<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SECTION240.14a-11(c) or SECTION240.14a-12
COMMUNITY PSYCHIATRIC CENTERS
(Name of Registrant as Specified in Its Charter)
COMMUNITY PSYCHIATRIC CENTERS
(Name of Person(s) Filing Proxy Statement)
--------
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1) N/A
4) Proposed maximum aggregate value of transaction: N/A
- -----------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
[LOGO]
COMMUNITY PSYCHIATRIC CENTERS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 11, 1995
TO THE STOCKHOLDERS:
The annual meeting of the stockholders of COMMUNITY PSYCHIATRIC CENTERS, a
Nevada corporation, will be held on Thursday, May 18, 1995, at 11:00 A.M.
Pacific Daylight Time, at THC--Las Vegas Hospital, 5100 West Sahara, Las Vegas,
Nevada 89102, for the following purposes:
1. To elect two directors for three-year terms; and
2. To transact such other business as may properly come before the
meeting or any adjournment of it.
Only stockholders of record at the close of business on March 31, 1995,
will be entitled to notice of and to vote at the meeting.
If you do not expect to attend the meeting in person, please date and sign
the enclosed proxy and return it promptly by mail in the envelope provided.
By Order of the Board of Directors
RONALD L. OOLEY
SECRETARY
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS
MAILING ADDRESS:
6600 WEST CHARLESTON BOULEVARD, SUITE 118
LAS VEGAS, NEVADA 89102
-------------
PROXY STATEMENT
TO THE STOCKHOLDERS:
The proxy accompanying this statement is solicited on behalf of the Board
of Directors of Community Psychiatric Centers (the "Company") for use at the
annual meeting of stockholders to be held on May 18, 1995, and at any
adjournment of it; it will be used for the purposes described in the foregoing
notice of meeting. This Proxy Statement and the accompanying proxy will be
first mailed to stockholders on or about April 11, 1995.
The proxy may be revoked at any time by delivery to the Company at the
above address of written notice of revocation, or if the stockholder is present
at the annual meeting and elects to vote in person. If not so revoked, the
proxy, when executed and returned to the Company, will be voted in accordance
with the instructions thereon specified by the stockholder and, if no
specification is made, will be voted for the election of the nominees for the
Board of Directors listed below, as described in this Proxy Statement.
Stockholders of record at the close of business on March 31, 1995 will be
entitled to vote at the meeting. The Company has outstanding only its $1.00 par
value Common Stock of which there were 43,626,156 outstanding shares entitled to
vote at the close of business on March 31, 1995. Each stockholder is entitled
to one vote for each share held and there is no right to cumulate votes.
Election of directors requires the affirmative vote of the holders of at
least a majority of the voting power of the Common Stock present in person or
represented by proxy at the meeting, provided a quorum is present. Abstentions
and withheld votes are counted in determining the presence or absence of a
quorum for the meeting and have the effect of a negative vote. Broker nonvotes
are counted in determining quorum but are not part of the voting power and are
not considered in determining the necessary majority. Broker nonvotes are not
anticipated.
MATTERS TO BE ACTED UPON
The following matter will be presented, considered and acted upon at the
meeting:
1. ELECTION OF DIRECTORS
Hartly Fleischmann and Jack H. Lindheimer, M.D., presently members of the
Board of Directors whose terms expire in 1995, will be nominees for re-election
to hold office until the annual meeting in 1998 and until their successors are
elected.
If the enclosed proxy is duly executed and received in time for the meeting
and if no direction to withhold the vote is made, shares represented by it will
be voted for Mr. Fleischmann and Dr. Lindheimer. If either nominee should
refuse or be unable to serve, the proxy will be voted for such person as shall
be designated by the Board of Directors to replace him, but management has no
knowledge that either nominee will refuse or be unable to serve.
<PAGE>
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings during fiscal 1994, all of which
were attended by all directors except that Mr. Dennis did not attend one
meeting. The Company has standing audit, compensation, finance, nominating and
quality of care committees.
The Audit Committee met three times during the fiscal year. Its members
were Messrs. Dennis, Powers, Fleischmann and Thomas and Dr. Shires, all of whom
attended the meeting. The Audit Committee reviewed with the auditors the
results of the 1993 audit, evaluated the adequacy of the internal accounting
controls of the Company and its wholly owned subsidiary, Transitional Hospitals
Corporation, the internal audit function and the procedures for recording,
evaluating and collecting accounts receivable, and it also reviewed the scope
and cost of the audit for fiscal 1994.
Messrs. Powers, Dennis and Thomas and Dr. Shires were members of the
Compensation Committee and the Nominating Committee and attended all meetings of
both committees. The Compensation Committee held four meetings during the
fiscal year. It set executive compensation for 1994. See "Compensation of
Executive Officers--Compensation Committee Report on Executive Compensation."
The Nominating Committee met twice during the fiscal year. It will
consider nominees recommended by stockholders; provided that notice of any
shareholder recommendation must be written and must include (i) the name,
address and number of shares of the Company's Common Stock beneficially owned by
the stockholder and the nominee, (ii) all biographical information relating to
the nominee, required by law to be disclosed in solicitations of proxies for
election of directors and (iii) the nominee's written consent to submission of
his or her name to the Nominating Committee for consideration. Such notices may
be submitted at any time, but a recommendation of a nominee for the election of
directors at an annual meeting of stockholders must be received by the Company
no later than the date stockholder proposals for such meeting must be submitted.
See "Time for Submission of Shareholder Proposals." The Nominating Committee
and the Board have and reserve the right to make all final decisions, in their
sole discretion, with respect to nominees for director.
Messrs. Dennis, Powers, Thomas and Fleischmann and Dr. Shires were members
of the Finance Committee. The Finance Committee considers and evaluates the
Company's need for and the availability and terms of additional financing.
Messrs. Thomas and Fleischmann and Dr. Lindheimer were members of the
Quality of Care Committee. This Committee evaluates the quality and outcomes of
care provided at the Company's facilities.
2
<PAGE>
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
The following information is furnished with respect to each nominee and the
continuing Directors.
<TABLE>
<CAPTION>
DIRECTOR
OCCUPATION AND CONTINUOUSLY TERM
NAME* AGE BUSINESS EXPERIENCE SINCE EXPIRES
----- --- ------------------- ------------ -------
<S> <C> <C> <C> <C>
NOMINEES:
Hartly Fleischmann . . . . . 67 Attorney since 1952, member of Fleischmann & Fleischmann, San 1972 1995
Francisco, California, engaged in the general practice of law;
counsel to the Company since 1971.
Jack H. Lindheimer, M.D. . . 63 Corporate Medical Director, U.S. Psychiatric Services since 1991; 1983 1995
Medical Director, CPC Alhambra Hospital 1970-1992; physician in
private practice since 1960, specializing in psychiatry.
CONTINUING DIRECTORS:
Richard L. Conte . . . . . . 41 Chairman of the Board of Directors since May 21, 1992, Chief Executive 1991 1997
Officer since April 13, 1992 and President since October 7, 1993;
President 1991-1992; Chief Financial Officer 1989-1991; Executive
Vice President---Dialysis, European and Home Health Division
1985-1989; General Counsel 1980-1990.
Dana L. Shires, M.D. . . . . 62 Physician in private practice since 1961 specializing in nephrology; 1989 1997
Chairman, Chief Executive Officer and President of LifeLink Foundation,
a not-for-profit corporation.
David L. Dennis. . . . . . . 46 Managing Director, Investment Banking, Donaldson, Lufkin & Jenrette 1991 1996
Securities Corporation, responsible for that corporation's health care
and media industry financing on the West Coast since 1989.
David A. Wakefield . . . . . 48 Chairman, Priory Hospitals Group since 1993; Executive Vice President 1992 1996
since 1992, responsible for hospital operations and development in
the United Kingdom and Europe; Senior Vice President--- United Kingdom
and European Division 1988-1992.
Robert L. Thomas . . . . . . 70 Retired since 1993; Consultant, 1992-1993 and Executive Director, 1977- 1993 1997
1992, National Association of Private Psychiatric Hospitals, a nonprofit
entity.
<FN>
- ----------
* Stephen J. Powers resigned as a director effective February 8, 1995.
</TABLE>
3
<PAGE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table lists and provides biographical data about the
executive officers of the Company.
<TABLE>
<CAPTION>
PERIOD OF SERVICE AND
NAME* AGE TITLE BUSINESS EXPERIENCE
----- --- ----- ---------------------
<S> <C> <C> <C>
Richard L. Conte . . . . 41 Chairman of the Board, Chief Appointed Chairman of the Board May 21, 1992, Chief Executive
Executive Officer and President Officer April 13, 1992 and President October 7, 1993;
President 1991-1992; Chief Financial Officer 1989-1991;
Executive Vice President--Dialysis, European and Home Health
Division 1985-1989; General Counsel 1980-1990.
James R. Laughlin. . . . 48 Executive Vice President of the Appointed Executive Vice President 1993 and President--
Company and President--Transitional Transitional Hospitals Corporation 1992; President, The
Hospitals Corporation Phoenix Group, health care consultants 1991-1992; Executive
Vice President, Development and Administrative Services,
Charter Medical Corporation 1987-1990.
Kay E. Seim. . . . . . . 48 Executive Vice President of the Appointed March 1994; Executive Vice President--U.S.
Company and President--U.S. Psychiatric Operations 1993; Executive Vice President--West
Psychiatric Services Coast Hospitals 1992; Senior Vice President and Chief
Operating Officer, Ramsay Health Care, Inc. 1991-1992; Vice
President--Northwest Region of the Company 1986-1991.
David A. Wakefield . . . 48 Executive Vice President of the Appointed Chairman--Priory Hospitals Group 1993 and Executive
Company and Chairman--Priory Vice President 1992; Senior Vice President--United Kingdom
Hospitals Group and European Division 1988-1992.
Wendy L. Simpson . . . . 45 Executive Vice President, Chief Appointed December 1994; Senior Vice President--Transitional
Financial Officer and Treasurer Hospitals Corporation 1994; Senior Vice President and Chief
Financial Officer, Weisman Taylor Simpson & Sabatino 1992-
1994; Senior Vice President and Chief Financial Officer,
American Medical International 1990-1991; Vice President and
Controller, American Medical International 1988-1990.
Ronald L. Ooley. . . . . 49 Executive Vice President--Adminis- Appointed Corporate Secretary 1994 and Executive Vice
tration and Corporate Secretary President 1993; Senior Vice President--Human Resources 1992;
Vice President--Human Resources, The Phoenix Group 1991-1992;
consultant, Core Management Resources, a benefits consulting
company, 1990-1991; Senior Vice President--Human Resources,
Charter Medical Corporation, 1988-1990.
Jack H. Lindheimer,M.D.. 63 Corporate Medical Director, U.S. Appointed 1991; Medical Director, CPC Alhambra Hospital 1970-
Psychiatric Services 1992; physician in private practice since 1960, specializing
in psychiatry.
Julia L. Kopta . . . . . 45 General Counsel and Executive Vice Appointed General Counsel January 27, 1995 and Executive
President--Corporate Planning and Vice President--Corporate Planning and Development 1993;
Development Chairperson, Care Visions Corporation 1987-1993.
<FN>
- --------------------
* Steven S. Weis resigned as Executive Vice President and Chief Financial
Officer effective December 31, 1994. See "Settlement with Steven S. Weis."
</TABLE>
REMUNERATION OF DIRECTORS
During fiscal 1994 those directors who were not employed by the Company
received a fee of $3,000 for each Board meeting and $1,000 for each Committee
meeting attended, plus travel expenses, if any, and they will receive the same
compensation for 1995. Officers of the Company who serve as directors receive
only reimbursement of expenses, if any, incurred in attending meetings.
Pursuant to the Company's 1989 Stock Incentive Plan, annual automatic grants of
options on 5,000 shares have been and will be made to each nonemployee director
on January 26 of each year, the first of such grants having been made on
January 26, 1989.
CERTAIN BUSINESS RELATIONSHIPS
Fleischmann & Fleischmann, of which Mr. Fleischmann is a general partner,
was paid $237,713 for legal services rendered to the Company and its subsidiary,
Transitional Hospitals Corporation, during fiscal 1994. The Company highly
values Mr. Fleischmann's long service and expertise at rates more favorable than
those charged or offered by any other law firm, and it plans to retain
Fleischmann & Fleischmann to provide legal services in fiscal 1995.
4
<PAGE>
CERTAIN RELATED TRANSACTIONS
The Company is a party to a joint venture with Continuum Healthcare, Inc.
("Continuum"), a corporation operated by Richard A. Seim, Ms. Seim's husband.
Mr. and Ms. Seim are the only shareholders of Continuum. The joint venture
operates an adolescent psychiatric residential treatment center. The Company
and Continuum share equally the profits and losses of the joint venture after
each party is fully reimbursed for its direct expenses allocable to the program.
During fiscal 1994, the joint venture had net operating revenues of $623,438,
and the Company and Continuum had direct expenses of $228,265 and $421,661,
respectively.
INDEBTEDNESS OF MANAGEMENT
OPTION LOANS. The Company's 1989 Stock Incentive Plan authorizes the Board
of Directors to extend credit to enable optionees to exercise their options.
The Board has discretion from time to time to change the terms of such credit.
The past policy and practice of the Board has been to require payment of one-
third of the option price in cash with the balance payable within the earlier of
ten years of the date of exercise or twelve years of the date of grant. The
resulting obligations are evidenced by full recourse promissory notes with
interest at a rate established by the Board, payable annually, and are secured
by a pledge of the stock so purchased. The Company also makes unsecured loans
on the same terms to optionees to enable them to pay income taxes due on
exercise of options granted thereunder which do not qualify as incentive stock
options.
RESIDENCE LOANS. The Company has loaned $296,000 to Mr. Ooley and $299,646
to Ms. Seim, in each case at 5% interest per year, to enable these executive
officers to acquire residences in close proximity to their principal business
offices. The loans, which are secured by the residences, originally mature in
three years and provide for consecutive three-year extensions while employment
continues. The loans are paid in monthly installments of principal and interest
based on a 30-year amortization and are accelerated and become immediately due
and payable ninety days after termination of employment.
RELOCATION LOANS AND PURCHASE OF EQUITY. The Company had loaned $300,000
to Mr. Conte and Mr. Weis on the same terms outlined above, and had advanced
$150,000 to Mr. Weis under the relocation program described below. These
amounts have been deemed paid in full pursuant to the Company's home purchase
program. Under that program, in connection with the relocation of the Company's
corporate headquarters to Las Vegas, Nevada, the Company has purchased Messrs.
Conte and Weis' equity interest in their former homes and has assumed all
burdens of ownership, including payment of all expenses and debts associated
therewith. The Company assumes the risk of loss in connection with the sale of
such properties, but also is entitled to any profit realized thereon.
Also in connection with the Company's relocation of its corporate
headquarters, the Company has loaned $15,300 to Ms. Kopta and an additional
$49,000 to Mr. Ooley to assist them to acquire residences in close proximity to
the new corporate headquarters. In each case, interest is at the annual rate of
5% and are secured by the officers' new or former residences and other security.
The loans mature in fifteen months and are paid in monthly installments of
interest only, beginning in the fourth such month. The Company has loaned an
additional $85,600 to Ms. Kopta, also at 5% annual interest and secured by the
property she acquired in Nevada, which loan matures in twelve months and is paid
in monthly installments of principal and interest based on a 30-year
amortization. All of these loans are accelerated and become immediately due and
payable thirty days after termination of employment.
5
<PAGE>
SCHEDULE OF INDEBTEDNESS. The following table shows, as to each director
or executive officer whose indebtedness exceeded $60,000, the largest aggregate
amount of such indebtedness during fiscal year 1994 and the balance due the
Company as of February 10, 1995.
<TABLE>
<CAPTION>
Largest Balance
Aggregate Due as of
Indebtedness February 10, 1995
------------ -----------------
<S> <C> <C>
Richard L. Conte $295,000 $ -0-
Kay E. Seim 299,000 294,000
Ronald L. Ooley 345,000 344,000
Julia Kopta 100,900 100,000
Steven S. Weis 441,000 -0-
</TABLE>
LEGAL PROCEEDINGS INVOLVING THE COMPANY AND ITS DIRECTORS AND OFFICERS
Immediately following the Company's public announcement of an increased
charge for uncollectible accounts on September 27, 1991, eleven securities class
action lawsuits were filed against the Company and several of its officers and
directors in the United States District Court for the Central District of
California. These suits allege generally that the Company has in the past made
materially false and misleading public statements or failed to disclose material
adverse information regarding its earnings, financial condition and business
prospects. A shareholders' derivative action was filed at about the same time
in the Superior Court for Orange County, California, against the Company and all
of its directors alleging breach of fiduciary duty, waste of corporate assets
and gross mismanagement based largely on the same operative facts. The
Directors and officers who are parties to the shareholders' derivative action
may be viewed as having material interests adverse to the Company's in those
lawsuits.
The Company maintains that the public statements and reports in question
were complete and correct and that its policy is and always has been to disclose
material adverse information publicly and on a timely basis. It has not been
possible to assess the likely outcome of these actions, but the Company intends
to defend them vigorously. Each of its officers and directors has broad
indemnification contracts with the Company and each is also entitled to
indemnity under circumstances prescribed by applicable law. In addition, the
Company's Articles of Incorporation and applicable law restrict the liability of
its officers and directors for damages for breach of their fiduciary duties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the outstanding shares of the Company's common stock, to file with the
Securities and Exchange Commission and the New York and Pacific Stock Exchanges
initial reports of ownership and reports of changes in ownership of such stock.
SEC regulations establish specific due dates for these reports. The Company is
required to disclose in this proxy statement any failure to file a report for
the 1994 fiscal year on a timely basis.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to it, during the fiscal year ended November 30, 1994 all
Section 16(a) filing requirements applicable to its officers and directors were
complied with, except that (i) Dr. Shires filed a late report on Form 4 relating
to one transaction; and (ii) Messrs. Wakefield and Weis filed their year-end
reports on Form 5 late.
6
<PAGE>
BENEFICIAL OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables show the beneficial ownership of the Company's common
stock, $1.00 par value, by all directors, executive officers and others.
BENEFICIAL OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF
NAME(1) AS OF 2/10/95(2) CLASS(3)
------- -------------------- ----------
<S> <C> <C>
Richard L. Conte 312,533
David L. Dennis 20,000
Hartly Fleischmann 41,665
James R. Laughlin 152,000
Jack H. Lindheimer 51,000
Stephen J. Powers 20,000
Kay E. Seim 76,544
Dana L. Shires 68,299
Robert L. Thomas 15,000
David A. Wakefield 121,007
All directors and executive 955,048 2.0%
officers as a group (13 persons)
<FN>
- ------------------
(1) Steven S. Weis resigned as Executive Vice President and Chief Financial
Officer effective December 31, 1994. See "Settlement with Steven S. Weis."
(2) Includes shares subject to options granted under the Company's 1989 Stock
Incentive Plan which are presently exercisable or which will become
exercisable on or before April 11, 1995, as follows: Mr. Conte, 286,531;
Mr. Wakefield, 119,882; Ms. Seim, 76,500; Dr. Lindheimer, 51,000; Mr.
Fleischmann, 35,765; Dr. Shires, 30,000; Messrs. Dennis and Powers, 20,000;
Mr. Thomas, 15,000; Mr. Laughlin, 152,000; and the group, 863,678. Also
includes shares held in trust, for which an above listed person acts as
trustee.
(3) In all cases except the group, the holdings represent less than 1% of the
outstanding shares of common stock.
</TABLE>
OTHER BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS(1) BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
------------------- ----------------------- ----------------
<S> <C> <C>
Invesco M.I.M. PLC 3,709,775(2) 8.5%
11 Devonshire Square
London, EC 2M 4YR
England
Goldman, Sachs & Co. 3,383,600(2) 7.8%
85 Broad Street
New York, NY 10004
<FN>
- ------------------
(1) Information based on Schedule 13G dated February 10, 1995, filed by the
named owner.
(2) Shared voting power and shared investment power with respect to all such
shares.
</TABLE>
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows the cash compensation paid by the Company, as
well as certain other compensation paid or accrued, (i) to the Chief Executive
Officer for his service in all executive capacities during 1992, the fiscal year
in which he was appointed chief executive officer and during the fiscal years
ending November 30, 1993 and 1994; and (ii) to each of the other four most
highly compensated executive officers who were serving as executive officers on
November 30, 1994, in all executive capacities in which they served during the
fiscal years ending November 30, 1992, 1993 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
--------------------- ------------
Securities All
Name and Underlying Other
Principal Options/ Compen-
Position Year Salary ($) Bonus ($) SARs (#) sation
-------- ---- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Richard L. Conte, 1994 750,000 237,500 100,000 218,802(7)
Chief Executive 1993 550,000 412,500 550,000(6) 223,844(7)
Officer(1) and President 1992 456,246 150,000 50,000 31,469(8)
James R. Laughlin, 1994 400,000 50,000 105,000
Executive Vice President of 1993 275,000 275,000 115,000
the Company and 1992 181,850 100,000
President--Transitional
Hospitals Corporation(2)
Kay E. Seim, Executive 1994 407,209 (9) 30,000
Vice President of the 1993 222,807 50,000 115,000
Company and President-- 1992 89,154 20,000 100,000
U.S. Psychiatric Operations(3)
David A. Wakefield, 1994 191,250(10) 191,250(10) 32,882
Executive Vice President of 1993 150,000(10) 150,000(10) 155,000
the Company and Chairman 1992 150,000(10) 23,000(10)
--Priory Hospitals Group(4)
Steven S. Weis(5) 1994 275,000 30,000 341,493(11)
1993 243,577 50,000 115,000
1992 219,950 25,000 100,000
<FN>
- ---------------------------
(1) Mr. Conte was appointed Chief Executive Officer on April 13, 1992.
(2) Prior to his appointment as an executive in May 1992, Mr. Laughlin received
compensation as a consultant to the Company.
(3) Ms. Seim rejoined the Company as an executive on June 29, 1992.
(4) Mr. Wakefield was not included as one of the most highly compensated
executive officers in prior years based on the Company's interpretation of
Commission regulations regarding overseas assignments. Mr. Wakefield is
one of the named executive officers for 1994 because the results of
operations of the United Kingdom Psychiatric Division have become more
material to the consolidated operating results of the Company. Therefore,
the Company's compensation to its chief executive in the United Kingdom can
be expected to continue at comparable levels.
Footnotes continued next page . . .
8
<PAGE>
Footnotes (Cont'd)
(5) Steven S. Weis resigned as Executive Vice President and Chief Financial
Officer effective December 31, 1994. See "Settlement with Steven S. Weis."
(6) Includes options on 166,328 shares, which were repriced on January 29, 1993
in exchange for the forfeiture of options on 332,656 shares.
(7) Includes $54,930 and $56,528 in life insurance premiums paid by the Company
on behalf of Mr. Conte in 1994 and 1993, respectively (see "Employment
Contracts"), and $163,872 and $167,316 deferred compensation accrued for
Mr. Conte in 1994 and 1993, respectively (see "Employment Contracts--
Retirement Benefits").
(8) Deferred compensation accrued for Mr. Conte. See "Employment Contracts--
Retirement Benefits."
(9) Includes $49,458 paid in lieu of accrued vacation.
(10) Paid in currency of the U.K. Average exchange rates used during the 1994,
1993 and 1992 fiscal years were 1.53, 1.50 and 1.68, respectively.
(11) Paid or to be paid in connection with the resignation of Mr. Weis as
follows: $275,000 severance pay; $34,064 accrued vacation; up to $5,635
relocation expenses; $19,513 net book value of Company car and $7,281 net
book value of Company laptop and desk computers. See "Settlement with
Steven S. Weis."
</TABLE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock
options and tandem limited stock appreciation rights ("SARs") under the
Company's 1989 Stock Incentive Plan to the named executives during the fiscal
year ended November 30, 1994:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term(4)
- ------------------------------------------------------------------------------ -----------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base Expira-
Granted in Fiscal Price tion
Name (#)(1) Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------- ------- ------ ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Conte 100,000 7.90 12.38 12/01/03 778,578 1,973,372
James R. Laughlin 30,000 2.40 12.38 12/01/03 233,573 592,012
75,000 5.90 17.00 1/28/04 801,848 2,032,350
Kay E. Seim 30,000 2.40 12.38 12/01/03 233,573 592,012
David A. Wakefield 30,000 2.40 12.38 12/01/03 233,573 592,012
Steven S. Weis 30,000(2) 2.40 12.38 12/31/95(3) 7,428 14,856
<FN>
- -------------------
(1) All options vest 20% on the date of grant and on the first day of each of
the following four fiscal years.
(2) Mr. Weis is entitled to exercise options on 12,000 of these shares, which
is the amount vested on the effective date of his termination. See
"Settlement with Steven S. Weis."
(3) See "Settlement with Steven S. Weis."
(4) The Company makes no representation as to the likelihood that the assumed
rates of appreciation will be achieved. Actual results may be less or
greater than the amounts stated.
</TABLE>
9
<PAGE>
OPTION/SAR HOLDINGS
The following table sets forth the number of shares of Common Stock
acquired on exercise of options during the fiscal year ended November 30, 1994,
and the number subject to outstanding stock options held by each of the named
executives as of the end of that fiscal year. The closing price of the
Company's common stock on the New York Stock Exchange on November 30, 1994 was
$10.00.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised,
Shares Unexercised Options/SARs In-The-Money Options/SARs
Acquired on Value At Fiscal Year End At Fiscal Year End($)(4)
Name Exercise(#) Realized($)(1) Exercisable(2) Unexercisable(3) Exercisable Unexercisable
---- ----------- -------------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Conte 160,000 1,245,004 189,796 350,204 0 15,000
James R. Laughlin -0- -0- 97,000 223,000 6,000 9,000
Kay E. Seim 45,500 358,312 36,500 163,000 6,000 9,000
David A. Wakefield -0- -0- 81,881 157,001 6,000 9,000
Steven S. Weis -0- -0- 82,000 163,000 6,000 9,000
<FN>
- ------------------
(1) Represents the difference between the market value of the underlying
securities at exercise minus the exercise or base price.
(2) Includes options on 189,796 shares for Mr. Conte; 85,000 shares for Mr.
Laughlin; 24,000 shares for Ms. Seim; 69,881 shares for Mr. Wakefield; and
70,000 shares for Mr. Weis, which were not "in the money" as of
November 30, 1994.
(3) Includes Converging Options on 100,000 shares for Mr. Conte and 75,000
shares for Messrs. Laughlin, Wakefield and Weis and Ms. Seim, which were
not "in the money" as of November 30, 1994.
(4) Represents the difference between the closing price of the Company's common
stock on November 30, 1994 as reported on the New York Stock Exchange and
the exercise price of options that were "in the money" as of that date.
</TABLE>
EMPLOYMENT CONTRACTS
EMPLOYMENT CONTRACTS. The Company has entered into an employment contract
with Mr. Conte, which provided (i) for the last seven months of fiscal 1992 and
for fiscal 1993, an annual salary of $550,000, subject to annual review by the
Board; (ii) an initial employment term ending November 30, 1996 and
automatically extending for an additional year on each December 1 of the
employment term; (iii) noncompetition, nondisclosure and nonsolicitation
covenants; and (iv) payment by the Company of the cost of a life insurance
policy for Mr. Conte with a death benefit of not less than $5,000,000. If
employment terminates because of Mr. Conte's permanent disability as defined in
the contract or if Mr. Conte terminates employment because of a breach of the
contract by the Company or within one (1) year after a "change in control" of
the Company as defined in the contract, he would be entitled to receive
termination payments equal to his salary through the November 30 following the
fourth anniversary of such termination and all other compensation and benefits
due under the contract and his "Supplemental Retirement Agreement" (see
"Retirement Benefits"); and in the case of termination because of a breach by
the Company or a "change in control," after such termination, Mr. Conte would
not be bound by the noncompetition, nondisclosure and nonsolicitation covenants.
Further, all options, contingent bonuses and similar deferred benefits held by
Mr. Conte immediately vest and become exercisable upon a change in control.
Effective December 1, 1993, Mr. Conte's annual salary was increased to $750,000.
See "Compensation Committee Report on Executive Compensation--Compensation of
Chief Executive Officer."
The Company also has entered into employment contracts with Ms. Seim and
Mr. Wakefield which expire July 1, 1995 and July 30, 1995, respectively, and
which automatically renew for additional one-year periods. Ms. Seim's contract
provided for an annual salary of $200,000 and $225,000 for fiscal 1992 and 1993,
respectively. Effective December 1, 1993 and April 15, 1994, Ms. Seim's annual
salary was increased to $300,000 and $400,000, respectively. Mr. Wakefield's
contract provided for an annual salary of L77,000 ($129,360) for July 31 through
November 30, 1992. Effective December 1, 1992 and 1993, Mr. Wakefield's salary
was increased to L100,000 ($150,000) and L125,000 ($191,250), respectively.
These contracts contain noncompetition, nondisclosure and nonsolicitation
covenants. If Ms. Seim or Mr. Wakefield terminates employment within ninety
(90) days after a
10
<PAGE>
"change in control" of the Company as defined in the agreements, she or he would
be entitled to receive termination payments equal to two years' salary and would
not be bound by the noncompetition, nondisclosure and nonsolicitation covenants
after such termination. Mr. Weis had a similar employment contract with the
Company which has been superseded by a Separation Agreement and General Release.
See "Settlement with Steven S. Weis."
RETIREMENT BENEFITS. In addition to his employment agreement, Mr. Conte,
as of June 1, 1988, entered into a Supplemental Retirement Agreement with the
Company pursuant to which he will become vested at the rate of 10% per year in
deferred benefits equal to 9 1/2% of his compensation each year plus any amount
by which the Company's authorized contributions for him to its profit sharing or
any other employee benefit plan cannot be allocated to his account in the plan
because the contribution exceeds limits imposed by the Internal Revenue Code of
1986 as amended. Interest will be credited annually to this accrued amount at a
rate to be specified from time to time by the Company but at not less than 6%
per annum. Distributions of the retirement benefits will be made in 20 equal
annual installments commencing 60 days after the later of the executive's 55th
birthday or the termination of his employment. During fiscal 1993, the Board of
Directors authorized vesting of Mr. Conte's deferred benefits at the rate of
100%, which resulted in $167,316 accrued on behalf of Mr. Conte for that year
and $163,872 for fiscal 1994. See "Summary Compensation Table."
SETTLEMENT WITH STEVEN S. WEIS
Steven S. Weis resigned as Executive Vice President and Chief Financial
Officer of the Company effective December 31, 1994. Mr. Weis and the Company
have entered into an agreement which settles the rights and obligations of Mr.
Weis and the Company with regard to his employment. Mr. Weis has released the
Company from certain obligations related to his employment and remains subject
to certain nondisclosure and nonsolicitation covenants, but he is no longer
bound by the noncompetition covenant in his employment contract. The Company
has agreed to pay Mr. Weis severance pay of $275,000, payable in 13 equal
installments of $21,154 on each of the first 13 dates after December 30, 1994 on
which the Company regularly pays its employees. In addition, the Company has
paid Mr. Weis $34,064 for accrued but unused vacation time as of December 31,
1994 and has agreed to reimburse Mr. Weis up to $5,635 in connection with his
relocation to either Los Angeles or Orange County, California at any time prior
to December 30, 1995. The Company will continue to provide Mr. Weis with health
insurance benefits through November 30, 1995, and thereafter, Mr. Weis will be
eligible to purchase 18 months of continued health coverage under the provisions
of the Consolidated Omnibus Budget Reconciliation Act. In addition, the Company
transferred to Mr. Weis the Company automobile and laptop and desk computers
that he had used as an employee, and the Company has accepted a grant deed to
the real property in Las Vegas, Nevada, on which Mr. Weis had been constructing
a residence in full satisfaction of sums advanced to him for the purchase
thereof and has agreed to assume Mr. Weis' construction loan to complete the
construction commenced thereon. See "Indebtedness of Management--Relocation
Loans and Purchase of Equity." The Company believes that the fair market value
of such real property is at least equal to the aggregate of the amounts advanced
to Mr. Weis and to be paid by the Company under the construction loan. The
Company also extended until December 31, 1995 the expiration date for options to
purchase 18,000, 4,000, 12,000 and 80,000 shares of the Company's common stock
at exercise prices of $9.50, $10.875, $12.375 and $14.625 per share,
respectively, which options had been fully vested in Mr. Weis at the time his
employment terminated. Nonvested options held by Mr. Weis terminated December
31, 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Powers, Dennis and Thomas and Dr. Shires have served on the
Company's Compensation Committee during the last fiscal year.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
The Company's management compensation policies have been designed to
encourage and reward substantial efforts to achieve its primary business goal,
which is to be the preeminent provider of quality behavioral health and long-
term critical care services wherever it operates. These policies must provide
remuneration which (i) is competitive in the employment market so as to enable
the Company to aggressively pursue and retain talented, experienced and
entrepreneurial professionals capable of developing, operating and marketing a
new business or new product lines while containing costs in an increasingly
competitive and difficult health care environment; (ii) is comprehensive and
consistent at all management levels so as to avoid arbitrary differences that
historically hindered the Company's ability to retain higher caliber managers;
and (iii) provides incentives that reward performance and encourage cooperative
effort for the good of the Company as a whole and its stockholders.
The Compensation Committee places heavy emphasis on incentives at all
levels to implement these policies. As executive responsibility increases, the
performance-based portion of compensation will also increase. Thus, basic
salary and employment market considerations will give way to incentives measured
both qualitatively and by the short- and long-term operating and investment
results of the Company as a whole. The Committee strongly believes that this
order of priorities enables the Company to respond competitively and relates
compensation more directly to enhancement of shareholder value.
1994 ACHIEVEMENTS
During 1994 the Company made further progress in its diversification
strategy designed to reduce dependence on the inpatient U.S. psychiatric
business while establishing and building businesses and product lines with
higher growth potential. The Company further developed the continuum of care
offered by its U.S. psychiatric division to offset negative trends in inpatient
treatment by creating an integrated behavioral health delivery system; doubled
the size and enhanced the profitability of its United Kingdom operations; and
expanded and made profitable its new long-term critical care division,
Transitional Hospitals Corporation (THC). Cost and staff reduction efforts were
integral to these initiatives throughout all of the Company's U.S. operations
and at its headquarters, where the Company consolidated its senior management
team and created a centralized billing office as part of the corporate office
relocation from Laguna hills, California and THC's relocation from Atlanta,
Georgia to Las Vegas, Nevada. These moves resulted in 31 corporate and regional
staff reductions during 1994 for a $2 million savings in salary and benefit
expenses. A further reduction of approximately $500,000 was realized through
additional staff reductions by the end of January 1995. This savings of more
than $2.5 million was net of increases in officer salaries during January 1995.
Compensation for 1994 was intended to reward Chief Executive Officer
Richard L. Conte for his continuing direction of the Company's efforts to adapt
the traditional psychiatric business to a new operating and reimbursement
environment, while at the same time growing a new, long-term critical care
business, expanding overseas operations, and containing expenses throughout the
corporation. Compensation for the other executive offices and for all other
levels of management provides strong incentives to assure that the Company
continues on this course to achieve its goals which are to increase earnings by
maintaining itself as a leading provider of behavioral health services in the
U.S. and United Kingdom, and to develop the long-term critical care division.
The Committee specifically recognized the following achievements in setting
compensation without giving any of them specific weighting.
- THC achieved significant and rapid revenue growth throughout 1994 and
turned profitable for the first time in the fourth quarter, after incurring
significant start-up costs earlier in the year due to expansion. Six new
facilities were added in fiscal 1994 and divisional leadership was strengthened
with the recruitment of a chief financial officer and two senior operations
executives. THC has experienced rapid census growth, reflecting the success of
its marketing efforts and acceptance within the medical community of THC as one
of the two leading participants in the long-term critical care niche. The
growth in new facilities and average daily census enabled the Company to
generate the highest revenues in its history and record the first positive year-
over-year comparison since 1991- despite an expansion slowdown due to temporary
uncertainties surrounding a possible moratorium on future licensing of these
facilities contained in certain national health reform proposals.
12
<PAGE>
- The U.S. psychiatric division successfully offset nationwide industry
declines in length of patient stay and net revenue per patient day by increasing
patient volume, principally through the continued development of its residential
treatment and partial hospitalization and outpatient programs. Regional
offices, which had been consolidated from nine to four during 1993, were further
reduced to three in 1994. Hospital-level staffing reductions and other cost
containment measures were implemented to ensure that the cost of delivering care
appropriately reflected lower reimbursement levels for psychiatric care across
the country. Physical assets were further maximized through selected hospital
closures, conversions to long-term critical care, and asset sales.
- The U.K. operations turned in their strongest financial performance in
the division's 14-year history. Three new facilities were acquired and
construction is nearing completion on its first hospital in Scotland. Net
revenue per patient day is improving and the group has achieved major increases
in admission and patient days.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation of the Chief Executive Officer was based primarily on the
foregoing achievements and comprised base salary, bonus and stock options. The
base salary was based on an analysis of the remuneration of executives in
businesses that are in direct competition with the Company for executive
recruitment and retainment, but was not limited to the businesses forming the
Company's peer group since the Company seeks executive talent from a broader
pool of hospital and health care service companies than its operations
represent. For example, medical/surgical hospital firms do not provide the same
services as the Company does, yet the Company competes with them for the same
executives. Therefore, compensation packages must be competitive to recruit and
retain highly qualified individuals to lead the Company. Mr. Conte's base
salary also reflects his dual function as the Company's president and chief
operating officer since that position was vacated in October 1993.
Although in January 1995 the Committee did not recommend a salary increase
for Mr. Conte, it did recommend and the Board approved a cash bonus of $237,500
based on specific performance goals being met and an overall evaluation of
Mr. Conte's performance. The Annual Management Incentive Plan adopted by the
Board effective December 1, 1992 provided for cash bonuses as a function of
pretax profit, quality of service and certain individual objectives for each
executive. The Company's United Kingdom division achieved the maximum of its
pretax performance goals and therefore warranted a 25% payment of his potential
award to Mr. Conte (equal to 25% of his salary). Although the U.S. psychiatric
division and THC did not meet their respective financial performance targets,
the Board awarded a partial bonus (equal to 6.66% of Mr. Conte's salary) for his
effort to greatly expand THC's revenue base.
Stock options are an important part of the Long-Term Incentive Compensation
Plan adopted effective December 1, 1993. Stock options relate Mr. Conte's total
compensation directly to increases in shareholder value. The Committee
evaluated options granted by other companies in the same business as the Company
or with whom the Company would compete for executives. The Committee learned
that Mr. Conte's option grants were not competitive with those of comparable
executives in these other companies, and the Company wanted to incentivize
Mr. Conte by making his option grants more competitive. The Committee also
wished to acknowledge Mr. Conte's dual role as chief executive and chief
operating officer and to reflect his larger responsibilities by granting him
more options relative to other executive officers. Therefore, on December 1,
1994, the Committee recommended and the Board agreed to issue new options on
100,000 shares to Mr. Conte at an option price of $9.875 per share, the closing
price of the Company's stock on the New York Stock Exchange that day. These
options vest 20% on the date of grant and 20% during each of the following four
years.
EXECUTIVE COMPENSATION PLAN
On January 29, 1993, the Board of Directors adopted an executive
compensation plan, the key elements of which are: (i) SALARY- Base, salary,
benefits and executive perquisites structured to be consistent with competitive
market practices and decreasing as a proportion of total compensation as
executive responsibility increases; (ii) CASH INCENTIVES- Incentives linked to
short- and long-term performances, but weighted to the latter, which emphasize
growth in shareholder value. These incentives will permit participating
executives to earn significantly above competitive levels when their
performances collectively and individually warrant it, but if performance
standards are not met, these executives earn below competitive levels;
(iii) OPTIONS- Stock options that also are weighted
13
<PAGE>
toward long-term performance will promote efficient management and growth of the
Company as a whole and will directly relate management and shareholder
interests.
This program provides for base salary, annual cash bonuses based on
business unit and individual performance for the year, and long-term bonus and
option incentive based on standards related to the overall performance of the
Company. The annual cash bonus and long-term elements of the program are "at
risk"--i.e., performance-based-- and are designed to link the interest of the
executive with the overall success of the Company, or his or her part of it, and
thus with the interests of shareholders. Total compensation for each CPC
executive will be variable, but as indicated above, as executive responsibility
increases, so too will the long- and short-term performance-based portion of
compensation. Each of these plan components is discussed in greater detail
below.
BASE SALARY. Base salaries for executive officers are determined by
evaluating both the responsibilities of their positions and their performance
against competitive market remuneration. Also taken into consideration when
establishing salary levels is the fact that the Company does not fund a pension
plan or provide employees with other retirement funding, such as a company
"match" for its 401(k) plan as most U.S. companies do. Furthermore, the
Company's executive officers tend to have fewer staff resources than larger
companies against which the Company competes to attract qualified executives.
ANNUAL MANAGEMENT INCENTIVE PLAN: CASH BONUSES. Under the Annual
Management Incentive Plan, all management-level personnel, to the level of
hospital department directors, have an opportunity to earn cash bonuses. This
plan has three performance categories: pretax profit, quality of service and
individual objectives. Each category is measured in terms of minimum, target
and maximum achievement standards. The Chief Executive Officer, executive
officers and senior management are measured against Company-wide standards and
other participants against individual and profit center standards. Incentives
range from 10% to 50% of salary per target, as each target goal is achieved, but
no incentive is earned unless the participant's profit center meets its minimum
pretax profit goal, so that no individual is rewarded unless his or her group,
or the Company, as the case may be, is financially successful.
LONG-TERM INCENTIVE COMPENSATION PLAN: OPTIONS. The Long-Term Incentive
Compensation Plan provides for incentive compensation in the form of cash and
annual stock awards:
(a) OPTION AWARDS. The Committee intends to review performance not less
often than annually and as appropriate award stock options to selected
managers. For 1994, stock options on 850,000 shares were awarded to
approximately 200 employees. These options are priced at fair market value at
the time of grant, vest 20% on date of grant and during each of the following
four years, and will have maximum terms of ten years. The 1994 option awards
shown in the foregoing tables (see "Summary Compensation Table" and "Option/
SAR Grants in Last Fiscal Year") were based on the performance described in this
Report (see "1994 Achievements").
(b) CONVERGING OPTIONS. On May 20, 1993 a special one-time award of
premium-priced nonqualified options at an option price of $29.50 ($20.00 above
the closing price of the Company's stock on the New York Stock Exchange on that
date) was made to the following officers: Messrs. Conte, Laughlin, Wakefield
and Ms. Seim and others. For each year during which the Company meets specific
targets or increases total return to shareholders, the option price will
decrease by $5.00 until the option price and the market price of the Company's
stock converge. The option price will be fixed at the market price on the date
of convergence, and options will then vest. Thus, the market price must improve
above the convergence price before Company's participating executives can
realize any gain. If the convergence does not occur during the first five years
after grant of these options, the options will be cancelled. The Company met
these targets for fiscal 1993 and the option price was lowered to $24.50. The
Company did not meet these targets for fiscal 1994.
LONG-TERM PERFORMANCE INCENTIVE PLAN. The final element of the Long-Term
Incentive compensation Plan is a Long-Term Performance Incentive Plan ("LTPIP").
The LTPIP will measure executive performance over successive periods against
certain financial targets applicable to each of the Company's business segments
and strategic criteria established by the Committee. The first performance
cycle is a two-year cycle that began with the 1994 fiscal years. Concurrently,
a three-year performance cycle began so that after three years the executive
will be participating in three separate performance cycles at the same time.
Performance measures will be stated in terms of minimum, target and maximum
achievement standards. Incentive opportunities will range from 40% to 50% of
14
<PAGE>
average base salary over the performance cycle for achievement of target goals,
but no incentive can be earned unless the minimum financial goal is achieve.
The Company's chief executive officer has discretion to increase or decrease
such award by up to 20% thereof. At the end of each performance cycle the
incentive will be paid in cash, stock or a combination of cash and stock at the
Committee's discretion.
$1 MILLION PAY CAP
In 1993, the Internal Revenue Code was expanded to add section 162(m),
which generally disallows a tax deduction for compensation paid to a company's
senior executive officers in excess of $1 million per person in any year.
Excluded from the $1 million limitation is compensation which meets
preestablished, objective performance criteria or results from the exercise of
stock options. While the Company does not presently have a specific policy with
respect to qualifying compensation under this new section, the Company believes
that compensation to the Company's executive officers resulting from the
exercise of stock options will continue to be deductible. The Compensation
Committee intends to establish a policy in the future with respect to section
162(m). However, the Company reserves the right to pay compensation to its
executives from time to time that may not be tax deductible.
THE COMPENSATION COMMITTEE
DANA L. SHIRES, M.D.
DAVID L. DENNIS
ROBERT L. THOMAS
15
<PAGE>
PERFORMANCE GRAPH
This graph compares the five-year cumulative total investment return
(including reinvestment of dividends) among the Company, the Standard & Poors
("S&P") 500 Index and the peer group, which consists of Ramsay Health Care Inc.,
Comprehensive Care Corporation, Charter Medical Corporation, National Medical
Enterprises, Inc. (now Tenet Healthcare Corp.) and Vencor, Incorporated. This
peer group is not identical to the group of companies used by the compensation
committee for compensation comparisons, because it comprises companies (a) whose
revenues and earnings derive primarily from the delivery of the same health care
services as the Company's--i.e., psychiatric or long-term critical care
services; (b) who compete in some markets directly with the Company for the same
patients, referral and payor sources; and (c) whose facilities and treatment
programs are subject to the same government regulations and reimbursement
practices by private and public payors as the Company's. The companies used as
a basis of comparison for establishing executive compensation may deliver
services and derive the majority of their revenues and earnings from health care
services different than the Company's--i.e., medical/ surgical hospitals care or
nursing homes-but are considered competitors in the employment market for
executive talent.
National Medical Enterprises has divested its psychiatric hospital division
and thus will not be included in the peer group in subsequent years. The
elimination of NME reflects the difficulty of determining a peer group for the
Company, as a number of former competitors have either exited the psychiatric
business or greatly downsized their operations during the recent period of
fundamental change and consolidation in the industry. Other competitors, such
as Vendell, are not publicly traded, while Healthcare America, Inc. reported in
March 1995 that it no longer meets the listing requirements of the American
Stock Exchange. Healthcare America is the successor to Healthvest, a chain of
psychiatric hospitals which declared bankruptcy in 1991.
The Company's entry into the long-term critical care market to offset the
deteriorating nationwide trends in the psychiatric business made it appropriate
to add the major competitor in long-term critical care (Vencor) to the peer
group in 1993. While Vencor's mature hospital base generated strong financial
results and a stock price performance which improved the performance of the peer
group in 1994, the Company's earnings and stock price suffered by comparison as
significant start-up costs were incurred to develop a business similar to
Vencor's. Nevertheless, Vencor's performance points to the longer-term
potential of the Company's participation in this higher-growth business when its
own hospitals mature and start-up costs are minimized.
[GRAPH]
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Community Psychiatric Centers 100.00 85.90 39.93 35.95 45.46 35.68
------------------------------------------------------------------------------------------
S&P 500 100.00 96.53 116.17 137.62 151.52 151.52
------------------------------------------------------------------------------------------
Peer Group 100.00 102.05 79.58 83.19 88.60 106.95
------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
OTHER MATTERS
At the time of this Proxy Statement, the only matters management intends to
present at the meeting are those specified in the foregoing notice of meeting.
Management is not aware of any other matters to be presented for action at the
meeting; however, if any other matters come before the meeting, it is intended
that the proxies shall be voted in respect thereto in accordance with the
judgment of the persons voting the proxies.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young was the principal independent accountant for the fiscal year
ended November 30, 1994. A representative of Ernst & Young is expected to
attend the annual meeting of stockholders, will have an opportunity to make a
statement and will be available to respond to appropriate questions. While
Ernst & Young remains the Company's independent accountant, proposals from other
accounting firms are being evaluated for the current fiscal year.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne in full by the Company, and in
the event an insufficient number of proxies are received to constitute a quorum,
there will be further solicitation of stockholders by mail, telephone or oral
communication. The Company will also request brokerage houses and other
nominees of fiduciaries to forward copies of its proxy material and annual
report to beneficial owners of stock held in their names, and the Company will
reimburse them for reasonable out-of-pocket expenses incurred in doing so. The
Company has retained Kissel-Blake, Inc. to assist in the solicitation of proxies
for a fee of $6,000, plus out-of-pocket expenses. Any such further solicitation
will be made by regular employees of the Company who will not receive additional
compensation.
TIME FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the next annual meeting, which
will take place on or about May 18, 1996, must be received by the Company for
inclusion in its proxy statement not later than December 12, 1995, unless such
meeting date is advanced by more than 30 calendar days or delayed by more than
90 calendar days, in which case such proposals must be received a reasonable
time prior to mailing of the proxy statement as set forth in the notice of such
change of meeting date.
ANNUAL REPORT
The Company's Annual Report on Form 10-K has been filed with the Securities
and Exchange Commission. Copies of that report may be obtained by shareholders
without charge by writing to Ms. Suzanne S. Hovdey, Community Psychiatric
Centers, 6600 West Charleston Boulevard, Suite 118, Las Vegas, Nevada, 89102.
The Company's Annual Report to Shareholders and Supplement thereto which
has been mailed or distributed to shareholders of record through March 31, 1995
in advance of or simultaneously with this Proxy Statement contains all the
information required to be included therein and in the 10-K Report as filed
except that it omits certain exhibits and supplemental financial statements and
schedules.
17
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS, MAY 18, 1995
The undersigned hereby appoints Richard L. Conte, Ronald L. Ooley and
Julia L. Kopta, and each of them, the attorneys and proxies of the undersigned
with full right of substitution to vote as designated on the reverse all the
shares of COMMUNITY PSYCHIATRIC CENTERS common stock held of record by the
undersigned on March 31, 1995 at the annual meeting of stockholders of the
Corporation to be held on May 18, 1995 at 11:00 a.m., and at all adjournments
thereof, with the same force and effect as the undersigned could do if
personally present at the meeting.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS NOMINATED, AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.
Management knows of no other matters which may properly be, or which are
likely to be, brought before the meeting. However, if any other matters are
properly brought before the meeting, the persons named in this proxy or their
substitutes will vote in accordance with their best judgment on such matters.
The proxies appointed may act by a majority of them present at the meeting or,
if only one is present, by that one.
PLEASE SIGN ON REVERSE SIDE AND RETURN PROMPTLY.
___________
See Reverse
Side
___________
<PAGE>
PLEASE MARK
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED [X] YOUR CHOICES
IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. LIKE THIS
________________
COMMON
Management recommends a vote FOR both nominees:
WITHHOLD
FOR FOR BOTH
1. ELECTION OF TWO DIRECTORS to [ ] [ ]
serve until the annual meeting in
1998 and until their successors are
duly elected and qualified.
NOMINEES: Hartly Fleischmann, Jack H. Lindheimer, M.D.
To withhold authority to vote for either individual nominee
write the name of the nominee on the space below:
___________________________________________________________
Please sign exactly as name appears on stock
certificates. When signing as attorney,
executor, administrator, trustee, or guardian
please give full title as such. If signer is
a corporation, sign in full corporate name by
authorized officer. Joint owners should each
sign personally.
_______
Signature(s)____________________________________________ Date___________
