownership, voting or partnership interests of Borrower have been duly authorized and validly issued and are fully paid and nonassessable, and each Person listed on Schedule 5.3 owns beneficially and of record all the equity securities and/or ownership, voting or partnership interests it is listed as owning free and clear of any Liens other than Liens created by the Security Documents. Schedule 5.3 also lists the directors, members, managers and/or partners of Borrower. Except as listed on Schedule 5.3, Borrower does not own an interest or participate or engage in any joint venture, partnership or similar arrangements with any Person. 5.4 PROPERTIES Borrower (a) is the sole owner and has good, valid and marketable title to, or a valid leasehold interest in, all of its properties and assets, including the Collateral, whether personal or real, subject to no transfer restrictions or Liens of any kind except for Permitted Liens, and (b) is in compliance in all material respects with each lease to which it is a party or otherwise bound. Schedule 5.4 lists all real properties (and their locations) owned or leased by or to, and all other assets or property that are leased or licensed by, Borrower and all leases (including leases of leased real property) covering or with respect to such properties and assets. Borrower enjoys peaceful and undisturbed possession under all such leases and such leases are all the leases necessary for the operation of such properties and assets, are valid and subsisting and are in full force and effect. 5.5 OTHER AGREEMENTS Borrower is not (a) a party to any judgment, order or decree or any agreement, document or instrument, or subject to any restriction, which would materially adversely affect its ability to execute and deliver, or perform under, any Loan Document or to pay the Obligations, (b) in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement, document or instrument to which it is a party or to which any of its properties or assets are subject, which default, if not remedied within any applicable 22 grace or cure period, could reasonably be expected to have a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse Effect; or (c) a party or subject to any agreement, document or instrument with respect to, or obligation to pay any, service or management fee with respect to, the ownership, operation, leasing or performance of any of its business or any facility, nor is there any manager with respect to any such facility. 5.6 LITIGATION There is no action, suit, proceeding or investigation pending or, to its knowledge, threatened against Borrower that (a) questions or could prevent the validity of any of the Loan Documents or the right of Borrower to enter into any Loan Document or to consummate the transactions contemplated thereby, (b) could reasonably be expected to be or have, either individually or in the aggregate, any Material Adverse Change or Material Adverse Effect, or (c) could reasonably be expected to result in any Change of Control or other change in the current ownership, control or management of Borrower. Borrower is not aware that there is any basis for the foregoing. Borrower is not a party or subject to any order, writ, injunction, judgment or decree of any Governmental Authority. There is no action, suit, proceeding or investigation initiated by Borrower currently pending. Borrower has no existing accrued and/or unpaid Indebtedness to any Governmental Authority or any other governmental payor. 5.7 HAZARDOUS MATERIALS Borrower is in compliance in all material respects with all applicable Environmental Laws. Borrower has not been notified of any action, suit, proceeding or investigation (a) relating in any way to compliance by or liability of Borrower under any Environmental Laws, (b) which otherwise deals with any Hazardous Substance or any Environmental Law, or (c) which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Substance. 5.8 TAX RETURNS; GOVERNMENTAL REPORTS Borrower (a) has filed all federal, state, foreign (if applicable) and local tax returns and other reports which are required by law to be filed by Borrower, and (b) has paid all taxes, assessments, fees and other governmental charges, including, without limitation, payroll and other employment related taxes, in each case that are due and payable, except only for items that Borrower is currently contesting in good faith and that are described on Schedule 5.8. 5.9 FINANCIAL STATEMENTS AND REPORTS All financial statements and financial information relating to Borrower that have been or may hereafter be delivered to Agent by Borrower are accurate and complete and have been prepared in accordance with GAAP consistently applied with prior periods. Borrower has no material obligations or liabilities of any kind not disclosed in such financial information or statements, and since the date of the most recent financial statements submitted to Agent, there 23 has not occurred any Material Adverse Change, Material Adverse Effect or Liability Event or, to Borrower's knowledge, any other event or condition that could reasonably be expected to have a Material Adverse Effect or Liability Event. 5.10 COMPLIANCE WITH LAW Borrower (a) is in compliance with all laws, statutes, rules, regulations, ordinances and tariffs of any Governmental Authority applicable to Borrower and/or Borrower's business, assets or operations, including, without limitation, ERISA and Healthcare Laws, and (b) is not in violation of any order of any Governmental Authority or other board or tribunal, except where noncompliance or violation could not reasonably be expected to have a Material Adverse Effect. There is no event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in any noncompliance with, or any violation of, any of the foregoing, in each case except where noncompliance or violation could not reasonably be expected to have a Material Adverse Effect. Borrower has not received any notice that Borrower is not in compliance in any respect with any of the requirements of any of the foregoing. Borrower has (i) not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, (ii) not failed to meet any applicable minimum funding requirements under Section 302 of ERISA in respect of its plans and no funding requirements have been postponed or delayed, (iii) no knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any of the employee benefit plans, (iv) no fiduciary responsibility under ERISA for investments with respect to any plan existing for the benefit of Persons other than its employees or former employees, or (v) not withdrawn, completely or partially, from any multi-employer pension plans so as to incur liability under the MultiEmployer Pension Plan Amendments of 1980. With respect to Borrower, there exists no event described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the 30 day notice period contained in 12 C.F.R. Section 2615.3 has not been waived. Borrower has maintained in all material respects all records required to be maintained by the Joint Commission on Accreditation of Healthcare Organizations, the Food and Drug Administration, Drug Enforcement Agency and State Boards of Pharmacy and the federal and state Medicare and Medicaid programs as required by the Healthcare Laws and, to the best knowledge of Borrower, there are no presently existing circumstances which likely would result in material violations of the Healthcare Laws. There is no Liability Event. 5.11 INTELLECTUAL PROPERTY Except as set forth on Schedule 5.11, Borrower does not own, license or utilize, and is not a party to, any patents, patent applications, trademarks, trademark applications, service marks, registered copyrights, copyright applications, copyrights, trade names, trade secrets, software or licenses (collectively, the "INTELLECTUAL PROPERTY"). 5.12 LICENSES AND PERMITS; LABOR Borrower is in compliance with and has all Permits and Intellectual Property necessary or required by applicable law or any Governmental Authority for the operation of its 24 businesses. All of the foregoing are in full force and effect and not in known conflict with the rights of others. Borrower is not (a) in breach of or default under the provisions of any of the foregoing, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse Effect, (b) a party to or subject to any agreement, instrument or restriction that is so unusual or burdensome that it might have a Material Adverse Effect, and/or (c) and has not been involved in any labor dispute, strike, walkout or union organization which could reasonably be expected to have a Material Adverse Effect 5.13 NO DEFAULT There does not exist any Default or Event of Default or any event, fact, condition or circumstance which, with the giving of notice or passage of time or both, would constitute or result in a Default or Event of Default. 5.14 DISCLOSURE No Loan Document nor any other agreement, document, certificate, or statement furnished to Agent by or on behalf of Borrower in connection with the transactions contemplated by the Loan Documents, nor any representation or warranty made by Borrower in any Loan Document, contains any untrue statement of material fact or omits to state any fact necessary to make the statements therein not materially misleading. There is no fact known to Borrower which has not been disclosed to Agent in writing which could reasonably be expected to have a Material Adverse Effect. 5.15 EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN CONTRACTS Except as contemplated by the Loan Document or as otherwise set forth on Schedule 5.15, Borrower (a) has no outstanding Indebtedness, (b) is not subject or party to any mortgage, deed of trust, note, indenture, indemnity or guarantee of, with respect to or evidencing any Indebtedness of any other Person, or (c) does not own or hold any equity or long-term debt investments in, and does not have any outstanding advances to or any outstanding guarantees for, the obligations of, or any outstanding borrowings from, any Person. Borrower has performed all material obligations required to be performed by Borrower pursuant to or connection with any items listed on Schedule 5.15 and there has occurred no breach, default or event of default under any document evidencing any such items or any fact, circumstance, condition or event which, with the giving of notice or passage of time or both, would constitute or result in a breach, default or event of default thereunder. 5.16 OTHER AGREEMENTS Except as set forth on Schedule 5.16, (a) there are no existing or proposed agreements, arrangements, understandings or transactions between Borrower and any of Borrower's officers, members, managers, directors, stockholders, partners, other interest holders, employees or affiliates or any members of their respective immediate families, and (b) none of the foregoing Persons are directly or indirectly, indebted to or have any direct or indirect 25 ownership, partnership or voting interest in, to Borrower's knowledge, any affiliate of Borrower or any Person with which Borrower has a business relationship or which competes with Borrower (except that any such Persons may own stock in (but not exceeding 2% of the outstanding capital stock of) any publicly traded company that may compete with Borrower. 5.17 INSURANCE Borrower has in full force and effect such insurance policies as are customary in its industry and as may be required pursuant to Section 6.5 hereof. All such insurance policies are listed and described on Schedule 5.17. 5.18 NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL During the preceding five years, Borrower has not conducted business under or used any name (whether corporate, partnership or assumed) other than as shown on Schedule 5.18A. Borrower is the sole owner of all of its names listed on Schedule 5.18A, and any and all business done and invoices issued in such names are Borrower's sales, business and invoices. Each trade name of Borrower represents a division or trading style of Borrower. Borrower maintains its places of business and chief executive offices only at the locations set forth on Schedule 5.18B, and all Accounts of Borrower arise, originate and are located, and all of the Collateral and all books and records in connection therewith or in any way relating thereto or evidencing the Collateral are located and shall be only, in and at such locations. All of the Collateral is located only in the continental United States and, with respect to RY Puerto Rico only, Puerto Rico. 5.19 NON-SUBORDINATION The Obligations are not subordinated in any way to any other obligations of Borrower or to the rights of any other Person. 5.20 ACCOUNTS In determining which Accounts are Eligible Receivables, Agent may rely on all statements and representations made by Borrower with respect to any Account. Unless otherwise indicated in writing to Agent, each Account of Borrower (a) is genuine and in all respects what is purports to be and is not evidenced by a judgment, (b) arises out of a completed, bona fide sale and delivery of goods or rendering of Services by Borrower in the ordinary course of business and in accordance with the terms and conditions of all purchase orders, contracts, certifications, participations, certificates of need and other documents relating thereto or forming a part of the contract between Borrower and the Account Debtor, (c) is for a liquidated amount maturing as stated in a claim or invoice covering such sale of goods or rendering of Services, a copy of which has been furnished or is available to Agent, (d) together with Agent's security interest therein, is not and will not be in the future (by voluntary act or omission by Borrower), subject to any offset, lien, deduction, defense, dispute, counterclaim or other adverse condition, is absolutely owing to Borrower and is not contingent in any respect or for any reason (except Accounts owed or owing by Medicaid/Medicare Account Debtors that may be subject to offset or deduction under applicable law), (e) there are no facts, events or occurrences which in any way impair the validity or enforceability thereof or tend to reduce the amount payable thereunder 26 from the face amount of the claim or invoice and statements delivered to Agent with respect thereto, (f) to the best of Borrower's knowledge, (i) the Account Debtor thereunder had the capacity to contract at the time any contract or other document giving rise thereto was executed and (ii) such Account Debtor is solvent, (g) to the best of Borrower's knowledge, there are no proceedings or actions which are threatened or pending against any Account Debtor thereunder which might result in any material adverse change in such Account Debtor's financial condition or the collectability thereof, (h) has been billed and forwarded to the Account Debtor for payment in accordance with applicable laws and is in compliance and conformance with any requisite procedures, requirements and regulations governing payment by such Account Debtor with respect to such Account, and, if due from a Medicaid/Medicare Account Debtor, is properly payable directly to Borrower, (i) Borrower has obtained and currently has all Permits necessary in the generation thereof, and (j) Borrower has disclosed to Agent on each Borrowing Certificate the amount of all Accounts of Borrower for which Medicare is the Account Debtor and for which payment has been denied and subsequently appealed pursuant to the procedure described in the definition of Eligible Receivables hereof, and Borrower is pursuing all available appeals in respect of such Accounts 5.21 HEALTHCARE Without limiting or being limited by any other provision of any Loan Document, Borrower has timely filed or caused to be filed all cost and other reports of every kind required by law, agreement or otherwise. Except consistent with past practices, there are no claims, actions or appeals pending (and Borrower has not filed any claims or reports which could reasonably result in any such claims, actions or appeals) before any commission, board or agency or other Governmental Authority, including, without limitation, any intermediary or carrier, the Provider Reimbursement Review Board or the Administrator of the Health Care Financing Administration, with respect to any state or federal Medicare or Medicaid cost reports or claims filed by Borrower, or any disallowance by any commission, board or agency or other Governmental Authority in connection with any audit of such cost reports. No validation review or program integrity review related to Borrower or the consummation of the transactions contemplated herein or to the Collateral have been conducted by any commission, board or agency or other Governmental Authority in connection with the Medicare or Medicaid programs, and to the knowledge of Borrower, no such reviews are scheduled, pending or threatened against or affecting any of the providers, any of the Collateral or the consummation of the transactions contemplated hereby. 5.22 SURVIVAL Borrower makes the representations and warranties contained herein with the knowledge and intention that Agent and Lenders are relying and will rely thereon. All such representations and warranties will survive the execution and delivery of this Agreement, the making of the Advances and the funding of the Term Loan. 27 VI. AFFIRMATIVE COVENANTS Each Borrower, jointly and severally, covenants and agrees that, until full performance and satisfaction, and indefeasible payment in full in cash, of all the Obligations and termination of this Agreement: 6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION (a) Financial Reports. Borrower shall furnish to Agent and each Lender (i) as soon as available and in any event within 90 calendar days after the end of each fiscal year of Borrower, audited annual consolidated and consolidating financial statements of Borrower, including the notes thereto, consisting of a consolidated and consolidating balance sheet at the end of such completed fiscal year and the related consolidated and consolidating statements of income, retained earnings, cash flows and owners' equity for such completed fiscal year, which financial statements shall be prepared and certified without qualification by an independent certified public accounting firm satisfactory to Agent and accompanied by related management letters, if available, and (ii) as soon as available and in any event within 30 calendar days after the end of each calendar month, unaudited consolidated and consolidating financial statements of Borrower consisting of a balance sheet and statements of income, retained earnings, cash flows and owners' equity as of the end of the immediately preceding calendar month. All such financial statements shall be prepared in accordance with GAAP consistently applied with prior periods. With each such financial statement, Borrower shall also deliver a certificate of its chief financial officer in the form of Exhibit B hereto (the "COMPLIANCE CERTIFICATE"), stating that (A) such person has reviewed the relevant terms of the Loan Documents and the condition of Borrower, (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto, (C) Borrower is in compliance with all financial covenants attached as Annex I hereto. Such certificate shall be accompanied by the calculations necessary to show compliance with the financial covenants in a form satisfactory to the Agent. (b) Other Materials. Borrower shall furnish to Agent and each Lender as soon as available, and in any event within 10 calendar days after the preparation or issuance thereof or at such other time as set forth below: (i) copies of such financial statements (other than those required to be delivered pursuant to Section 6.1(a)) prepared by, for or on behalf of Borrower and any other notes, reports and other materials related thereto, including, without limitation, any pro forma financial statements, (ii) any reports, returns, information, notices and other materials that Borrower shall send to its stockholders, members, partners or other equity owners at any time, (iii) all Medicare and Medicaid cost reports and other documents and materials filed by Borrower and any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for or on behalf of Borrower, (iv) any other reports, materials or other information regarding or otherwise relating to Medicaid or Medicare prepared by, for, or on behalf of, Borrower or any of its Subsidiaries, including, without limitation, (A) copies of licenses and permits required by any applicable federal, state, foreign or local law, statute, ordinance or regulation or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys pertaining to any healthcare facility operated or owned or leased by Borrower or any of its Affiliates (other than Affiliates who are holders of the Series A Convertible Preferred Stock of PSI) or Subsidiaries, and (D) participating agreements relating to medical plans, (v) within 15 calendar days after the 28 end of each calendar month for such month, (A) a report of the status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts, (B) a sales and collection report and accounts receivable and accounts payable aging schedule, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts reported in the monthly financial statements, and (C) a report of census and occupancy percentage by payor type, (vi) promptly upon receipt thereof, copies of any reports submitted to Borrower by its independent accountants in connection with any interim audit of the books of such Person or any of its affiliates and copies of each management control letter provided by such independent accountants, (vii) by the second Business Day of each month (and any other time reasonably requested by Agent), a detailed aging and categorizing of Borrower's accounts receivable, and (viii) such additional information, documents, statements, reports and other materials as Agent may reasonably request from a credit or security perspective or otherwise from time to time. (c) Notices. Borrower shall promptly, and in any event within two calendar days after Borrower or any authorized officer of Borrower obtains knowledge thereof, notify Agent in writing of (i) any pending or threatened litigation, suit, investigation, arbitration, dispute resolution proceeding or administrative proceeding brought or initiated by Borrower or otherwise affecting or involving or relating to Borrower or any of its property or assets to the extent (A) the amount in controversy exceeds $50,000, or (B) to the extent any of the foregoing seeks injunctive relief, (ii) any Default or Event of Default, which notice shall specify the nature and status thereof, the period of existence thereof and what action is proposed to be taken with respect thereto, (iii) any other development, event, fact, circumstance or condition that could reasonably be expected to have a Material Adverse Effect, in each case describing the nature and status thereof and the action proposed to be taken with respect thereto, (iv) any notice received by Borrower from any payor of a claim, suit or other action such payor has, claims or has filed against Borrower, (v) any matter(s) affecting the value, enforceability or collectability of any of the Collateral, including, without limitation, claims or disputes in the amount of $50,000 or more, singly or in the aggregate, in existence at any one time, (vi) any notice given by Borrower to any other lender of Borrower and shall furnish to Agent a copy of such notice, (vii) receipt of any notice or request from any Governmental Authority or governmental payor regarding any liability or claim of liability, (viii) receipt of any notice by Borrower regarding termination of any manager of any facility owed, operated or leased by Borrower, (ix) if any Account becomes evidenced or secured by an instrument or chattel paper, and/or (x) any default under the High Yield Documents. (d) Consents. Borrower shall obtain and deliver from time to time all required consents, approvals and agreements from such third parties as Agent shall determine are necessary or desirable in its sole discretion and that are satisfactory to Agent with respect to (i) the Loan Documents and the transactions contemplated thereby, (ii) claims against Borrower, or the Collateral, and/or (iii) any agreements, consents, documents or instruments to which Borrower is a party or by which any properties or assets of Borrower or any of the Collateral is or are bound or subject, including, without limitation, Landlord Waivers and Consents with respect to leases. (e) Operating Budget. Borrower shall furnish to Agent and each Lender on or prior to the Closing Date and for each fiscal year of Borrower thereafter not less than 30 calendar days prior to the commencement of such fiscal year, consolidated and consolidating month by 29 month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash flow reports of and for Borrower for such upcoming fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied with prior periods. 6.2 PAYMENT OF OBLIGATIONS Borrower shall make full and timely indefeasible payment in cash of the principal of and interest on the Loans, Advances and all other Obligations. Simultaneously upon any prepayment of the Revolving Loan and termination of the Revolving Facility, Borrower shall make full indefeasible payment in cash of the principal of and interest on the Term Loan and all other Obligations relating to the Term Loan. 6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS Borrower shall (a) conduct its business in accordance with good business practices customary to the industry, (b) engage principally in the same or similar lines of business substantially as heretofore conducted, (c) collect its Accounts in the ordinary course of business, (d) maintain all of its material properties, assets and equipment used or useful in its business in good repair, working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of the Loan Documents), (e) from time to time to make all necessary or desirable repairs, renewals and replacements thereof, (f) maintain and keep in full force and effect its existence and all material Permits and qualifications to do business and good standing in each jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits or qualification necessary and in which failure to maintain such Permits or qualification could reasonably be likely to have a Material Adverse Effect, and (g) remain in good standing and maintain operations in all jurisdictions in which Borrower is currently located. 6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS Borrower shall (a) comply with all laws, statutes, rules, regulations, ordinances and tariffs of all Governmental Authorities applicable to it or its business, assets or operations, (b) pay all taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other obligations or liabilities of any kind, except liabilities being contested in good faith and against which adequate reserves have been established, (c) perform in accordance with its terms each contract, agreement or other arrangement to which it is a party or by which it or any of the Collateral is bound, except where the failure to comply, pay or perform could not reasonably be expected to have a Material Adverse Effect, (d) maintain and comply with all Permits necessary to conduct its business and comply with any new or additional requirements that may be imposed on it or its business, and (e) properly file all Medicaid and Medicare cost reports, including without limitation the filing of all termination cost reports (if not otherwise filed by the applicable sellers) when due. 6.5 INSURANCE Borrower shall (a) keep all of its insurable properties and assets adequately insured in all material respects against losses, damages and hazards as are customarily insured 30 against by businesses engaging in similar activities or owning similar assets or properties and at least the minimum amount required by applicable law, including, without limitation, medical malpractice and professional liability insurance, as applicable; (b) maintain general public liability insurance at all times against liability on account of damage to persons and property having such limits, deductibles, exclusions and co-insurance and other provisions as are customary for a business engaged in activities similar to those of Borrower; and (c) maintain insurance under all applicable workers' compensation laws; all of the foregoing insurance policies to (i) be reasonably satisfactory in form and substance to Agent, (ii) name Agent, for the benefit of itself and Lenders, as loss payee and additional insured thereunder, and (iii) expressly provide that they cannot be altered, amended, modified or canceled without 30 Business Days prior written notice to Agent and that they inure to the benefit of Agent, for the benefit of itself and the Lenders, notwithstanding any action or omission or negligence of or by Borrower, or any insured thereunder. 6.6 TRUE BOOKS Borrower shall (a) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and transactions in all material respects; and (b) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements. 6.7 INSPECTION; PERIODIC AUDITS Borrower shall permit the representatives of Agent and Lenders, at the expense of Borrower, from time to time during normal business hours upon reasonable notice, to (a) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers, (b) make copies and extracts therefrom, and (c) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts with its officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss the foregoing). 6.8 FURTHER ASSURANCES; POST CLOSING At Borrower's cost and expense, Borrower shall (a) within five Business Days after Agent's demand, take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, assignments, instructions or documents as Agent may reasonably request with respect to the purposes, terms and conditions of the Loan Documents and the consummation of the transactions contemplated thereby, whether before, at or after the performance and/or consummation of the transactions contemplated hereby or the occurrence of a Default or Event of Default, (b) without limiting and notwithstanding any other provision of any Loan Document, execute and deliver, or cause to be executed and delivered, such agreements and documents, and take or cause to be taken such actions, and otherwise perform, observe and comply with such obligations, as are set forth on Schedule 6.8, and (c) upon the exercise by Agent, any Lender or any of their affiliates of any power, right, privilege or 31 remedy pursuant to any Loan Document or under applicable law or at equity which requires any consent, approval, registration, qualification or authorization of any Governmental Authority, execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments and other documents that may be so required for such consent, approval, registration, qualification or authorization. Without limiting the foregoing, upon the exercise by Agent, any Lender or any of their affiliates of any right or remedy under any Loan Document which requires any consent, approval or registration with, consent, qualification or authorization by any Person, Borrower shall execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments and other documents that Agent, any Lender or such affiliate may be required to obtain for such consent, approval, registration, qualification or authorization. 6.9 PAYMENT OF INDEBTEDNESS Except as otherwise prescribed in the Loan Documents, Borrower shall pay, discharge or otherwise satisfy at or before maturity (subject to applicable grace periods and, in the case of trade payables, to ordinary course payment practices) all of its material obligations and liabilities, except when the amount or validity thereof is being contested in good faith by appropriate proceedings and such reserves as Agent may deem proper and necessary in its sole discretion shall have been made. 6.10 LIEN RELEASES If Liens other than Permitted Liens exist, Borrower immediately shall take, execute and deliver all actions, documents and instruments necessary to release and terminate such Liens. 6.11 USE OF PROCEEDS Borrower shall use the proceeds from the Revolving Facility and the Term Loan only for the purposes set forth in the recitals to this Agreement. 6.12 COLLATERAL DOCUMENTS On demand of Agent or any Lender, Borrower shall make available to Agent or such Lender copies of any and all documents, instruments, materials and other items that relate to, secure, evidence, give rise to or generate or otherwise involve Accounts of such Person. 6.13 RIGHT OF FIRST REFUSAL (a) If at any time Borrower receives from a third party an offer, term sheet or commitment or makes a proposal (including without limitation any application filed in connection with a HUD Financing) accepted by any Person (each, an "OFFER") which provides for any type of debt financing to or for Borrower, Borrower shall notify Agent and Lenders of the Offer in writing (including all material terms of the Offer) and Agent and Lenders shall have 15 Business Days after Receipt of such notice (the "OPTION PERIOD") to agree to provide similar debt financing in the place of such Person upon substantially the same terms and conditions (or terms more favorable to such Borrower) as set forth in the Offer. Agent shall notify Borrower in writing of Agent's and Lenders' acceptance of the Offer pursuant hereto (the "ACCEPTANCE 32 NOTICE"), in which case Borrower shall obtain such debt financing from Agent and Lenders and shall not accept the Offer from such other Person. If no Acceptance Notice has been Received from Agent within the Option Period, Borrower may consummate the Offer with the other Person on the terms and conditions set forth in the Offer (the "TRANSACTION"); provided, however, that none of foregoing or any failure by Agent to issue an Acceptance Notice shall be construed as a waiver of any of the terms, covenants or conditions of any of the Loan Documents. If the Transaction is not consummated on the terms set forth in the Offer or with the Person providing the Offer or during the 90 calendar day period following the expiration of the Option Period, Borrower shall not be permitted to consummate the Transaction without again complying with this Section 6.13. The provisions of this Section 6.13 shall survive the payment in full of the Obligations and termination of this Agreement for a period of six months. For purposes of this Section 6.13, "Lender" shall include CapitalSource and any of its parents, Subsidiaries or affiliates. (b) If, at any time prior to and including the third anniversary of the last day of the later of the Revolving Facility Term and the Term Notes Term, Borrower applies for or otherwise seeks financing from any Person under a program sponsored by the United States Department of Housing and Urban Development (each application, a "HUD APPLICATION"), Borrower agrees that CapitalSource Mortgage Finance LLC, an FHA-approved lender, shall have the exclusive right to provide and arrange Borrower's financing obtained in connection with such HUD Application. 6.14 TAXES AND OTHER CHARGES All payments and reimbursements to Agent, for the benefit of Lenders, made under any Loan Document shall be free and clear of and without deduction for all taxes, levies, imposts, deductions, assessments, charges or withholdings, and all liabilities with respect thereto of any nature whatsoever, excluding taxes to the extent imposed on each Lender's net income. If Borrower shall be required by law to deduct any such amounts from or in respect of any sum payable under any Loan Document to Agent, for the benefit of Lenders, then the sum payable to Agent, for the benefit of Lenders, shall be increased as may be necessary so that, after making all required deductions, each Lender receives an amount equal to the sum it would have received had no such deductions been made. Notwithstanding any other provision of any Loan Document, if at any time after the Closing (a) any change in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (b) any new law, regulation, treaty or directive enacted or any interpretation or application thereof, or (c) compliance by any Lender with any request or directive (whether or not having the force of law) from any Governmental Authority: (i) subjects such Lender to any tax, levy, impost, deduction, assessment, charge or withholding of any kind whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to Agent, for the benefit of Lenders, of any amount payable thereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or commitment fees or other fees payable hereunder or changes in the rate of tax on the overall net income of each Lender), or (ii) imposes on Lenders any other condition or increased cost in connection with the transactions contemplated thereby or participations therein; and the result of any of the foregoing is to increase the cost to Lenders of making or continuing any Loan hereunder or to reduce any amount receivable hereunder, then, in any such case, Borrower shall promptly pay to Agent, for 33 the benefit of itself and the Lenders, any additional amounts necessary to compensate each Lender, on an after-tax basis, for such additional cost or reduced amount as determined by such Lender. If any Lender becomes entitled to claim any additional amounts pursuant to this Section 6.14 it shall promptly notify Borrower of the event by reason of which such Lender has become so entitled, and each such notice of additional amounts payable pursuant to this Section 6.14 submitted by such Lender to Borrower shall, absent manifest error, be final, conclusive and binding for all purposes. Without limiting or being limited by any other provision of any Loan Document, Borrower at all times shall retain and use a Person acceptable to Agent to process, manage and pay its payroll taxes and shall cause to be delivered to Agent and each Lender within ten calendar days after the end of each calendar month a report of its payroll taxes for the immediately preceding calendar month and evidence of payment thereof. 6.15 PATIENT BILLS Within three Business Days of discharge of a Patient, Borrower will deliver a bill to the applicable payor(s) for Services rendered to such Patient. For any Patient who qualifies for billing prior to discharge, Borrower will deliver a bill to the applicable payor(s) for Services rendered to such Patient, as frequently as allowed; provided, however, no such billing shall be required more often than twice per month. 6.16 MODIFICATION OF SUBORDINATION AGREEMENTS On or before the Closing Date, (a) Borrower shall amend and restate the Subordination Agreement to reference this Agreement, (b) Borrower shall cause the holder of such Subordinated Debt to otherwise revise such Subordination Agreement to the satisfaction of Agent and (c) Borrower shall make such other changes as Agent may request. 6.17 INTERNAL COST REPORTS; RESERVES (a) Notwithstanding and in addition to Section 6.1 and the other provisions of this Agreement and the Loan Documents, Borrower shall prepare and furnish to Agent and Lenders when completed, but in no event more than 15 calendar days after the end of each calendar quarter, a cost report for the immediately preceding calendar quarter for Borrower (each individually and collectively, "INTERNAL COST REPORT") setting forth for Borrower the precise amount of cumulative cost-year to date accrued Medicare and Medicaid liability for the Medicare and Medicaid cost-year in which such preceding quarter falls based on and calculated as the difference between actual reported costs and the interim reimbursement rate then being used for Medicare and Medicaid, as applicable (such cumulative cost-year to date amounts being the "ACCRUED LIABILITIES"). (b) At the expense of Borrower, Borrower agrees and acknowledges that Agent shall have the right at any time within 90 Business Days after the Closing and at such other times as Agent deems necessary (provided, that any such audits other than the initial audit contemplated by this sentence shall be at the expense of Borrower only if Agent determines as a result of and based on any such audit that the methods or procedures used by Borrower in preparing any of the Internal Cost Reports or the amounts or figures contained in any such reports are incorrect or inaccurate in any material respect), during normal business hours, to have 34 an independent third party expert in reimbursement issues as chosen and determined by Agent visit and inspect any of the offices or properties of Borrower and any other place where Collateral is located or Accounts and receivables are generated to audit the methods and procedures used by Borrower in preparing the Internal Cost Reports and calculating the amounts and figures contained in such reports and all of its books of account, records, reports and other papers relating in any way thereto. VII. NEGATIVE COVENANTS Each Borrower, jointly and severally, covenants and agrees that, until full performance and satisfaction, and indefeasible payment in full in cash, of all the Obligations and termination of this Agreement: 7.1 FINANCIAL COVENANTS Borrower shall not violate the financial covenants set forth on Annex I to this Agreement, which is incorporated herein and made a part hereof. 7.2 INDEBTEDNESS Borrower shall not create, incur, assume or suffer to exist any Indebtedness, except the following (collectively, "PERMITTED INDEBTEDNESS"): (a) Indebtedness under the Loan Documents; (b) any Indebtedness set forth on Schedule 7.2; provided, that any refinancing of the Indebtedness set forth on Schedule 7.2 shall have the following terms: (i) the stated applicable pre-default or post-default interest rate (or the margin thereon if based on a variable rate) on such Indebtedness shall not be greater than the stated applicable pre-default or post-default interest rate (or the margin thereon if based on a variable rate) as in effect on the date hereof; (ii) the maximum principal amount outstanding under such Indebtedness as so refinanced does not exceed the maximum principal amount permitted to be outstanding on the date hereof; and (iii) no advances under such Indebtedness may be made on or after the date hereof; (c) Capitalized Lease Obligations incurred after the Closing Date and Indebtedness incurred pursuant to purchase money Liens permitted by Section 7.3(e); provided, that the aggregate amount thereof outstanding at any time shall not exceed $250,000; (d) Indebtedness in connection with advances made by a stockholder in order to cure any default of the financial covenants set forth on Annex I; provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Agent's and Lenders' rights and in form and substance satisfactory to Agent; (e) accounts payable to trade creditors and current operating expenses (other than for borrowed money) incurred in the ordinary course of business and paid when due, unless the same are being contested in good faith and by appropriate and lawful proceedings and such reserves, if any, with respect thereto as are required by GAAP and deemed adequate by Borrower's independent accountants shall have been reserved; (f) Indebtedness owing by any Borrower to another Borrower; provided, that such Indebtedness shall be (i) evidenced by a note, (ii) on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Agent's and Lenders' rights and in form and substance satisfactory to Agent, and (iii) pledged to Agent, for the benefit of itself and Lenders; (g) borrowings incurred in the ordinary course of business and not exceeding $100,000 individually or in the aggregate outstanding at any one time; (h) the Put Price Notes (as defined 35 in the Securities Purchase Agreement; and (i) the High Yield Indebtedness; provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Agent's and Lenders' rights and in form and substance satisfactory to Agent. Borrower shall not make prepayments on any existing or future Indebtedness to any Person other than to Agent, for the benefit of itself and the Lenders, or to the extent specifically permitted by this Agreement or any subsequent agreement between Borrower, Agent and Lenders. 7.3 LIENS Borrower shall not create, incur, assume or suffer to exist any Lien upon, in or against, or pledge of, any of the Collateral or any of its properties or assets or any of its shares, securities or other equity or ownership or partnership interests, whether now owned or hereafter acquired, except the following (collectively, "PERMITTED LIENS"): (a) Liens under the Loan Documents or otherwise arising in favor of Agent, for the benefit of itself and Lenders, (b) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by Borrower in accordance with GAAP to the satisfaction of Agent in its sole discretion, (c) (i) statutory Liens of landlords (provided that any such landlord has executed a Landlord Waiver and Consent in form and substance satisfactory to Agent) and of carriers, warehousemen, mechanics and materialmen, and (ii) other Liens imposed by law or that arise by operation of law in the ordinary course of business from the date of creation thereof, in each case only for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by Borrower in accordance with GAAP to the satisfaction of Agent in its sole discretion, (d) Liens (i) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations, or (ii) arising as a result of progress payments under government contracts, (e) purchase money Liens (i) securing Indebtedness permitted under Section 7.2(c), or (ii) in connection with the purchase by Borrower of equipment in the normal course of business; provided, that such payables shall not exceed any limits on Indebtedness provided for herein and shall otherwise be Permitted Indebtedness hereunder, (f) Liens necessary and desirable for the operation of Borrower's business; provided, that Agent has consented to such Liens in writing before their creation and existence and the priority of such Liens and the debt secured thereby are both subject and subordinate in all respects to the Liens securing the Collateral and to the Obligations and all of the rights and remedies of Agent and each Lender, all in form and substance satisfactory to Agent in its sole discretion, (g) Liens shown on the title policy or survey covering the Real Property and approved by Agent prior to the date hereof, (h) promptly after the rendition thereof, Liens imposed by any judgment rendered against Borrower or any of its Subsidiaries in excess of (A) $250,000, if such amount is covered by insurance or (B) $100,000, if such amount is not covered by insurance, and (i) Liens disclosed on Schedule 7.3. 36 7.4 INVESTMENTS; NEW FACILITIES OR COLLATERAL; SUBSIDIARIES Borrower, directly or indirectly, shall not (a) purchase, own, hold, invest in or otherwise acquire obligations or stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person or any joint venture, except for those entities listed on Schedule 5.3; provided, however, Borrower may consummate the Ramsay Acquisition, or (b) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any Person other than those created by the Loan Documents and Permitted Indebtedness, and other than (i) trade credit extended in the ordinary course of business, (ii) advances for business travel and similar temporary advances made in the ordinary course of business to officers, directors and employees, and (iii) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; provided, however, Borrower may consummate the Ramsay Acquisition. Borrower, directly or indirectly, shall not purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or any Collateral that is not located at the locations set forth on Schedule 5.18B, unless Borrower shall provide to Agent at least 30 Business Days prior written notice. Notwithstanding anything in this Section 7.4 to the contrary, Borrower may invest in Permitted Investments at any time. Borrower shall have no Subsidiaries other than Borrowers hereunder, RY Puerto Rico, HUD Financing Subsidiaries and PSI Surety. 7.5 DIVIDENDS; REDEMPTIONS Borrower shall not (a) declare, pay or make any dividend or distribution on any shares of capital stock or other securities or interests (other than (i) dividends or distributions payable in its stock, or split-ups or reclassifications of its stock, and (ii) dividends and distributions payable to (A) PSI, and (B) wholly-owned Subsidiaries of PSI which are Borrowers), (b) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital stock or other securities or interests or of any options to purchase or acquire any of the foregoing (provided, however, that Borrower may redeem its capital stock from terminated employees pursuant to, but only to the extent required under, the terms of the related employment agreements as long as no Default or Event of Default has occurred and is continuing or would be caused by or result therefrom), (c) otherwise make any payments or Distributions to any stockholder, member, partner or other equity owner in such Person's capacity as such, or (d) make any payment of any management, service or related or similar fee to any Person or with respect to any facility owned, operated or leased by Borrower; provided, that nothing contained in this Section 7.5 shall prevent Borrower from making any payments and/or consummating any transactions permitted pursuant to the Subordination Agreement with the 1818 Mezzanine Fund. 7.6 TRANSACTIONS WITH AFFILIATES Borrower shall not enter into or consummate any transaction of any kind with any of its affiliates or any Guarantor or any of their respective affiliates other than: (a) salary, bonus, employee stock option and other compensation, and employment and standard indemnification arrangements with directors or officers in the ordinary course of business; provided, that no payment of any bonus shall be permitted if a Default or Event of Default has occurred and remains in effect or would be 37 caused by or result from such payment, (b) distributions and dividends permitted pursuant to Section 7.5, (c) transactions on overall terms at least as favorable to Borrower as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power, (d) transactions with Agent or Lenders or any affiliate of Agent or Lenders, (e) payments to any Borrower, (f) payments to any HUD Financing Subsidiary to pay obligations on a non-accelerated basis under a HUD Financing which has been approved by Agent, (g) payments to PSI Surety in the ordinary course of business pursuant to agreements entered into on arm's length terms which have been disclosed to Agent in writing and approved by Agent, (h) payments permitted under and pursuant to written agreements entered into by and between Borrower and one or more of its affiliates that both (i) reflect and constitute transactions on overall terms at least as favorable to Borrower as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power, and (ii) are subject to such terms and conditions as determined by Agent in its sole discretion; provided, that notwithstanding the foregoing clauses (i) and (ii) of this clause (h), Borrower shall not (A) enter into or consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any of its affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant to any agreement for any Indebtedness of any such affiliate, or (B) make any payment to any of its affiliates in excess of $10,000 without the prior written consent of Agent (other than (i) to portfolio companies of the institutional owners of PSI so long as such payment otherwise complies with clause (h)(i) [it being understood that clause (ii) shall not apply to such transactions with portfolio companies satisfying clause (i)], or (ii) pursuant to the High Yield Documents), (i) transactions pursuant to the Stock Purchase Agreement dated as of January 6, 2003 between PSI and the purchasers thereunder (the "Series A Purchasers") and the Registration Rights Agreement dated as of January 6, 2003, between PSI and the Series A Purchasers, in each case otherwise complying with this Agreement, and (j) payments and/or transactions permitted pursuant to the Subordination Agreement with the 1818 Mezzanine Fund. 7.7 CHARTER DOCUMENTS; FISCAL YEAR; DISSOLUTION; USE OF PROCEEDS Borrower shall not (a) amend, modify, restate or change its certificate of incorporation or formation or bylaws or similar charter documents in a manner that would be adverse to Agent or any Lender, (b) change its fiscal year unless Borrower demonstrates to Agent's satisfaction compliance with the covenants contained herein for both the fiscal year in effect prior to any change and the new fiscal year period by delivery to Agent and each Lender of appropriate interim and annual pro forma, historical and current compliance certificates for such periods and such other information as Agent may reasonably request, (c) amend, alter or suspend or terminate or make provisional in any material way, any Permit without the prior written consent of Agent, which consent shall not be unreasonably withheld, (d) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, or (e) use any proceeds of any Loans for "purchasing" or "carrying" "margin stock" as defined in Regulations T, U or X of the Board of Governors of the Federal Reserve System. 7.8 TRUTH OF STATEMENTS Borrower shall not furnish to Agent or any Lender any certificate or other document that contains any untrue statement of a material fact or that omits to state a material 38 fact necessary to make it not misleading in light of the circumstances under which it was furnished. 7.9 PAYMENT ON SUBORDINATED DEBT Borrower shall not (a) make any prepayment of any part or all of any Subordinated Debt, (b) defease, repurchase, redeem or retire any instrument evidencing any such Subordinated Debt prior to maturity, or (c) enter into any agreement (oral or written) which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing or relating to any Subordinated Debt; provided, however, that Borrower may make any required payments on any Subordinated Debt in accordance with the provisions of the note evidencing such Subordinated Debt, or if more restrictive, the provisions of any Subordination Agreement, each as in effect on the date hereof. Notwithstanding the foregoing, Borrower shall not make any (i) payments on any Subordinated Debt if a Default or Event of Default shall have occurred and be continuing or would occur as a result of any payment on such Subordinated Debt (unless, with respect to the 1818 Mezzanine Fund Subordinated Indebtedness, such payment is permitted pursuant to the Subordination Agreement with the 1818 Mezzanine Fund), or (ii) principal payments on the High Yield Indebtedness. 7.10 AMENDMENT OF THE HIGH YIELD DOCUMENTS Borrower shall not, without the prior written consent of Agent, agree to any amendment, modification or supplement to the High Yield Documents the effect of which is to (a) increase the maximum principal amount of the High Yield Indebtedness or rate of interest on any of the High Yield Indebtedness, (b) change the dates upon which payments of principal or interest on the High Yield Indebtedness are due, (c) change or add any event of default or any covenant with respect to the High Yield Indebtedness, (d) change any redemption or prepayment provisions of the High Yield Indebtedness, (e) alter the subordination provisions with respect to the High Yield Indebtedness, including, without limitation, subordinating the High Yield Indebtedness to any other indebtedness, (f) take any liens or security interests in any assets of Borrower or any guarantor as security for the High Yield Indebtedness or (g) change or amend any other term of the High Yield Documents if such change or amendment would result in an Event of Default, increase the obligations of Borrower or any guarantor under the High Yield Indebtedness or confer additional material rights on any other holder of the High Yield Indebtedness in a manner adverse to Borrower, any such guarantor or Agent. Borrower shall not designate any indebtedness other than the Obligations as "Designated Senior Debt" (as defined in the High Yield Documents). 7.11 NON-BORROWERS Borrower shall not make any investment in or loans to or any asset transfers to PSI Surety or the HUD Financing Subsidiaries (other than ordinary course of business transactions entered into on arm's length terms which have been disclosed to Agent in writing and approved by Agent). Borrower shall cause PSI Surety and the HUD Financing Subsidiaries to not make any Distribution other than (a) to a Borrower, and (b) ordinary course of business transactions entered into on arm's length terms which have been disclosed to Agent in writing 39 and approved by Agent. No HUD Financing Subsidiary may own any material assets, unless such HUD Financing Subsidiary has completed a HUD Financing. VIII. EVENTS OF DEFAULT The occurrence of any one or more of the following shall constitute an "Event of Default": (a) Borrower shall fail to pay any amount on the Obligations or provided for in any Loan Document when due (whether on any payment date, at maturity, by reason of acceleration, by notice of intention to prepay, by required prepayment or otherwise); provided, that, if Borrower shall fail to pay any amount on the Obligations when due, there shall be a one day grace period after Receipt by Borrower of written notice from Agent of such nonpayment; (b) any representation, statement or warranty made or deemed made by Borrower or any Guarantor in any Loan Document or in any other certificate, document, report or opinion delivered in conjunction with any Loan Document or in any other agreement, contract, document or instrument between any Borrower or Guarantor and Agent or any Lender or affiliate of Agent or any Lender to which it is a party, shall not be true and correct in all material respects or shall have been false or misleading in any material respect on the date when made or deemed to have been made (except to the extent already qualified by materiality, in which case it shall be true and correct in all respects and shall not be false or misleading in any respect); (c) Borrower or any Guarantor or other party thereto, other than Agent or any Lender, shall be in violation, breach or default of, or shall fail to perform, observe or comply with any covenant, obligation or agreement set forth in, any Loan Document and such violation, breach, default or failure shall not be cured within the applicable period set forth in the applicable Loan Document; provided, that, with respect to the affirmative covenants set forth in Article VI (other than Sections 6.2, 6.3(f), 6.9 and 6.11 for which there shall be no cure period, and other than Sections 6.1 and 6.3(a)-(e) and (g) for which there shall be a 15 calendar day cure period), there shall be a 30 calendar day cure period commencing from the earlier of (i) Receipt by such Person of written notice of such breach, default, violation or failure, and (ii) the time at which such Person or any authorized officer thereof knew or became aware, or should have known or been aware, of such failure, violation, breach or default; (d) (i) any of the Loan Documents ceases to be in full force and effect, or (ii) any Lien created thereunder ceases to constitute a valid perfected first priority Lien on the Collateral in accordance with the terms thereof, or Agent, for the benefit of itself and Lenders, ceases to have a valid perfected first priority security interest in any of the Collateral or any securities pledged to Agent, for the benefit of itself and Lenders, pursuant to the Security Documents; (e) one or more judgments or decrees is rendered against any Borrower or Guarantor in an amount in excess of (i) $250,000, if such amount is covered by insurance or (ii) $100,000, if such amount is not covered by insurance, which is/are not satisfied, stayed, vacated or discharged of record within 30 calendar days of being rendered; 40 (f) (i) any default occurs, which is not cured or waived, (x) in the payment of any amount with respect to any Indebtedness (other than the Obligations) of any Borrower or Guarantor in excess of $100,000, (y) in the performance, observance or fulfillment of any provision contained in any agreement, contract, document or instrument to which any Borrower or Guarantor is a party or to which any of their properties or assets are subject or bound under or pursuant to which any Indebtedness was issued, created, assumed, guaranteed or secured and such default continues for more than any applicable grace period or permits the holder of any Indebtedness, in excess of $100,000, to accelerate the maturity thereof, or (z) in the performance, observance or fulfillment of any provision contained in any agreement, contract, document or instrument between any Borrower or Guarantor and Agent or any Lender or affiliate of Agent or any Lender (other than the Loan Documents), or (ii) any Indebtedness of any Borrower or Guarantor in excess of $100,000 is declared to be due and payable or is required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof, or any obligation of such Person for the payment of Indebtedness (other than the Obligations) is not paid when due or within any applicable grace period, or any such obligation becomes or is declared to be due and payable before the expressed maturity thereof, or there occurs an event which, with the giving of notice or lapse of time, or both, would cause any such obligation to become, or allow any such obligation to be declared to be, due and payable; (g) any Borrower or Guarantor shall (i) be unable to pay its debts generally as they become due, (ii) file a petition under any insolvency statute, (iii) make a general assignment for the benefit of its creditors, (iv) commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property, or (v) file a petition seeking reorganization or liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute; (h) (i) a court of competent jurisdiction shall (A) enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of any Borrower or Guarantor or the whole or any substantial part of any such Person's properties, which shall continue unstayed and in effect for a period of 60 calendar days, (B) shall approve a petition filed against any Borrower or Guarantor seeking reorganization, liquidation or similar relief under the any Debtor Relief Law or any other applicable law or statute, which is not dismissed within 60 calendar days or, (C) under the provisions of any Debtor Relief Law or other applicable law or statute, assume custody or control of any Borrower or Guarantor or of the whole or any substantial part of any such Person's properties, which is not irrevocably relinquished within 60 calendar days, or (ii) there is commenced against any Borrower or Guarantor any proceeding or petition seeking reorganization, liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute, which (A) is not unconditionally dismissed within 60 calendar days after the date of commencement, or (B) is with respect to which such Borrower or Guarantor takes any action to indicate its approval of or consent to; (i) (i) any Change of Control occurs or any agreement or commitment to cause or that may result in any such Change of Control is entered into, (ii) any Material Adverse Effect, Material Adverse Change occurs, or is reasonably expected to occur, (iii) any Liability Event occurs or is reasonably expected to occur, which results or is reasonably expected to result in a liability of Borrower in excess of $100,000, or (iv) any Borrower or Guarantor ceases any portion of its business operations as currently conducted; 41 (j) Agent or any Lender receives any indication or evidence that any Borrower or Guarantor may have directly or indirectly been engaged in any type of activity which, in Agent's judgment, might result in forfeiture of any property to any Governmental Authority which shall have continued unremedied for a period of ten calendar days after written notice from Agent; (k) an Event of Default occurs under any other Loan Document; (l) uninsured damage to, or loss, theft or destruction of, any portion of the Collateral occurs that exceeds $100,000 in the aggregate; (m) any Borrower or Guarantor or any of their respective directors or senior officers is criminally indicted or convicted under any law that could lead to a forfeiture of any Collateral; (n) the issuance of any process for levy, attachment or garnishment or execution upon or prior to any judgment against any Borrower or Guarantor or any of their property or assets; or (o) any Borrower or Guarantor does, or enters into or becomes a party to any agreement or commitment to do, or cause to be done, any of the things described in this Article VIII or otherwise prohibited by any Loan Document (subject to any cure periods set forth therein); then, and in any such event, notwithstanding any other provision of any Loan Document, Agent may (and at the request of Requisite Lenders, shall), by notice to Borrower (i) terminate its obligations to make Loans hereunder, whereupon the same shall immediately terminate, (ii) declare all or any of the Notes, all interest thereon and all other Obligations to be due and payable immediately (except in the case of an Event of Default under Section 8(c), (g), (h) or (i)(iii), in which event all of the foregoing shall automatically and without further act by Agent or any Lender be due and payable; provided, that, with respect to non-material breaches or violations that constitute Events of Default under clause (ii) of Section 8(c), there shall be a three Business Day cure period commencing from the earlier of (A) Receipt by the applicable Person of written notice of such breach or violation or of any event, fact or circumstance constituting or resulting in any of the foregoing, and (B) the time at which such Person or any authorized officer thereof knew or became aware, or should have known or been aware, of such breach or violation and resulting Event of Default or of any event, fact or circumstance constituting or resulting in any of the foregoing), in each case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower, and (iii) prohibit any action permitted to be taken under Article VII hereof. IX. RIGHTS AND REMEDIES AFTER DEFAULT 9.1 RIGHTS AND REMEDIES (a) In addition to the acceleration provisions set forth in Article VIII above, upon the occurrence and continuation of an Event of Default, Agent shall have the right to (and at the request of Requisite Lenders, shall) exercise any and all rights, options and remedies 42 provided for in any Loan Document, under the UCC or at law or in equity, including, without limitation, the right to (i) apply any property of any Borrower held by Agent, for the benefit of Lenders, to reduce the Obligations, (ii) foreclose the Liens created under the Security Documents, (iii) realize upon, take possession of and/or sell any Collateral or securities pledged (other than Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law) with or without judicial process, (iv) exercise all rights and powers with respect to the Collateral as any Borrower as applicable, might exercise (other than with respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law), (v) collect and send notices regarding the Collateral (other than with respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law), with or without judicial process, (vi) by its own means or with judicial assistance, enter any premises at which Collateral and/or pledged securities are located, or render any of the foregoing unusable or dispose of the Collateral and/or pledged securities on such premises without any liability for rent, storage, utilities, or other sums, and no Borrower shall resist or interfere with such action, (vii) at Borrower's expense, require that all or any part of the Collateral be assembled and made available to Agent at any place designated by Agent, (viii) reduce or otherwise change the Facility Cap and/or the Maximum Loan Amount, and/or (ix) relinquish or abandon any Collateral or securities pledged or any Lien thereon. Notwithstanding any provision of any Loan Document, Agent, in its sole discretion, shall have the right, at any time that Borrower fails to do so, and from time to time, without prior notice, to: (A) obtain insurance covering any of the Collateral to the extent required hereunder; (B) pay for the performance of any of Obligations; (C) discharge taxes or Liens on any of the Collateral that are in violation of any Loan Document unless Borrower is in good faith with due diligence by appropriate proceedings contesting those items; and (D) pay for the maintenance and preservation of the Collateral. Such expenses and advances shall be added to the Obligations until reimbursed to Agent and shall be secured by the Collateral, and such payments by Agent and/or any Lender shall not be construed as a waiver by Agent or Lenders of any Event of Default or any other rights or remedies of Agent and Lenders. (b) Borrower agrees that notice Received by it at least ten calendar days before the time of any intended public sale, or the time after which any private sale or other disposition of Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Agent without prior notice to Borrower. At any sale or disposition of Collateral or securities pledged, Agent may (to the extent permitted by applicable law) purchase all or any part thereof free from any right of redemption by any Borrower which right is hereby waived and released. 9.2 RIGHTS AND REMEDIES NOT EXCLUSIVE Agent and Lenders shall have the right in their sole discretion to determine which rights, Liens and/or remedies Agent or Lenders may at any time pursue, relinquish, subordinate or modify, and such determination will not in any way modify or affect any of Agent's or Lenders' rights, Liens or remedies under any Loan Document, applicable law or equity. The enumeration of any rights and remedies in any Loan Document is not intended to be exhaustive, and all rights and remedies of Agent and Lenders described in any Loan Document are 43 cumulative and are not alternative to or exclusive of any other rights or remedies which Agent or Lenders otherwise may have. The partial or complete exercise of any right or remedy shall not preclude any other further exercise of such or any other right or remedy. X. WAIVERS AND JUDICIAL PROCEEDINGS 10.1 WAIVERS Except as expressly provided for herein, Borrower hereby waives demand, presentment, protest, all defenses with respect to any and all instruments and all notices and demands of any description, and the pleading of any statute of limitations as a defense to any demand under any Loan Document. Borrower hereby waives any and all defenses and counterclaims it may have or could interpose in any action or procedure brought by Agent or Lenders to obtain an order of court recognizing the assignment of, or Lien of Agent, for the benefit of itself and Lenders, in and to, any Collateral, whether or not payable by a Medicaid/Medicare Account Debtor. 10.2 DELAY; NO WAIVER OF DEFAULTS No course of action or dealing, renewal, release or extension of any provision of any Loan Document, or single or partial exercise of any such provision, or delay, failure or omission on Agent's or Lenders' part in enforcing any such provision shall affect the liability of any Borrower or Guarantor or operate as a waiver of such provision or affect the liability of any Borrower or Guarantor or preclude any other or further exercise of such provision. No waiver by any party to any Loan Document of any one or more defaults by any other party in the performance of any of the provisions of any Loan Document shall operate or be construed as a waiver of any future default, whether of a like or different nature, and each such waiver shall be limited solely to the express terms and provisions of such waiver. Notwithstanding any other provision of any Loan Document, by completing the Closing under this Agreement and/or by making Advances or funding the Term Loan, neither Agent or any Lender waives any breach of any representation or warranty of under any Loan Document, and all of Agent's and Lenders' claims and rights resulting from any such breach or misrepresentation are specifically reserved. 10.3 JURY WAIVER EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY. 44 10.4 COOPERATION IN DISCOVERY AND LITIGATION In any litigation, arbitration or other dispute resolution proceeding relating to any Loan Document, Borrower waives any and all defenses, objections and counterclaims it may have or could interpose with respect to (a) any of its directors, officers, members, managers, partners, employees or agents being deemed to be employees or managing agents of Borrower for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise), (b) Agent's or any Lender's counsel examining any such individuals as if under cross-examination and using any discovery deposition of any of them as if it were an evidence deposition, and/or (c) using all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Agent, all Persons, documents (whether in tangible, electronic or other form) and/or other things under its control and relating to the dispute. 10.5 AMENDMENT AND WAIVERS (a) Except as otherwise provided herein, no amendment, modification, termination, or waiver of any provision of this Agreement or any Loan Document, or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Requisite Lenders and Agent; provided, that no amendment, modification, termination, or waiver shall, unless in writing and signed by each Lender directly affected thereby, do any of the following: (i) increase the Commitment of any Lender (which action shall be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of interest on or fees payable with respect to any Loan; (iii) extend the scheduled due date, reduce the amount due on any scheduled due date, of any installment of principal, interest, or fees payable with respect to any Loan, or waive, forgive, extend, defer or postpone the payment thereof; (iv) change the percentage of the Commitments, of the aggregate unpaid principal amount of the Loans, or of Lenders which shall be required for Lenders or any of them to take any action hereunder (which action shall be deemed to directly affect all Lenders); (v) except as otherwise permitted herein or in the other Loan Documents, release any Guaranty or release any material portion of the Collateral (which action shall be deemed to directly affect all Lenders) (provided, that consent to such release shall not be required if such release is made after and during the continuance of an Event of Default in connection with the sale or disposition of the Collateral by Agent); (vi) amend, modify or waive this Section 10.5 or the definitions of the terms used in this Section 10.5 insofar as the definitions affect the substance of this Section 10.5 (which action shall be deemed to directly affect all Lenders); (vii) consent to the assignment or other transfer by Borrower or any other party (other than any Lender) to any Loan Documents of any of their rights and obligations under any Loan Document; and, provided, further, that no amendment, modification, termination or waiver affecting the rights or duties of Agent under any Loan Document shall in any event be effective, unless in writing and signed by Agent, in addition to Lenders required herein above to take such action. (b) 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 Agent to take additional Collateral pursuant to any Loan Document. 45 (c) Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.5 shall be binding upon each Lender, and, if signed by Borrower, on Borrower. XI. EFFECTIVE DATE AND TERMINATION 11.1 EFFECTIVENESS AND TERMINATION Subject to each Lender's right to terminate and cease making Loans upon or after any Event of Default, this Agreement shall continue in full force and effect until the full performance and indefeasible payment in cash of all Obligations, unless terminated sooner as provided in this Section 11.1. Borrower may terminate this Agreement at any time upon not less than 30 calendar days prior written notice to Agent and upon full performance and indefeasible payment in full in cash of all Obligations on or prior to such 30th calendar day after Receipt by Agent of such written notice. All of the Obligations shall be immediately due and payable upon any such termination on the termination date stated in any notice of termination (the "TERMINATION DATE"); provided, that, notwithstanding any other provision of any Loan Document, the Termination Date shall be effective no earlier than the first Business Day of the month following the expiration of the 30 calendar days prior written notice period. Notwithstanding any other provision of any Loan Document, no termination of this Agreement shall affect any Lender's rights or any of the Obligations existing as of the effective date of such termination, and the provisions of the Loan Documents shall continue to be fully operative until the Obligations have been fully performed and indefeasibly paid in cash in full. The Liens granted to Agent, for the benefit of itself and Lenders, under the Security Documents and the financing statements filed pursuant thereto and the rights and powers of Agent and Lenders shall continue in full force and effect notwithstanding the fact that Borrower's borrowings hereunder may from time to time be in a zero or credit position until all of the Obligations have been fully performed and indefeasibly paid in full in cash. Notwithstanding anything contained in this Agreement, Borrower may not voluntarily terminate the Revolving Facility during the first six months of the Revolving Facility Term. 11.2 SURVIVAL All obligations, covenants, agreements, representations, warranties, waivers and indemnities made by Borrower in any Loan Document shall survive the execution and delivery of the Loan Documents, the Closing, the making of the Loans and any termination of this Agreement until all Obligations are fully performed and indefeasibly paid in full in cash. The obligations and provisions of Sections 3.5, 3.6, 3.7, 6.13, 10.1, 10.3, 12.3, 12.4, 12.7 and Article XI shall survive termination of the Loan Documents and any payment, in full or in part, of the Obligations. 11.3 AGENT (a) Appointment. Each Lender hereby designates and appoints CapitalSource as the administrative agent and the collateral agent, under this Agreement and the other Loan Documents, and each Lender hereby irrevocably authorizes CapitalSource, as the administrative agent and the collateral agent for such Lender, to take such action or to refrain from taking such 46 action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this Section 11.3. The provisions of this Section 11.3 are solely for the benefit of Agent and Lenders, and Borrower shall have no rights as a third-party beneficiary of any of the provisions hereof. Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents or employees. (b) Nature of Duties. In performing its functions and duties under this Agreement, Agent is acting solely on behalf of Lenders and its duties are administrative in nature and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Lenders, other than as expressly set forth herein and in the other Loan Documents, or Borrower. Agent shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement or in the other Loan Documents. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Except for information, notices, reports, and other documents expressly required to be furnished to Lenders by the Agent hereunder or given to the Agent for the account of or with copies for Lenders, each Lender shall make its own independent investigation of the financial condition and affairs of Borrower in connection with the extension of credit hereunder and shall make its own appraisal of the creditworthiness of Borrower, and Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the Closing Date or at any time or times thereafter. If Agent seeks the consent or approval of any Lenders to the taking or refraining from taking any action hereunder, then Agent shall send prior written notice thereof to each Lender. Agent shall promptly notify (in writing) each Lender any time that the applicable percentage of Lenders have instructed Agent to act or refrain from acting pursuant hereto. (c) Rights, Exculpation, Etc. Neither Agent nor any of its officers, directors, managers, members, employees or agents shall be liable to any Lender for any action lawfully taken or omitted by them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, except that Agent shall be obligated on the terms set forth herein for performance of its express duties and obligations hereunder, and except that Agent shall be liable with respect to its or their own gross negligence or willful misconduct. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith, and if any such apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them). In performing its functions and duties hereunder, Agent shall exercise the same care which it would in dealing with loans for its own account. Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties made by Borrower herein or for the execution, effectiveness, genuineness, validity, enforceability, collectability, or sufficiency of this Agreement or any of the other Loan Documents or the transactions contemplated thereby, or for the financial condition of Borrower. Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions, or conditions of 47 this Agreement or any of the Loan Documents or the financial condition of Borrower, or the existence or possible existence of any Default or Event of Default. Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the other Loan Documents Agent is permitted or required to take or to grant, and Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from taking any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from the applicable percentage of Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the applicable percentage of Lenders and notwithstanding the instructions of Lenders, Agent shall have no obligation to take any action if it, in good faith believes that such action exposes Agent to any personal liability unless Agent receives an indemnification reasonably satisfactory to it from Lenders with respect to such action. (d) Reliance. Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, telex, telecopy or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the other Loan Documents and its duties hereunder or thereunder, upon advice of legal counsel, independent accountants, and other experts selected by Agent in its sole discretion. (e) Indemnification. Each Lender, severally and not jointly, agrees to reimburse and indemnify Agent (to the extent not reimbursed by Borrower or the Guarantors), ratably according to their respective Pro Rata Share in effect on the date on which indemnification is sought under this subsection of the total outstanding obligations (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Pro Rata Share immediately prior to such date of the total outstanding obligations), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by Agent under this Agreement or any of the other Loan Documents; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from Agent's gross negligence or willful misconduct. The obligations of Lenders under this Section 11.3(e) shall survive the payment in full of the Obligations and the termination of this Agreement. (f) CapitalSource Individually. With respect to the Loans made by it, and the Notes issued to it, CapitalSource shall have and may exercise the same rights and powers hereunder and under the other Loan Documents and is subject to the same obligations and liabilities as and to the extent set forth herein and the other Loan Documents as any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include CapitalSource in its individual capacity as a Lender or one of the Requisite Lenders. CapitalSource may lend money to, and generally engage in any kind of 48 banking, trust or other business with Borrower or any subsidiary of Borrower as if it were not acting as Agent pursuant hereto. (g) Successor Agent. (i) Resignation. Agent may resign from the performance of all its functions and duties hereunder at any time by giving at least 30 days prior written notice to Borrower and Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clause (g)(ii) below or as otherwise provided below. (ii) Appointment of Successor. Upon any such notice of resignation pursuant to clause (g)(i) above, Requisite Lenders shall appoint a successor Agent. If a successor Agent shall not have been so appointed within said 30 day period, the retiring Agent, upon notice to Borrower, may, on behalf of Lenders, then appoint a successor Agent who shall serve as Agent until such time, as Requisite Lenders, appoint a successor Agent as provided above. If no successor Agent has been appointed pursuant to the foregoing within said 30 day period, the resignation shall become effective and Requisite Lenders shall thereafter perform all the duties of Agent hereunder, until such time, if any, as Requisite Lenders appoint a successor Agent as provided above. (iii) Successor Agent. Upon the acceptance of any appointment as Agent under the Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and, upon the earlier of such acceptance or the effective date of the retiring Agent's resignation, the retiring Agent shall be discharged from its duties and obligations under the Loan Documents, except that any indemnity rights or other rights in favor of such retiring Agent shall continue. After any retiring Agent's resignation as Agent under the Loan Documents, the provisions of this Section 11.3 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents. (h) Collateral Matters. (i) Collateral. Each Lender agrees that any action taken by the Agent or the Requisite Lenders (or, where required by the express terms of this Agreement, a greater proportion of Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents relating to the Collateral, and the exercise by the Agent or the Requisite Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders and the Agent. Without limiting the generality of the foregoing, the Agent shall have the sole and exclusive right and authority to (A) act as the disbursing and collecting agent for Lenders with respect to all payments and collections arising in connection herewith and with the Loan Documents in connection with the Collateral; (B) execute and deliver each Loan Document relating to the Collateral and accept delivery of each such agreement delivered by Borrower or any of its Subsidiaries; (C) act as collateral agent for Lenders for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein; (D) manage, supervise and otherwise deal with the Collateral; (E) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and 49 Liens created or purported to be created by the Loan Documents relating to the Collateral, and (F) except as may be otherwise specifically restricted by the terms hereof or of any other Loan Document, exercise all remedies given to such Agent and Lenders with respect to the Collateral under the Loan Documents relating thereto, applicable law or otherwise. (ii) Release of Collateral. Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release any Lien granted to or held by Agent for the benefit of Lenders upon any property covered by this Agreement or the Loan Documents (A) upon termination of the Revolving Facility and payment and satisfaction in full of all Obligations; (B) constituting property being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance with the provisions of this Agreement (and Agent may rely in good faith conclusively on any such certificate, without further inquiry); or (C) constituting property leased to Borrower under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by Borrower to be, renewed or extended. (iii) Confirmation of Authority; Execution of Releases. Without in any manner limiting Agent's authority to act without any specific or further authorization or consent by Lenders (as set forth in Section 11.3(h)(i) and (ii)), each Lender agrees to confirm in writing, upon request by Borrower, the authority to release any property covered by this Agreement or the Loan Documents conferred upon Agent under Section 11.3(h)(ii). So long as no Event of Default is then continuing, upon receipt by Agent of confirmation from the requisite percentage of Lenders, of its authority to release any particular item or types of property covered by this Agreement or the Loan Documents, and upon at least five Business Days prior written request by Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to Agent for the benefit of Lenders herein or pursuant hereto upon such Collateral; provided, however, that (A) Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (B) such release shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of Borrower or any subsidiary of Borrower, in respect of), all interests retained by Borrower or any subsidiary of Borrower, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part of the property covered by this Agreement or the Loan Documents. (iv) Absence of Duty. Agent shall have no obligation whatsoever to any Lender or any other Person to assure that the property covered by this Agreement or the Loan Documents exists or is owned by Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent on behalf of Lenders herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Section 11.3(h) or in any of the Loan Documents, it being understood and agreed that in respect of the property covered by this Agreement or the Loan Documents or any act, omission, or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in property covered by this Agreement or the Loan Documents as one of Lenders and that Agent shall have no duty or 50 liability whatsoever to any of the other Lenders; provided, that Agent shall exercise the same care which it would in dealing with loans for its own account. Notwithstanding the foregoing, Agent shall be liable with respect to its own gross negligence or willful misconduct. (i) Agency for Perfection. Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Lenders' security interest in Collateral which, in accordance with Article 9 of the UCC in any applicable jurisdiction, can be perfected only by possession. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver such Collateral to Agent or in accordance with Agent's instructions. (j) Exercise of Remedies. Except as set forth in Section 11.5, each Lender agrees that it will not have any right individually to enforce or seek to enforce this Agreement or any Loan Document or to realize upon any collateral security for the Loans, it being understood and agreed that such rights and remedies may be exercised only by Agent. 11.4 CONSENTS (a) In the event Agent requests the consent of a Lender and does not receive a written denial thereof within five Business Days after such Lender's receipt of such request, then such Lender will be deemed to have given such consent so long as such request contained a notice stating that such failure to respond within five Business Days would be deemed to be a consent by such Lender. (b) In the event Agent requests the consent of a Lender in a situation where such Lender's consent would be required and such consent is denied, then CapitalSource may, at its option, require such Lender to assign its interest in the Loans to CapitalSource for a price equal to the then outstanding principal amount thereof plus accrued and unpaid interest and fees due such Lender (but no prepayment fee with respect thereto, it being agreed that any prepayment fee is not applicable to such an assignment), which interest and fees will be paid when collected from Borrower. In the event that CapitalSource elects to require any Lender to assign its interest to CapitalSource pursuant to this Section 11.4, CapitalSource will so notify such Lender in writing within 45 calendar days following such Lender's denial, and such Lender will assign its interest to CapitalSource no later than five calendar days following Receipt of such notice. 11.5 SET-OFF AND SHARING OF PAYMENTS In addition to any rights and remedies 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 is hereby authorized by Borrower at any time or from time to time, to the fullest extent permitted by law, with reasonably prompt subsequent notice to Borrower or to any other Person (any prior or contemporaneous notice being hereby expressly waived) to set-off and to appropriate and to apply any and all (a) balances (general or special, time or demand, provisional or final) held by such Lender or such holder at any of its offices for the account of Borrower or any of its Subsidiaries (regardless of whether such balances are then due to Borrower or its Subsidiaries), and (b) other property at any time held or 51 owing by such Lender or such holder to or for the credit or for the account of Borrower or any of its Subsidiaries, against and on account of any of the Obligations which are not paid when due; except that no Lender or any such holder shall exercise any such right without prior written notice to Agent; provided, however, that the failure to give notice to Borrower or to any other Person shall not affect the validity of such set-off and application. Any Lender which has exercised its right to set-off or otherwise has received any payment on account of the Obligations shall, to the extent the amount of any such set-off or payment exceeds its Pro Rata Share of payments obtained by all of the Lenders on account of such Obligations, purchase for cash (and the other Lenders or holders of Loans shall sell) participations in each such other Lender's or holder's Pro Rata Share of Obligations as would be necessary to cause such Lender to share such excess with each other Lenders or holders in accordance with their respective Pro Rata Shares; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such purchasing Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery. Borrower agrees, 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 excess to other Lenders and holders, and (b) any Lender or holder 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 Loans and other Obligations in the amount of such participation. 11.6 DISBURSEMENT OF FUNDS Agent may, on behalf of Lenders, disburse funds to Borrower for Advances requested. Each Lender shall reimburse Agent on demand for its Pro Rata Share of all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender will remit to Agent its Pro Rata Share of any Advance before Agent disburses same to Borrower. If Agent elects to require that funds be made available prior to disbursement to Borrower, Agent shall advise each Lender by telephone, telex or telecopy of the amount of such Lender's Pro Rata Share of such requested Advance no later than one Business Day prior to the funding date applicable thereto, and each such Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan, in same day funds, by wire transfer to Agent's account not later than 3:00 p.m. (Eastern Time). If any Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify Borrower, and Borrower shall immediately repay such amount to Agent. Any repayment required pursuant to this Section 11.6 shall be without premium or penalty. Nothing in this Section 11.6 or elsewhere in this Agreement or the other Loan Documents, including without limitation the provisions of Section 11.7, shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights that Agent or Borrower may have against any Lender as a result of any default by such Lender hereunder. 52 11.7 SETTLEMENTS; PAYMENTS AND INFORMATION (a) Advances and Payments; Term Loan Payments; Interest and Fee Payments. (i) The amount outstanding pursuant to Advances may fluctuate from day to day through Agent's disbursement of funds to, and receipt of funds from, Borrower. In order to minimize the frequency of transfers of funds between Agent and each Lender notwithstanding terms to the contrary set forth in Section 11.6, Advances and repayments may be settled according to the procedures described in Sections 11.7(a)(ii) and 11.7(a)(iii) of this Agreement. Payments of principal, interest and fees in respect of the Term Loan will be settled, in accordance with each Lender's Pro Rata Share on the first Business Day after such payments are received. Notwithstanding these procedures, each Lender's obligation to fund its Pro Rata Share of any Advances made by Agent to Borrower will commence on the date such Advances are made by Agent. Such payments will be made by such Lender without set-off, counterclaim or reduction of any kind. (ii) Once each week, or more frequently (including daily), if Agent so elects (each such day being a "SETTLEMENT DATE"), Agent will advise each Lender by 1 p.m. (Eastern Time) by telephone, telex, or telecopy of the amount of each such Lender's Pro Rata Share of the outstanding Advances. In the event payments are necessary to adjust the amount of such Lender's share of the Advances to such Lender's Pro Rata Share of the Advances, the party from which such payment is due will pay the other, in same day funds, by wire transfer to the other's account not later than 3:00 p.m. (Eastern Time) on the Business Day following the Settlement Date. (iii) On the first Business Day of each month ("INTEREST SETTLEMENT DATE"), Agent will advise each Lender by telephone, telefax or telecopy of the amount of interest and fees charged to and collected from Borrower for the proceeding month in respect of the Advances. Provided that such Lender has made all payments required to be made by it under this Agreement, Agent will pay to such Lender, by wire transfer to such Lender's account (as specified by such Lender on Schedule 1 of this Agreement as amended by such Lender from time to time after the date hereof pursuant to the notice provisions contained herein or in the applicable Lender Addition Agreement) not later than 3 p.m. (Eastern Time) on the next Business Day following the Interest Settlement Date such Lender's share of such interest and fees. (b) Availability of Lenders' Pro Rata Share. (i) Unless Agent has been notified by a Lender prior to any proposed funding date of such Lender's intention not to fund its Pro Rata Share of the Advance amount requested by Borrower, Agent may assume that such Lender will make such amount available to Agent on the proposed funding date or the Business Day following the next Settlement Date, as applicable. If such amount is not, in fact, made available to Agent by such Lender when due, Agent will be entitled to recover such amount on demand from such Lender without set-off, counterclaim, or deduction of any kind. (ii) Nothing contained in this Section 11.7(b) will be deemed to relieve a Lender of its obligation to fulfill its commitments or to prejudice any rights Agent or Borrower may have against such Lender as a result of any default by such Lender under this Agreement. 53 (c) Return of Payments. (i) If 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 Agent from Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender without set-off, counterclaim or deduction of any kind. (ii) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to Borrower or paid to any other person pursuant to any solvency law or otherwise, then, notwithstanding any other term or condition of this Agreement, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to Borrower or such other Person, without set-off, counterclaim or deduction of any kind. 11.8 DISSEMINATION OF INFORMATION The Agent will distribute promptly to each Lender copies of all notices, schedules, reports, projections, financial statements, agreements and other material and other information, including, but not limited to, financial and reporting information received from Borrower or its Subsidiaries or generated by a third party (and excluding only internal information generated by CapitalSource for its own use as a Lender), as provided for in this Agreement and the other Loan Documents as received by the Agent. The Agent shall promptly give notice to Lenders of the receipt or sending of any notice, schedule, report, projection, financial statement or other document or information pursuant to this Agreement or any of the other Loan Documents and shall promptly forward a copy thereof to each Lender. Agent shall request information from Borrower or its Subsidiaries as Lenders may request from time to time. Agent shall not be liable to Lenders for any failure to comply with its obligations under this Section 11.8, except to the extent that such failure is attributable to Agent's gross negligence or willful misconduct. XII. MISCELLANEOUS 12.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE The Loan Documents shall be governed by and construed in accordance with the internal laws of the State of Maryland without giving effect to its choice of law provisions. Any judicial proceeding against Borrower with respect to the Obligations, any Loan Document or any related agreement may be brought in any federal or state court of competent jurisdiction located in the State of Maryland. By execution and delivery of each Loan Document to which it is a party, Borrower (i) accepts the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any judgment rendered thereby, (ii) waives personal service of process, (iii) agrees that service of process upon it may be made by certified or registered mail, return receipt requested, pursuant to Section 12.5 hereof, and (iv) waives any objection to jurisdiction and venue of any action instituted hereunder and agrees not to assert any defense based on lack of jurisdiction, venue or convenience. Nothing shall affect the right of Agent or any Lender to serve process in any manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against Borrower in the courts of any other jurisdiction having jurisdiction. Any judicial proceedings against Agent or any Lender involving, directly or indirectly, the 54 Obligations, any Loan Document or any related agreement shall be brought only in a federal or state court located in the State of Maryland. All parties acknowledge that they participated in the negotiation and drafting of this Agreement and that, accordingly, no party shall move or petition a court construing this Agreement to construe it more stringently against one party than against any other. 12.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS (a) Each Lender may at any time assign all or a portion of its rights and delegate all or a portion of its obligations under this Agreement and the other Loan Documents (including all its rights and obligations with respect to the Loans) to one or more Persons (a "TRANSFEREE"); provided, that such Transferee and such assigning Lender shall execute and deliver to Agent for acceptance and recording in the Register, a Lender Addition Agreement, substantially in the form of Exhibit C. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Lender Addition Agreement, (i) the Transferee thereunder shall be a party hereto and, to the extent provided in such Lender Addition Agreement, have the same rights, benefits and obligations as it would if it were a Lender hereunder, (ii) the assigning Lender shall be relieved of its obligations hereunder with respect to its Commitment or assigned portion thereof, as the case may be, to the extent that such obligations shall have been expressly assumed by the Transferee pursuant to such Lender Addition Agreement (and, in the case of a Lender Addition Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto but shall nevertheless continue to be entitled to the benefits of Section 12.7). Borrower hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Borrower to the Transferee and that the Transferee shall be considered to be a "Lender" hereunder. Borrower may not sell, assign or transfer any interest in this Agreement, any of the other Loan Documents, or any of the Obligations, or any portion thereof, including Borrower's rights, title, interests, remedies, powers, and duties hereunder or thereunder. (b) Each Lender may at any time sell participations in all or any part of its rights and obligations under this Agreement and the other Loan Documents (including all its rights and obligations with respect to the Loans) to one or more Persons (a "PARTICIPANT"). In the event of any such sale by a Lender of a participation to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan (and any Note evidencing such Loan) for all purposes under this Agreement and the other Loan Documents and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement pursuant to which any Lender shall sell any such participation shall provide that such Lender shall retain the sole right and responsibility to exercise such Lender's rights and enforce each of the Borrower's obligations hereunder, including the right to consent to any amendment, supplement, modification or waiver of any provision of this Agreement or any of the other Loan Documents; provided, that such participation agreement may provide that such Lender will not agree, without the consent of the Participant, to any amendment, supplement, modification or waiver of: (i) any 55 reduction in the principal amount, interest rate or fees payable with respect to any Loan in which such holder participates; (ii) any extension of the termination date of this Agreement or the date fixed for any payment of principal, interest or fees payable with respect to any Loan in which such holder participates; and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement or the Loan Documents). Borrower hereby acknowledges and agrees that the Participant under each participation shall, solely for the purposes of Sections 11.5 and 12.4 of this Agreement be considered to be a "Lender" hereunder. (c) The Agent, on behalf of the Borrower, shall maintain at its address referred to in Section 12.5 a copy of each Lender Addition Agreement delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Commitment of, and the principal amount of the Loans owing to, and the Notes evidencing such Loans owned by, each Lender from time to time. Notwithstanding anything in this Agreement to the contrary, each of the Borrower, the Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loan, the Notes and the Commitment recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Notwithstanding anything in this Agreement to the contrary, no assignment under subsection 12.2(a) of any rights or obligations under or in respect of the Loans or the Notes evidencing such Loans shall be effective unless and until the Agent shall have recorded the assignment pursuant to subsection 12.2(c). Upon its receipt of a Lender Addition Agreement executed by an assigning Lender and a Transferee, the Agent shall (i) promptly accept such Lender Addition Agreement and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give prompt notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the assigning Lender shall surrender any outstanding Notes held by it all or a portion of which are being assigned, and the Borrower, at its own expense, shall, upon the request of the Agent by the assigning Lender or the Transferee, as applicable, execute and deliver to the Agent new Notes to reflect the interest held by the assigning Lender and its Transferee. (e) Except as otherwise provided in this Section 12.2 no Lender shall, as between Borrower 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 or other Obligations owed to such Lender. Each Lender may furnish any information concerning Borrower and its Subsidiaries in the possession of that Lender from time to time to assignees, Transferees and Participants (including prospective assignees, Transferees and Participants); provided, that the Persons obtaining such information agrees to maintain the confidentiality of such information to the extent required by Section 12.10. (f) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it and the Notes held by it and the other Loan Documents and Collateral). 56 (g) Borrower agrees to use its commercially reasonable best efforts to assist any Lender in assigning or selling participations in all or any part of any Loans made by such Lender to another Person identified by such Lender. (h) Notwithstanding anything in the Loan Documents to the contrary, (i) CapitalSource and its affiliates shall not be required to execute and deliver a Lender Addition Agreement in connection with any transaction involving its affiliates, financing or funding sources or lenders, (ii) no lender to or financing or funding source of CapitalSource or its affiliates shall be considered a Transferee and (iii) there shall be no limitation or restriction on (A) CapitalSource's ability to assign or otherwise transfer any Loan Document or Obligation to any such affiliate, financing source or lender, or (B) any such affiliate's, financing source's or lender's ability to assign or otherwise transfer any Loan Document or Obligation; provided, however, CapitalSource shall continue to be liable as a "Lender" under the Loan Documents unless such affiliate or lender executes a Lender Addition Agreement and thereby becomes a "Lender," in which case such lender shall be required to comply with the other provisions of this Section 12.2. (i) The Loan Documents shall inure to the benefit of each Lender, Agent, Transferees, Participants (to the extent expressly provided therein only) and all future holders of any Note, the Obligations and/or any of the Collateral, and each of their respective successors and assigns. Each Loan Document shall be binding upon the Persons that are parties thereto and their respective successors and assigns. Except as otherwise permitted herein, no Person may assign, delegate or transfer any Loan Document or any of its rights or obligations thereunder without the prior written consent of Agent. No rights are intended to be created under any Loan Document for the benefit of any third party donee, creditor or incidental beneficiary of any Borrower or any Guarantor. Nothing contained in any Loan Document shall be construed as a delegation to Agent or any Lender of any other Person's duty of performance. BORROWER ACKNOWLEDGES AND AGREES THAT AGENT OR ANY LENDER AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND REISSUE (WITHOUT SUBSTANTIVE CHANGES OTHER THAN THOSE RESULTING FROM SUCH DIVISION) THE NOTES, AND/OR (II) PURSUANT TO SECTION 12.2, SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS, IN EACH CASE ON THE TERMS AND CONDITIONS PROVIDED HEREIN. Each Transferee and Participant shall have all of the rights and benefits with respect to the Obligations, Notes, Collateral and/or Loan Documents held by it as fully as if the original holder thereof; provided, that, notwithstanding anything to the contrary in any Loan Document, no Borrower shall be obligated to pay under this Agreement to any Transferee or Participant any sum in excess of the sum which it would have been obligated to pay to Lenders had such participation not been effected. Notwithstanding any other provision of any Loan Document, Agent and Lenders may disclose to any Transferee or Participant all information, reports, financial statements, certificates and documents obtained under any provision of any Loan Document; provided, that Transferees and Participants shall be subject to the confidentiality provisions contained herein that are applicable to Agent and Lenders. 57 12.3 APPLICATION OF PAYMENTS To the extent that any payment made or received with respect to the Obligations is subsequently invalidated, determined to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other Person under any Debtor Relief Law, common law or equitable cause or any other law, then the Obligations intended to be satisfied by such payment shall be revived and shall continue as if such payment had not been received by Agent or any Lender. Any payments with respect to the Obligations received shall be credited and applied in such manner and order as Agent shall decide in its sole discretion. 12.4 INDEMNITY Each Borrower jointly and severally shall indemnify Agent and each Lender, their affiliates and their respective managers, members, officers, employees, affiliates, agents, representatives, successors, assigns, accountants and attorneys (collectively, the "INDEMNIFIED PERSONS") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel and in-house documentation and diligence fees and legal expenses) which may be imposed on, incurred by or asserted against any Indemnified Person with respect to or arising out of, or in any litigation, proceeding or investigation instituted or conducted by any Person with respect to any aspect of, or any transaction contemplated by or referred to in, or any matter related to, any Loan Document or any agreement, document or transaction contemplated thereby, whether or not such Indemnified Person is a party thereto, except to the extent that any of the foregoing arises out of the gross negligence or willful misconduct of such Indemnified Person. If any Indemnified Person uses in-house counsel for any purpose for which any Borrower is responsible to pay or indemnify, each Borrower expressly agrees that its indemnification obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by such Indemnified Person in its sole discretion for the work performed. Agent agrees to give Borrower reasonable notice of any event of which Agent becomes aware for which indemnification may be required under this Section 12.4, and Agent may elect (but is not obligated) to direct the defense thereof; provided, that the selection of counsel shall be subject to Borrower's consent, which consent shall not be unreasonably withheld or delayed. Any Indemnified Person may, in its reasonable discretion, take such actions as it deems necessary and appropriate to investigate, defend or settle any event or take other remedial or corrective actions with respect thereto as may be necessary for the protection of such Indemnified Person or the Collateral. Notwithstanding the foregoing, if any insurer agrees to undertake the defense of an event (an "INSURED EVENT"), Agent agrees not to exercise its right to select counsel to defend the event if that would cause any Borrower's insurer to deny coverage; provided, however, that Agent reserves the right to retain counsel to represent any Indemnified Person with respect to an Insured Event at its sole cost and expense. To the extent that Agent or any Lender obtains recovery from a third party other than an Indemnified Person of any of the amounts that any Borrower has paid to Agent or any Lender pursuant to the indemnity set forth in this Section 12.4, then Agent and/or Lender shall promptly pay to such Borrower the amount of such recovery. 58 12.5 NOTICE Any notice or request under any Loan Document shall be given to any party to this Agreement at such party's address set forth beneath its signature on the signature page to this Agreement, or at such other address as such party may hereafter specify in a notice given in the manner required under this Section 12.5. Any notice or request hereunder shall be given only by, and shall be deemed to have been received upon (each, a "RECEIPT"): (i) registered or certified mail, return receipt requested, on the date on which such received as indicated in such return receipt, (ii) delivery by a nationally recognized overnight courier, one Business Day after deposit with such courier, or (iii) facsimile or electronic transmission, in each case upon telephone or further electronic communication from the recipient acknowledging receipt (whether automatic or manual from recipient), as applicable. 12.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES If any provision of any Loan Document is adjudicated to be invalid under applicable laws or regulations, such provision shall be inapplicable to the extent of such invalidity without affecting the validity or enforceability of the remainder of the Loan Documents which shall be given effect so far as possible. The captions in the Loan Documents are intended for convenience and reference only and shall not affect the meaning or interpretation of the Loan Documents. The Loan Documents may be executed in one or more counterparts (which taken together, as applicable, shall constitute one and the same instrument) and by facsimile transmission, which facsimile signatures shall be considered original executed counterparts. Each party to this Agreement agrees that it will be bound by its own facsimile signature and that it accepts the facsimile signature of each other party. 12.7 EXPENSES Borrower shall pay, whether or not the Closing occurs, all costs and expenses incurred by Agent, Lenders and/or their affiliates, including, without limitation, documentation and diligence fees and expenses, all search, audit, appraisal, recording, professional and filing fees and expenses and all other out-of-pocket charges and expenses (including, without limitation, UCC and judgment and tax lien searches and UCC filings and fees for post-Closing UCC and judgment and tax lien searches and wire transfer fees and audit expenses), and reasonable attorneys' fees and expenses, (i) in any effort to enforce, protect or collect payment of any Obligation or to enforce any Loan Document or any related agreement, document or instrument, (ii) in connection with entering into, negotiating, preparing, reviewing and executing the Loan Documents and/or any related agreements, documents or instruments, (iii) arising in any way out of administration of the Obligations, (iv) in connection with instituting, maintaining, preserving, enforcing and/or foreclosing on Agent's, for the benefit of itself and Lenders, Liens in any of the Collateral or securities pledged under the Loan Documents, whether through judicial proceedings or otherwise, (v) in defending or prosecuting any actions, claims or proceedings arising out of or relating to Agent's and Lenders' transactions with Borrower, (vi) in seeking, obtaining or receiving any advice with respect to its rights and obligations under any Loan Document and any related agreement, document or instrument, and/or (vii) in connection with any modification, restatement, supplement, amendment, waiver or extension of any Loan Document and/or any related agreement, document or instrument. All of the foregoing shall be 59 charged to Borrower's account and shall be part of the Obligations. If Agent, any Lender or any of their affiliates uses in-house counsel for any purpose under any Loan Document for which Borrower is responsible to pay or indemnify, Borrower expressly agrees that its Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent, such Lender or such affiliate in its sole discretion for the work performed. Without limiting the foregoing, Borrower shall pay all taxes (other than taxes based upon or measured by each Lender's income or revenues or any personal property tax), if any, in connection with the issuance of any Note and the filing and/or recording of any documents and/or financing statements. 12.8 ENTIRE AGREEMENT This Agreement and the other Loan Documents to which Borrower is a party constitute the entire agreement between Borrower, Agent and Lenders with respect to the subject matter hereof and thereof, and supersede all prior agreements and understandings, if any, relating to the subject matter hereof or thereof. Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing signed by Borrower, Agent and such Lenders. No provision of this Agreement may be changed, modified, amended, restated, waived, supplemented, discharged, canceled or terminated orally or by any course of dealing or in any other manner other than by an agreement in writing signed by Borrower, Agent and Lenders. Each party hereto acknowledges that it has been advised by counsel in connection with the negotiation and execution of this Agreement and is not relying upon oral representations or statements inconsistent with the terms and provisions hereof. 12.9 AGENT APPROVALS Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of Agent with respect to any matter that is subject of any Loan Document may be granted or withheld by Agent in its sole and absolute discretion. 12.10 CONFIDENTIALITY AND PUBLICITY Borrower agrees, and agrees to cause each of its affiliates, (i) not to transmit or disclose any provision of any Loan Document to any Person (other than (A) to the extent required by applicable laws or regulations, (B) to their respective advisors and officers on a need-to-know basis, and (C) to their respective owners in connection with reports distributed in the ordinary course of business) without Agent's prior written consent, (ii) to inform all Persons of the confidential nature of the Loan Documents and to direct them not to disclose the same to any other Person and to require each of them to be bound by these provisions. Agent and each Lender reserve the right to review and approve all materials that Borrower or any of its affiliates prepares that contain Agent's or such Lender's name or describe or refer to any Loan Document, any of the terms thereof or any of the transactions contemplated thereby. Borrower shall not, and shall not permit any of its affiliates to, use either Agent's or any Lender's name (or the name of any of Agent's or any Lender's affiliates) in connection with any of its business operations. Nothing contained in any Loan Document is intended to permit or authorize Borrower or any of its affiliates to contract on behalf of Agent or any Lender. 60 12.11 RELEASE OF AGENT AND LENDERS Notwithstanding any other provision of any Loan Document, Borrower voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself, its managers, members, directors, officers, employees, shareholders, affiliates, agents, representatives, accountants, attorneys, successors and assigns and their respective affiliates (collectively, the "RELEASING PARTIES"), hereby fully and completely releases and forever discharges the Indemnified Parties and any other Person or insurer which may be responsible or liable for the acts or omissions of any of the Indemnified Parties, or who may be liable for the injury or damage resulting therefrom (collectively, with the Indemnified Parties, the "RELEASED PARTIES"), of and from any and all actions, causes of action, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, matured or unmatured, vested or contingent, that any of the Releasing Parties has against any of the Released Parties as of the date of the Closing. Borrower acknowledges that the foregoing release is a material inducement to Agent's and each Lender's decision to extend to Borrower the financial accommodations hereunder and has been relied upon by Agent and each Lender in agreeing to make the Loans. 12.12 AMENDMENT, RESTATEMENT, RENEWAL AND EXTENSION THIS AGREEMENT IS GIVEN IN AMENDMENT, RESTATEMENT, RENEWAL AND EXTENSION (BUT NOT IN NOVATION) OF THE HEALTHCARE LOAN AGREEMENT, THE ORIGINAL LOAN AGREEMENT AND THE AMENDED AND RESTATED LOAN AGREEMENT. BORROWER HEREBY AGREES THAT, WITH RESPECT TO MATTERS RELATING TO THE PERIOD PRIOR TO THE DATE HEREOF, ALL PROVISIONS OF THE HEALTHCARE LOAN AGREEMENT, THE ORIGINAL LOAN AGREEMENT AND THE AMENDED AND RESTATED LOAN AGREEMENT ARE HEREBY RATIFIED AND CONFIRMED AND SHALL REMAIN IN FULL FORCE AND EFFECT. 12.13 JOINDER Each of the New Borrowers hereby acknowledges, agrees and confirms that, by its execution of this Agreement, it will, as if it has executed the Amended and Restated Loan Agreement and the other Amended and Restated Loan Documents, be and have all of the obligations of (i) a Borrower (as defined in the Amended and Restated Loan Agreement) for all purposes of the Amended and Restated Loan Agreement, (ii) a Debtor (as defined in the Amended and Restated Security Agreement) for all purposes of the Amended and Restated Security Agreement, and (iii) a party of identical capacity and obligations as a Borrower to each of the Amended and Restated Loan Documents. As of the date hereof, each New Borrower hereby ratifies and agrees to be bound by all of the terms, provisions and conditions contained in the Amended and Restated Loan Agreement, the Amended and Restated Security Agreement and the other Amended and Restated Loan Documents which are binding upon the Borrower, including, without limitation (a) all of the representations and warranties of the Borrower set forth in Article V of the Amended and Restated Loan Agreement, as supplemented from time to time in accordance with the terms thereof, and (b) all of the covenants set forth in Articles VI and VII of the Amended and Restated Loan Agreement. 61 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 62 IN WITNESS WHEREOF, each of the parties has duly executed this Second Amended and Restated Revolving Credit and Term Loan Agreement as of the date first written above. BORROWER: PSYCHIATRIC SOLUTIONS, INC. AERIES HEALTHCARE CORPORATION AERIES HEALTHCARE OF ILLINOIS, INC. BOUNTIFUL PSYCHIATRIC HOSPITAL, INC. COLLABORATIVE CARE CORPORATION EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION GREAT PLAINS HOSPITAL, INC. GULF COAST TREATMENT CENTER, INC. HAVENWYCK HOSPITAL INC. H.C. CORPORATION HSA HILL CREST CORPORATION HSA OF OKLAHOMA, INC. INFOSCRIBER CORPORATION MICHIGAN PSYCHIATRIC SERVICES, INC. PSI CEDAR SPRINGS HOSPITAL, INC. PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC. PSI-EAP, INC. PSI HOSPITALS, INC. PSI TEXAS HOSPITALS, LLC PSYCHIATRIC MANAGEMENT RESOURCES, INC. PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC. PSYCHIATRIC SOLUTIONS HOSPITALS, INC. PSYCHIATRIC SOLUTIONS OF ALABAMA, INC. PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC. PSYCHIATRIC SOLUTIONS OF FLORIDA, INC. PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC. PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC. PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC. RAMSAY MANAGED CARE, INC. RAMSAY TREATMENT SERVICES, INC. RAMSAY YOUTH SERVICES OF ALABAMA, INC. RAMSAY YOUTH SERVICES OF FLORIDA, INC. RAMSAY YOUTH SERVICES OF GEORGIA, INC. RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC. RHCI SAN ANTONIO, INC. SOLUTIONS CENTER OF LITTLE ROCK, INC. SUNSTONE BEHAVIORAL HEALTH, INC. THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC. THERAPEUTIC SCHOOL SERVICES, LLC TRANSITIONAL CARE VENTURES (TEXAS), INC. TRANSITIONAL CARE VENTURES, INC. By: /s/ Steven T. Davidson ________________________________________________ Steven T. Davidson Vice President H.C. PARTNERSHIP By: H.C. Corporation, its general partner HSA Hill Crest Corporation, its general partner By: /s/ Steven T. Davidson ________________________________________________ Steven T. Davidson Vice President NEURO INSTITUTE OF AUSTIN, L.P. TEXAS CYPRESS CREEK HOSPITAL, L.P. TEXAS LAUREL RIDGE HOSPITAL, L.P. TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P. TEXAS SAN MARCOS TREATMENT CENTER, L.P. TEXAS WEST OAKS HOSPITAL, L.P. By: PSI Texas Hospitals, LLC, its general partner By: /s/ Steven T. Davidson _______________________________________________ Steven T. Davidson Vice President 113 Seaboard Lane, Suite C-100 Franklin, Tennessee 37067 Attention: President and Chief Executive Officer Telephone: (615) 312-5700 FAX: (615) 312-5711 2 AGENT AND LENDER: CAPITALSOURCE FINANCE LLC By: /s/ Keith D. Reuben ________________________________________________ Keith D. Reuben Director CapitalSource Finance LLC 4445 Willard Avenue, 12th Floor Chevy Chase, MD 20815 Attention: Healthcare Finance Group, Portfolio Manager Telephone: (301) 841-2700 FAX: (301) 841-2340 E-Mail: aheller@capitalsource.com 3 EXHIBITS A Borrowing Certificate B Compliance Certificate C Lender Addition Agreement SCHEDULES 1 Lenders/Commitments 2.4 Borrower's Accounts 5.2 Consents, Approvals and Authorizations Required 5.3 Subsidiaries; Authorized and Issued Capital Stock; Capitalization; Directors, Members, Managers and/or Partners; Joint Venture and Partnership Arrangements 5.4 Real Properties 5.8 Taxes Contested in Good Faith 5.11 Intellectual Property 5.15 Indebtedness; Material Obligations 5.16 Other Agreements 5.17 Insurance Policies 5.18A Corporate Names 5.18B Place of Business/Chief Executive Officer 6.8 Post Closing Obligations 7.2 Permitted Indebtedness 7.3 Permitted Liens A-1 Facility Census A-2 EBITDA Adjustments ANNEX I FINANCIAL COVENANTS 1. MINIMUM CENSUS As of the last day of each Monthly Test Period, (a) the aggregate combined census levels at the facilities owned, operated or leased by Borrower and (b) the census level at each such facility, shall be not less than 75% of the census levels for such applicable calendar months for the facilities listed on Schedule A-1. 2. TOTAL LEVERAGE RATIO (TOTAL DEBT/EBITDA) As of the last day of each month through and including June 30, 2004, the Total Leverage Ratio shall not exceed 4.95 to 1.00. As of the last day of each month beginning on July 1, 2004 through and including June 30, 2005, the Total Leverage Ratio shall not exceed 4.80 to 1.00. As of the last day of each month after July 1, 2005, the Total Leverage Ratio shall not exceed 4.65 to 1.00. 3. SENIOR LEVERAGE RATIO As of the last day of each month through and including June 30, 2004, the Senior Leverage Ratio shall not exceed 2.25 to 1.00. As of the last day of each month beginning on July 1, 2004, through and including June 30, 2005, the Senior Leverage Ratio shall not exceed 2.10 to 1.00. As of the last day of each month after July 1, 2005, the Senior Leverage Ratio shall not exceed 1.95 to 1.00. 4. Interest Coverage Ratio (EBITDA/Interest Expense) As of the last day of each Monthly Test Period, through and including June 30, 2004, the Interest Coverage Ratio shall not be less than 1.50:1.00. As of the last day of each Monthly Test Period beginning on July 1, 2004 through and including June 30, 2005, the Interest Coverage Ratio shall not be less than 1.65:1.00. As of the last day of each Monthly Test Period after July 1, 2005, the Interest Coverage Ratio shall not be less than 1.80:1.00. 5. Fixed Charge Ratio (EBITDA/Fixed Charges) As of the last day of each Monthly Test Period through and including June 30, 2004, the Fixed Charge Ratio shall not be less than 1.00:1.00. As of the last day of each Monthly Test Period beginning on July 1, 2004 through and including June 30, 2005, the Fixed Charge Ratio shall not be less than 1.15:1.00. As of the last day of each Monthly Test Period after July 1, 2005, the Fixed Charge Ratio shall not be less than 1.30:1.00. For purposes of this financial covenant only, the following shall be excluded from calculation of the Fixed Charge Ratio: (a) the aggregate amount of all principal payments made (in an aggregate amount not to exceed $2,100,000) by Borrower on or before April 1, 2003 to The Brown Schools in accordance with the provisions of the note evidencing such Subordinated Debt, (b) all non-cash interest expenses related to such Seller Notes and (c) such other non-occurring charges as Agent may consent to in its sole discretion (e.g., computer conversions). 1 For purposes of the covenants set forth in this Annex I, the terms listed below shall have the following meanings: "Capital Expenditures" shall mean, for any Test Period, the sum (without duplication) of all expenditures (whether paid in cash or accrued as liabilities) during the Test Period that are or should be treated as capital expenditures under GAAP. "Cash Equivalents" shall mean (a) securities issued, or directly and fully guaranteed or insured, by the United States or any agency or instrumentality thereof (provided, that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (b) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (i) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000, or (ii) any bank (or the parent company of such bank) whose short-term commercial paper rating from Standard & Poor's Ratings Services ("S&P") is at least A-2 or the equivalent thereof or from Moody's Investors Service, Inc. ("MOODY'S") is at least P-2 or the equivalent thereof in each case with maturities of not more than six months from the date of acquisition (any bank meeting the qualifications specified in clauses (b)(i) or (ii), an "Approved Bank"), (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a), above, entered into with any Approved Bank, (d) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A-2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within six months after the date of acquisition and (e) investments in money market funds substantially all of whose assets are comprised of securities of the type described in clauses (a) through (d) above. "EBITDA" shall mean, for any Test Period, the sum, without duplication, of the following for Borrower, on a consolidated and consolidating basis: Net Income determined in accordance with GAAP, plus, (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash, non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, (f) loss from any sale of assets, other than sales in the ordinary course of business, and (g) the amounts listed for the applicable periods on Schedule A-2, minus (h) gains from any sale of assets, other than sales in the ordinary course of business, and (i) other extraordinary or non-recurring gains, all of the foregoing determined in accordance with GAAP. "Fixed Charge Ratio" shall mean, at any date of determination, for Borrower individually and collectively on a consolidated and consolidating basis, the ratio of (a) EBITDA for the Monthly Test Period most recently ended before such date, to (b) Fixed Charges for the Monthly Test Period most recently ended before such date, in each case taken as one accounting period. "Fixed Charges" shall mean, on any calculation date, for any Monthly Test Period, the sum of the following for Borrower, individually and collectively, on a consolidated 2 and consolidating basis: (a) Total Debt Service for such period, (b) Capital Expenditures and management and services fees during such period, (c) income taxes paid in cash or accrued during such period, (d) dividends paid or accrued or declared during such period and (e) and principal payments made by Borrower pursuant to a HUD Financing. Any principal payments by Borrower made pursuant to the Revolving Facility shall be excluded from this definition. "Interest Coverage Ratio" shall mean, at any date of determination, for Borrower individually and on a consolidated and consolidating basis, without duplication, the ratio of (a) EBITDA for the Monthly Test Period most recently ended before such date (taken as one accounting period), to (b) Interest Expense for the Monthly Test Period most recently ended before such date (taken as one accounting period). "Interest Expense" shall mean, for any Test Period, total interest expense (including attributable to Capital Leases in accordance with GAAP) of Borrower individually and collectively, on a consolidated and consolidating basis with respect to all outstanding Indebtedness, including, without limitation, (i) the Interest Expense on the aggregate outstanding amount of the Term Loan on such date, (ii) the Interest Expense on the aggregate amount of all Advances outstanding under the Revolving Facility on such date, (iii) the Interest Expense on the aggregate amount of all Capitalized Lease Obligations on such date, (iv) the Interest Expense on the aggregate outstanding amount of all High Yield Indebtedness on such date, (v) the Interest Expense on the aggregate outstanding amount of the Seller Notes, excluding all non-cash interest expenses related to such Seller Notes, (vi) Interest Expense on any other Indebtedness on such date, (vii) the Interest Expense on the aggregate outstanding amount of any HUD Financing and (viii) capitalized interest, but excluding commissions, discounts and other fees owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements. "Interest Rate Agreement" shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates. "Leverage Test Period" shall mean a period ending on the last calendar day of each month, including the twelve most recent calendar months then ended (taken as one accounting period), or such other period as specified in the Agreement or any Annex thereto. "Monthly Test Period" shall mean a period ending on the last calendar day of each month, including the three most recent calendar months then ended (taken as one accounting period), or such other period as specified in the Agreement or any Annex thereto. "Net Income" shall mean, for any Test Period, the net income (or loss) of Borrower individually and collectively on a consolidated and consolidating basis for such period taken as a single accounting period determined in conformity with GAAP; provided, that there shall be excluded (i) the income (or loss) of any Person in which any other Person (other than Borrower) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to a Borrower by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or consolidated with a Borrower or that Person's assets are acquired by a Borrower, (iii) the income 3 of any Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar distributions of that income by that Subsidiary is not at the time permitted by operation of the terms of the charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) compensation expense resulting from the issuance of capital stock, stock options or stock appreciation rights issued to former or current employees, including officers, of a Borrower, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by a Borrower or any affiliate thereof, and (v) compensation expense resulting from the repurchase of capital stock, options and rights described in clause (iv) of this definition of Net Income. "Senior Leverage Ratio" shall mean, at any date of determination, for Borrower individually and collectively on a consolidated and consolidating basis, the ratio of (i) the aggregate outstanding amount of (A) the aggregate outstanding amount of the Term Loan on such date, (B) the Facility Cap, (C) the aggregate amount of all Capitalized Lease Obligations on such date, and (D) the aggregate outstanding amount of all HUD Financings to (ii) EBITDA for the Leverage Test Period most recently ended before such date. "Test Period" means, individually and/or collectively, Monthly Test Period, and Leverage Test Period. "Total Debt Service" shall mean for any period, for Borrower individually and collectively on a consolidated and consolidating basis, the sum of (i) scheduled or other required payments of principal on Indebtedness, and (ii) Interest Expense, in each case for such period. "Total Leverage Ratio" shall mean, at any date of determination, for Borrower individually and collectively on a consolidated and consolidating basis, the ratio of (i) Indebtedness for borrowed money (including HUD Financings) and Capitalized Lease Obligations, less cash held on such date and Cash Equivalents held on such date, to (ii) EBITDA for the Leverage Test Period most recently ended before such date. 4 APPENDIX A DEFINITIONS "1818 Mezzanine Fund" shall mean The 1818 Mezzanine Fund II, L.P., a Delaware limited partnership. "1818 Mezzanine Fund Subordinated Indebtedness" shall mean the subordinated indebtedness owing by Hospitals (and any other Borrower who is a party or obligor thereunder) to 1818 Mezzanine Fund pursuant to the Securities Purchase Agreement and related documents. "Account Debtor" shall mean any Person who is obligated under an Account. "Accounts" shall mean all "accounts" (as defined in the UCC) of Borrower (or, if referring to another Person, of such other Person), including without limitation, accounts, accounts receivables, monies due or to become due and obligations in any form (whether arising in connection with contracts, contract rights, instruments, general intangibles or chattel paper), in each case whether arising out of goods sold or services rendered or from any other transaction and whether or not earned by performance, now or hereafter in existence, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing. "Accrued Liabilities" shall have the meaning assigned to such term in Section 6.17(a). "Advances" shall mean a borrowing under the Revolving Facility. Any amounts paid by Agent or any Lender on behalf of Borrower or any Guarantor under any Loan Document shall be an Advance for purposes of the Agreement. "Agreement and Plan of Merger" shall mean that certain Agreement and Plan of Merger, dated as of April 8, 2003, duly executed by PSI, PSI Acquisition Sub, Inc., and Ramsay Youth Services, Inc. "Amended and Restated Loan Agreement" shall have the meaning assigned to such term in the recitals. "Amended and Restated Loan Documents" shall mean, collectively and each individually, the Amended and Restated Loan Agreement, the notes issued thereunder, the Security Documents, the Guarantees, the Stock Pledge Agreements, the Lockbox Agreements, the Participation Agreement, the UCC financing statements, the Subordination Agreements, the Landlord Waiver and Consents, the Borrowing Certificates, the Warrant Agreement and the Warrant and all other agreements, documents, instruments and certificates executed or delivered to Agent in connection with any loans made pursuant to the Original Loan Agreement, as the same may have been amended, modified or supplemented from time to time. "Amended and Restated Security Agreement" shall mean that certain Security Agreement, by and among the Existing Borrower and Agent, dated April 1, 2003, as the same may have been amended, modified or supplemented from time to time. 1 "Applicable Rate" shall mean the interest rates applicable from time to time to Advances under the Agreement. "Availability" shall have the meaning assigned to such term in Section 2.1. "Borrowing Base" shall mean, as of any date of determination, the Net Collectible Value of Eligible Receivables, as determined with reference to the most recent Borrowing Certificate and otherwise in accordance with the Agreement; provided, however, that if as of such date the most recent Borrowing Certificate is of a date more than one month before such date, the Borrowing Base shall be determined by Agent in its sole discretion. "Borrowing Base Availability" shall mean 85% of the Borrowing Base, as may be adjusted by Agent in its sole credit judgment by applying percentages (known as "LIQUIDITY FACTORS") to Eligible Receivables by payor class based upon Borrower's actual recent collection history for each such payor class (i.e., Medicare, Medicaid, commercial insurance, etc.) in a manner consistent with Agent's underwriting practices and procedures, including, without limitation, Agent's review and analysis of, among other things, Borrower's historical returns, rebates, discounts, credits and allowances; provided, that such liquidity factors and the advance rate may be adjusted by Agent throughout the Revolving Facility Term as warranted by Agent's underwriting practices and procedures in its sole credit judgment. "Borrowing Certificate" shall mean a Borrowing Certificate substantially in the form of Exhibit A. "Borrowing Date" shall have the meaning assigned to such term in Section 2.4. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which the Federal Reserve or Agent is closed. "Capital Lease" shall mean, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is, should be or should have been recorded as a "capital lease" in accordance with GAAP. "Capitalized Lease Obligations" shall mean all obligations of any Person under Capital Leases, in each case, taken at the amount thereof accounted for as a liability in accordance with GAAP. "Change of Control" shall mean, with respect to any Borrower or Guarantor, the occurrence of any of the following: (i) a merger, consolidation, reorganization, recapitalization or share or interest exchange, sale or transfer or any other transaction or series of transactions in which its stockholders, managers, partners or interest holders immediately prior to such transaction or series of transactions receive, in exchange for the stock or interests owned by them, cash, property or securities of the resulting or surviving entity or any affiliate thereof, and, as a result thereof, Persons who, individually or in the aggregate, were holders of 50% or more of its voting stock, securities or equity, partnership or ownership interests immediately prior to such transaction or series of transactions hold less than 50% of the voting stock, securities or other equity, partnership or ownership interests of the resulting or surviving entity or such affiliate thereof, calculated on a fully diluted basis, excluding any sale and issuance of new equity 2 securities by PSI, (ii) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, of all or substantially all of its assets, (iii) the initial public offering of its securities, or (iv) any "change in/of control" or "sale" or "disposition" or similar event as defined in any document governing indebtedness of such Person which gives the holder of such indebtedness the right to accelerate or otherwise require payment of such indebtedness prior to the maturity date thereof. "Charter and Good Standing Documents" shall mean, for each Borrower (i) a copy of the certificate of incorporation or formation (or other charter document) certified as of a date not more than three Business Days before the Closing Date by the applicable Governmental Authority of the jurisdiction of incorporation or organization of such Borrower, (ii) a copy of the bylaws or similar organizational documents certified as of a date not more than three Business Days before the Closing Date by the corporate secretary or assistant secretary of such Borrower, (iii) an original certificate of good standing as of a date acceptable to Agent issued by the applicable Governmental Authority of the jurisdiction of incorporation or organization of such Borrower and of every other jurisdiction in which such Borrower has an office or conducts business or is otherwise required to be in good standing, and (iv) copies of the resolutions of the Board of Directors or managers (or other applicable governing body) and, if required, stockholders, members or other equity owners authorizing the execution, delivery and performance of the Loan Documents to which such Borrower is a party, certified by an authorized officer of such Person as of the Closing Date. "Closing" shall mean the satisfaction, or written waiver by Agent and Lenders, of all of the conditions precedent set forth in the Agreement required to be satisfied prior to the consummation of the transactions contemplated hereby and which occurs on a date mutually satisfactory to Agent and Borrower. "Closing Date" shall mean the date the Closing occurs. "Collateral" shall mean, collectively and each individually, all collateral and/or security granted to Agent, for the benefit of itself and Lenders, by Borrower and/or Guarantors pursuant to the Loan Documents. "Collateral Assignment" shall mean the Collateral Assignment of the Agreement and Plan of Merger between Agent and PSI, consented to by Ramsay Youth Services, Inc., and dated as of the Closing Date. "Commitment" or "Commitments" shall mean (a) as to any Lender, the aggregate commitment of such Lender to make Advances and Term Loans, as set forth on Schedule 1 or in the most recent Lender Addition Agreement executed by such Lender, and (b) as to all Lenders, the aggregate commitment of all Lenders to make Advances and Term Loans. "Compliance Certificate" shall have the meaning assigned to such term in Section 6.1(a). "Concentration Account" shall have the meaning assigned to such term in Section 2.5. "Debtor Relief Law" shall mean, collectively, the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, 3 rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally, as amended from time to time. "Default" shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would constitute or be or result in an Event of Default. "Deposit Account" shall mean, collectively, the Lockbox Account and all bank or other depository accounts of any Borrower. "Distribution" shall mean any fee, payment, bonus or other remuneration of any kind, and any repayment of or debt service on loans or other indebtedness. "Dollars" shall mean the currency of the United States of America. "Early Termination Fee" shall mean the amount equal to 1% of the original principal amount of the Term Notes. "Eligible Receivables" shall mean (for purposes of calculating the Borrowing Base in any given month) each Account arising in the ordinary course of Borrower's business from the sale of goods or rendering of Services which Agent, in its reasonable discretion, deems an Eligible Receivable unless: (a) it is not subject to a valid perfected first priority security interest in favor of Agent, for the benefit of itself and Lenders, subject to no other Lien of equal or higher priority; (b) it is not evidenced by an invoice, statement or other documentary evidence satisfactory to Agent; provided, that Agent in its sole discretion may from time to time include as Accounts that are not evidenced by an invoice, statement or other documentary evidence satisfactory to Agent as Eligible Receivables and determine the advance rate, liquidity factors and reserves applicable to Advances made on any such Accounts; (c) it or any portion thereof (in which case only such portion shall not be an Eligible Receivable) is payable by a beneficiary, recipient or subscriber individually and not directly by a Medicaid/Medicare Account Debtor or commercial medical insurance carrier acceptable to Agent; (d) it arises out of services rendered or a sale made to, or out of any other transaction between or with, one or more affiliates of any Borrower; (e) it remains unpaid for longer than the earlier of (i) 120 calendar days after the first to occur of the claim date or invoice date, and (ii) 135 calendar days after the applicable Services were rendered; (f) with respect to all Accounts owed by any particular Account Debtor and/or its affiliates, if more than 10% of the aggregate balance of all such Accounts owing from such Account Debtor and/or its affiliates remain unpaid for longer than the earlier of (i) 120 4 calendar days after the first to occur of the claim date or invoice date, and (ii) 135 calendar days after the applicable Services were rendered; (g) with respect to all Accounts owed by any particular Account Debtor and/or its affiliates, 25% or more of all such Accounts are not deemed Eligible Receivables for any reason hereunder (which percentage may, in Agent's sole discretion, be increased or decreased); (h) with respect to all Accounts owed by any particular Account Debtor and/or its affiliates (except Medicaid/Medicare Account Debtors), if such Accounts exceed 20% of the net collectible dollar value of all Eligible Receivables at any one time (including Accounts from Medicaid/Medicare Account Debtors) (which percentage may, in Agent's sole discretion, be increased or decreased); provided, that only the portion of Accounts which exceed 20% shall be deemed ineligible for purposes of this subsection (h); (i) any covenant, agreement, representation or warranty contained in any Loan Document with respect to such Account has been breached and remains uncured; (j) the Account Debtor for such Account has commenced a voluntary case under any Debtor Relief Law or has made an assignment for the benefit of creditors, or a decree or order for relief has been entered by a court having jurisdiction in respect of such Account Debtor in an involuntary case under any Debtor Relief Law, or any other petition or application for relief under any Debtor Relief Law has been filed against such Account Debtor, or such Account Debtor has failed, suspended business, ceased to be solvent, called a meeting of its creditors, or has consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs, or Borrower, in the ordinary course of business, should have known of any of the foregoing; (k) it arises from the sale of property or services rendered to one or more Account Debtors outside the continental United States or that have their principal place of business or chief executive offices outside the continental United States; (l) it represents the sale of goods or rendering of services to an Account Debtor on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper or an instrument of any kind or has been reduced to judgment; (m) the applicable Account Debtor for such Account is any Governmental Authority, unless rights to payment of such Account have been assigned to Agent, for the benefit of itself and Lenders, pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727, et seq. and 41 U.S.C. Section 15, et seq.), or otherwise all with applicable statutes or regulations respecting the assignment of government Accounts have been complied with (for example, with respect to all Account payable directly by a Medicaid/Medicare Account Debtor); (n) it is subject to any offset, credit (including any resource or other income credit or offset), deduction, defense, discount, chargeback, freight claim, allowance, adjustment, dispute or counterclaim, or is contingent in any respect or for any reason; provided, however, that such Account shall be ineligible only to the extent of such offset, credit, deduction, defense, 5 discount, chargeback, freight claim, allowance, adjustment, dispute, counterclaim or contingency; (o) there is any agreement with an Account Debtor for any deduction from such Account, except for discounts or allowances made in the ordinary course of business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each invoice related thereto, such that only the discounted amount of such Account after giving effect to such discounts and allowances shall be considered an Eligible Receivable; (p) any return, rejection or repossession of goods or services related to it has occurred; (q) it is not payable to Borrower; (r) Borrower has agreed to accept or has accepted any non-cash payment for such Account; (s) with respect to any Account arising from the sale of goods, the goods have not been shipped to the Account Debtor or its designee; (t) with respect to any Account arising from the performance of Services, the Services have not been actually performed or the Services were undertaken in violation of any law; or (u) it fails to meet such other specifications and requirements which may from time to time be established by Agent or is not otherwise satisfactory to Agent, as determined in Agent's reasonable discretion. "Environmental Laws" shall mean, collectively and each individually, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendment and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, any other "Superfund" or "Superlien" law and all other federal, state, local and foreign environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances, in each case, as amended, and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of Governmental Authorities with respect thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. "Event of Default" shall mean the occurrence of any event set forth in Article VIII. "Facility Cap" shall mean $50,000,000. 6 "Fair Valuation" shall mean the determination of the value of the consolidated assets of a Person on the basis of the amount which may be realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under ordinary selling conditions in an arm's length transaction. "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by nationally recognized accounting firms. "Governmental Authority" shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District of Columbia. "Guarantor" shall mean, collectively and each individually, all guarantors of the Obligations or any part thereof. "Guaranty" shall mean, collectively and each individually, all guarantees executed by any Guarantors. "Hazardous Substances" shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials as defined in or subject to any applicable Environmental Law. "Healthcare Laws" shall mean all applicable statutes, laws, ordinances, rules and regulations of any Governmental Authority with respect to regulatory matters primarily relating to patient healthcare, healthcare providers and healthcare services (including without limitation Section 1128B(b) of the Social Security Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or State Health Care Programs), commonly referred to as the "Federal Anti-Kickback Statute," and the Social Security Act, as amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as "Stark Statute"). "Healthcare Loan Agreement" shall mean that certain Loan and Security Agreement dated as of May 5, 2000, by and between Healthcare Business Credit Corporation (formerly known as Copelco/American Healthfund. Inc.) and Borrower and its Subsidiaries and affiliates named therein, as amended. "High Yield Documents" shall mean the Indenture among PSI, the guarantors party thereto and Wachovia Bank, National Association, as trustee, and all other documents, agreements and instruments pertaining to all or a portion of the High Yield Indebtedness, each as such exist on the Closing Date. 7 "High Yield Indebtedness" shall mean the senior subordinated indebtedness in the amount of up to $200,000,000, and in an original amount of not less than $150,000,000, owing by Borrower as evidenced by Borrower's 10-5/8% senior subordinated notes due 2013 governed by the terms of the High Yield Documents. "HUD Application" shall have the meaning assigned to such term in Section 6.13(b). "HUD Financing" shall mean any type of financing to or for Borrower, or any Subsidiary of Borrower, from the U.S. Department of Housing and Urban Development. "HUD Financing Subsidiaries" shall mean Holly Hill Real Estate, LLC, a North Carolina limited liability company, PSI Cedar Springs Hospital Real Estate, Inc., a Colorado corporation, Psychiatric Solutions of Oklahoma Real Estate, Inc., an Oklahoma corporation, Riveredge Real Estate, Inc., an Illinois corporation, Cypress Creek Real Estate, L.P., a Texas limited partnership, West Oaks Real Estate, L.P., a Texas limited partnership, Neuro Rehab Real Estate, L.P., a Texas limited partnership, Texas Laurel Ridge Hospital Real Estate, L.P., a Texas limited partnership, Texas Oaks Psychiatric Hospital Real Estate, L.P., a Texas limited partnership, Texas San Marcos Treatment Center Real Estate, L.P., a Texas limited partnership, and such other Subsidiaries of Borrower hereafter disclosed in writing to Agent and approved in writing by Agent. "Indebtedness" of any Person shall mean, without duplication, (a) all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of the balance sheet of such Person as of the date as of which Indebtedness is to be determined, including any lease which, in accordance with GAAP would constitute Indebtedness, (b) all indebtedness secured by any mortgage, pledge, security, Lien or conditional sale or other title retention agreement to which any property or asset owned or held by such Person is subject, whether or not the indebtedness secured thereby shall have been assumed, (c) all indebtedness of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. "Indemnified Persons" shall have the meaning assigned to such term in Section 12.4. "Initial Advance" shall have the meaning assigned to such term in Section 4.1. "Insured Event" shall have the meaning assigned to such term in Section 12.4. "Insurer" shall mean a Person that insures another Person against any costs incurred in the receipt by such other Person of Services, or that has an agreement with any Borrower to compensate it for providing Services to such Person. "Intellectual Property" shall have the meaning assigned to such term in Section 5.11. 8 "Interest Settlement Date" shall have the meaning assigned to such term in Section 11.7(a)(iii). "Internal Cost Report" shall have the meaning assigned to such term in Section 6.17(a). "Inventory" shall mean all "inventory" (as defined in the UCC) of Borrower (or, if referring to another Person, of such other Person), now owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing. "Landlord Waiver and Consent" shall mean a waiver/consent in form and substance satisfactory to Agent from the owner/lessor of any premises not owned by Borrower at which any of the Collateral is now or hereafter located for the purpose of providing Agent access to such Collateral, in each case as such may be modified, amended or supplemented from time to time. "Lender Addition Agreement" shall mean an agreement among Agent, a Lender and such Lender's assignee regarding their respective rights and obligations with respect to assignments of the Loans and other interests under this Agreement and the other Loan Documents substantially in the form of Exhibit C hereto. "Lenders" shall mean the financial institutions, from time to time named on Schedule 1 under the heading "Lenders", their respective successors and permitted assigns (but not, except as expressly set forth herein, any participant that is not otherwise a party to this Agreement). "Liability Event" shall mean any event, fact, condition or circumstance or series thereof (i) in or for which any Borrower becomes liable or otherwise responsible for any amount owed or owing to any Medicaid or Medicare program by a provider under common ownership with such Borrower or any provider owned by such Borrower pursuant to any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority after the failure of any such provider to pay any such amount when owed or owing, (ii) in which Medicaid or Medicare payments to any Borrower are lawfully set-off against payments to such or any other Borrower to satisfy any liability of or for any amounts owed or owing to any Medicaid or Medicare program by a provider under common ownership with such Borrower or any provider owned by such Borrower pursuant to any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority, excluding any cost report liability which has been appropriately recorded in Borrower's financial statements in accordance with GAAP, or (iii) any of the foregoing under clauses (i) or (ii) in each case pursuant to statutory or regulatory provisions that are similar to any applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority referenced in clauses (i) and (ii) above or successor provisions thereto. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, restriction, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof), or any other arrangement 9 pursuant to which title to the property is retained by or vested in some other Person for security purposes. "Liquidity Factors" shall have the meaning assigned to such term in the definition of Borrowing Base Availability. "Loan" or "Loans" shall mean, individually and collectively, the Term Loan and all Advances. "Loan Documents" shall mean, collectively and each individually, the Agreement, the Notes, the Security Documents, the Guarantees, the Stock Pledge Agreements, the Collateral Assignment, the Lockbox Agreements, the Participation Agreement, the UCC financing statements, the Subordination Agreements, the Landlord Waiver and Consents, the Borrowing Certificates, the Warrant Agreement and the Warrant and all other agreements, documents, instruments and certificates heretofore or hereafter executed or delivered to Agent in connection with any of the foregoing or the Loans, as the same may be amended, modified or supplemented from time to time. "Lockbox Accounts" shall mean the accounts maintained by Borrower at the Lockbox Banks into which all collections or payments on their Accounts and other Collateral are paid. "Lockbox Agreement" shall have the meaning assigned to such term in Section 2.5. "Lockbox Banks" shall mean all banks at which Borrower maintains a Lockbox Account. "Material Adverse Effect" or "Material Adverse Change" shall mean any event, condition or circumstance or set of events, conditions or circumstances or any change(s) which (i) has or could reasonably be expected to have any material adverse effect upon or change in the validity or enforceability of any Loan Document, (ii) has been or could reasonably be expected to be material and adverse to the value of any material portion of the Collateral or to the business, operations, prospects, properties, assets, liabilities or condition of Borrower and Guarantors, in each case taken as a whole, or (iii) has materially impaired or could reasonably be expected to materially impair the ability of Borrowers and Guarantors (taken as a whole) to perform the Obligations or to consummate the transactions under the Loan Documents executed by such Person. "Maximum Loan Amount" shall mean $17,000,000. "Medicaid/Medicare Account Debtor" shall mean any Account Debtor which is (i) the United States of America acting under the Medicaid or Medicare program established pursuant to the Social Security Act or any other federal healthcare program, including, without limitation, CHAMPUS, (ii) any state or the District of Columbia acting pursuant to a health plan adopted pursuant to Title XIX of the Social Security Act or any other state health care program, or (iii) any agent, carrier, administrator or intermediary for any of the foregoing. "Minimum Termination Fee" shall mean (for the time period indicated) the amount equal to the greater of (a) Yield Maintenance, and (b) (i) 4% of the Facility Cap, if the date of termination is after the day that is six months after the Closing Date but before the second 10 anniversary of the Closing Date; or (ii) 3% of the Facility Cap, if the date of termination is on or after the second anniversary of the Closing Date. "Mortgages" shall mean, collectively, those certain Mortgages, Deeds of Trust, Assignments of Rents, Security Agreements and Fixture Filings executed by Borrower in favor of Agent, for the benefit of itself and Lenders, by which Borrower granted and conveyed to Agent, for the benefit of itself and Lenders, as security for the Obligations, a Lien upon the each of the Real Properties. "Net Collectible Value" shall mean the amount Borrower bills third party payors less deductible obligations and contractual allowances. "New Borrower" shall have the meaning assigned to such term in the recitals. "Note" shall mean, collectively and each individually, the Revolving Notes and the Term Notes. "Obligations" shall mean all shall mean all present and future obligations, Indebtedness and liabilities of Borrower and/or Guarantors to Agent or Lenders at any time and from time to time of every kind, nature and description, direct or indirect, secured or unsecured, joint and several, absolute or contingent, due or to become due, matured or unmatured, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, under any of the Loan Documents or otherwise relating to Notes and/or Loans, including, without limitation, all applicable fees, charges and expenses and/or all amounts paid or advanced by Agent or Lenders on behalf of or for the benefit of any Borrower and/or Guarantor for any reason at any time, including in each case obligations of performance as well as obligations of payment and interest that accrue after the commencement of any proceeding under any Debtor Relief Law by or against any such Person. "Original Closing Date" shall mean November 30, 2001. "Original Loan Amount" shall have the meaning assigned to such term in the recitals. "Participant" shall have the meaning assigned to such term in Section 12.2(b). "Participation Agreement" shall mean that certain Participation Agreement by and between Agent and Healthcare. "Patient" shall mean any Person receiving Services from Borrower and all Persons legally liable to pay Borrower for such Services other than Insurers. "Payment Office" shall mean initially the address set forth beneath the Agent's name on the signature page of the Agreement, and thereafter, such other office of Agent, if any, which it may designate by notice to Borrower to be the Payment Office. "Permit" shall mean collectively all licenses, leases, powers, permits, franchises, certificates, authorizations, approvals, certificates of need, provider numbers and other rights. 11 "Permitted Indebtedness" shall have the meaning assigned to such term in Section 7.2. "Permitted Investments" shall mean: (a) any investment in PSI or any Subsidiary of PSI to the extent permitted under Section 7.6 and 7.11; (b) any investment in Cash Equivalents (as defined in Annex I); (c) any investments received in compromise of obligations of such Persons incurred in the ordinary course of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; and (d) investments in prepaid expenses, negotiable instruments held for collection, utility and workers compensation, performance and similar deposits made in the ordinary course of business and consistent with past practices. "Permitted Liens" shall have the meaning assigned to such term in Section 7.3. "Person" shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, a Governmental Authority or any other entity of whatever nature. "Prime Rate" shall mean a fluctuating interest rate per annum equal at all times to the rate of interest announced publicly from time to time by Citibank, N.A. as its base rate; provided, that such rate is not necessarily the best rate offered to its customers, and, should Agent be unable to determine such rate, such other indication of the prevailing prime rate of interest as may reasonably be chosen by Agent; provided, that each change in the fluctuating interest rate shall take effect simultaneously with the corresponding change in the Prime Rate. "Pro Rata Share" shall mean (a) with respect to matters relating to a particular Commitment of a Lender, the percentage obtained by dividing (i) such Commitment of that Lender by (ii) all such Commitments of all Lenders; provided, however, that if any Commitment is terminated pursuant to the terms hereof, then "Pro Rata Share" means the percentage obtained by dividing (x) the aggregate amount of such Lender's outstanding Loans related to such Commitment by (y) the aggregate amount of all outstanding Loans related to such Commitment, (b) with respect to matters relating to a particular Term Loan of a Lender, the percentage obtained by dividing (i) the aggregate amount of such Lender's outstanding Term Loans by (ii) the aggregate amount of all outstanding Term Loans, and (c) with respect to all other matters, the percentage obtained by dividing (i) the aggregate amount of a Lender's Term Loans outstanding and such Lender's Commitment by (ii) the aggregate amount of all Lenders' Term Loans outstanding and all Lender's Commitments; in any case as such percentage may be adjusted by assignments permitted pursuant to Section 12.3. "PSI Surety" shall mean PSI Surety, Inc., a Montana corporation. 12 "Ramsay Acquisition" shall mean the transaction contemplated by the Agreement and Plan of Merger. "Real Property" shall mean the owned real property listed on Schedule 5.4. "Receipt" shall have the meaning assigned to such term in Section 12.5. "Register" shall have the meaning assigned to such term in Section 12.2(c). "Released Parties" shall have the meaning assigned to such term in Section 12.11. "Releasing Parties" shall have the meaning assigned to such term in Section 12.11. "Requisite Lenders" shall mean Lenders holding or being responsible for 51% or more of the sum of (a) all outstanding Loans and (b) all unutilized Commitments. "Reserve Percentage" shall mean the maximum effective percentage in effect on a given day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) for a member bank of the Federal Reserve System with respect to Eurocurrency funding. "Revolving Facility" shall mean a revolving credit facility provided by Lenders to Borrower pursuant to Section 2.1. "Revolving Facility Term" shall mean the period commencing on the Closing Date and ending on the date that is three years after the Closing Date (i.e., the third year anniversary of the Closing Date). "Revolving Note(s)" shall mean, collectively and each individually, the Revolving Note A-1, the Revolving Note A-2, the Revolving Note B, the Revolving Note C and any additional promissory note(s) payable to the order of each Lender executed by Borrower evidencing the Revolving Facility, as the same may be modified, amended or supplemented from time to time. "Securities Purchase Agreement" shall mean that certain Securities Purchase Agreement, dated as of June 28, 2002 by and between PSI and 1818 Mezzanine Fund, as amended, supplemented, restated or otherwise modified from time to time as permitted hereunder. "Security Agreement" shall mean that certain Second Amended and Restated Security Agreement executed by Borrower in favor of Agent, for the benefit of itself and Lenders, as such may be modified, amended or supplemented from time to time. "Security Documents" shall mean the Notes, Security Agreement, Mortgages, Guarantees, Stock Pledge Agreements, Lockbox Agreements, UCC financing statements and all other documents or instruments necessary to create or perfect the Liens in the Collateral, as such may be modified, amended or supplemented from time to time. 13 "Seller Notes" shall mean the indebtedness owing to The Brown Schools, Inc. as identified in the Subordination Agreement applicable thereto. "Services" shall mean medical and health care services provided to a Person, including, but not limited to, medical and health care services which are covered by a policy of insurance issued by an Insurer, physician services, nurse and therapist services, dental services, hospital services, skilled nursing facility services, comprehensive outpatient rehabilitation services, home health care services, residential and out-patient behavioral healthcare services. "Settlement Date" shall have the meaning assigned to such term in Section 11.7(a)(ii). "Stock Pledge Agreement" shall mean, collectively and each individually, one or more Stock Pledge Agreements, executed by Borrowers and Guarantors in favor of Agent, for the benefit of itself and Lenders, as the same may be modified, amended or supplemented from time to time. "Subordinated Debt" shall mean any Indebtedness of Borrower that is expressly subordinated to the Obligations, including, without limitation, (i) the Indebtedness identified in each Subordination Agreement, (ii) the High Yield Indebtedness and (iii) the Seller Notes. "Subordination Agreement" shall mean, collectively and each individually, as each has been and may be amended, revised or restated, (i) that certain Subordination and Intercreditor Agreement, dated as of June 28, 2002 by and among CapitalSource, 1818 Mezzanine Fund, PSI (and its Subsidiaries thereof party thereto), (ii) that certain Amended and Restated Subordination Agreement, dated as of April 1, 2003 by and among CapitalSource, 1818 Mezzanine Fund, Hospitals and The Brown Schools, Inc., and (iii) any other subordination agreements to which Agent or any Lender and other service providers or creditors of any Borrower are a party. "Subsidiary" shall mean, (i) as to Borrower, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by Borrower or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than 50% of all equity, membership, partnership or other ownership interests is owned directly or indirectly by such Person or by one or more of such Person's Subsidiaries. "Term Finance Fee" shall mean the amount equal to 1.0% of the original principal amount of the Term Notes. "Termination Date" shall have the meaning assigned to such term in Section 11.1. "Term Loan" shall mean a term loan facility provided by Lenders to Borrower pursuant to Section 2.6. "Term Loan Extension Fee" shall mean the amount equal to 1.0% of the result of (a) $17,000,000, minus (b) the portion of the Term Notes paid after the Closing Date as a result of a HUD Financing obtained through an affiliate of CapitalSource, payable by Borrower in the event the Term Notes Term is extended an additional two years. "Term Loan Maturity Date" shall have the meaning assigned to such term in Section 2.8. 14 "Term Note(s)" shall mean, collectively and each individually, Term Note A, Term Note B and Term Note C and any additional promissory note(s) payable to the order of each Lender executed by Borrower evidencing the Term Loan, as the same may be modified, amended or supplemented from time to time. "Term Notes Term" shall mean the period commencing on the Original Closing Date and ending on the date that is two years after the Original Closing Date; provided, that this period may be extended for an additional two years (i.e., the fourth year anniversary of the Original Closing Date) upon (i) the mutual written agreement of the parties hereto and (ii) payment by Borrower of the Term Loan Extension Fee. "Term Termination" shall have the meaning assigned to such term in Section 3.4(b). "The Brown Schools" shall mean The Brown Schools, Inc., a Delaware corporation. "Transferee" shall have the meaning assigned to such term in Section 12.2(a). "UCC" shall mean the Uniform Commercial Code as in effect in the State of Maryland from time to time. "Unused Line Fee" shall have the meaning assigned to such term in Section 3.2. "Warrant" shall have the meaning given such term in the Warrant Agreement. "Warrant Agreement" shall mean the Common Stock Purchase Warrant dated as of August 5, 2002, by and between Borrower and CapitalSource, as such may be modified, restated, amended or supplemented from time to time. "Yield Maintenance" shall mean the difference between (a) the all-in effective yield (measured as a percent per annum) on the Revolving Facility for the six months prior to termination of the Revolving Facility minus (b) the most recent published ask yield to maturity as quoted in the Wall Street Journal for United States Treasury Notes or Bills with a maturity date closest to the last day of the Revolving Facility Term multiplied by (c) the average amount of Advances outstanding (or amounts deemed to be outstanding under Section 2.3) under the Revolving Facility for the six months prior to termination of the Revolving Facility multiplied by (d) the quotient of (x) the number of months then remaining in the Revolving Facility Term divided by (y) twelve. 15 SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT AMONG PSYCHIATRIC SOLUTIONS, INC., AND VARIOUS SUBSIDIARIES THEREOF AND CAPITALSOURCE FINANCE LLC DATED AS OF JUNE 30, 2003 SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT TABLE OF CONTENTS
Page I. DEFINITIONS.................................................................................... 2 1.1 GENERAL TERMS........................................................................... 3 II. ADVANCES, PAYMENT AND INTEREST................................................................. 3 2.1 THE REVOLVING FACILITY.................................................................. 3 2.2 THE REVOLVING NOTES; MATURITY........................................................... 3 2.3 INTEREST................................................................................ 4 2.4 FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER BORROWING CERTIFICATE.................... 4 2.5 COLLECTIONS; REPAYMENT; BORROWING AVAILABILITY AND LOCKBOX.............................. 5 2.6 TERM LOAN............................................................................... 6 2.7 INTEREST ON THE TERM NOTES.............................................................. 7 2.8 REPAYMENT OF TERM LOAN; MATURITY........................................................ 7 2.9 MANNER OF PAYMENT....................................................................... 7 2.10 REPAYMENT OF EXCESS ADVANCES............................................................ 7 2.11 OTHER MANDATORY PREPAYMENTS............................................................. 8 2.12 PAYMENTS BY AGENT....................................................................... 8 2.13 COLLATERAL; SECURITY INTEREST........................................................... 8 2.14 COLLATERAL ADMINISTRATION............................................................... 8 2.15 POWER OF ATTORNEY....................................................................... 10 III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE........................................... 10 3.1 COMMITMENT AND MODIFICATION FEES........................................................ 10 3.2 UNUSED LINE FEE......................................................................... 10 3.3 COLLATERAL MANAGEMENT FEE............................................................... 11 3.4 EARLY TERMINATION/ FINANCE FEES......................................................... 11 3.5 COMPUTATION OF FEES; LAWFUL LIMITS...................................................... 12 3.6 DEFAULT RATE OF INTEREST................................................................ 12 3.7 ACKNOWLEDGEMENT OF JOINT AND SEVERAL LIABILITY, CROSS-GUARANTY AND CONTRIBUTION RIGHTS; GUARANTY ENFORCEMENT................................................................... 12 3.8 WARRANTS................................................................................ 16 3.9 ALLOCATION OF PURCHASE PRICE............................................................ 16 IV. CONDITIONS PRECEDENT........................................................................... 16 4.1 CONDITIONS TO INITIAL ADVANCE, FUNDING OF TERM LOAN AND CLOSING......................... 16 4.2 CONDITIONS TO EACH ADVANCE AND FUNDING OF THE TERM LOAN................................. 20 V. REPRESENTATIONS AND WARRANTIES................................................................. 21 5.1 ORGANIZATION AND AUTHORITY.............................................................. 21 5.2 LOAN DOCUMENTS.......................................................................... 21 5.3 SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS.................................... 22 5.4 PROPERTIES.............................................................................. 22 5.5 OTHER AGREEMENTS........................................................................ 22 5.6 LITIGATION.............................................................................. 23 5.7 HAZARDOUS MATERIALS..................................................................... 23 5.8 TAX RETURNS; GOVERNMENTAL REPORTS....................................................... 23
i 5.9 FINANCIAL STATEMENTS AND REPORTS........................................................ 23 5.10 COMPLIANCE WITH LAW..................................................................... 24 5.11 INTELLECTUAL PROPERTY................................................................... 24 5.12 LICENSES AND PERMITS; LABOR............................................................. 24 5.13 NO DEFAULT.............................................................................. 25 5.14 DISCLOSURE.............................................................................. 25 5.15 EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN CONTRACTS.................... 25 5.16 OTHER AGREEMENTS........................................................................ 25 5.17 INSURANCE............................................................................... 26 5.18 NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL...................................... 26 5.19 NON-SUBORDINATION....................................................................... 26 5.20 ACCOUNTS................................................................................ 26 5.21 HEALTHCARE.............................................................................. 27 5.22 SURVIVAL................................................................................ 27 VI. AFFIRMATIVE COVENANTS.......................................................................... 27 6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION..................................... 28 6.2 PAYMENT OF OBLIGATIONS.................................................................. 30 6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS............................. 30 6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS............................................. 30 6.5 INSURANCE............................................................................... 30 6.6 TRUE BOOKS.............................................................................. 31 6.7 INSPECTION; PERIODIC AUDITS............................................................. 31 6.8 FURTHER ASSURANCES; POST CLOSING........................................................ 31 6.9 PAYMENT OF INDEBTEDNESS................................................................. 32 6.10 LIEN RELEASES........................................................................... 32 6.11 USE OF PROCEEDS......................................................................... 32 6.12 COLLATERAL DOCUMENTS.................................................................... 32 6.13 RIGHT OF FIRST REFUSAL.................................................................. 32 6.14 TAXES AND OTHER CHARGES................................................................. 33 6.15 PATIENT BILLS........................................................................... 34 6.16 MODIFICATION OF SUBORDINATION AGREEMENTS................................................ 34 6.17 INTERNAL COST REPORTS; RESERVES......................................................... 34 VII. NEGATIVE COVENANTS............................................................................. 35 7.1 FINANCIAL COVENANTS..................................................................... 35 7.2 INDEBTEDNESS............................................................................ 35 7.3 LIENS................................................................................... 36 7.4 INVESTMENTS; NEW FACILITIES OR COLLATERAL; SUBSIDIARIES................................. 37 7.5 DIVIDENDS; REDEMPTIONS.................................................................. 37 7.6 TRANSACTIONS WITH AFFILIATES............................................................ 37 7.7 CHARTER DOCUMENTS; FISCAL YEAR; DISSOLUTION; USE OF PROCEEDS............................ 38 7.8 TRUTH OF STATEMENTS..................................................................... 38 7.9 PAYMENT ON SUBORDINATED DEBT............................................................ 39 7.10 AMENDMENT OF THE HIGH YIELD DOCUMENTS................................................... 39 7.11 NON-BORROWERS........................................................................... 39 VIII. EVENTS OF DEFAULT.............................................................................. 40 IX. RIGHTS AND REMEDIES AFTER DEFAULT.............................................................. 42 9.1 RIGHTS AND REMEDIES..................................................................... 42 9.2 RIGHTS AND REMEDIES NOT EXCLUSIVE....................................................... 43

ii X. WAIVERS AND JUDICIAL PROCEEDINGS............................................................... 44 10.1 WAIVERS................................................................................. 44 10.2 DELAY; NO WAIVER OF DEFAULTS............................................................ 44 10.3 JURY WAIVER............................................................................. 44 10.4 COOPERATION IN DISCOVERY AND LITIGATION................................................. 45 10.5 AMENDMENT AND WAIVERS................................................................... 45 XI. EFFECTIVE DATE AND TERMINATION................................................................. 46 11.1 EFFECTIVENESS AND TERMINATION........................................................... 46 11.2 SURVIVAL................................................................................ 46 11.3 AGENT................................................................................... 46 11.4 CONSENTS................................................................................ 51 11.5 SET-OFF AND SHARING OF PAYMENTS......................................................... 51 11.6 DISBURSEMENT OF FUNDS................................................................... 52 11.7 SETTLEMENTS; PAYMENTS AND INFORMATION................................................... 52 11.8 DISSEMINATION OF INFORMATION............................................................ 54 XII. MISCELLANEOUS.................................................................................. 54 12.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE.................................. 54 12.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.................................. 55 12.3 APPLICATION OF PAYMENTS................................................................. 58 12.4 INDEMNITY............................................................................... 58 12.5 NOTICE.................................................................................. 59 12.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES.............................. 59 12.7 EXPENSES................................................................................ 59 12.8 ENTIRE AGREEMENT........................................................................ 60 12.9 AGENT APPROVALS......................................................................... 60 12.10 CONFIDENTIALITY AND PUBLICITY........................................................... 60 12.11 RELEASE OF AGENT AND LENDERS............................................................ 61 12.12 AMENDMENT, RESTATEMENT, RENEWAL AND EXTENSION........................................... 61 12.13 JOINDER................................................................................. 61

~~iii~~ EX-12.1 102 g83903exv12w1.txt EX-12.1 COMPUTATION OF RATIO OF EARNINGS . . . EXHIBIT 12.1 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES HISTORICAL RATIOS OF EARNINGS TO FIXED CHARGES
Three Months Ended March 31, Year Ended December 31, ------------------ ----------------------------------------------------- 2003 2002 2002 2001 2000 1999 1998 ------- ------- ------- ------- ------- ------- ------- (dollars in thousands) Earnings: Income (loss) from continuing operations $ 1,862 $ 776 $ 4,677 $ 990 $ (528) $(2,593) $(2,567) before income taxes Fixed charges 1,482 1,420 5,782 2,742 1,817 433 146 ------- ------- ------- ------- ------- ------- ------- Total earnings $ 3,344 $ 2,196 $10,459 $ 3,732 $ 1,289 $(2,160) $(2,421) Fixed charges: Interest expense, including amortized $ 1,420 $ 1,372 $ 5,564 $ 2,660 $ 1,723 $ 371 $ 98 premiums, discounts and capitalized expenses related to indebtedness Interest component of rental expense (1) 62 48 218 82 94 62 48 ------- ------- ------- ------- ------- ------- ------- Total fixed charges $ 1,482 $ 1,420 $ 5,782 $ 2,742 $ 1,817 $ 433 $ 146 ------- ------- ------- ------- ------- ------- ------- Ratio of historical earnings to fixed charges 2.26x 1.55x 1.81x 1.36x 0.71x -4.99x -16.58x ======= ======= ======= ======= ======= ======= =======
PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
Three Months Ended Year Ended March 31, December 31, -------- ---------- 2003 2002 -------- ---------- (dollars in thousands) Earnings: Income (loss) from continuing operations $ 1,211 $ 13,307 before income taxes Fixed charges 5,513 21,973 -------- -------- Total earnings $ 6,724 $ 35,280 Fixed charges: Interest expense, including amortized $ 5,076 $ 20,384 premiums, discounts and capitalized expenses related to indebtedness Interest component of rental expense (1) 437 1,589 -------- -------- Total fixed charges $ 5,513 $ 21,973 ======== ======== Ratio of pro forma earnings to fixed charges 1.22x 1.61x ======== ========
(1) Represents 25% of rent expense, which management believes is representative of the interest component. EX-21.1 103 g83903exv21w1.txt EX-21.1 SUBSIDIARIES OF PSYCHIATRIC SOLUTIONS . . . EXHIBIT 21.1
Name State - ---- ----- Aeries Healthcare Corporation Delaware Aeries Healthcare of Illinois, Inc. Illinois Bountiful Psychiatric Hospital, Inc. Utah Collaborative Care Corporation Tennessee Cypress Creek Real Estate, L.P. Texas East Carolina Psychiatric Services Corporation North Carolina Great Plains Hospital, Inc. Missouri Gulf Coast Treatment Center, Inc. Florida Havenwyck Hospital Inc. Michigan H.C. Corporation Alabama H.C. Partnership Alabama Holly Hill Real Estate, LLC North Carolina HSA Hill Crest Corporation Alabama HSA of Oklahoma, Inc. Oklahoma InfoScriber Corporation Delaware Michigan Psychiatric Services, Inc. Michigan Neuro Institute of Austin, L.P. Texas Neuro Rehab Real Estate, L.P. Texas PSI Cedar Springs Hospital, Inc. Delaware PSI Cedar Springs Hospital Real Estate, Inc. Colorado PSI Community Mental Health Agency Management, Inc. Tennessee PSI Hospitals, Inc. Delaware PSI Surety, Inc. Montana PSI Texas Hospitals, LLC Texas PSI-EAP, Inc. Delaware Psychiatric Management Resources, Inc. California Psychiatric Practice Management of Arkansas, Inc. Tennessee Psychiatric Solutions Hospitals, Inc. Delaware Psychiatric Solutions of Alabama, Inc. Tennessee Psychiatric Solutions of Coral Gables, Inc. Delaware Psychiatric Solutions of Florida, Inc. Tennessee Psychiatric Solutions of North Carolina, Inc. Tennessee Psychiatric Solutions of Oklahoma, Inc. Delaware Psychiatric Solutions of Oklahoma Real Estate, Inc. Oklahoma Psychiatric Solutions of Tennessee, Inc. Tennessee Ramsay Managed Care, Inc. Delaware Ramsay Treatment Services, Inc. Delaware Ramsay Youth Services of Alabama, Inc. Delaware Ramsay Youth Services of Florida, Inc. Delaware Ramsay Youth Services of Georgia, Inc. Delaware Ramsay Youth Services of South Carolina, Inc. Delaware Ramsay Youth Services Puerto Rico, Inc. Puerto Rico RHCI San Antonio, Inc. Delaware
Riveredge Real Estate, Inc. Illinois Solutions Center of Little Rock, Inc. Tennessee Sunstone Behavioral Health, Inc. Tennessee Texas Cypress Creek Hospital, L.P. Texas Texas Laurel Ridge Hospital, L.P. Texas Texas Laurel Ridge Hospital Real Estate, L.P. Texas Texas Oaks Psychiatric Hospital, L.P. Texas Texas Oaks Psychiatric Hospital Real Estate, L.P. Texas Texas San Marcos Treatment Center, L.P. Texas Texas San Marcos Treatment Center Real Estate, L.P. Texas Texas West Oaks Hospital, L.P. Texas The Counseling Center of Middle Tennessee, Inc. Tennessee Therapeutic School Services, L.L.C. Oklahoma Transitional Care Ventures, Inc. Delaware Transitional Care Ventures (Texas), Inc. Delaware West Oaks Real Estate, L.P. Texas

EX-23.1 104 g83903exv23w1.txt EX-23.1 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-4) of Psychiatric Solutions, Inc. for the registration of $150,000,000 of its 10 5/8% Senior Subordinated Notes due 2013 and to the inclusion therein of our reports dated (i) March 7, 2003, with respect to the consolidated financial statements of Psychiatric Solutions, Inc. and (ii) May 2, 2003, with respect to the combined financial statements of The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc., and The Oaks Psychiatric Hospital, Inc. and to the incorporation by reference therein of our reports dated (iii) June 4, 2002, with respect to the financial statements of Holly Hill/Charter Behavioral Health System, L.L.C.; (iv) May 31, 2002, with respect to the combined financial statements of Cypress Creek Hospital, Inc., West Oaks Hospital, Inc., and Healthcare Rehabilitation of Austin, Inc.; and (v) June 21, 2002, with respect to the consolidated financial statements and schedule of PMR Corporation included in PMR Corporation's Annual Report (Form 10-K) for the year ended April 30, 2002, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP July 24, 2003 Nashville, Tennessee EX-23.2 105 g83903exv23w2.txt EX-23.2 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Psychiatric Solutions, Inc. on Form S-4 of our report for Ramsay Youth Services, Inc. dated March 14, 2003 (April 8, 2003 as to Note 19) (which report expresses an unqualified opinion and includes an explanatory paragraph referring to Ramsay Youth Services, Inc. changing its method of accounting for goodwill and other intangible assets by adopting certain provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002), appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Certified Public Accountants Miami, Florida July 29, 2003 EX-23.3 106 g83903exv23w3.txt EX-23.3 CONSENT OF BDO SEIDMAN EXHIBIT 23.3 INDEPENDENT AUDITOR'S CONSENT To the Board of Directors The Brown Schools of Oklahoma, Inc. and Subsidiary We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Form S-4 of our report dated May 22, 2003, relating to the consolidated financial statements of The Brown Schools of Oklahoma, Inc. and subsidiary as of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO Seidman, LLP Houston, Texas July 25, 2003 EX-23.4 107 g83903exv23w4.txt EX-23.4 INDEPENDENT AUDITORS CONSENT EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Form S-4 of our report dated February 14, 2002, except for notes 9c and 10 which are as of July 1, 2002, relating to the consolidated financial statements of Aeries Healthcare Corporation (d/b/a Riveredge Hospital), as of December 31, 2001 and 2000 and for the year ended December 31, 2001 and the ten month period ended December 31, 2000. We also consent to the reference to us under the caption "Experts" in the Prospectus. Chicago, Illinois July 25, 2003 EX-25.1 108 g83903exv25w1.txt EX-25.1 FORM T-1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) WACHOVIA BANK, NATIONAL ASSOCIATION (Exact Name of Trustee as Specified in its Charter) 22-1147033 (I.R.S. Employer Identification No.) 301 S. COLLEGE STREET, CHARLOTTE, NORTH CAROLINA (Address of Principal Executive Offices) 28288-0630 (Zip Code) WACHOVIA BANK, NATIONAL ASSOCIATION 2525 WEST END AVENUE, SUITE 1200 NASHVILLE, TENNESSEE 37203 ATTENTION: CORPORATE TRUST ADMINISTRATION (615) 341-3926 (Name, address and telephone number of Agent for Service) PSYCHIATRIC SOLUTIONS, INC. (Exact Name of Obligor as Specified in its Charter) DELAWARE (State or other jurisdiction of Incorporation or Organization) 22-2491707 (I.R.S. Employer Identification No.) 113 SEABOARD LANE, SUITE C-100 FRANKLIN, TN (Address of Principal Executive Offices) 37067 (Zip Code) (see table of Additional Registrants on following page) 10-5/8% SENIOR SUBORDINATED NOTES DUE 2013 (TITLE OF INDENTURE SECURITIES) ADDITIONAL REGISTRANTS
State or other Primary I.R.S Name, address jurisdiction of Standard Industrial Employer and telephone incorporation or Classification Code Identification number organization Number Number Psychiatric Solutions, Inc. AL 8093 23-2491707 Psychiatric Solutions of Alabama, Inc. TN 8093 62-1711427 Psychiatric Solutions of Coral Gables, Inc. DE 8093 63-0857352 Psychiatric Solutions of Florida, Inc. TN 8093 62-1732340 Psychiatric Solutions of Tennessee, Inc. TN 8093 62-1734491 Solutions Center of Little Rock, Inc. TN 8093 62-1734488 Psychiatric Solutions of North Carolina, Inc. TN 8093 62-1692189 PSI Community Mental Health Agency Management, Inc. TN 8093 62-1734870 PSI-EAP, Inc. DE 8093 51-0411229 Sunstone Behavioral Health, Inc. TN 8093 80-0051894 The Counseling Center of Middle Tennessee, Inc. TN 8093 62-1383217 PSI Hospitals, Inc. DE 8093 62-1871091 PSI Texas Hospitals, LLC TX 8093 62-1871092 Psychiatric Practice Management of Arkansas, Inc. TN 8093 62-1738261 Texas Cypress Creek Hospital, L.P. TX 8093 62-1864266 Texas West Oaks Hospital, L.P. TX 8093 62-1864265 Neuro Institute of Austin, L.P. TX 8093 56-2274069 Aeries Healthcare Corporation DE 8093 22-3682759 Aeries Healthcare of Illinois, Inc. IL 8093 22-3682760 Infoscriber Corporation DE 8093 33-0878629 Collaborative Care Corporation TN 8093 62-1603168 Psychiatric Solutions Hospitals, Inc. DE 8093 62-1658476 Psychiatric Management Resources, Inc. CA 8093 33-0290342 PSI Cedar Springs Hospital, Inc. DE 8093 74-3081810 Psychiatric Solutions of Oklahoma, Inc. DE 8093 43-2001465 Texas Laurel Ridge Hospital, L.P. TX 8093 43-2002326 Texas Oaks Psychiatric Hospital, L.P. TX 8093 84-1618661 Texas San Marcos Treatment Center, L.P. TX 8093 43-2002231 Therapeutic School Services, LLC OK 8093 73-1559296 Bountiful Psychiatric Hospital, Inc. UT 8093 93-0893928 East Carolina Psychiatric Services Corporation NC 8093 56-1317433 Great Plains Hospital, Inc. MO 8093 43-1328523 Gulf Coast Treatment Center, Inc. FL 8093 56-1341134 Havenwyck Hospital Inc. MI 8093 38-2409580 H.C. Corporation AL 8093 63-0870528 H.C. Partnership AL 8093 63-0862148 HSA Hill Crest Corporation AL 8093 95-3900761 HSA of Oklahoma, Inc. OK 8093 74-2373564 Michigan Psychiatric Services, Inc. MI 8093 38-2423002 Ramsay Managed Care, Inc. DE 8093 72-1249464 Ramsay Treatment Services, Inc. DE 8093 65-0852413 Ramsay Youth Services of Alabama, Inc. DE 8093 52-2090040 Ramsay Youth Services of Florida, Inc. DE 8093 65-0816927 Ramsay Youth Services of Georgia, Inc. DE 8093 35-2174803 Ramsay Youth Services of South Carolina, Inc. DE 8093 22-3600673 Ramsay Youth Services Puerto Rico, Inc. PR 8093 66-0555371 RHCI San Antonio, Inc. DE 8093 74-2611258 Transitional Care Ventures, Inc. DE 8093 72-1235219 Transitional Care Ventures (Texas), Inc. DE 8093 51-0343645
(1) The address of each of these additional registrants is 113 Seaboard Lane, Suite C-100, Franklin, Tennessee 37067. 1. 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT: Comptroller of the Currency United States Department of the Treasury Washington, D.C. 20219 Federal Reserve Bank Richmond, Virginia 23219 Federal Deposit Insurance Corporation Washington, D.C. 20429 B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 3. VOTING SECURITIES OF THE TRUSTEE. FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF THE TRUSTEE: Not applicable - see answer to Item 13. 4. TRUSTEESHIPS UNDER OTHER INDENTURES. IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION: Not applicable - see answer to Item 13. 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR UNDERWRITERS. IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION. Not applicable - see answer to Item 13. 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS. FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF THE OBLIGOR: Not applicable - see answer to Item 13. 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS. FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER: Not applicable - see answer to Item 13. 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE. FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE TRUSTEE: Not applicable - see answer to Item 13. 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE. IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE: Not applicable - see answer to Item 13. 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING STOCK OF THE OBLIGOR OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON: Not applicable - see answer to Item 13. 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE: Not applicable - see answer to Item 13. 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE TRUSTEE, FURNISH THE FOLLOWING INFORMATION: Not applicable - see answer to Item 13. 13. DEFAULTS BY THE OBLIGOR. A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT. None. B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT. None 14. AFFILIATIONS WITH THE UNDERWRITERS. IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. Not applicable - see answer to Item 13. 15. FOREIGN TRUSTEE. IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE TRUSTEE IS AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE ACT. Not applicable - trustee is a national banking association organized under the laws of the United States. 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. _1. Copy of Articles of Association of the trustee as now in effect.* _2. Copy of the Certificate of the Comptroller of the Currency dated March 27, 2002, evidencing the authority of the trustee to transact business.* _3. Copy of the Certification of Fiduciary Powers of the trustee by the Office of the Comptroller of the Currency dated March 27, 2002.* _4. Copy of existing by-laws of the trustee.** _5. Copy of each indenture referred to in Item 4, if the obligor is in default. Not Applicable. X 6. Consent of the trustee required by Section 321(b) of the Act. X 7. Copy of report of condition of the trustee at the close of business on March 31, 2003, published pursuant to the requirements of its supervising authority. _8. Copy of any order pursuant to which the foreign trustee is authorized to act as sole trustee under indentures qualified or to be qualified under the Act. Not Applicable _9. Consent to service of process required of foreign trustees pursuant to Rule 10a-4 under the Act. Not Applicable - ------------------------ *Previously filed with the Securities and Exchange Commission on April 11, 2002 as an Exhibit to Form T-1 (in connection with Registration Statement File No. 333-86036) and is incorporated by reference herein. **Previously filed with the Securities and Exchange Commission on May 13, 2003 as an Exhibit to Form T-1 (in connection with Registration Statement File No. 333-105207) and is incorporated by reference herein. NOTE The trustee disclaims responsibility for the accuracy or completeness of information contained in this Statement of Eligibility and Qualification not known to the trustee and not obtainable by it through reasonable investigation and as to which information it has obtained from the obligor and has had to rely or will obtain from the principal underwriters and will have to rely. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, Wachovia Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility and Qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Nashville and the State of Tennessee, on the 30th day of July, 2003. Wachovia Bank, National Association By: s/ Greta Wright ------------------------------- Greta Wright Vice President EXHIBIT T-6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, and in connection with the proposed issue of Psychiatric Solutions, Inc. 10-5/8% Senior Subordinated Notes due 2013, Wachovia Bank, National Association, hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Greta Wright ------------------------------- Greta Wright Vice President Nashville, Tennessee July 30, 2003 EXHIBIT T-7 REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of Wachovia Bank, N.A., at the close of business on March 31, 2003, published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161. Charter Number 1 Comptroller of the Currency. STATEMENT OF RESOURCES AND LIABILITIES ASSETS Thousand of Dollars Cash and balance due from depository institutions: Noninterest-bearing balances and currency and coin ................... 14,130,000 Interest-bearing balances ............................................ 2,142,000 Securities ................................................................ //////// Held-to-maturity securities (from Schedule RC-B, column A) ........... 0 Available-for-sale securities (from schedule RC-B, column D) ......... 69,552,000 Federal funds sold and securities purchased under agreements to resell .... 0 Federal funds sold in domestic offices .................................... 1,833,000 Securities purchased under agreements to resell(3) ........................ 4,293,000 Loans and lease financing receivables (from Schedule RC-C): Loan and leases held for sale ........................................ 8,101,000 Loan and leases, net of unearned income .............................. 161,553,000 LESS: Allowance for loan and lease losses ............................ 2,716,000 LESS: Allocated transfer risk reserve ................................ 0 Loans and leases, net of unearned income and allowance (item.4.b misus 4.c) ............................................... 158,837,000 Trading assets (from Schedule RC-D) ....................................... 26,199,000 Premises and fixed assets (including capitalized leases) .................. 4,255,000 Other real estate owned (from Schedule RC-M) .............................. 143,000 Investment in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ................................................... 669,000 Customer's liability to this bank on acceptances outstanding .............. 1,485,000 Intangible assets ......................................................... 9,499,000 Goodwill.............................................................. Other intangible assets (from Schedule RC-M) .............................. 1,698,000 Other assets (from Schedule RC-F) ......................................... 20,947,000 TOTAL ASSETS ..................................................... 323,783,000 LIABILITIES Deposits: In domestic offices .................................................. 188,964,000 Noninterest-bearing ................................................ 32,609,000 Interest-bearing ................................................... 156,355,000 In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, partII) ....................................... 12,591,000 Noninterest-bearing ................................................ 21,000 Interest-bearing ................................................... 12,570,000 Federal funds purchased in domestic offices(2) ............................ 3,342,000 Securities sold under agreements to repurchase(3) ......................... 26,168,000 Trading liabilities(from Schedule RC-D) ................................... 18,156,000 Other borrowed money (includes mortgage indebtedness and obligations under Capitalized leases)(from Schedule RC-M) ........................... 21,041,000 Bank's liability on acceptances executed and outstanding .................. 1,492,000 Subordinated notes and debentures ......................................... 8,149,000 Other liabilities ......................................................... 11,156,000 TOTAL LIABILITIES ......................................................... 291,059,000 Minority Interest in consolidated subsidiaries ............................ 1,327,000 EQUITY CAPITAL Perpetual preferred stock and related surplus ............................. 0 Common Stock .............................................................. 455,000 Surplus ................................................................... 24,194,000 Retained Earnings ......................................................... 4,660,000 Accumulated other comprehensive income .................................... 2,088,000 Other Equity Capital components ........................................... 0 Total equity capital (sum of item 23 through 27) .......................... 31,397,000 Total liabilities and equity capital (sum of items 21,22, and 28 .......... 323,783,000

EX-99.1 109 g83903exv99w1.txt EX-99.1 FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL PSYCHIATRIC SOLUTIONS, INC. OFFER TO EXCHANGE 10 5/8% SENIOR SUBORDINATED NOTES DUE 2013 FOR ANY AND ALL OUTSTANDING 10 5/8% SENIOR SUBORDINATED NOTES DUE 2013 ---------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, 2003 (THE "EXPIRATION DATE") UNLESS EXTENDED BY PSYCHIATRIC SOLUTIONS, INC. ---------------------------------------------------------- WACHOVIA BANK, NATIONAL ASSOCIATION By Registered or Certified Mail, Hand or Overnight Courier: 2525 West End Avenue, Suite 1200 Nashville, Tennessee 37203 Attn: Corporate Trust Group By Facsimile: By Telephone: (615) 341-3927 (615) 341-3926 (For Eligible Institutions Only) DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 2003 (the "Prospectus") of Psychiatric Solutions, Inc. (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of its 10 5/8% Senior Subordinated Notes due 2013 (the "Registered Notes") for each $1,000 in principal amount of outstanding 10 5/8% Senior Subordinated Notes due 2013 (the "Old Notes"). The terms of the Registered Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Registered Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus) and are not subject to any covenant regarding registration under the Securities Act of 1933, as amended (the "Securities Act"). The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amounts should be listed on a separate signed schedule affixed hereto. DESCRIPTION OF OLD NOTES
- ---------------------------------------------------------------------------------------------------------------------- Aggregate Principal Name(s) and Addresses of Registered Holder(s) Certificate Amount Represented By Principal Amount (Please fill-in) Number(s) Old Notes* Tendered** - -------------------------------------------------- --------------------- -------------------------- ------------------ --------------------- -------------------------- ------------------ --------------------- -------------------------- ------------------ --------------------- -------------------------- ------------------ --------------------- -------------------------- ------------------ --------------------- -------------------------- ------------------ Total - ---------------------------------------------------------------------------------------------------------------------- * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. See Instruction 2. - ----------------------------------------------------------------------------------------------------------------------
2 This Letter of Transmittal is to be used either if certificates representing Old Notes are to be forwarded herewith or if delivery of Old Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at the Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering Old Notes." Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering Old Notes." [ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution(s) ---------------------------- The Depository Trust Company Account Number ----------------- Transaction Code Number ------------------------------------- [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) -------------------------------- Name of Eligible Institution that Guaranteed Delivery ----------------------------------------- Date of Execution of Notice of Guaranteed Delivery ---------- Name of Institution that Guaranteed Delivery ---------------- If Delivered by Book-Entry Transfer: ------------------------ Account Number ---------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO Name: ------------------------------------------------------- Address: ---------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Registered Notes. If the undersigned is a broker-dealer that will receive Registered Notes for its own account in exchange for Old Notes that were acquired as result of market-making activities or other trading activities (other than Old Notes acquired directly from the Company), it acknowledges that it will deliver a prospectus in connection with any resale of such Registered Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Any holder who is an "affiliate" of the Company or who has an arrangement or understanding with respect to the distribution of the Registered Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: 1. Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount at maturity of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered hereby. 2. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any Registered Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Registered Notes, whether or not such person is the undersigned, that neither the holder of such Old Notes nor any such other person is engaging in or intends to engage in a distribution of such Registered Notes and that neither the holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Company. 3. The undersigned also acknowledges that the Exchange Offer is being made in reliance on an interpretation, made to third parties, by the staff of the Securities and Exchange Commission (the "SEC") that the Registered Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Registered Notes are acquired in the ordinary course of such holders' business, such holders are not engaging in and do not intend to engage in the distribution of such Registered Notes and such holders have no arrangements with any person to participate in the distribution of such Registered Notes. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in. a distribution of Registered Notes. If the undersigned is a broker-dealer that will receive Registered Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such Registered Notes. However, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 4. The undersigned may, if, and only if, it would not receive freely tradable Registered Notes in the Exchange Offer or is not eligible to participate in the Exchange Offer, elect to have its Old Notes registered in the shelf registration described in the Exchange and Registration Rights Agreement, dated as of June 30, 2003, among the Company, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Jefferies & Company, Inc. (the "Registration Agreement"). Capitalized terms used in this paragraph 4 and not otherwise defined herein shall have the meanings given to them in the Registration Agreement. Such election may be made by checking the box under "Special Registration Instructions" below. By making such election, the undersigned agrees, as a holder of Old Notes participating in a Shelf Registration, to comply with the Registration Agreement and to indemnify and hold harmless the Company, its directors, officers, employees and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the 4 "Exchange Act"), from and against any and all losses, claims, damages, liabilities, judgments (including without limitation, any legal or other expenses incurred in connection with investigating or defending any judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement or any preliminary prospectus or prospectus forming a part thereof (or any amendment or supplement thereto), or the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the undersigned specifically for inclusion therein. Any such indemnification shall be governed by the terms and subject to the conditions set forth in the Registration Agreement, including, without limitation, the provisions regarding notice, retention of counsel, contribution and payment of expenses set forth therein. The above summary of the indemnification provisions of the Registration Agreement is not intended to be exhaustive and is qualified in its entirety by the Registration Agreement. 5. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal Rights." See Instruction 9. 6. Unless otherwise indicated in the box entitled "Special Issuance Instructions" below, please issue the Registered Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Registered Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." 5 THE UNDERSIGNED ACKNOWLEDGES THAT THE EXCHANGE OFFER IS SUBJECT TO THE MORE DETAILED TERMS SET FORTH IN THE PROSPECTUS AND, IN CASE OF ANY CONFLICT BETWEEN THE TERMS OF THE PROSPECTUS AND THIS LETTER, THE TERMS OF THE PROSPECTUS SHALL PREVAIL. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. - -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 2, 3, 4 AND 5) To be completed ONLY if certificates for Old Notes not exchanged and/or Registered Notes are to be issued in the name of someone other than the person or persons whose signature(s) appear(s) on this Letter below, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: Registered Notes and/or Old Notes to: Name(s)* --------------------------------------------------------------- (Please type or print) --------------------------------------------------------------- (Please type or print) Address: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Zip Code Such person(s) must properly complete a Substitute Form W-9, a Form W-8BEN, a Form W-8ECI, or a Form W-8IMY) Credit unchanged Old Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. ------------------------------------------------------------ (Book-Entry Transfer Facility Account Number, if applicable) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Old Notes not exchanged and/or Registered Notes are to be sent to someone other than the person or persons whose signatures(s) appear(s) on this Letter below or to such person or persons at an address other than shown in the box entitled "Description of Old Notes" on this Letter above. Mail Registered Notes and/or Old Notes to: Name(s)* --------------------------------------------------------------- (Please type or print) --------------------------------------------------------------- (Please type or print) Address: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Zip Code (Such person(s) must properly complete a Substitute Form W-9, a Form W-8BEN, a Form W-8ECI, or a Form W-8IMY) - -------------------------------------------------------------------------------- 6 SPECIAL REGISTRATION INSTRUCTIONS (SEE PARAGRAPH 4 ABOVE) - -------------------------------------------------------------------------------- To be completed ONLY IF (i) the undersigned satisfies the conditions set forth in paragraph 4 above, (ii) the undersigned elects to register its Old Notes in the shelf registration described in the Registration Agreement, and (iii) the undersigned agrees to comply with the Registration Agreement and to indemnify certain entities and individuals as set forth in paragraph 4 above. [ ] By checking this box the undersigned hereby (i) represents that it is entitled to have its Old Notes registered in a shelf registration in accordance with the Registration Agreement, (ii) elects to have its Old Notes registered pursuant to the shelf registration described in the Registration Agreement, and (iii) agrees to comply with the Registration Agreement and to indemnify certain entities and individuals identified in, and to the extent provided in, paragraph 4 above. - -------------------------------------------------------------------------------- IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. 7 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. - -------------------------------------------------------------------------------- PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) X. , 2003 ------------------------------------ ----------------------- X. , 2003 ------------------------------------ ----------------------- X. , 2003 ------------------------------------ ----------------------- Signature(s) of Owner Date Area Code and Telephone Number ------------------------------------------- If a holder is tendering any Old Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s): -------------------------------------------------------------------- - ----------------------------------------------------------------------------- Capacity: -------------------------------------------------------------------- Address: -------------------------------------------------------------------- SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by an Eligible Institution: -------------------------------------------------- (Authorized Signature) - ----------------------------------------------------------------------------- (Title) - ----------------------------------------------------------------------------- (Name and Firm) - -------------------------------------------------------------------------------- 8 INSTRUCTIONS 1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Prospectus under the caption "The Exchange Offer--Book-Entry Transfer." Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile thereof), with any required signature guarantees, and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations or principal amount at maturity of $1,000 or any integral multiple thereof. Noteholders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and any other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) on or prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter, must be received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. Instead of delivery by mail it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. No Letter of Transmittal or Old Notes should be sent to the Company. See "The Exchange Offer" section in the Prospectus. 2. PARTIAL TENDERS. If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount at maturity of Old Notes to be tendered in the box above entitled "Description of Old Notes" under "Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes of a tendering holder who physically delivered Old Notes will be sent to such tendering holder, unless otherwise provided in the 9 appropriate box on this Letter, promptly after the Expiration Date. All of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Registered Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) or bond powers must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificates must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificates(s) or bond powers must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted with this Letter. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program (each an "Eligible Institution" and collectively, "Eligible Institutions"). Signatures on the Letter need not be guaranteed by an Eligible Institution if (A) the Old Notes are tendered (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution and (B) the box entitled "Special Registration Instructions" on this Letter has not been completed. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Old Notes should indicate in the applicable box the name and address to which Registered Notes issued pursuant to the Exchange Offer and/or substitute certificates 10 evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated and such person named must properly complete a Substitute Form W-9, a Form W-8BEN, a Form W-8ECI, or a Form W-8IMY, as applicable. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter. 5. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, Registered Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. 6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give any such notice. 8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 9. WITHDRAWAL OF TENDERS. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal of a tender of Old Notes to be effective, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) be signed by the holder in the same manner as the original signature 11 on this Letter by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee under the Indenture pursuant to which the Old Notes were issued register the transfer of such Old Notes into the name of the person withdrawing the tender, and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. Any Old Notes so properly withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender, or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities, or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions of this Letter) will be final and binding on all parties. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus, this Letter and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. IMPORTANT TAX INFORMATION Each prospective holder of Registered Notes to be issued pursuant to Special Issuance Instructions should complete the attached Substitute Form W-9. Under current federal income tax law, a holder of Registered Notes is required to provide the Company (as payor) with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 or otherwise establish a basis for exemption from backup withholding to prevent any backup withholding on any payments received in respect of the Registered Notes. If a holder of Registered Notes is an individual, the TIN is such holder's social security number. If the Company is not provided with the correct taxpayer identification number, a holder of Registered Notes may be subject to a $50 penalty imposed by the Internal Revenue Service. The Substitute Form W-9 need not be completed if the box entitled Special Issuance Instructions has not been completed. Certain holders of Registered Notes (including, among other, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt prospective holders of Registered Notes should indicate their exempt status on Substitute Form W-9. A foreign individual may qualify as an exempt recipient by submitting to the Company, through the Exchange Agent, the appropriate Internal Revenue Service Form W-8 (e.g., W-8BEN, Form W-8ECI or Form W-8IMY), properly completed and signed under penalty of perjury, attesting to the holder's exempt status. The appropriate W-8 will be provided by the Exchange Agent upon request. See the enclosed Substitute Form W-9 for additional instructions. If backup withholding applies, the Company is required to withhold 30% of any "reportable payment" made to the holder of Registered Notes or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup 12 withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding with respect to any payments received in respect of the Registered Notes, each prospective holder of Registered Notes to be issued pursuant to Special Issuance Instructions should provide the Company, through the Exchange Agent, with either: (i) such prospective holder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such prospective holder is awaiting a TIN), that such prospective holder is a U.S. person (including a U.S. resident alien), and that (A) such prospective holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified such prospective holder that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The prospective holder of Registered Notes to be issued pursuant to Special Issuance Instructions is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the prospective record owner of the Registered Notes. If the Registered Notes will be held in more than one name or are not held in the name of the actual owner, consult the enclosed Substitute Form W-9 for additional guidance regarding which number to report. 13 Form W-9 GIVE FORM TO THE (Rev. January 2003) REQUESTER. DO NOT Department of the Treasury SEND TO THE IRS. Internal Revenue Service REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION PRINT OR TYPE See SPECIFIC INSTRUCTIONS on page 2. - ---------------------------------------------------------------------------------------------------------------------------------- Name - ---------------------------------------------------------------------------------------------------------------------------------- Business name, if different from above - ---------------------------------------------------------------------------------------------------------------------------------- Individual/ Exempt from backup Check appropriate box: [ ] Sole proprietor [ ] Corporation [ ] Partnership [ ] Other ........... [ ] withholding - ---------------------------------------------------------------------------------------------------------------------------------- Address (number, street, and apt. or suite no.) Requester's name and address (optional) - --------------------------------------------------------------------------------- City, state, and ZIP code - ---------------------------------------------------------------------------------------------------------------------------------- List account number(s) here (optional) - ----------------------------------------------------------------------------------------------------------------------------------

PART I TAXPAYER IDENTIFICATION NUMBER (TIN) Enter your TIN in the appropriate box. For SOCIAL SECURITY NUMBER individuals, this is your social security [ ] [ ] [ ] [ ] [ ] number (SSN). HOWEVER, FOR A RESIDENT ALIEN, SOLE PROPRIETOR, OR DISREGARDED ENTITY, SEE THE PART I INSTRUCTIONS ON PAGE 3. For other entities, it is your employer identification OR number (EIN). If you do not have a number, See HOW TO GET A TIN on page 3. NOTE: If the account is in more than one name, EMPLOYER IDENTIFICATION NUMBER see the chart on page 4 for guidelines on [ ] [ ] [ ] [ ] [ ] whose number to enter. PART II CERTIFICATION Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), AND 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, AND 3. I am a U.S. person (including a U.S. resident alien). CERTIFICATION INSTRUCTIONS. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the Certification, but you must provide your correct TIN. (See the instructions on page 4). - -------------------------------------------------------------------------------- SIGN SIGNATURE OF HERE U.S. PERSON DATE - -------------------------------------------------------------------------------- PURPOSE OF FORM NONRESIDENT ALIEN WHO BECOMES A RESIDENT ALIEN. Generally, only a A person who is required to file an nonresident alien individual may use information return with the IRS, must the terms of a tax treaty to reduce or obtain your correct taxpayer eliminate U.S. tax on certain types of identification number (TIN) to report, income. However, most tax treaties for example, income paid to you, real contain a provision known as a "saving estate transactions, mortgage interest clause." Exceptions specified in the you paid, acquisition or abandonment saving clause may permit an exemption of secured property, cancellation of from tax to continue for certain types debt, or contributions you made to an of income even after the recipient has IRA. otherwise become a U.S. resident alien for tax purposes. U.S. PERSON. Use Form W-9 only if you are a U.S. person (including a If you are a U.S. resident alien who resident alien), to provide your is relying on an exception contained in correct TIN to the person requesting the saving clause of a tax treaty to it (the requester) and, when claim an exemption from U.S. tax on applicable, to: certain types of income, you must attach a statement that specifies the 1. Certify that the TIN you are following five items: giving is correct (or you are waiting for a number to be issued), 1. The treaty country. Generally, this must be the same treaty under 2. Certify that you are not subject which you claimed exemption from tax as to backup withholding, or a nonresident alien. 3. Claim exemption from backup 2. The treaty article addressing the withholding if you are a U.S. exempt income. payee. 3. The article number (or location) NOTE: If a requester gives you a in the tax treaty that contains the form other than Form W-9 to request saving clause and its exceptions. your TIN, you must use the requester's form if it is substantially similar to 4. The type and amount of income this form W-9. that qualifies for the exemption from tax. FOREIGN PERSON. If you are a foreign person, use the appropriate Form W-8 5. Sufficient facts to justify the (see PUB. 515, Withholding of Tax on exemption from tax under the terms of Nonresident Aliens and Foreign the treaty article. Entities). - -------------------------------------------------------------------------------- Cat. No. 10231x Form W-9 (Rev. 1-2003) EX-99.2 110 g83903exv99w2.txt EX-99.2 FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY PSYCHIATRIC SOLUTIONS, INC. OFFER TO EXCHANGE 10 5/8% SENIOR SUBORDINATED NOTES DUE 2013 FOR ANY AND ALL OUTSTANDING 10 5/8% SENIOR SUBORDINATED NOTES DUE 2013 This form or one substantially equivalent hereto must be used by registered holders of outstanding 10 5/8% Senior Subordinated Notes due 2013 (the "Old Notes") who wish to tender their Old Notes in exchange for a like principal amount of 10 5/8% Senior Subordinated Notes due 2013 (the "Registered Notes") pursuant to the exchange offer described in the Prospectus dated , 2003 (the "Prospectus") if the holder's Old Notes are not immediately available or if such holder cannot deliver its Old Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Wachovia Bank, National Association (the "Exchange Agent") prior to 5:00 p.m., New York City time, on , 2003. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering--Guaranteed Delivery Procedures" in the Prospectus. The Exchange Agent for the Exchange Offer is: WACHOVIA BANK, NATIONAL ASSOCIATION By Registered or Certified Mail, Hand or Overnight Courier: 2525 West End Avenue Nashville, Tennessee 37203 Attn: Corporate Trust Group By Facsimile: By Telephone: ((615) 341-3927 (615) 341-3926 (For Eligible Institutions Only) DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an eligible institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders to Psychiatric Solutions, Inc. (the "Company") the principal amount of Old Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus, receipt of which is hereby acknowledged.
- ----------------------------------------------------------------------------------------------------------- DESCRIPTION OF SECURITIES TENDERED - ----------------------------------------------------------------------------------------------------------- NAME AND ADDRESS OF REGISTERED HOLDER NAME OF AS IT APPEARS ON THE CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT TENDERING HOLDER OLD NOTES (PLEASE PRINT) FOR OLD NOTES TENDERED OF OLD NOTES TENDERED - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
PLEASE SIGN HERE X__________________________________ X_______________________________ X__________________________________ X_______________________________ X__________________________________ X_______________________________ Signature(s) of Owner Date Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on certificates for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): _____________________________________________ _____________________________________________ _____________________________________________ Capacity: _____________________________________________ Address(es): _____________________________________________ _____________________________________________ _____________________________________________ [ ] The Depository Trust Company (Check if Old Notes will be tendered by book-entry transfer) Account Number:_____________________________________________________ THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED. 2 THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth above, the certificates representing the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guaranteed, and any other documents required by the Letter of Transmittal within three NYSE trading days after the date of execution of this Notice of Guaranteed Delivery. Name of Firm:__________________________ ____________________________________ (AUTHORIZED SIGNATURE) Address:_______________________________ Title:______________________________ _______________________________________ Name:_______________________________ (ZIP CODE) (PLEASE TYPE OR PRINT) _______________________________________ Date:_______________________________ AREA CODE AND TELEPHONE NO. NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. 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Delaware	8093	23-2491707
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)






		Proposed Maximum	Proposed Maximum
Title of Each Class of	Amount to be	Offering Price	Aggregate	Amount of
Securities to be Registered	Registered	Per Note(1)	Offering Price(1)	Registration Fee


10 5/8% Senior Subordinated Notes Due 2013	$150,000,000	100%	$150,000,000	$12,135

Guarantee of 10 5/8% Senior Subordinated Notes Due 2013	$150,000,000	(2)	(2)	(2)


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
SUMMARY
RISK FACTORS
THE EXCHANGE OFFER
USE OF PROCEEDS
CAPITALIZATION
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK
DESCRIPTION OF THE REGISTERED NOTES
FEDERAL INCOME TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION OF DOCUMENTS BY REFERENCE
INDEX TO FINANCIAL STATEMENTS
INDEX TO EXHIBITS
Ex-3.4 Certificate of Incorporation
EX-3.5 Bylaws
Ex-3.6 Articles of Incorporation
EX-3.7 Bylaws
Ex-3.8 Articles of Incorporation
Ex-3.9 Restated Bylaws
Ex-3.10 Charter
Ex-3.11 Bylaws
Ex-3.12 Articles of Incorporation
Ex-3.13 Restated Bylaws
Ex-3.14 Articles of Incorporation
Ex-3.15 Restated Bylaws
Ex-3.16 Articles of Incorporation
Ex-3.17 Bylaws
Ex-3.18 Articles of Incorporation
Ex-3.19 Amended and Restated Bylaws
Ex-3.20 General Partnership Agreement
Ex-3.21 Bylaws
Ex-3.22 Articles of Incorporation
Ex-3.23 Restated Bylaws
Ex-3.24 Articles of Incorporation
Ex-3.25 Amended and Restated Bylaws
Ex-3.26 Articles of Incorporation
Ex-3.27 Restated Bylaws
Ex-3.28 Certificate of Incorporation
Ex-3.29 Bylaws
Ex-3.30 Articles of Incorporation
Ex-3.31 Bylaws
Ex-3.32 Certificate of Limited Partnership
Ex-3.33 Limited Partnership Agreement
Ex-3.34 Certificate of Incorporation
Ex-3.35 Bylaws
Ex-3.36 Charter
Ex-3.37 Bylaws
Ex-3.38 Certificate of Incorporation
Ex-3.39 Bylaws
Ex-3.40 Articles of Organization
Ex-3.41 Certificate of Incorporation
Ex-3.42 Bylaws
Ex-3.43 Articles of Incorporation
Ex-3.44 Bylaws
Ex-3.45 Amended and Restated Charter
Ex-3.46 Bylaws of Physician Practice Management
Ex-3.47 Third Amended and Restated Certificate
Ex-3.48 Amended and Restated Bylaws
Ex-3.49 Charter
ex-3.50 Bylaws
Ex-3.51 Restated Certificate of Incorporation
Ex-3.52 Amended and Restated Bylaws
Ex-3.53 Charter
Ex-3.54 Bylaws
Ex-3.55 Charter
Ex-3.56 Bylaws
Ex-3.57 Certificate of Incorporation
Ex-3.58 Bylaws
Ex-3.59 Charter
Ex-3.60 Bylaws
Ex-3.61 Amended and Restated Certificate
Ex-3.62 Amended and Restated Bylaws
Ex-3.63 Certificate of Incorporation
Ex-3.64 Amended and Restated Bylaws
Ex-3.65 Certificate of Incorporation
Ex-3.66 Bylaws
Ex-3.67 Certificate of Incorporation
Ex-3.68 Bylaws
Ex-3.69 Certificate of Incorporation
Ex-3.70 Bylaws
Ex-3.71 Certificate of Incorporation
Ex-3.72 Bylaws
Ex-3.73 Certificate of Incorporation
Ex-3.74 Bylaws
Ex-3.75 Certificate of Incorporation
Ex-3.76 Restated Bylaws
Ex-3.77 Amended and Restated Charter
Ex-3.78 Bylaws
Ex-3.79 Charter
Ex-3.80 Bylaws
Ex-3.81 Certificate of Limited Partnership
Ex-3.82 Amended and Restated Limited Partnership
Ex-3.83 Certificate of Limited Partnership
Ex-3.84 Limited Partnership Agreement
EX-3.85 Certificate of Limited Partnership
Ex-3.86 Limited Partnership Agreement
Ex-3.87 Certificate of Limited Partnership
Ex-3.88 Limited Partnership Agreement
Ex-3.89 Certificate of Limited Partnership
Ex-3.90 Amended and Restated Limited Partnership
Ex-3.91 Amended and Restated Charter
Ex-3.92 Bylaws
Ex-3.93 Articles of Organization
Ex-3.94 Operating Agreement
Ex-3.95 Certificate of Incorporation
Ex-3.96 Bylaws
Ex-3.97 Certificate of Incorporation
Ex-3.98 Bylaws
Ex-4.10 Indenture
EX-4.12 Purchase Agreement
Ex-4.13 Exchange and Registration Rights Agreement
Ex-10.27 Second Amended and Restated Revolving
EX-12.1 COMPUTATION OF RATIO OF EARNINGS
Ex-21.1 Subsidiaries of Psychiatric Solutions
EX-23.1 Consent of Ernst & Young LLP
Ex-23.2 Consent of Deloitte & Touche LLP
EX-23.3 CONSENT OF BDO SEIDMAN
EX-23.4 INDEPENDENT AUDITORS CONSENT
EX-25.1 FORM T-1
Ex-99.1 Form of Letter of Transmittal
Ex-99.2 Form of Notice of Guaranteed Delivery


Old Notes:		On June 30, 2003, we sold to the initial purchasers $150,000,000 aggregate principal amount of our 10 5/8% Senior Subordinated Notes due 2013, which are fully and unconditionally guaranteed on a senior subordinated basis by substantially all of our existing operating subsidiaries. In this prospectus we refer to those senior subordinated notes as the “old notes.” The initial purchasers resold those old notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 and outside the United States to persons other than United States persons in offshore transactions meeting the requirements of Regulation S under the Securities Act.

Registration Rights Agreement:		When we sold the old notes we entered into a registration rights agreement with the initial purchasers in which we agreed, among other things, to provide to you and all other holders of these old notes the opportunity to exchange your unregistered old notes for substantially identical registered notes that we have registered under the Securities Act. This exchange offer is being made for that purpose.

Registered Notes:		We are offering to exchange the old notes for 10 5/8% Senior Subordinated Notes due 2013 that have been registered under the Securities Act, which are fully and unconditionally guaranteed on a senior subordinated basis by substantially all of our existing operating subsidiaries. In this prospectus we refer to those registered senior subordinated notes as the “registered notes.” In this prospectus we may refer to the old notes and the registered notes collectively as the “notes.” The terms of the registered notes and the old notes are substantially identical except:

		• the registered notes will be issued in a transaction that will have been registered under the Securities Act;

		• the registered notes will not contain securities law restrictions on transfer, and

		• the registered notes will not provide for the payment of liquidated damages under circumstances relating to the timing of the exchange offer.

The Exchange Offer:		We are offering to exchange $1,000 principal amount of the registered notes for each $1,000 principal amount of your old notes. As of the date of this prospectus, $150,000,000 aggregate principal amount of the old notes are outstanding. For procedures for tendering, see “The Exchange Offer — Procedures for Tendering Old Notes.”

Expiration Date:		This exchange offer will expire at 5:00 p.m., New York City time, on , 2003, unless we extend it.

Resales of Registered Notes:		We believe that the registered notes issued pursuant to the exchange offer in exchange for old notes may be offered for resale, resold and otherwise transferred by you without compliance


Issuer:		Psychiatric Solutions, Inc. (“PSI”)

Offering:		$150,000,000 in aggregate principal amount of 10 5/8% Senior Subordinated Notes due 2013.

Maturity Date:		June 15, 2013.

Interest Payment Dates:		June 15 and December 15, commencing December 15, 2003.

Guarantees:		All payments with respect to the old notes are, and the registered notes, including principal and interest, will be, fully and unconditionally guaranteed on a senior subordinated basis by substantially all of our existing operating subsidiaries. In 2002, the non-guarantor subsidiaries had revenues of $118,000 and a net loss of $40,000 and, as of March 31, 2003, had total assets of


	State or Other		Primary		I.R.S.
	Jurisdiction of		Standard Industrial		Employer
	Incorporation or		Classification Code		Identification		Registration
Name, address and telephone number(1)	Organization		Number		Number		No.

Psychiatric Solutions, Inc.		AL		8093		23-2491707
Psychiatric Solutions of Alabama, Inc.		TN		8093		62-1711427
Psychiatric Solutions of Coral Gables, Inc.		DE		8093		63-0857352
Psychiatric Solutions of Florida, Inc.		TN		8093		62-1732340
Psychiatric Solutions of Tennessee, Inc.		TN		8093		62-1734491
Solutions Center of Little Rock, Inc.		TN		8093		62-1734488
Psychiatric Solutions of North Carolina, Inc.		TN		8093		62-1692189
PSI Community Mental Health Agency Management, Inc.		TN		8093		62-1734870
PSI-EAP, Inc.		DE		8093		51-0411229
Sunstone Behavioral Health, Inc.		TN		8093		80-0051894
The Counseling Center of Middle Tennessee, Inc.		TN		8093		62-1383217
PSI Hospitals, Inc.		DE		8093		62-1871091
PSI Texas Hospitals, LLC		TX		8093		62-1871092
Psychiatric Practice Management of Arkansas, Inc.		TN		8093		62-1738261
Texas Cypress Creek Hospital, L.P.		TX		8093		62-1864266
Texas West Oaks Hospital, L.P.		TX		8093		62-1864265
Neuro Institute of Austin, L.P.		TX		8093		56-2274069
Aeries Healthcare Corporation		DE		8093		22-3682759
Aeries Healthcare of Illinois, Inc.		IL		8093		22-3682760
Infoscriber Corporation		DE		8093		33-0878629
Collaborative Care Corporation		TN		8093		62-1603168
Psychiatric Solutions Hospitals, Inc.		DE		8093		62-1658476
Psychiatric Management Resources, Inc.		CA		8093		33-0290342
PSI Cedar Springs Hospital, Inc.		DE		8093		74-3081810
Psychiatric Solutions of Oklahoma, Inc.		DE		8093		43-2001465
Texas Laurel Ridge Hospital, L.P.		TX		8093		43-2002326
Texas Oaks Psychiatric Hospital, L.P.		TX		8093		84-1618661
Texas San Marcos Treatment Center, L.P.		TX		8093		43-2002231
Therapeutic School Services, LLC		OK		8093		73-1559296
Bountiful Psychiatric Hospital, Inc.		UT		8093		93-0893928
East Carolina Psychiatric Services Corporation		NC		8093		56-1317433
Great Plains Hospital, Inc.		MO		8093		43-1328523
Gulf Coast Treatment Center, Inc.		FL		8093		56-1341134
Havenwyck Hospital Inc.		MI		8093		38-2409580
H.C. Corporation		AL		8093		63-0870528
H.C. Partnership		AL		8093		63-0862148
HSA Hill Crest Corporation		AL		8093		95-3900761
HSA of Oklahoma, Inc.		OK		8093		74-2373564
Michigan Psychiatric Services, Inc.		MI		8093		38-2423002
Ramsay Managed Care, Inc.		DE		8093		72-1249464
Ramsay Treatment Services, Inc.		DE		8093		65-0852413
Ramsay Youth Services of Alabama, Inc.		DE		8093		52-2090040
Ramsay Youth Services of Florida, Inc.		DE		8093		65-0816927
Ramsay Youth Services of Georgia, Inc.		DE		8093		35-2174803
Ramsay Youth Services of South Carolina, Inc.		DE		8093		22-3600673
Ramsay Youth Services Puerto Rico, Inc.		PR		8093		66-0555371
RHCI San Antonio, Inc.		DE		8093		74-2611258
Transitional Care Ventures, Inc.		DE		8093		72-1235219
Transitional Care Ventures (Texas), Inc.		DE		8093		51-0343645


	Page

Special Note Regarding Forward-Looking Statements		i
Summary		1
Risk Factors		20
The Exchange Offer		29
Use of Proceeds		37
Capitalization		38
Unaudited Pro Forma Condensed Combined Financial Information		40
Selected Consolidated Financial and Operating Data		48
Management’s Discussion and Analysis of Financial Condition and Results of Operations		54
Business		68
Management		85
Security Ownership of Principal Stockholders and Management		87
Certain Relationships and Related Party Transactions		89
Description of Other Indebtedness and Preferred Stock		92
Description of the Registered Notes		96
Federal Income Tax Considerations		131
Plan of Distribution		132
Legal Matters		132
Experts		132
Where You Can Find More Information		134
Incorporation of Documents by Reference		135
Index to Financial Statements		F-1


(1)	In connection with the original note offering, we amended and restated, as well as repaid a portion of, our existing credit facility. Our amended and restated credit facility is comprised of a $17.0 million senior secured term note and a $50.0 million senior secured revolver, which remains undrawn. See “Description of Other Indebtedness and Preferred Stock.”

(2)	Consists of $4.9 million of mortgage loans insured by HUD, $0.1 million of capital lease obligations and $5.0 million of subordinated seller notes.

(3)	On April 1, 2003, concurrently with the acquisition of The Brown Schools, we received $12.5 million from the private placement of 2,272,727 shares of our series A convertible preferred stock with affiliates of Oak Investment Partners and Salix Ventures and with Brown Brothers Harriman & Co.’s The 1818 Mezzanine Fund II, L.P., or the 1818 Fund. These investors purchased an additional 2,272,727 shares of our series A convertible preferred stock for $12.5 million on June 19, 2003.

(4)	All payments with respect to the old notes and the registered notes offered hereby, including principal and interest, will be fully and unconditionally guaranteed on an unsecured senior subordinated basis by substantially all of our existing operating subsidiaries. In 2002, the non-guarantor subsidiaries had revenues of $118,000 and a net loss of $40,000 and, as of March 31, 2003, had total assets of $8.0 million and stockholders’ equity of $2.8 million. Each of the subsidiary guarantors will also guarantee our amended and restated credit facility on a senior secured basis.


Covenants:		The indenture governing the notes limits the ability of PSI and all restricted subsidiaries to, among other things:

		• incur additional indebtedness and issue preferred stock;

		• pay dividends or make other distributions;

		• make other restricted payments and investments;

		• create liens;

		• incur restrictions on the ability of restricted subsidiaries to pay dividends or make other payments;

		• sell assets, including capital stock of restricted subsidiaries;

		• merge or consolidate with other entities; and

		• enter into transactions with affiliates.

		Each of the covenants is subject to a number of important exceptions and qualifications. See “Description of the Registered Notes — Certain Covenants.”

No Prior Market:		The notes are a new issue of securities for which there is currently no market. The initial purchasers of the old notes have informed us that they intend to make a market in the notes, but they are not obligated to do so and they may discontinue market-making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the notes will develop or be maintained. We do not intend to apply for the notes to be listed on any securities exchange or to arrange for any quotation system to quote them.



			Three Months Ended
			March 31,					Year Ended
								December 31,
			2003		2002			2002


			(dollars in thousands, except ratios and
			operating data)
Income Statement Data:
Revenue			$	91,877	$	89,638		$	364,225
Expenses:
	Salaries, wages and employee benefits			51,071		50,553			201,860
	Other operating expenses(1)			29,719		27,705			114,911
	Provision for (recovery of) doubtful accounts(2)			2,132		(52	)		5,584
	Depreciation and amortization			1,711		1,639			6,629
	Interest expense			5,076		4,928			20,384
	Other expenses(3)			957		107			1,550

		Total expenses		90,666		84,880			350,918



			Twelve Months			Three Months
			Ended			Ended March 31,						Year Ended December 31,
			March 31,
			2003			2003			2002			2002			2001			2000


			(dollars in thousands, except operating data)
Income Statement Data:
Revenue			$	127,828		$	37,104		$	23,188		$	113,912		$	43,999		$	23,502
Costs and expenses:
	Salaries, wages and employee benefits(1)			66,259			17,785			13,970			62,444			26,183			15,257
	Other operating expenses(2)			43,212			13,549			5,969			35,632			11,322			5,826
	Provision for bad debts			4,288			1,322			715			3,681			662			467
	Depreciation and amortization			2,051			667			386			1,770			945			757
	Interest expense			5,612			1,420			1,372			5,564			2,660			1,723
	Other expenses(3)			643			499			—			144			1,237			—

		Total costs and expenses		122,065			35,242			22,412			109,235			43,009			24,030
Income (loss) from continuing operations before income taxes			$	5,763		$	1,862		$	776		$	4,677		$	990		$	(528	)

Net income (loss)			$	5,718		$	789		$	755		$	5,684		$	2,578		$	(1,916	)

Balance Sheet Data (End of Period):
Cash			$	4,045		$	4,045		$	1,157		$	2,392		$	1,262		$	336
Working capital (deficit)				3,389			3,389			(2,600	)		2,369			(3,624	)		(4,571	)
Property and equipment, net				33,764			33,764			17,858			33,547			17,980			308
Total assets				96,620			96,620			55,901			90,138			54,294			26,356
Total debt				46,186			46,186			36,999			43,822			36,338			16,641
Stockholders’ equity				30,891			30,891			10,404			30,549			9,238			6,235
Other Financial Data:
Capital expenditures			$	1,911		$	628		$	187		$	1,470		$	116		$	106
Net cash provided by (used in) continuing operating activities				10,392			1,125			(345	)		8,922			6,791			(177	)
Adjusted EBITDA(4)				14,083			4,453			2,643			12,273			5,832			1,952
Ratio of Earnings to Fixed Charges(5)				1.99	x		2.26	x		1.55	x		1.81	x		1.36	x		—
Operating Data:
Number of facilities:
	Owned			5			5			4			5			4			—
	Leased			—			—			—			—			—			—
Number of licensed beds				683			683			497			683			493			—
Admissions				15,937			4,344			3,144			14,737			3,027			—
Patient days				160,539			45,785			30,821			145,575			30,511			—
Average length of stay				10			11			10			10			10			—


			Twelve
			Months		Three Months
			Ended		Ended March 31,				Year Ended December 31,
			March 31,
			2003		2003		2002		2002		2001		2000


			(dollars in thousands, except operating data)
Statement of Operations Data:
Revenue			$	145,852	$	36,527	$	35,831	$	145,156	$	134,416	$	108,360
Costs and expenses:
	Salaries, wages and benefits			92,318		23,571		22,196		90,943		83,563		68,353
	Other operating expenses(1)			41,227		10,554		9,692		40,365		37,715		28,310
	Provision for doubtful accounts			1,549		402		720		1,867		2,911		2,817
	Depreciation and amortization			2,593		641		625		2,577		2,430		2,369
	Interest and other financing charges, net			2,342		557		690		2,475		3,299		2,706
	Other expenses(2)			—		—		125		125		254		705

		Total costs and expenses		140,029		35,725		34,048		138,352		130,172		105,260
Income before income taxes			$	5,823	$	802	$	1,783	$	6,804	$	4,244	$	3,100

Net income			$	11,596	$	497	$	1,569	$	12,668	$	3,466	$	2,852

Balance Sheet Data (End of Period):
Cash and cash equivalents			$	328	$	328	$	643	$	796	$	752	$	1,539
Working capital, net				10,633		10,633		13,648		10,250		13,099		8,328
Property and equipment				33,732		33,732		34,503		33,979		34,531		34,469
Total assets				72,140		72,140		71,159		73,297		69,011		69,598
Total debt				16,917		16,917		25,358		17,803		26,878		27,511
Stockholders’ equity				37,613		37,613		25,927		37,090		24,325		20,833
Other Financial Data:
Capital expenditures			$	2,010	$	413	$	876	$	2,473	$	2,467	$	2,503
Net cash provided by (used in) operating activities				10,079		692		2,184		11,571		1,998		(3,343	)
Adjusted EBITDA(3)				10,758		2,000		3,223		11,981		10,227		8,880
Operating Data:
Number of facilities:
	Owned			8		8		8		8		8		8
	Leased			3		3		3		3		3		3
Number of beds				1,250		1,250		1,183		1,200		1,119		1,094
Admissions				9,777		2,560		2,372		9,589		8,571		7,910
Patient days				368,889		92,304		90,505		367,090		352,702		295,126
Average length of stay				38		36		38		38		41		37


	*If federal or state health care programs or managed care companies reduce reimbursement rates or methods of reimbursement for our services, our revenue may decline.*


	*If we are unable to successfully integrate recent acquisitions into our business, our operations could be disrupted.*


	*Additional financing will be necessary to fund our acquisition program, and additional financing may not be available when needed.*


	*If competition decreases the ability to acquire additional facilities on favorable terms, we may be unable to execute our acquisition strategy.*


	*If we fail to comply with regulations regarding licenses, ownership and operation, we could impair our ability to operate or expand our operations in any state.*


	*If we fail to comply with extensive laws and government regulations, we could suffer penalties or be required to make significant changes to our operations.*


	Other companies within the health care industry continue to be the subject of federal and state investigations, which increases the risk that we may become subject to investigations in the future.


	We may be subject to liabilities because of claims brought against our owned, leased and managed inpatient behavioral health care facilities. In addition, if we acquire facilities with unknown or contingent liabilities, we could become liable for material obligations.


	*We may be subject to liabilities because of claims arising from our unit management activities.*


	We face periodic reviews, audits and investigations under our contracts with federal and state government agencies, and these audits could have adverse findings that may negatively impact our business.


	*If we fail to cultivate new, or maintain existing, relationships with the physicians in the communities in which we operate, our patient base may decline.*


	We depend on our key management personnel, and the loss of services of one or more key executives or a significant portion of our local management personnel could weaken our management team and our ability to deliver behavioral health care services efficiently.


	The shortage of qualified registered nursing staff and other health care workers could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs.


	*Our substantial indebtedness could adversely affect our financial health and our ability to fulfill our obligations under the notes.*


	*Covenant restrictions under our amended and restated credit facility and the indenture may limit our ability to operate our business.*


	*Our business and financial results depend on our ability to generate sufficient cash flows to service our debt or refinance our indebtedness on commercially reasonable terms.*


	*As a holding company, we rely on payments from our subsidiaries in order for us to make payments on the notes.*


	*Your right to receive payments on the notes and guarantees is subordinated to our senior debt.*


	*A subsidiary guarantee could be voided or subordinated because of federal bankruptcy law or comparable state law provisions.*


	*We may be unable to repurchase the notes if we experience a change of control.*


	No public market exists for the notes, and the offering and sale of the notes are subject to significant legal restrictions as well as uncertainties regarding the liquidity of the trading market for the notes.



			As of March 31, 2003

							As Adjusted for
					As Adjusted for		the Acquisition
					The Brown		of Ramsay and
			Psychiatric		Schools		the Financing
			Solutions		Acquisition		Transactions


			(Unaudited)
			(Dollars in thousands)
Cash and cash equivalents			$	4,045	$	4,045	$	7,087

Debt:
	Amended and restated credit facility due 2005-2008(1)		$	24,023	$	76,194	$	17,000
	Mortgage loan due 2037(2)			4,917		4,917		4,917
	Capital lease obligations			75		75		75
	Notes offered hereby			—		—		150,000
	12.0% senior subordinated notes due 2009(3)			10,000		10,000		—
	Subordinated seller notes with varying maturities(4)			5,994		4,994		4,994

		Total debt	$	45,009	$	96,180	$	176,986
Series A convertible preferred stock(5)				—		12,500		25,000
Common stockholders’ equity				30,891		30,891		23,678

		Total capitalization	$	75,900	$	139,571	$	225,664



																		Ramsay and Financing Transactions
							The Brown Schools Adjustments											Adjustments

																					Offering
																					and
							The		The Brown			Pro Forma									Purchase
				Psychiatric			Brown		Schools of			Purchase			Pro Forma						Pro Forma			Pro Forma
				Solutions			Schools(1)		Oklahoma, Inc.			Adjustments			Combined			Ramsay			Adjustments			Combined

Assets
	Current assets:
		Cash and cash equivalents		$	4,045		$	—	$	2		$	(2	)(2)	$	4,045		$	328		$	2,714		$	7,087
		Accounts receivable, net			22,137			8,913		2,213			—			33,263			21,089			—			54,352
		Other current assets			2,832			345		114			—			3,291			7,007			—			10,298

			Total current assets		29,014			9,258		2,329			(2	)		40,599			28,424			2,714			71,737
	Property, plant and equipment, net				33,764			13,321		2,226			30,625	(3)		79,936			33,732			—			113,668
	Costs in excess of net assets acquired, net				26,846			—		3,004			11,268	(4)		41,118			2,286			28,755	(8)		72,159
	Amortizable intangible asset, net				3,558			—		—			—			3,558			—			—			3,558
	Other assets				3,438			39		24			682	(5)		4,183			7,698			1,896	(9)		13,777

	Total assets			$	96,620		$	22,618	$	7,583		$	42,573		$	169,394		$	72,140		$	33,365		$	274,899

Liabilities and stockholders’ equity
	Current liabilities:
		Short-term borrowings		$	9,529		$	—	$	—		$	15,171	(6)		24,700		$	3,856		$	(27,002	)(10)	$	1,554
		Accounts payable			3,486			6,172		1,054			(597	)(2)		10,115			4,504			—			14,619
		Accrued liabilities			12,610			2,385		661			(572	)(2)		15,084			9,431			—			24,515

			Total current liabilities		25,625			8,557		1,715			14,002			49,899			17,791			(27,002	)		40,688
	Long-term debt, less current portion				36,657			—		—			36,000	(6)		72,657			13,061			89,714	(10)		175,432
	Other liabilities				3,447			—		—			—			3,447			3,675			2,979	(11)		10,101

	Total liabilities				65,729			8,557		1,715			50,002			126,003			34,527			65,691			226,221
	Series A convertible preferred stock				—			—		—			12,500	(6)		12,500			—			12,500	(10)		25,000
	Common stock				77			—		1			(1	)(7)		77			95			(95	)(12)		77
	Additional paid-in capital				35,013			14,061		10,749			(24,810	)(7)		35,013			127,169			(127,169	)(12)		35,013
	Notes receivable from stockholders				(711	)		—		—			—			(711	)		—			—			(711	)
	Accumulated (deficit) earnings				(3,488	)		—		(4,882	)		4,882	(7)		(3,488	)		(85,752	)		78,539	(12)		(10,701	)
	Treasury stock				—			—		—			—			—			(3,899	)		3,899	(12)		—

	Total stockholders’ equity				30,891			14,061		5,868			(19,929	)		30,891			37,613			(44,826	)		23,678

	Total liabilities and stockholders’ equity			$	96,620		$	22,618	$	7,583		$	42,573		$	169,394		$	72,140		$	33,365		$	274,899