<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 1
ANNUAL REPORT PURSUANT TO THE SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 001-12055
PARACELSUS HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-3565943
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
515 W. GREENS ROAD, SUITE 800, HOUSTON, TEXAS
(Address of principal executive offices)
77067 (281) 774-5100
(Zip Code) (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, NO STATED VALUE NEW YORK STOCK EXCHANGE
- ----------------------------- -----------------------
(Title of Class) (Name of each exchange on which registered)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The number of shares of Registrant's Common Stock outstanding on March 26, 1999
was 55,118,330. The aggregate market value of voting stock held by
non-affiliates of the Registrant, based upon the closing price of the
Registrant's Common Stock on March 26, 1999 was $28,775,878*.
THE REGISTRANT HEREBY AMENDS THE INFORMATION SET FORTH UNDER PART III - ITEMS
10, 11, 12 AND 13 IN THEIR ENTIRETY.
- --------------------------
* Excludes 32,097,628 shares deemed to be held by directors and officers, and
stockholders whose ownership exceeds ten percent of the shares of Common
Stock outstanding at March 26, 1999. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of the management or
policies of the Registrant, or that such person is controlled by, or under
common control with, the Registrant.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ARRANGEMENTS WITH RESPECT TO THE DESIGNATION OF DIRECTORS
The Bylaws of the Company provide that there shall be nine members on
the Board. Currently, the Board consists of five persons, one of whom is an
employee of the Company. As of the time of this filing, the Board has not
chosen nominees to replace two independent director positions that were vacated
after December 31, 1998. The Company is in the process of filling the remaining
vacancies.
In accordance with the Bylaws of the Company, directors are divided
into three classes composed as nearly as possible of an equal number of
directors. Pursuant to a shareholder agreement between Park- Hospital GmbH (the
"Majority Shareholder") and the Company dated August 16, 1996 (the "1996
Shareholder Agreement"), four members of the Board shall be designated by the
Majority Shareholder (the "Majority Shareholder Directors") for nomination by
the Board for election by the shareholders. Pursuant to the 1996 Shareholder
Agreement, three of the nine members are to be directors who are neither
Majority Shareholder directors nor officers of the Company (the "Independent
Directors") and the remaining two members must be directors who are neither
Majority Shareholder Directors nor Independent Directors (the "Management
Directors").
The proposed global settlement discussed in Part I. Item 3. "Legal
Proceedings" of the Company's Form 10-K filed on April 13, 1999 gives each of
the Majority Shareholder and the former Champion shareholders (as described in
Part I. Item 3) the right to designate three members of the Company's Board of
Directors (the Majority Shareholder Directors and the "Champion Directors,"
respectively). As part of that arrangement, on March 24, 1999, the current
directors elected Mr. Peter Schnitzler as a Majority Shareholder Director. His
appointment became effective on April 15, 1999 upon the resignation of Mr.
Charles R. Miller from the Board of Directors. As the result of the proposed
global settlement, the Board of Directors will be comprised of three Majority
Shareholder Directors, three Champion Directors, two Independent Directors and
one Management Director. Also in connection with the proposed global
settlement, the Company has entered into a new shareholder agreement, which
becomes effective upon the final settlement of the Shareholder Litigation (as
defined in Part I. Item 3) and which will supersede the 1996 Shareholder
Agreement.
The directors of the Company, their positions and offices, their
respective terms of office as a director and their respective ages are as
follows:
<TABLE>
<CAPTION>
SERVED AS
POSITIONS AND OFFICES DIRECTOR EXPIRATION OF
NAME AGE* WITH THE COMPANY SINCE TERM
- ----------------------------------------- --------- -------------------------------- --------------- ------------------
<S> <C> <C> <C> <C>
James G. VanDevender (a) 51 Senior Executive Vice 1996 2001
President, Chief Financial
Officer and Director
Heiner Meyer zu Losebeck (b) (c) 46 Director 1998 2001
Nolan Lehmann (b) (c) 54 Director 1998 2000
Christian A. Lange (b) (c) 59 Director 1983 1999
Peter Schnitzler (d) 31 Director 1999 2000
</TABLE>
- ------------------------------------
*As of April 30, 1999
(a) Member of the Executive Committee.
(b) Member of the Finance and Strategic Planning Committee.
(c) Member of the Stock Option and Compensation Committee.
(d) Mr. Charles R. Miller resigned as director of the Company on April 15,
1999. The current directors have appointed Mr. Peter Schnitzler, as
director effective on April 15, 1999.
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<PAGE> 3
BACKGROUND OF DIRECTORS
Information required with respect to Mr. VanDevender is set forth
under "Business - Executive Officers of the Company" in Part I of the Company's
Form 10-K filed on April 13, 1999. Mr. VanDevender is a Management Director.
HEINER MEYER ZU LOSEBECK - Dr. Meyer zu Losebeck is the Managing
Director of Paracelsus-Kliniken-Deutschland GmbH ("PKD"), Park-Hospital GmbH,
and other affiliates of PKD. PKD owns and operates 26 hospitals ranging in size
from 42 to 350 beds in Germany and Switzerland. Park-Hospital currently owns
approximately 54 percent of the shares of the Company, and PKD owns all the
shares of Park-Hospital. From 1989 through August 1997, Dr. Meyer zu Losebeck
was a tax consultant, auditor, and chartered accountant at Dr. Mertens and
Partners, Osnabruck, Germany. Dr. Meyer zu Losebeck is a Majority Shareholder
Director.
NOLAN LEHMANN - Mr. Lehmann is the President and director of Equus
Capital Management Corporation, an investment advisor firm located in Houston,
Texas, since 1983. Mr. Lehmann is also President and a director of Equus II
Incorporated, a registered investment company traded on the New York Stock
Exchange. Mr. Lehmann also serves as a director of Allied Waste Industries,
Inc., American Residential Services, Inc., Brazos Sportswear, Inc., and Drypers
Corporation. Mr. Lehmann holds graduate and undergraduate degrees in accounting
and economics from Rice University and is a Certified Public Accountant. Mr.
Lehmann is a Champion Director .
CHRISTIAN A. LANGE - Mr. Lange has been the President of European
Investors, Inc., since 1983 and has served as Chairman of the Board of European
Investors Corporate Finance, Inc. Prior to 1983, he was a senior executive of
Friedrich Flick Industrieverwaltung KgaA of Dusseldorf, Germany. From July 1983
to August 1996, Mr. Lange was a financial consultant to the Company. Mr. Lange
is a Majority Shareholder Director.
PETER SCHNITZLER - Mr. Schnitzler is the Corporate Accountant of PKD.
He has been employed by PKD (and its respective legal predecessor) since 1993.
Mr. Schnitzler has a graduate degree in finance, auditing and hospital
administration. Mr. Schnitzler is a Majority Shareholder Director.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon confirmations provided by the directors and
executive officers of the Company reporting transactions involving the
Company's securities during the most recent fiscal year, the Company believes
that all transactions by reporting persons were reported on a timely basis.
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ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation for the Company's
President and Chief Operating Officer and four most highly compensated
executive officers (the "Named Executives") with respect to all services
rendered to the Company during the calendar years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ -------------- -------------
ALL
SECURITIES OTHER
UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS OPTIONS PAYOUTS SATION
POSITION(a) YEAR ($) ($)(b) (#)(c) ($) ($)(d)
- ------------------------------ ------- ------------ ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Miller 1998 $ 548,167 $ -- -- $ -- $ 315,460
President & Chief 1997 500,000 -- -- -- --
Operating 1996 187,500 1,492,188 1,547,876 -- --
Officer
James G. VanDevender
Senior Executive Vice 1998 $ 370,313 $ -- -- $ -- $ 108,005
President & Chief 1997 360,000 -- -- -- --
Financial 1996 131,250 911,875 1,070,000 -- --
Ronald R. Patterson 1998 $ 370,313 $ -- -- $ -- $ 92,920
Executive Vice President 1997 360,000 -- -- -- 2,375
President, Healthcare 1996 131,250 661,875 690,690 -- 563
Operations
Michael M. Brooks 1998 $ 232,062 $ 100,000 -- $ -- $ 3,690
Senior Vice President, 1997 224,253 -- 100,000 -- 8,962
Development 1996 69,375 80,000 90,000 -- 464
Warren W. Wilkey 1998 $ 269,479 $ -- -- $ -- $ 2,544
Senior Vice President, 1997 250,000 -- 100,000 -- 1,211
Operations 1996 84,375 377,755 20,000 -- 563
</TABLE>
- -------------------------------------------------------------------------------
(a) The Named Executives are former Champion executives who became
employees of the Company effective August 16, 1996, the consummation
date of the Merger. Salaries for 1996 reflect amounts paid for the
period from August 16, 1996 to December 31, 1996.
(b) Payments of $1.2 million, $750,000, $500,000 and $280,000 for Messrs.
Miller, VanDevender, Patterson and Wilkey, respectively, were made in
1996 in exchange for Messrs. Miller, VanDevender and Patterson
surrendering certain severance rights under the Change of Control
provisions in their Champion employment agreements and a special
merger bonus to Mr. Wilkey.
(c) Includes Champion stock options assumed pursuant to the terms of the
Merger.
(d) Represents relocation reimbursements, life insurance premiums and
matching contributions paid by the Company under its Employee
Retirement Savings 401(k) Plan and includes payments in 1998 for
vested benefits under the supplemental executive retirement plan to
Messrs. Miller, VanDevender and Patterson of $310,510, $104,969 and
$85,793, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any options to the Named Executives in 1998
and the exercise prices on stock options previously granted were not amended or
adjusted. The Company has no outstanding stock appreciation rights.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
No options were exercised by the Named Executives during 1998. In
connection with an executive agreement executed on November 25, 1998 (the
"Executive Agreement"), Messrs. Miller, VanDevender and Patterson gave up all
rights to exercise or dispose of options to acquire 696,000 shares of Company
common stock at $0.01 per share ("Value Options") that they received at the
time of the Merger. See "Employment,
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Services and Other Agreements". The following table excludes the Value Options
and sets forth the number of options held by the Named Executives and their
value at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE-MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END($)(a)
------------------------------------------- ----------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------------ ---------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Charles R. Miller 211,876 1,000,000 (b) $ 60,750 --
James G. VanDevender 350,000 540,000 (b) 40,500 --
Ronald R. Patterson 270,690 240,000 (b) -- --
Michael M. Brooks 125,416 64,584 -- --
Warren W. Wilkey 55,416 64,584 -- --
</TABLE>
- ---------------------------
(a) Market value of underlying securities at December 31, 1998 minus the
option exercise price times the number of unexercised options at
December 31, 1998.
(b) Represents options granted to Messrs. Miller, VanDevender, and
Patterson to purchase 1.0 million, 540,000, and 240,000 shares,
respectively, of the Company's common stock at $8.50 per share (the
"Market Options"), which will terminate when the proposed global
settlement becomes effective and cannot be exercised prior to their
termination.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has a supplemental executive retirement plan ("SERP") to
provide additional post-termination benefits to selected members of management
and certain highly compensated employees. As a result of a change in control
from the Merger, officers and employees of the Company who were participants in
the SERP prior to the Merger became fully vested in all benefits thereunder.
Pursuant to their respective employment agreements, certain Champion executives
became participants in the SERP and received retroactive benefits for their
years of service with Champion. In April 1997, the Board of Directors elected
to terminate the provision of future benefits for certain participants under
the plan.
Pursuant to the Executive Agreement, the Company is released from SERP
obligations to Messrs. Miller, VanDevender and Patterson. In turn, the Company
paid the senior executives $501,272 during 1998 (as reported in footnote (d) to
the Summary Compensation Table), which represented amounts due such individuals
for vested benefits under the SERP. In connection with the proposed global
settlement of the Shareholder Litigation, the Company will be relieved of
certain existing contractual obligations under the SERP to certain former
officers when the settlement becomes effective. Messrs. Wilkey and Brooks do
not participate in the SERP.
ANNUAL BONUS PLAN
The 1998 Bonus Plan (the "Bonus Plan") is designed to reward certain
employees of the Company for achieving corporate performance objectives. The
Bonus Plan is intended to provide an incentive for superior work and to
motivate participating employees toward higher achievement and business
results, to link their goals and interests more closely with those of the
Company and its shareholders, and to enable the Company to attract and retain
highly qualified employees. With respect to those officers holding the title of
executive officer and above, the Bonus Plan is administered and approved by the
Stock Option and Compensation Committee each year. Upon achievement by the
Company of certain targeted operating results or other performance goals, such
as operating income, earnings per share or quality standards, the Company will
pay performance bonuses, the aggregate amounts of which will be determined
annually based upon an objective formula.
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<PAGE> 6
EMPLOYEE RETIREMENT SAVINGS 401(K) PLAN
The Company has defined contribution 401(k) retirement plans covering
all eligible employees at its hospitals and the corporate office. Participants
may contribute up to 15% of pretax compensation, not exceeding a limit set
annually by the Internal Revenue Service. The Company matched $.25 for each
$1.00 of employee contributions up to 6% of employees' gross pay. The Company
may make additional discretionary contributions. The Company paid $ 454,000 in
discretionary contributions in 1998.
CHANGE OF CONTROL SEPARATION PAY PLAN
Effective August 1, 1997 and amended April 1, 1999, the Company has
established the Change of Control Separation Pay Plan (the "Separation Pay
Plan") to retain key employees and to provide, under certain circumstances,
severance to participants whose employment with the Company ends after a Change
of Control, as defined. Messrs. Miller, VanDevender and Patterson do not
participate in the Separation Pay Plan. Messrs. Brooks and Wilkey, other
officers and certain employees of the Company participate in the Separation Pay
Plan which is administered by the Stock Option and Compensation Committee and
provides participants with severance benefits, under certain circumstances,
ranging from twelve to twenty-four months of base salary, as defined.
EMPLOYMENT, SERVICES AND OTHER AGREEMENTS
On November 25, 1998, the Company and its senior executives, Messrs.
Miller, VanDevender and Patterson executed the Executive Agreement superseding
their existing employment contracts and certain other stock option and
retirement agreements with the Company. The Executive Agreement was amended in
certain respects, including the elimination of certain additional payments, in
connection with the proposed global settlement of the Shareholder Litigation.
Under the Executive Agreement, as amended, the senior executives agreed to
remain in their current management positions with the Company at least until
June 30, 1999. Messrs. Miller and Patterson intend to leave the Company
immediately after June 30, 1999. Mr. VanDevender has been designated interim
Chief Executive Officer effective on July 1, 1999.
Pursuant to the Executive Agreement, the Company paid during 1998
amounts of $310,510, $104,969 and $85,793 due Messrs. Miller, VanDevender, and
Patterson, respectively, for vested benefits under the SERP, and the senior
executives released the Company from any obligations under the SERP or any
similar retirement plan. In accordance with the Executive Agreement, the
Company paid the senior executives $4.6 million on April 14, 1999. Such amount
reflects payments equal to i) three times of each executive's current annual
salary or $1.6 million to Mr. Miller and $1.1 million each to Messrs.
VanDevender and Patterson and ii) three times 25 percent of each executive's
target annual bonus or $344,250 to Mr. Miller and $196,875 each to Messrs.
VanDevender and Patterson. Upon payment to the senior executives, the Company
and the senior executives provided each other with mutual releases of any and
all obligations either party may have under the respective employment
agreements or otherwise arising out of the senior executives' employment. Upon
signing the Executive Agreement, the senior executives also gave up all rights
to exercise or dispose of 696,000 shares of Value Options that they received at
the time of the Merger. Upon final court approval of the proposed global
settlement, the senior executives have agreed to release all rights they have
to the Market Options they received in connection with the Merger and cannot
exercise such options prior to their termination.
The Company entered into Indemnity and Insurance Coverage Agreements,
effective August 16, 1996, with Messrs. Miller, VanDevender and Patterson,
members of the Board of Directors and certain other officers of the Company, to
advance reasonable defense costs in connection with litigation, investigations
and other proceedings, subject to their undertakings to repay such costs in
certain circumstances. Pursuant to these agreements, the Company paid defense
costs of approximately $235,000 in 1998 on behalf of Messrs. Miller, VanDevender
and Patterson, collectively. Upon final court approval of the proposed global
settlement, the Indemnity and Insurance Coverage Agreement between Mr. Christian
Lange, who is a director, and the Company will terminate.
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COMPENSATION OF DIRECTORS
Non-employee directors of the Company each receive an annual fee of
$30,000 and a fee of $2,500 for each meeting of the Board or any committee
thereof attended. Directors of the Company who are also employees of the
Company will not receive any additional compensation for their service as
directors. All directors will be reimbursed for reasonable expenses incurred in
the performance of their duties.
Directors are also eligible to receive options to purchase shares of
the Company's Common Stock under the 1996 Stock Incentive Plan (the "Incentive
Plan"). No stock option grants were made to directors under the Incentive Plan
during 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 30, 1999, certain
information concerning the shares of the Company's common stock beneficially
owned by (i) each stockholder known by the Company to be a beneficial owner of
more than five percent of the Company's Common Stock, (ii) each director of the
Company, (iii) each "Named Executive" (see "Executive Compensation"), and (iv)
all directors and executive officers of the Company as a group.
When effective, after final court approval, the settlement agreements
will affect the ownership set forth below. See Part I. Item 3 - "Legal
Proceedings." The Company will issue approximately 1.5 million new shares of the
Company's common stock to the class settlement fund (as defined and described in
Part I. Item 3) and 1.0 million shares to Dr. Manfred G. Krukemeyer, the
Company's former Chairman of the Board (the "Former Chairman") and the ultimate
legal owner of the Majority Shareholder, in connection with the termination of a
10-year service agreement. The Majority Shareholder will transfer 8.7 million
and 1.2 million shares of the Company's common stock that it currently owns to
the former Champion shareholders and to the class settlement fund, respectively.
The former Champion shareholders could be deemed to be a group for
purposes of section 13(d) of the Securities Exchange Act of 1934. As of the end
of March 1999, the former Champion shareholders as a group beneficially owned
more than 10% of the total outstanding shares of the Company's common stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2)(3) CLASS (3)
- ---------------------------------------------------------------- ------------------------------- -----------------
<S> <C> <C>
Park-Hospital GmbH (4,5) 29,771,742(7) 54.0%
Paracelsus-Kliniken-Deutschland GmbH (4,5) 29,771,742(7) 54.0%
Dr. Heiner Meyer zu Losebeck (4,5) 29,771,742(7) 54.0%
Peter Frommhold (5,6) 29,771,742(7) 54.0%
Peter Schnitzler (4) -- *
Charles R. Miller 739,026(8) 1.3%
James G. VanDevender 450,000(9) *
Christian A. Lange --(10) *
Nolan Lehmann (11,12,13) 1,607,307 2.9%
Equus II Incorporated (12,13) 1,263,058 2.2%
Equus Capital Partners, L.P. (12,13) 338,249 *
Ronald R. Patterson 281,761(14) *
Michael M. Brooks 165,000(15) *
Warren W. Wilkey 97,000(16) *
All directors and officers as a group (19 persons) 33,772,445(17) 59.5%
</TABLE>
- -----------------------------------
* Percentage is less than 1% of the total outstanding shares of the
Company.
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(1) The address of each named director and officer, unless otherwise
indicated, is c/o Paracelsus Healthcare Corporation, 515 W. Greens
Road, Suite 800, Houston, Texas 77067.
(2) Unless otherwise indicated, such shares of Common Stock are owned
directly with sole voting and investment power.
(3) Includes shares issuable upon exercise of stock options or warrants
that are exercisable as of, or exercisable 60 days after, April 30,
1999. Such shares, for the purpose of computing the percentage of
outstanding Common Stock, are deemed owned by each named individual
and by the group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person.
(4) The address is Am Natruper Holz 69, D-49076 Osnabruck, Federal
Republic of Germany.
(5) Park-Hospital GmbH ("Park"), a German corporation wholly owned by
Paracelsus-Kliniken-Deutschland GmbH ("PKD"), is the record owner of
such shares. PKD may be deemed to beneficially own the shares of the
Company's Common Stock owned by Park. Pursuant to the Schedule 13D
filed by Park, PKD, Dr. Heiner Meyer zu Losebeck, and Mr. Peter
Frommhold on December 15, 1997, Dr. Meyer zu Losebeck and Mr.
Frommhold, as co-executors of the Estate of Professor Dr. Hartmut
Krukemeyer, and the Managing Directors of Park and PKD share indirect
voting and investment power over the shares of the Company's Common
Stock owned by Park. Therefore, they may be deemed to beneficially own
the shares of the Company's Common Stock owned by Park.
(6) The address is Drubbel 17/18, D-48143 Munster, Federal Republic of
Germany.
(7) Excludes the shares beneficially owned by Messrs. Miller and
VanDevender, which are subject to a voting agreement with the Majority
Shareholder pursuant to which Messrs Miller and VanDevender are bound
to vote with the Majority Shareholder in certain circumstances and to
sell their shares in accordance with certain acquisition proposals.
Upon final approval of the Shareholder Litigation, this voting
agreement will terminate.
(8) Includes 211,876 shares issuable upon exercise of options that are
currently exercisable, or exercisable within 60 days.
(9) Includes 350,000 shares issuable upon exercise of options that are
currently exercisable, or exercisable within 60 days.
(10) Excludes 56,000 shares of Value Options which will terminate upon
final court approval of the proposed global settlement and cannot be
exercised prior to the termination.
(11) Mr. Lehmann is President of Equus Capital Management Corporation, the
financial advisor and manager of Equus II Incorporated and Equus
Capital Partners, L.P.
(12) Address is 2929 Allen Parkway, Suite 2500, Houston, TX 77019.
(13) Equus II Incorporated is the owner of 1,263,058 shares of the
Company's Common Stock. Equus Capital Partners, L.P. is the owner of
338,249 shares of the Company's Common Stock. By reason of his status
as President of Equus Capital Management Corporation, Mr. Lehmann may
be deemed to be the beneficial owner of the common shares owned by
Equus II Incorporated and Equus Capital Partners, L.P. In addition,
Mr. Lehmann owns directly 6,000 shares of the Company's Common Stock.
Accordingly, Mr. Lehmann may be deemed to be the beneficial owner of
1,607,307 shares of the Company's Common Stock. Mr. Lehmann disclaims
beneficial ownership of the Company's Common Stock owned by Equus II
Incorporated, and Equus Capital Partners, L.P. Both Equus II
Incorporated and Equus Capital Partners, L.P. (as well as other
entities with which Mr. Lehmann is associated) are former Champion
shareholders. The number of shares beneficially owned by Mr. Lehmann
does not include any shares owned by other former Champion
shareholders.
(14) Includes 270,690 shares issuable upon exercise of options that are
currently exercisable, or exercisable within 60 days.
(15) Includes 165,000 shares issuable upon exercise of options that are
currently exercisable, or exercisable within 60 days.
(16) Includes 95,000 shares issuable upon exercise of options that are
currently exercisable, or exercisable within 60 days.
(17) Includes 1,674,816 shares issuable upon exercise of options that are
currently exercisable, or exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Majority Shareholder loaned the Company $7.2 million in the form of
a $7.2 million 6.51% subordinated note, payable in the annual amount of $1.0
million over a term of 10 years. Effective April 14, 1997, pursuant to the terms
of the Company's senior bank credit agreement, the Majority Shareholder waived
its right to receive principal payments under the note until all obligations of
the Company under such credit agreement have been satisfied. The Company made
interest payments of
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<PAGE> 9
$467,000 and $533,000 during 1998 and 1997, respectively. In connection of the
Shareholder Litigation, the proposed global settlement, upon final court
approval, provides that beginning with the annual payment due in August 2000,
the Company will recommence payment of principal in accordance with the note's
stated terms. Additionally, the Company has agreed to use its reasonable best
efforts to seek approval from its lenders to repay principal amounts that are
in arrears. The Company will prepay the outstanding balance in certain
circumstances.
Effective August 16, 1996, the Company became a party to a service
agreement with the Former Chairman. Pursuant to such agreement, the Former
Chairman will provide management and strategic advisory services to the Company
for a consulting fee of $1.0 million per year, for a term not to exceed ten
years. Effective April 14, 1997, the annual consulting fee was reduced to
$250,000 until all obligations of the Company under its senior bank credit
agreement have been satisfied. Payments of $187,500 and $500,000 were made to
the Former Chairman during 1998 and 1997, respectively, under the agreement.
Under the proposed global settlement of the Shareholder Litigation, all
obligations to the Former Chairman will terminate; in return, the Company will
issue the Former Chairman 1.0 million newly issued shares of the Company's
common stock and pay him $1.0 million when the proposed settlement becomes
effective.
The Company is also a party to an insurance agreement which provides
insurance benefits to the Former Chairman in the event of his death or
permanent disability, in an amount equal to $1.0 million per year during the
10-year term of such agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARACELSUS HEALTHCARE CORPORATION
(Registrant)
Date: April 28, 1999 By: /s/ CHARLES R. MILLER
-------------------------------------
Charles R. Miller
President and Chief Operating Officer
Pursuant to the requirement of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ---------------------------------------- --------------------
<S> <C> <C>
/s/ CHARLES R. MILLER President and Chief Operating April 28, 1999
- --------------------------------------------------- Officer
Charles R. Miller
/s/ JAMES G. VANDEVENDER Senior Executive Vice President, April 28, 1999
- --------------------------------------------------- Chief Financial Officer and Director
James G. VanDevender
/s/ ROBERT M. STARLING Senior Vice President and April 28, 1999
- --------------------------------------------------- Controller
Robert M. Starling
/s/ HEINER MEYER ZU LOSEBECK Director April 28, 1999
- ---------------------------------------------------
Dr. Heiner Meyer Zu Losebeck
/s/ NOLAN LEHMANN Director April 28, 1999
- ---------------------------------------------------
Nolan Lehmann
/s/ CHRISTIAN A. LANGE Director April 28, 1999
- ---------------------------------------------------
Christian A. Lange
/s/ PETER SCHNITZLER Director April 28, 1999
- ---------------------------------------------------
Peter Schnitzler
</TABLE>
10
