<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RAMSAY HEALTH CARE, INC.
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $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:
......................................................................
2) Aggregate number of securities to which transaction applies:
......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
......................................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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:
......................................................................
2) Form, Schedule or Registration Statement No.:
......................................................................
3) Filing party:
......................................................................
4) Date Filed:
......................................................................
Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
RAMSAY HEALTH CARE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 10, 1995
The Annual Meeting of Stockholders of RAMSAY HEALTH CARE, INC. ("RHC" or
the "Company") will be held at the Windsor Court Hotel, 300 Gravier Street, New
Orleans, Louisiana at 10:00 A.M., local time, on November 10, 1995, for the
following purposes, as more fully described in the accompanying Proxy Statement:
1. To elect nine directors of RHC for the ensuing year;
2. To consider and take action upon a proposal to approve the Ramsay
Health Care, Inc. 1995 Long Term Incentive Plan;
3. To consider and take action upon a proposal to ratify the Board of
Directors' selection of Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending June 30, 1996; and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only RHC stockholders of record at the close of business on September 22,
1995 will be entitled to notice of and to vote at the meeting, or any
adjournment or adjournments thereof. A list of the stockholders entitled to vote
at the meeting may be examined at the corporate headquarters of Ramsay Health
Care, Inc., Entergy Corporation Building, 639 Loyola Avenue, Suite 1700, New
Orleans, Louisiana during the ten-day period preceding the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY. NO POSTAGE IS REQUIRED WHEN MAILED IN THE
UNITED STATES. THE PROXY IS REVOCABLE AT ANY TIME. IF YOU ARE PRESENT AT THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE. YOUR
BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF THE NOMINEES FOR DIRECTORS AND FOR
THE OTHER PROPOSALS TO BE CONSIDERED AT THE MEETING.
By Order of the Board of Directors,
Paul J. Ramsay
Chairman of the Board
October 5, 1995
<PAGE>
RAMSAY HEALTH CARE, INC.
Entergy Corporation Building
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held
November 10, 1995
General
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Ramsay Health Care, Inc. ("RHC" or the "Company")
for use at the Annual Meeting of Stockholders (the "Meeting") to be held at the
time and place and for the purposes specified in the accompanying Notice of
Annual Meeting of Stockholders and at any adjournment or adjournments thereof.
When the enclosed proxy (the "Proxy") is properly executed and returned, the
shares that it represents will be voted at the Meeting in accordance with the
instructions thereon. In the absence of any such instructions, the shares
represented thereby will be voted IN FAVOR of the nominees for directors listed
on the Proxy, FOR the proposal to approve the Company's 1995 Long Term Incentive
Plan and FOR the ratification of the Board of Directors' selection of
independent auditors for the Company. Management does not know of any other
business to be brought before the Meeting not described herein, but it is
intended that as to such other business, a vote may be cast pursuant to the
Proxy in accordance with the best judgment of the person or persons acting
thereunder. It is anticipated that the proxy materials will be mailed to the
stockholders of the Company on or about October 5, 1995.
It is important that Proxies be returned promptly. Stockholders who do not
expect to attend the Meeting in person are urged to mark, sign and date the
accompanying form of Proxy and mail it in the enclosed return envelope, which
requires no postage if mailed in the United States, so that their votes can be
recorded.
Any stockholder who executes and delivers a Proxy may revoke it at any time
prior to its use by (i) giving written notice of such revocation to the Company,
care of the Secretary, Entergy Corporation Building, 639 Loyola Avenue, Suite
1700, New Orleans, Louisiana 70113 prior to the Meeting; (ii) executing and
delivering a Proxy bearing a later date to the Company, care of the Secretary,
Entergy Corporation Building, 639 Loyola Avenue, Suite 1700, New Orleans,
Louisiana 70113 prior to the Meeting; or (iii) appearing at the Meeting and
voting in person.
1995 Annual Report
The Company's 1995 Annual Report on Form 10-K for the fiscal year ended
June 30, 1995 is enclosed with this Proxy Statement.
Expenses of Solicitation
The cost of soliciting Proxies will be borne by the Company. Officers,
directors, and employees of the Company may solicit Proxies by telephone,
telecopier, telegram, or personal
<PAGE>
interview. The Company has also engaged the services of Corporate
Communications, Inc. and First Union National Bank of North Carolina to assist
in the solicitation and tabulation of Proxies. The Company estimates that these
entities will receive fees totalling approximately $3,500, plus expenses, in
connection with these services.
Voting
Holders of record of issued and outstanding shares of (i) common stock,
$.01 par value ("Common Stock"), of the Company and (ii) class B convertible
preferred stock, Series C, $1.00 par value ("Series C Preferred Stock"), of the
Company, in each case as of September 22, 1995 (the "Record Date"), will be
entitled to notice of and to vote at the Meeting as described below. On the
Record Date, there were issued and outstanding 7,732,328 shares of Common Stock
and 142,486 shares of Series C Preferred Stock.
Each share of Common Stock is entitled to one vote with respect to each
matter to be voted on at the Meeting. Each share of Series C Preferred Stock is
entitled to ten votes with respect to each matter to be voted on at the Meeting.
Directors are elected by plurality vote. Adoption of proposals 2 and 3
will require the affirmative vote of a majority of the shares of Common Stock
and Series C Preferred Stock present and voting thereon at the Meeting.
Abstentions and broker non-votes (as hereinafter defined) will be counted as
present for the purpose of determining the presence of a quorum. For the purpose
of determining the vote required for approval of matters to be voted on at the
Meeting, abstentions will be treated as being "present" and "entitled to vote"
on the matter and, thus, an abstention has the same legal effect as a vote
against the matter. However, in the case of a broker non-vote or where a
stockholder withholds authority from his proxy to vote the proxy as to a
particular matter, such shares will not be treated as "present" and "entitled to
vote" on the matter and, thus, a broker non-vote or the withholding of a proxy's
authority will have no effect on the outcome of the vote on the matter. A
"broker non-vote" refers to shares of Common Stock represented at the Meeting in
person or by proxy by a broker or nominee where such broker or nominee (i) has
not received voting instructions on a particular matter from the beneficial
owners or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on such matter.
Ramsay Holdings HSA Limited ("Ramsay Holdings") and Paul Ramsay Holdings
Pty. Limited ("Holdings Pty.") are the holders of all of the 142,486 issued and
outstanding shares of Series C Preferred Stock and Ramsay Holdings is the holder
of 1,404,035 shares of Common Stock. Accordingly, as of the Record Date, Ramsay
Holdings and Holdings Pty. had an approximate 30.9% voting interest in the
Company. To the best of the Company's knowledge, Ramsay Holdings and Holdings
Pty. will vote their shares of Common Stock and Series C Preferred Stock in
favor of each of the proposals presented at the Meeting. See "Certain
Relationships and Related Transactions", "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management", below.
1. ELECTION OF DIRECTORS
Nine directors will be elected at the Meeting. It is the intention of
each of the persons named in the accompanying Proxy to vote the shares
represented thereby in favor of the nine nominees listed in the following table,
unless contrary instructions are given. All of the
2
<PAGE>
nominees are presently serving as directors. In case any nominee is unable or
declines to serve, such persons reserve the right to vote the shares represented
by such Proxy for another person duly nominated by the Board of Directors in his
stead or, if no other person is so nominated, to vote such shares only for the
remaining nominees. The Board of Directors has no reason to believe that any
persons nominated will be unable or will decline to serve. The directors
elected by the stockholders will serve until the next Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified.
Certain information concerning the nominees for election of directors is
set forth below. Such information was furnished by them to the Company.
<TABLE>
<CAPTION>
Principal Occupations for Past Five
Name and Age Years and Certain Other Directorships
- ------------ -------------------------------------
<S> <C>
Aaron Beam, Jr. (51) Executive Vice President and Chief Financial Officer of
HEALTHSOUTH Corporation (provider of medical
rehabilitation services) since prior to 1990; Director
of HEALTHSOUTH Corporation since 1993; Director of
Ramsay Managed Care, Inc. (provider of managed mental
health care and HMO services); Director of the Company
since 1991.
Gregory H. Browne (42) Chief Executive Officer of the Company from January 1992
through September 1995; acting Chief Financial Officer
of the Company from September 1994 through September
1995; President of the Company from January 1992 to
September 1994; Vice-Chairman of the Company from August
1991 through September 1995. Vice-Chairman of the Board
of Ramsay-HMO, Inc. (operator of a health maintenance
organization) from prior to 1990 to May 1994; Chief
Executive Officer and Chief Financial Officer of Ramsay-
HMO, Inc. from prior to 1990 to January 1992; Director
of Ramsay Managed Care, Inc. (provider of managed mental
health care and HMO services); Director of the Company
since 1990.
Peter J. Evans (46) Financial consultant to a number of Australian
companies; Partner, P.J. Evans & Co., a chartered
accounting firm in Australia, since prior to 1990;
Former partner in big six accounting firm; Director of
Ramsay Health Care Pty. Limited (owner and operator of
hospitals in Australia), Prime Television Limited
(operator of an Australian television network) and
Ramsay Managed Care, Inc. (provider of managed mental
health care and HMO services); Director of the Company
since 1989.
Robert E. Galloway (50) Healthcare consultant with Galloway Consulting Group
since prior to 1990; Financial consultant to Graduate
Health System (regional health care network of
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
not-for-profit hospitals and a health maintenance
organization) and Interim Chief Financial Officer of
Franciscan Sisters of Allegany, New York from July 1991
to January 1992; Senior Vice President and Chief
Financial Officer of Graduate Health System from prior
to 1990 to July 1991; President of Iberville
Properties, Inc. (a medical office property company)
since prior to 1990; President of Sacred Heart Medical
Center (Chester, Pennsylvania hospital) since 1992;
Director of the Company since 1987.
Thomas M. Haythe (56) Partner, Haythe & Curley (attorneys) since prior to
1990; Director of Novametrix Medical Systems, Inc.
(manufacturer of electronic medical instruments),
Isomedix, Inc. (provider of sterilization services),
Guest Supply, Inc. (provider of hotel guest room
amenities, accessories and products), Westerbeke
Corporation (manufacturer of marine engine products)
and Ramsay Managed Care, Inc. (provider of managed
mental health care and HMO services); Director of the
Company since 1987.
Reynold J. Jennings (49) President of the Company beginning September 1995;
President and Chief Operating Officer of the Company
from September 1994 to September 1995; Executive Vice
President and Chief Operating Officer of the Company
from November 1993 until September 1994; various
management and administrative positions with National
Medical Enterprises, Inc. since prior to 1990 to
October 1993; Director of the Company since August
1995.
Paul J. Ramsay (59) Chairman of the Board of the Company since July 1988;
President of the Company from February 1988 to July
1988; Chairman of the Board of the Company from
November 1987 to February 1988; involved in the health
care industry for more than 25 years; Chairman of the
Board of Ramsay Health Care Pty. Limited (or its
predecessors), Paul Ramsay Hospitals Pty. Limited and
Prime Television Limited (operator of an Australian
television network); Director of Ramsay Managed Care,
Inc. (provider of managed mental health care and HMO
services); Director of the Company since 1987.
Steven J. Shulman (44) President of the Pharmacy and Disease Management Group
of Value Health, Inc. (provider of specialty managed
care programs) since September 1995; Executive Vice
President of Value Health, Inc. since prior to 1990 to
September 1995; President and Chief Executive Officer
of American PsychManagement, Inc. (wholly-owned
subsidiary of
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Value Health, Inc.) from October 1990 to June 1991;
Director of Value Health, Inc., Novametrix Medical
Systems, Inc. (manufacturer of electronic medical
instruments) and Ramsay Managed Care, Inc. (provider of
managed mental health care and HMO services); Director
of the Company since 1991.
Michael S. Siddle (46) Managing Director (Chief Executive Officer) of Ramsay
Health Care Pty. Limited (or its predecessors) and Paul
Ramsay Hospitals Pty. Limited since prior to 1990;
various executive positions with corporations
controlled by Paul J. Ramsay since prior to 1990;
Director of Prime Television Limited (operator of an
Australian television network) and Ramsay Managed Care,
Inc. (provider of managed mental health care and HMO
services); Director of the Company since 1987.
</TABLE>
Bruce R. Soden resigned as a director of the Company effective August
4, 1995. However, Mr. Soden continues in his capacity as a Senior Vice President
of the Company. On August 30, 1995, the Board of Directors elected Mr. Jennings
to fill the vacancy created by Mr. Soden's resignation.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company met six times in fiscal 1995.
All of the directors named above (other than Mr. Siddle) attended at least 75%
of the meetings of the Board of Directors and meetings of the Committees on
which such director served held during the time that such person served. Mr.
Siddle attended 67% of such meetings.
The Company had six standing committees during fiscal 1995: the
Executive Committee, the Audit Committee, the Compensation and Conflict of
Interest Committee, the Quality Assurance Committee, the Independent Directors
Committee and the Operations Committee.
The Executive Committee presently is composed of Messrs. Evans, Haythe
and Ramsay. The Committee's function is to act in the place and stead of the
Board to the extent permitted by law on matters which require Board action
between meetings of the Board of Directors. The Executive Committee met once
during fiscal 1995.
The Audit Committee presently is composed of Messrs. Beam, Evans and
Haythe. The Audit Committee's functions include reviewing the results of the
reports and audits by the Company's independent public accountants and making
recommendations to the Board of Directors with respect to accounting practices
and procedures and internal controls. The Audit Committee of the Company met
once during fiscal 1995.
The Compensation and Conflict of Interest Committee (the "Compensation
Committee") presently is composed of Messrs. Beam, Evans and Haythe. The
Compensation Committee's functions include reviewing and recommending
remuneration arrangements for senior officers and for members of the Board of
Directors, adopting compensation plans in which officers and directors are
eligible to participate, granting stock options under the Company's stock option
5
<PAGE>
plans, establishing personnel policies and acting on other important personnel
matters, nominating senior officers, resolving matters involving possible
conflicts of interest, and providing for management succession. The
Compensation Committee met four times during fiscal 1995.
The Quality Assurance Committee presently is composed of Messrs.
Galloway and Shulman. The Committee's functions are to review and monitor the
clinical functions of the Company, to administer peer review and a case
management system, and to implement a professional education program. The
Quality Assurance Committee did not meet during fiscal 1995.
The Independent Directors Committee presently is composed of Messrs.
Beam, Galloway, Haythe and Shulman. The Committee's function is to review all
transactions between the Company and persons affiliated with Paul J. Ramsay or
any entity in which Paul J. Ramsay directly or indirectly has an equity
interest. See "Security Ownership of Certain Beneficial Owners" and "Security
Ownership of Management" below for information concerning Mr. Ramsay's
beneficial ownership of the stock of the Company. The Independent Directors
Committee met three times during fiscal 1995.
The Operations Committee is composed of Messrs. Browne, Evans,
Jennings, Ramsay and Siddle, with Mr. Jennings have been appointed at the time
of his appointment to the Board of Directors in August 1995. The Committee's
function is to review the Company's operations on a divisional and hospital-by-
hospital basis. The Operations Committee met six times during fiscal 1995.
The Company does not have a nominating committee and has established
no procedures whereby nominees for director may be recommended by stockholders.
Compensation of Directors
During fiscal 1995, the Company paid directors who are not employees
of the Company an annual fee of $12,000 and a fee of $3,000 for each of the
first four meetings of the Board of Directors attended during the year, with no
additional compensation to be paid for attendance at additional meetings.
Additionally, the Company reimbursed directors for out-of-pocket expenses
incurred in connection with attending meetings of the Board of Directors and
committees of the Board of Directors. The compensation of directors in fiscal
1996 will remain unchanged except that, on September 1, 1995, approximately 25%
of the fiscal 1996 fees to non-employee directors was paid by way of a grant of
Common Stock and options for Common Stock of the Company.
Executive Compensation
The following table sets forth information for the fiscal years ended
June 30, 1995, 1994 and 1993 concerning the compensation paid or awarded to the
Chief Executive Officer and the other most highly compensated executive officers
of the Company.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------- -------------
Fiscal Securities
Year Other Annual Underlying All Other
Name and Ended Salary Bonus Compensation Stock Options Compensation
Principal Position June 30 ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gregory H. Browne(9) 1995 220,757 --- 32,046(7) --- ---
Chief Executive Officer 1994 206,472 --- 27,860(7) --- ---
1993 217,413 --- 29,024(7) 312,075(2)(10) ---
Reynold J. Jennings(1) 1995 225,859 135,000 7,500(8) 174,830(11)(10) 63,830(4)
President 1994 141,162 --- 12,150(7) 124,830(3)(10) 7,319(4)
1993 --- --- --- --- ---
Wallace E. Smith 1995 160,609 5,000 4,800(8) --- ---
Senior Vice President - 1994 159,908 27,000 4,800(8) 6,242(10) 836
Operations 1993 137,263 27,761 4,800(8) 62,415(5)(10) 1,273
John A. Quinn 1995 135,156 45,000 4,800(8) --- ---
Senior Vice President - 1994 126,823 25,000 4,800(8) 6,242(10) 481
Operations 1993 112,232 17,500 4,800(8) 37,450(6)(10) ---
Curtis L. Dosch 1995 119,919 25,000 4,800(8) --- ---
Vice President - Finance/ 1994 107,810 25,000 4,200(8) 12,484(10) ---
Reimbursement 1993 90,808 9,000 --- 29,129(12)(10) ---
</TABLE>
(1) Mr. Jennings commenced employment with the Company as Chief Operating
Officer on November 8, 1993. Mr. Jennings was appointed President in
September 1994.
(2) Includes repricing of options to purchase an aggregate of 268,384 shares of
Common Stock.
(3) Grant and subsequent repricing of options to purchase an aggregate of
124,830 shares of Common Stock.
(4) Includes moving expense reimbursement and other costs of relocation
totalling $51,619 in 1995. Amount also includes or, in 1994, represents
the benefit to Mr. Jennings of premiums paid by the Company during the
fiscal year with respect to a split-dollar insurance arrangement, which
benefit was determined by calculating the time value of money from the date
premiums were paid until the date (March 1999) premiums are expected to be
repaid to the Company.
(5) Includes repricing of options to purchase an aggregate of 49,932 shares of
Common Stock.
(6) Includes repricing of options to purchase an aggregate of 31,208 shares of
Common Stock.
(7) Includes housing allowance for Mr. Browne of approximately $20,000 and for
Mr. Jennings of approximately $9,000.
(8) Represents automobile allowance.
(9) Effective September 30, 1995, Mr. Browne resigned from his position as
Chief Executive Officer of the Company.
(10) Amount reflects the antidilution adjustment in connection with the RMCI
Distribution (as defined below).
(11) Includes repricing of options to purchase an aggregate of 124,830 shares of
Common Stock.
(12) Includes repricing of options to purchase an aggregate of 14,981 shares of
Common Stock.
On April 24, 1995, the Company distributed, on a pro rata basis in the form
of a dividend, the stock of its subsidiary, Ramsay Managed Care, Inc. ("RMCI"),
held by the Company, to the holders of record on April 21, 1995 of the Company's
common and preferred stock (the "RMCI Distribution"). In connection with the
RMCI Distribution and in accordance with the Company's 1990, 1991 and 1993 Stock
Option Plans, the Company made certain antidilution adjustments to stock options
issued under these Stock Option Plans. These adjustments were made to reflect
the assumed reduction in the market price of the Common Stock following the RMCI
Distribution and to preserve the aggregate "spread" (if any) between the
aggregate option price under each option and the aggregate market value of the
shares of Common Stock of the Company purchasable upon exercise of the option.
Accordingly, the exercise price of each option outstanding under the Company's
1990, 1991 and 1993 Stock Option Plans was adjusted by multiplying the market
price in effect prior to the RMCI
7
<PAGE>
Distribution by 0.8011 and the number of shares covered by each option was
adjusted by multiplying the number of shares prior to the RMCI Distribution by
1.2483. All information contained in this Proxy Statement reflects such
adjustments.
The following table sets forth the grants of stock options to the executive
officers named in the Summary Compensation Table during the fiscal year ended
June 30, 1995. The Table also includes options which were repriced during the
fiscal year. The amounts shown for each of the named executive officers as
potential realizable values are based on arbitrarily assumed annualized rates of
stock price appreciation of five percent and ten percent over the exercise price
of the options during the full terms of the options. No gain to the optionees
is possible without an increase in stock price which will benefit all
stockholders proportionately. These potential realizable values are based
solely on arbitrarily assumed rates of appreciation required by applicable
Securities and Exchange Commission regulations. Actual gains, if any, on option
exercises and holdings of Common Stock are dependent on the future performance
of the Common Stock and overall stock market conditions. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
STOCK OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Individual Price Appreciation
Grants for Option Term
-------------------------------------------------------- ---------------------
% of Total
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- --------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Gregory H. Browne(2) None -- -- -- -- --
Reynold J. Jennings 50,000(1) 76.9% $3.75 2005 $118,000 $299,000
124,830 -- $3.75 2003 240,900 585,500
Wallace E. Smith None -- -- -- -- --
John A. Quinn None -- -- -- -- --
Curtis L. Dosch None -- -- -- -- --
</TABLE>
(1) Options are exercisable in annual increments of 33% beginning June 1, 1995.
The options include a reload feature. The reload feature provides that if
upon exercise of an option the optionee pays the purchase price of such
option in shares of Common Stock owned by the optionee for at least 6
months, the Company shall grant such optionee on the date of such exercise
an additional option to purchase a number of shares of Common Stock equal
to the number of shares of Common Stock transferred to the Company in
payment of the purchase price.
(2) Effective September 30, 1995, Mr. Browne resigned from his position as
Chief Executive Officer of the Company.
8
<PAGE>
The following table summarizes stock options exercised during fiscal 1995
and the number and value of options held by the executive officers named in the
Summary Compensation Table at June 30, 1995.
STOCK OPTION EXERCISES IN FISCAL 1995 AND
STOCK OPTION VALUES AT JUNE 30, 1995
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at June 30, 1995 (#) at June 30, 1995 ($)(1)
---------------------------- -------------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gregory H. Browne (2) -- -- 187,245 124,830 $34,454 $29,960
Reynold J. Jennings -- -- 79,082 95,748 39,541 47,875
Wallace E. Smith 16,666 31,249 47,853 -- 6,991 --
John A. Quinn -- -- 43,692 -- 7,490 --
Curtis L. Dosch -- -- 41,613 -- 3,595 --
</TABLE>
(1) In-the-money options are those where the fair market value of the
underlying Common Stock exceeds the exercise price of the option. The value
of in-the-money options is determined in accordance with regulations of the
Securities and Exchange Commission by subtracting the aggregate exercise
price of the options from the aggregate year-end value of the underlying
Common Stock.
(2) Effective September 30, 1995, Mr. Browne resigned from his position as
Chief Executive Officer of the Company.
On June 1, 1995, stock options which were granted to Mr. Jennings in
November 1993 and repriced in May 1994 were repriced again. Except for this
repricing and the antidilution adjustments made as a result of the RMCI
Distribution, all other option prices remained unchanged during fiscal 1995. In
accordance with applicable Securities and Exchange Commission regulations, the
following table sets forth information as to the repricing of all options held
by each executive officer of the Company during the past ten fiscal years.
9
<PAGE>
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Market Price Original
of Exercise Option Term
Number of Stock at Price at Remaining at
Options Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
------ ------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gregory H. Browne (2) November 16, 1992 8,321 $ 4.01 $ 6.01 $4.01 3 years
10,403 4.01 5.61 4.01 8 years
249,660 4.01 5.61 4.01 9 years
April 7, 1992 10,403 5.61 7.81 5.61 9 years
124,830 5.61 7.01 5.61 10 years
November 11, 1991 10,403 7.81 11.32 7.81 10 years
Reynold J. Jennings June 1, 1995 124,830 $ 3.75 $ 5.51 $3.75 8 years
May 26, 1994 124,830 5.51 6.31 5.51 9 years
Bruce R. Soden (1) November 16, 1992 8,321 $ 4.01 $ 6.01 $4.01 3 years
22,886 4.01 5.61 4.01 8 years
18,725 4.01 5.61 4.01 9 years
April 7, 1992 22,886 5.61 7.81 5.61 9 years
18,725 5.61 7.01 5.61 10 years
November 11, 1991 22,886 7.81 11.66 7.81 10 years
Wallace E. Smith November 16, 1992 20,804 $ 4.01 $ 5.61 $4.01 3 years
29,128 4.01 5.61 4.01 8 years
April 7, 1992 20,804 5.61 7.81 5.61 4 years
29,128 5.61 7.81 5.61 9 years
November 11, 1991 29,128 7.81 11.32 7.81 10 years
John A. Quinn November 16, 1992 18,725 $ 4.01 $ 5.61 $4.01 9 years
12,483 4.01 5.61 4.01 8 years
April 7, 1992 18,725 5.61 7.81 5.61 10 years
12,483 5.61 7.81 5.61 9 years
November 11, 1991 12,483 7.81 11.32 7.81 10 years
Curtis L. Dosch November 16, 1992 6,242 $ 4.01 $ 5.61 $4.01 9 years
2,497 4.01 5.61 4.01 8 years
6,242 4.01 5.61 4.01 9 years
April 7, 1992 6,242 5.61 7.81 5.61 10 years
2,497 5.61 7.81 5.61 9 years
6,242 5.61 7.01 5.61 10 years
November 11, 1991 6,242 7.81 11.22 7.81 6 years
2,497 7.81 11.32 7.81 10 years
William N. Nyman November 16, 1992 6,242 $ 4.01 $ 5.61 $4.01 9 years
2,497 4.01 5.61 4.01 8 years
6,242 4.01 5.61 4.01 9 years
April 7, 1992 6,242 5.61 7.81 5.61 10 years
2,497 5.61 7.81 5.61 9 years
6,242 5.61 7.01 5.61 10 years
November 11, 1991 6,242 7.81 11.22 7.81 6 years
2,497 7.81 11.32 7.81 10 years
</TABLE>
(1) Mr. Soden was the Chief Financial Officer of the Company from September
1991 to September 1993 and a member of its Board of Directors from
September 1993 to August 1995. He continues to serve as a Senior Vice
President of the Company.
(2) Effective September 30, 1995, Mr. Browne resigned from his position as
Chief Executive Officer of the Company.
10
<PAGE>
Employment Agreements
In January 1992, the Company entered into an employment agreement with
Gregory H. Browne, Chief Executive Officer of the Company through September 30,
1995, providing for the payment of an initial annual base salary of $200,000,
subject to annual increases determined by the Company's Board of Directors and
minimum annual increases based on the Consumer Price Index. The agreement was
for an initial term of two years with annual renewals. Mr. Browne's agreement
was renewed in January 1994 and again in January 1995. In addition, in February
1995, Mr. Browne's base salary was increased $25,000 by the Board of Directors.
Pursuant to the employment agreement, the Company agreed to provide Mr. Browne
with housing and automobile allowances, reimbursement of certain travel expenses
and a bonus based on the positive percentage change in earnings per share
between years. In September 1995, Mr. Browne announced his intention to resign
from his positions as Vice Chairman and Chief Executive Officer of the Company,
effective September 30, 1995. Mr. Browne continues to serve as a director of
the Company. As part of a termination agreement, the Company agreed to pay Mr.
Browne his current salary during the 12-month period subsequent to his
resignation.
On October 2, 1993, the Company entered into a three-year employment
agreement with Reynold J. Jennings, President of the Company. The agreement was
amended in May 1994 and June 1994. The agreement provides for (a) a base
salary of $225,000 per annum, (b) a bonus in an amount equal to 2% of any
increase in operating income, as defined in the agreement, of the Company
between fiscal years (or portion thereof in the case of the fiscal years
corresponding with the year of employment and termination) and (c) a bonus in an
amount determined by the Board of Directors and based in part on additional
activities of Mr. Jennings and quality matters. Additional bonuses included in
the agreement totalling $75,000 and contingent upon Mr. Jennings remaining in
the Company's employ were paid during fiscal 1995. The agreement also provides
for a split-dollar insurance arrangement, pursuant to which the Company will pay
semi-annual premium costs (up to $150,000 in the aggregate over the three-year
period beginning with the date of the first premium payment) on life insurance
for Mr. Jennings. Mr. Jennings' employment agreement also provides for an
automobile allowance and gives him the right to cause the Company to purchase
from him, beginning on May 31, 1998 or the date of termination of his employment
(if other than by reason of death, disability or for due cause), the options to
purchase 100,000 shares of Common Stock granted to him pursuant to his
employment agreement at a price of $4.00 per share (as adjusted for stock
dividends or splits). Pursuant to the agreement, Mr. Jennings' employment by
the Company may be terminated by either the Company or Mr. Jennings; however, in
the event the Company terminates Mr. Jennings' employment without due cause, the
Company must provide Mr. Jennings with 9 months' notice. The agreement also
provides for a lump sum cash payment to Mr. Jennings of his bonus and twelve
months base salary upon the termination of his employment for any reason
following certain change of control events involving the Company.
In January 1992, the Company entered into employment agreements with
Wallace E. Smith, Senior Vice President - Operations and John A. Quinn, Senior
Vice President -Operations, for the payment of initial annual base salaries to
Mr. Smith and Mr. Quinn of $125,000 and $115,000, respectively, subject to
annual review by the Board of Directors. Effective June 1992, Mr. Smith's salary
was increased to $140,000. In July 1993, Mr. Smith's and Mr. Quinn's salaries
were increased to $160,000 and $126,500, respectively, and, in July 1994, Mr.
Quinn's salary was increased to $135,000. The agreements also provide for the
payment to Mr. Smith and Mr. Quinn of a bonus of up to 30% of their respective
base salaries
11
<PAGE>
based upon the attainment of certain performance targets, as well as a
discretionary amount based on job performance and approved by the Compensation
Committee. In addition, the agreements provide for the reimbursement of
reasonable expenses incurred by them in the performance of their duties, an
automobile allowance and the reimbursement of certain relocation expenses.
Pursuant to the agreements, if the Company terminates either of the agreements
for any reason other than due cause or because of the death of the employee, the
employee will be entitled to receive his base salary for a period of six months.
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 Company's Common Stock, to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock. Officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) reports they file.
The Company notes that William N. Nyman inadvertently filed one late report
relating to his purchase of shares of Common Stock. The Company believes that
for the period ending June 30, 1995, except as provided above, its executive
officers, directors and greater than ten percent stockholders complied with all
Section 16(a) filing requirements.
Certain Relationships and Related Transactions
The Management Agreement:
In June 1992, the Company renewed its management agreement (the "Management
Agreement") with Ramsay Health Care Pty. Limited, an affiliate of Paul J. Ramsay
(the "Manager"). The renewal term commenced on November 1, 1992 and will
terminate upon the earlier of (i) October 31, 1997 or (ii) one year after
written notice of termination is given by either party. Pursuant to the
Management Agreement, the Manager provides managerial services to the Company
including, but not limited to (a) participation in overall strategic planning of
the Company, (b) strategic and operational discussions with the executive
officers of the Company, (c) review and evaluation of possible
merger/acquisition candidates, (d) review of material contracts and commitments
entered into by the Company and (e) participation in bank refinancing
negotiations. In addition, the Manager has provided a pool of management
standby resources (on both a part-time and full-time basis) to mitigate the
impact of executive and senior management turnover. The Management Agreement
provided for the payment of an initial annual management fee of $677,422,
subject to increases based on increases in the Consumer Price Index and subject
to certain restrictions set forth in certain loan agreements to which the
Company is a party. For services under the Management Agreement, the Manager
received approximately $716,000 for the year ended June 30, 1995. The
management fee payable to the Manager under the Management Agreement has been
set forth on the basis of a negotiated amount based on the time spent and out-
of-pocket costs incurred by personnel of the Manager in performing the duties
pursuant to the Management Agreement, including expenses for travel by the
Manager's personnel to and from the Company's annual management conference and
all other meetings at which representatives of the Manager are present. In
addition, directors of the Company who reside in Australia and who incur travel
expenses and other out-of-pocket costs in their capacities
12
<PAGE>
as directors, including in connection with their attendance at Board of Director
and other meetings of the Company, are reimbursed out of the annual management
fee paid to the Manager.
The Distribution of RMCI and the Rights Offering by RMCI:
On April 24, 1995 (the "Distribution Date"), RHC distributed, on a pro rata
basis in the form of a dividend (the "Distribution"), all of the shares of
common stock of RMCI, par value $.01 per share (the "RMCI Common Stock"), held
by RHC, to the holders of record as of April 21, 1995 (the "Distribution Record
Date") of (i) the Common Stock, (ii) RHC's Class A Convertible Preferred Stock,
par value $1.00 per share, and (iii) the Series C Preferred Stock.
Immediately after the close of business on the Distribution Date, RMCI
issued, at no cost, to the holders of Common Stock of record as of the
Distribution Date, other than Paul Ramsay Hospitals Pty. Limited ("Ramsay
Hospitals"; collectively with Ramsay Holdings and Holdings Pty., the "Ramsay
Affiliates"), Ramsay Holdings and Holdings Pty., transferrable rights (the
"Rights") to subscribe for and purchase up to 980,913 shares of RMCI Common
Stock for a price of $2.00 per share (the "Rights Offering"). The Rights
Offering expired on June 8, 1995 with all Rights having been exercised.
Relationship With Ramsay Affiliates:
Ramsay Holdings, Holdings Pty. and Ramsay Hospitals are corporations
controlled by the Company's Chairman, Paul J. Ramsay. At October 2, 1995,
Ramsay Holdings and Holdings Pty. owned of record approximately 18.2% of the
issued and outstanding shares of Common Stock and 100% of the issued and
outstanding shares of Series C Preferred Stock and had an approximate 30.9%
voting interest in RHC. In addition, the Ramsay Affiliates hold a total voting
interest in RMCI of approximately 54.7%.
In connection with the Distribution, Ramsay Holdings received its pro rata
share of RMCI Common Stock based upon the number of issued and outstanding
shares of Common Stock held by Ramsay Holdings as of the Distribution Record
Date and, in addition, each of Ramsay Holdings and Holdings Pty. received their
respective pro rata share of RMCI Common Stock based upon the number of issued
and outstanding shares of Common Stock into which the issued and outstanding
Series C Preferred Stock held by them was convertible as of the Distribution
Record Date.
Debt Financing of Acquisitions:
In connection with the Distribution, RMCI issued to RHC a subordinated
promissory note (the "Subordinated Promissory Note") in the principal amount of
$6,000,000, which note bears interest at 8% per annum and evidences certain
advances by RHC made to or on behalf of RMCI since RMCI's inception, including
for working capital and other general corporate purposes and partially to
finance the cash portion of the purchase prices for acquisitions of certain
acquired businesses. Prior to the Distribution, the amounts evidenced by the
Subordinated Promissory Note were recorded as intercompany indebtedness between
RMCI and RHC. The Subordinated Promissory Note is payable as to interest only
through September 30, 1996 and, commencing on September 30, 1996, principal and
interest will be payable in equal quarterly installments in arrears for a four-
year period, with the final payment due on September 30, 2000.
13
<PAGE>
The Subordinated Promissory Note is unsecured and subordinated and junior
in right of payment to all indebtedness of RMCI and its subsidiaries incurred in
connection with the acquisition of Florida Psychiatric Management ("FPM"), a
managed behavioral health care company, and Human Dynamics Institute ("HDI"), a
former managed mental health care services division of Phoenix South Community
Mental Health Services, Inc., future acquisitions of other managed mental health
care services businesses and any other Senior Indebtedness (as defined in the
Subordinated Promissory Note), including any indebtedness arising under RMCI's
credit facility with First Union National Bank of Florida (the "Bank") and any
other bank indebtedness of RMCI or its subsidiaries.
Issuance of RMCI Common Stock and Warrants to Ramsay Hospitals Prior to the
Distribution:
On October 27, 1994 (the "First Closing"), prior to the Distribution, RMCI
consummated $3,320,000 of a $5,820,000 private placement of RMCI Common Stock
(the "Private Placement"). At the First Closing, Ramsay Hospitals purchased
1,500,000 shares of RMCI Common Stock (the "First Shares") and three officers of
RMCI purchased an aggregate of 160,000 shares of RMCI Common Stock. On May 31,
1995, Ramsay Hospitals purchased 1,250,000 shares of RMCI Common Stock (the
"Second Shares"; collectively with the First Shares, the "Ramsay Shares") for an
aggregate purchase price of $2,500,000.
In connection with the Private Placement and the Distribution, RMCI issued
warrants (the "Ramsay Warrants") to purchase an aggregate of 125,000 shares of
RMCI Common Stock to Ramsay Hospitals, at an exercise price per share of $2.00
per share.
As part of the Private Placement, RMCI and Ramsay Hospitals entered into a
Registration Rights Agreement, pursuant to which RMCI granted to Ramsay
Hospitals and its transferees one "demand" and unlimited "piggyback"
registration rights covering the Ramsay Shares and the 125,000 shares of RMCI
Common Stock issuable upon the exercise of the Ramsay Warrants.
Other Issuances of RMCI Common Stock:
On October 27, 1994, prior to the Distribution, in conjunction with the
purchase of shares of RMCI Common Stock by Ramsay Hospitals, RMCI issued and
sold 75,000 shares of RMCI Common Stock to Parveez A. Oliaii and 50,000 shares
of RMCI Common Stock to Martin Lazoritz, executive officers of RMCI, and 35,000
shares of RMCI Common Stock to another officer of a subsidiary of RMCI, in each
case at a purchase price per share equal to $2.00 per share. RMCI entered into
stock purchase agreements with each of these officers pursuant to which these
individuals purchased their respective shares of RMCI Common Stock. Mr. Oliaii
issued a promissory note to RMCI in the original principal amount of $148,500 as
part of the purchase price for the 75,000 shares of RMCI Common Stock purchased
by him. Principal on the promissory note is payable in quarterly installments
commencing on December 31, 1995. Interest on such promissory note is computed at
a fluctuating rate per annum equal to the one-year London Interbank Offered
Rate, as in effect from time to time, and is payable quarterly in arrears,
commencing on March 31, 1995.
14
<PAGE>
Certain Agreements in Connection with the Distribution:
Following the Distribution, RHC and RMCI became separate, publicly-traded
companies with the contractual arrangements described below. Other than by
reason of their equity ownership in RHC and RMCI, neither Ramsay Holdings,
Holdings Pty. nor Ramsay Hospitals have any interest in RHC's or RMCI's rights
and benefits arising under these contractual arrangements. In addition, other
than by reason of his equity ownership interests in Ramsay Holdings, Holdings
Pty. and Ramsay Hospitals, Mr. Ramsay does not have any ownership interests in
RHC or RMCI or their respective rights and benefits under these contractual
arrangements.
In connection with the Distribution, RHC and RMCI entered into a Second
Amended and Restated Distribution Agreement (the "Distribution Agreement") which
sets forth the terms of the Distribution and certain agreements in connection
with the Distribution and the Rights Offering. In addition, RHC and RMCI entered
into a Rights Agreement (the "Rights Agreement"), Employee Benefit Agreement
(the "Employee Benefit Agreement"), Tax Sharing Agreement (the "Tax Sharing
Agreement") and Corporate Services Agreement (the "Corporate Services
Agreement), and RMCI issued the Subordinated Promissory Note to RHC. Except as
otherwise provided in these agreements, all covenants and agreements terminate
on the sixth anniversary of the Distribution Date.
The Distribution Agreement provides that RHC and RMCI will indemnify each
other with respect to (i) claims in connection with the Prospectus or the
Registration Statement on Form S-1 relating to the Distribution with respect to
the information provided by RHC or RMCI, as the case may be; (ii) failure to
perform, or violation of the Distribution Agreement, the Rights Agreement, the
Employee Benefit Agreement, the Tax Sharing Agreement, the Corporate Services
Agreement or the Subordinated Promissory Note; and (iii) claims related to their
respective businesses whether the occurrence giving rise to the claim occurred
prior to or subsequent to the Distribution Date. Under the Distribution
Agreement, RMCI will also indemnify RHC for all matters arising out of or
relating to the acquisitions of FPM, Florida Psychiatric Associates, a physician
practice group located in Orlando, Florida, and HDI, including with respect to
earn-out obligations and purchase price indebtedness thereunder. In addition,
the Distribution Agreement provides that RHC will honor certain non-compete
covenants relating to such acquisitions.
The Distribution Agreement provides that all intercompany receivables or
payables reflected on the books and records of RHC or RMCI (other than those
evidenced by the Subordinated Promissory Note, which are governed by the terms
of the Subordinated Promissory Note) between RHC and its subsidiaries on the one
hand, and RMCI and its subsidiaries, on the other hand, outstanding on the
Distribution Date will be calculated as of the Distribution Date and agreed to
between RHC and RMCI within 180 days following the Distribution Date. At June
30, 1995, the net amount of these receivables and parables payable to RHC by
RMCI totalled approximately $1,441,000. Pursuant to the Distribution Agreement,
$600,000 of this amount will be payable by RMCI on or before October 21, 1995
(the "First Payment Date") or on such other date and on such other terms and
conditions as shall be mutually agreed to by RHC and RMCI, and the balance of
this amount will be payable on or before December 31, 1996, together with
interest at 7% per annum accruing from the First Payment Date, or on such other
date and on such other terms and conditions as shall be mutually agreed to
between RHC and RMCI.
15
<PAGE>
RMCI has agreed to pay the out-of-pocket costs and expenses related to
accomplishing the Private Placement, the Distribution and the Rights Offering
other than as specified in the Employee Benefit Agreement, the Tax Sharing
Agreement and the Corporate Services Agreement. These costs include accounting,
legal, printing, investment banking and distribution and rights agent fees and
expenses. These costs and expenses aggregated approximately $2,100,000, a
portion of which has been paid by RHC and is included in the foregoing
$1,441,000 net amount payable by RMCI to RHC.
Pursuant to the Corporate Services Agreement, RHC receives (i) a monthly
fee of $15,000 per month for certain administrative and other services which RHC
historically has provided to RMCI and will continue to provide for a one year
term following the Distribution Date (other than Gregory H. Browne's services),
payable monthly in arrears in cash, (ii) an amount equal to the pro rata portion
of the base salary and other annual compensation (other than bonuses) payable by
RHC to Mr. Browne calculated based upon the percentage of time devoted by Mr.
Browne for RMCI services, not to exceed $100,000 annually, payable monthly in
arrears in cash (Mr. Browne resigned his executive officer positions with RHC
and RMCI, effective September 30, 1995), and (iii) reasonable out-of-pocket
expenses incurred by RHC in providing such services. Pursuant to the Corporate
Services Agreement RMCI will receive (i) a fee of $1,000 for each day during
which RMCI provides consulting services to RHC relating to the managed mental
health care services business, payable monthly in arrears in cash and (ii)
reasonable out-of-pocket expenses incurred by RMCI in providing such services.
The foregoing fees are subject to quarterly review by the parties and to
adjustment, if necessary, to reflect any increase or decrease or additional
services being provided by RHC or RMCI, as the case may be.
The Corporate Services Agreement also provides that RMCI will utilize RHC's
network of mental health hospitals and clinics as a "preferred provider" to the
extent practicable and to the extent clinically and geographically appropriate,
all as determined by RMCI, for the treatment of individuals covered under
agreements held by RMCI. The fees for such services will be at mutually agreed
upon rates and which will be no less favorable to RHC or RMCI than fees paid by
RMCI to an unaffiliated third-party preferred provider.
Pursuant to the Tax Sharing Agreement, RHC has agreed to indemnify RMCI for
any income tax liability (i) attributable to the operations of RMCI during any
period on or before October 27, 1994 and (ii) attributable to the operations of
RHC and its subsidiaries (other than RMCI and its subsidiaries), and RMCI has
agreed to indemnify RHC for any income tax liability attributable to the
operations of RMCI and its subsidiaries for all periods beginning the day after
October 27, 1994.
Pursuant to the Employee Benefit Agreement, following the Distribution,
employees of RMCI will continue to be eligible to participate in certain
employee benefit plans maintained by RHC and in which such employees have been
eligible to participate during a transition period during which RMCI is
obligated to establish its own health insurance and other employee benefit
plans. Under the Employee Benefit Agreement, RMCI has assumed all liabilities
relating to employees of RMCI and its subsidiaries, including for accrued
vacation, sick pay and holidays, and RHC is responsible for providing COBRA
coverage to any RMCI employee who was entitled to such coverage prior to or on
the Distribution Date. In addition, each party will reimburse the other for
costs and expenses incurred by it in performing its obligations under the
Employee Benefit Agreement to the same extent and in the same manner as the
parties allocated such costs and expenses prior to the Distribution, including
costs and expenses incurred by RHC in
16
<PAGE>
administering such employee benefit plans for the benefit of RMCI employees
which are not otherwise reimbursed to RHC.
Stock Purchase Agreement:
As of September 7, 1995, RHC entered into a Stock Purchase Agreement (the
"Original Agreement") with Holdings Pty. pursuant to which Holdings Pty. agreed
to purchase 266,667 shares of the Common Stock at a purchase price of $3.75 per
share. The closing of the purchase was scheduled to occur in October 1995,
subject to the satisfaction of certain conditions. One of these conditions was
not satisfied and, therefore, as of September 28, 1995, the Original Agreement
was amended and restated by an Amended and Restated Stock Purchase Agreement
(the "Amended Agreement"). Pursuant to the Amended Agreement, Holdings Pty.
agreed to purchase 275,863 shares of the Common Stock (the "Shares") at a
purchase price of $3.625 per share as follows: (i) 121,363 of the Shares (the
"Cash Shares") for a purchase price of $439,940.88, payable in cash and (ii)
154,500 of the Shares (the "Management Fee Shares") for a purchase price of
$560,062.50, payable $1,545 in cash and $558,517.50 as a prepayment by the
Company of management fees now or hereafter due for fiscal year 1996 under the
Management Agreement between the Company and Ramsay Health Care Pty. Limited, an
affiliate of Holdings Pty. The closing of the purchase of the Management Fee
Shares and the Cash Shares is scheduled to occur in October 1995, subject to the
satisfaction of certain conditions. At October 2, 1995, Ramsay Holdings and
Holdings Pty. have a voting interest in the Company of 30.9%. Following the
closing for the Shares, the voting interest in the Company of Ramsay Holdings
and Holdings Pty. would increase to 32.9%.
Other Arrangements:
On August 11, 1994, the Company loaned $130,000 to Mr. Jennings at an
interest rate of 5.75%. The loan was evidenced by a promissory note and secured
by a mortgage on Mr. Jennings' home. Mr. Jennings repaid the loan and accrued
interest in full on May 5, 1995.
Thomas M. Haythe, a director of the Company, is a partner of the New York
City law firm of Haythe & Curley, which firm rendered legal services to the
Company during fiscal year 1995 and will continue to render legal services to
the Company in the future.
Robert E. Galloway, a director of the Company, rendered consulting services
to the Company during fiscal year 1995 and will continue to render such services
to the Company in the future. Mr. Galloway received $66,225 for his services
during fiscal year 1995.
Compensation Committee Interlocks
and Insider Participation
The members of the Compensation Committee of the Board of Directors are
Aaron Beam, Jr., Peter J. Evans and Thomas M. Haythe. Mr. Evans is a director
of Ramsay Health Care Pty. Limited, which provides management services to the
Company for which it receives an annual management fee. Mr. Haythe is a partner
of the New York City law firm of Haythe & Curley, which firm rendered legal
services to the Company during the last fiscal year and will continue to render
legal services to the Company in the future. See "Certain Relationships and
Related Transactions" above.
17
<PAGE>
Compensation Committee Report
on Executive Compensation
The Compensation Committee of the Board of Directors determines the
compensation arrangements for executive officers of the Company. The Company's
executive compensation program is designed to attract, motivate, reward and
retain individuals with the executive and management skills needed to achieve
the Company's business objectives. The compensation program accomplishes this
goal by providing the Company's executives with incentives which reward
achievement of both short- and long-term objectives that contribute to the
growth and profitability of the Company, and which link executive pay with the
interests of the Company's stockholders.
The Company's executive compensation program consists of base salary,
bonuses and stock options. The Company's salary levels are determined by
comparisons with companies of similar size and complexity in the behavioral
health care industry. Salary increases are determined in light of the financial
performance of the Company, the individual performance of the executive and any
increased responsibilities assumed by the executive. The salaries for Mr.
Browne and Mr. Jennings were determined pursuant to the terms of their
employment agreements with the Company, which in turn were based on the
foregoing considerations.
Mr. Browne's employment agreement provided for a bonus equal to the product
of Mr. Browne's base salary multiplied by the positive percentage change in
earnings per share of the Company between years. Mr. Browne did not receive a
bonus during the last fiscal year. Mr. Browne resigned from his positions as
Vice Chairman and Chief Executive Officer of the Company, effective September
30, 1995. As part of a termination agreement, the Company agreed to pay Mr.
Browne his current base salary during the 12-month period subsequent to his
resignation.
Mr. Jenning's employment agreement provides for a bonus equal to 2% of any
increase in operating income, as defined in the agreement, of the Company
between fiscal years (or portion thereof in the case of the fiscal years
corresponding with the year of employment and termination). The Company accrued
$60,000 as a fiscal 1995 bonus for Mr. Jennings in its 1995 statement of
operations. In addition, the Company paid Mr. Jennings a bonus of $75,000
during the year as a result of his meeting the length of service requirements
included in his agreement.
The Company may also award bonuses to other executives based on the level
of financial performance achieved by the Company and the individual
accomplishments of the executive, as evaluated by the President of the Company.
The chief executive officer of each hospital is entitled to an annual bonus if
operating income for the hospital improves over operating income of the hospital
for the previous year, with a stipulation that no bonus is payable if certain
quality of care levels are not attained.
18
<PAGE>
The Company periodically grants stock options to its executive officers and
other key employees. Stock option grants are intended to provide the Company's
executives and other key employees with a significant incentive to work to
maximize stockholder value. The Committee believes that by providing its
executives and key employees who have substantial responsibility for the
management and growth of the Company with an opportunity to profit from
increases in the value of the Company's stock, the interests of the Company's
stockholders and executives will be most closely aligned.
THE COMPENSATION AND CONFLICT OF INTEREST
COMMITTEE OF THE BOARD OF DIRECTORS
Aaron Beam, Jr.
Peter J. Evans
Thomas M. Haythe
19
<PAGE>
Performance Graph
The following performance graph compares the cumulative total return on the
Company's Common Stock to the NASDAQ Stock Market-U.S. Index and to a peer group
which consists of Community Psychiatric Centers, Charter Medical Corporation,
Comprehensive Care Corporation and Mental Health Management, Inc. The Company
believes that these peer companies, which are engaged in the behavioral health
services industry, are most comparable to the Company, within the parameters set
by the Securities and Exchange Commission. The graph assumes that $100 was
invested in the Common Stock, the NASDAQ Stock Market - U.S. Index and the peer
group on June 30, 1990 and that all dividends were reinvested.
20
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG RAMSAY HEALTH CARE, INC., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------
6/90 6/91 6/92 6/93 6/94 6/95
<S> <C> <C> <C> <C> <C> <C>
Ramsay Health Care Inc 100 158 71 72 78 52
PEER GROUP 100 115 45 46 52 43
NASDAQ STOCK MARKET-US 100 106 127 160 162 215
</TABLE>
21
<PAGE>
Security Ownership of Certain Beneficial Owners
The stockholders (including any "group," as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge of the
Board of Directors of the Company, owned beneficially more than five percent of
any class of the outstanding voting securities of the Company as of October
2,1995 and their respective shareholdings as of such date (according to
information furnished by them to the Company), are set forth in the following
table. Except as indicated in the footnotes to the table, all of such shares
are owned with sole voting and investment power.
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE NUMBER OF PERCENTAGE
BENEFICIAL OWNER OF CLASS SHARES OWNED OF CLASS
----------------- -------------------- ------------- -----------
<S> <C> <C> <C>
Paul J. Ramsay Common 3,134,399(1) 33.2%
Paul Ramsay Group
156 Pacific Highway Series C
Greenwich, NSW 2065 Preferred 142,486(2) 100.0%
Australia
Ramsay Holdings HSA Limited Common 2,117,065(3) 25.1%
c/o Haythe & Curley
237 Park Avenue Series C
New York, New York 10017 Preferred 71,303 50.0%
Paul Ramsay Holdings Pty. Limited Common 711,830(4) 8.4%
c/o Haythe & Curley
237 Park Avenue Series C
New York, New York 10017 Preferred 71,183 50.0%
Mellon Bank Corporation Common 444,000(5) 5.7%
Mellon Bank, N.A.
The Dreyfus Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Brinson Holdings, Inc. Common 763,900(6) 9.9%
Brinson Partners, Inc.
Brinson Trust Company
209 South LaSalle
Chicago, Illinois 60604
Merrill Lynch & Co., Inc. Common 544,214(7) 7.0%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
Heartland Advisors, Inc. Common 1,530,800(8) 19.8%
Heartland Group, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
</TABLE>
(1) Mr. Ramsay's beneficial ownership of Common Stock includes 2,117,065 shares
of Common Stock beneficially owned by Ramsay Holdings and 711,830 shares of
Common Stock beneficially owned by Holdings Pty., which entities Mr. Ramsay
indirectly controls, and 303,754 shares of Common Stock issuable upon the
exercise of currently exercisable options to purchase shares of Common
Stock granted pursuant to the Company's 1990 Stock Option Plan and 1991
Stock Option Plan.
22
<PAGE>
(2) Ramsay Holdings, a company Mr. Ramsay indirectly controls, owns 71,303
shares of Series C Preferred Stock and Holdings Pty., a company which Mr.
Ramsay indirectly controls, owns 71,183 shares of Series C Preferred Stock.
(3) Based on 1,404,035 shares of Common Stock currently owned of record by
Ramsay Holdings and 713,030 shares of Common Stock issuable upon the
conversion of the 71,303 shares of Series C Preferred Stock currently
outstanding and owned by Ramsay Holdings.
(4) Based on 711,830 shares of Common Stock issuable upon the conversion of the
71,183 shares of Series C Preferred Stock currently outstanding and owned
by Holdings Pty. Does not include 275,863 shares of Common Stock which
Holdings Pty. has agreed to purchase pursuant to the Amended Agreement.
See "Certain Relationships and Related Transactions."
(5) Information as to the holdings of Mellon Bank Corporation ("Mellon
Corporation"), Mellon Bank, N.A. ("Mellon Bank") and The Dreyfus
Corporation ("Dreyfus") is based upon a report on Schedule 13G filed with
the Securities and Exchange Commission. Such report indicates that 444,000
shares were owned by Mellon Corporation and Mellon Bank with sole voting
power, that 29,000 were owned by Mellon Corporation and Mellon Bank with
sole dispositive power and that 415,000 shares were owned by Mellon
Corporation, Mellon Bank and Dreyfus with shared dispositive power. Such
report indicates that Mellon Bank is a Bank as defined in Section 3(a)(6)
of the Act and that Dreyfus is an Investment Adviser registered under
Section 203 of the Investment Advisers Act of 1940.
(6) Information as to the holdings of Brinson Holdings, Inc. ("BHI"), Brinson
Partners, Inc. ("BPI") and Brinson Trust Company ("BTC") is based upon a
report on Schedule 13G filed with the Securities and Exchange Commission.
Such report indicates that 328,826 shares were owned by BPI with sole
voting and sole dispositive power and 435,074 shares were owned by BTC with
sole voting and sole dispositive power. Such report indicates that BTC is a
bank and the wholly-owned subsidiary of BPI, an investment adviser
registered under the Investment Advisers Act of 1940, which in turn is a
wholly-owned subsidiary of BHI, a parent holding company.
(7) Information as to the holdings of Merrill Lynch & Co., Inc. ("Merrill") is
based upon a report on Schedule 13G filed with the Securities and Exchange
Commission. Such report indicates that 544,214 shares were owned by
Merrill and its affiliates with shared voting and dispositive power.
Merrill and its affiliates disclaim any beneficial interest in such shares,
other than shares held by Merrill and its affiliates in proprietary
accounts.
(8) Information as to the holdings of Heartland Advisors, Inc. ("HAI") and
Heartland Group, Inc. ("HGI") is based upon information provided to the
Company by HAI and HGI. Such information indicates that HAI owned 402,200
shares with sole voting power, HGI owned 520,000 shares with sole voting
power and HAI owned 1,530,800 shares with sole dispositive power. Other
information provided to the Company indicates that HAI is an investment
adviser registered under the Investment Advisers Act of 1940 and that HGI
is an investment company registered under the Investment Company Act of
1940.
Security Ownership of Management
The following table sets forth, as of October 2, 1995, the number of
shares of Common Stock of the Company beneficially owned by each of the
Company's directors and nominees for directors, each executive officer named in
the Summary Compensation Table, and all directors and executive officers as a
group, based upon information obtained from such persons.
23
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF TITLE OF NUMBER OF OF
BENEFICIAL OWNER CLASS SHARES OWNED(1) CLASS(1)
---------------- -------- --------------- ----------
<S> <C> <C> <C>
Paul J. Ramsay Common 3,134,399(2) 33.1%
Series C
Preferred 142,486(3) 100.0%
Aaron Beam, Jr. Common 11,112(4) *
Gregory H. Browne Common 180,924(5) 2.3%
Peter J. Evans Common 33,998(6) *
Robert E. Galloway Common 34,248(6) *
Thomas M. Haythe Common 43,998(6) *
Reynold J. Jennings Common 120,289(7) 1.5%
Steven J. Shulman Common 42,319(6) *
Michael S. Siddle Common 33,998(8) *
Bruce R. Soden Common 64,456(9) *
John A. Quinn Common 43,692(10) *
Wallace E. Smith Common 48,253(11) *
Curtis L. Dosch Common 41,613(12) *
All directors, executive
officers and other officers
as a group (15 persons) Common 3,874,450(2)(4) 38.1%
(5)(6)
(7)(8)
(9)(10)
(11)(12)
(13)
Series C
Preferred 142,486(3) 100.0%
</TABLE>
(*) Indicates ownership percentage of less than one percent (1%).
(1) Includes all shares that each named person is entitled to receive within 60
days, through the exercise of any option, warrant, conversion right, or
similar arrangement. Such shares are deemed to be owned and outstanding by
such person individually, and by all directors and officers as a group, for
purposes of calculating the number of shares owned and the percentage of
class for each such named person and the group, but are not deemed to be
outstanding for purposes of such calculations for any other named person.
24
<PAGE>
(2) Mr. Ramsay's beneficial ownership of Common Stock includes 2,117,065 shares
of Common Stock beneficially owned by Ramsay Holdings and 711,830 shares of
Common Stock beneficially owned by Holdings Pty., which entities Mr. Ramsay
indirectly controls (see "Security Ownership of Certain Beneficial
Owners"), and 303,754 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock granted
pursuant to the Company's 1990 and 1991 Stock Option Plans. Does not
include 275,863 shares of Common Stock which Holdings Pty. has agreed to
purchase pursuant to the Amended Agreement. See "Certain Relationships and
Related Transactions."
(3) Ramsay Holdings, a company which Mr. Ramsay indirectly controls, owns
71,303 shares of Series C Preferred Stock and Holdings Pty., a company
which Mr. Ramsay indirectly controls, owns 71,183 shares of Series C
Preferred Stock.
(4) Includes 9,362 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1993 Stock Option Plan.
(5) Includes 178,924 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990 and 1991 Stock Option Plans.
(6) Includes 32,248 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990, 1991 and 1993 Stock Option Plans.
(7) Includes 110,289 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1991 and 1993 Stock Option Plans.
(8) Includes 32,248 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990, 1991 and 1993 Stock Option Plans.
(9) Includes 63,456 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990, 1991 and 1993 Stock Option Plans.
(10) Consists of 43,692 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990, 1991 and 1993 Stock Option Plans.
(11) Includes 47,853 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990, 1991 and 1993 Stock Option Plans.
(12) Consists of 41,613 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock pursuant
to the Company's 1990, 1991 and 1993 Stock Option Plans.
(13) Includes 37,451 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock granted
pursuant to the Company's 1990, 1991 and 1993 Stock Option Plans to
officers of the Company not listed in the above table.
2. APPROVAL OF THE RAMSAY HEALTH CARE, INC.
1995 LONG TERM INCENTIVE PLAN
The Company's Board of Directors believes that attracting and
retaining key employees and directors of high quality is essential to the
Company's growth and success. The Board of Directors also believes that
important advantages to the Company are gained by a comprehensive compensation
program which includes different types of incentives for motivating such
individuals and rewards for outstanding service. In this regard, stock options
and other stock-related awards have been and will continue to be an important
element of the Company's compensation program because such awards enable
employees and directors to acquire or increase their proprietary interest in the
Company, thereby promoting a close identity of interests between such
individuals and the Company's stockholders. Such awards also provide to
25
<PAGE>
employees and directors an increased incentive to expend their maximum efforts
for the success of the Company's business.
Accordingly, on August 30, 1995 the Company's Board of Directors
adopted, subject to stockholder approval at the Meeting, the Ramsay Health Care,
Inc. 1995 Long Term Incentive Plan (the "Incentive Plan"). In authorizing
grants of a wide range of awards, including options, stock appreciation rights
("SARs"), restricted stock, performance awards and other stock-based awards, the
Incentive Plan is intended to give the Company greater flexibility to respond to
rapidly changing business, economic and regulatory requirements and conditions.
In addition, such flexibility will enhance the ability of the Company to closely
link compensation to performance. The Incentive Plan will not become effective
unless approved by the holders of a majority of the shares of Common Stock
present or represented and voting thereon at the Meeting. The text of the
Incentive Plan is set forth in Exhibit A hereto.
The following discussion of the material features of the Incentive
Plan is qualified by reference to the text of the Incentive Plan set forth in
Exhibit A hereto.
Shares Subject to the Plan. Under the Incentive Plan, 500,000 shares
of Common Stock will be available for issuance of awards. Shares distributed
under the Incentive Plan may be either newly issued shares or treasury shares.
If any shares subject to an Incentive Plan award are forfeited or the award is
settled in cash or otherwise terminates without a distribution of shares, the
shares subject to such award will again be available for awards under the
Incentive Plan. Thus, for example, if an award is voluntarily surrendered in
exchange for a new award, the shares that were subject to the surrendered award
would be available for the new award (or other awards) under the Incentive Plan.
The Incentive Plan provides that, in the event of changes in the
corporate structure of the Company affecting the Common Stock, the Compensation
Committee may adjust (i) the number and kind of shares which may be issued in
connection with awards, (ii) the number and kind of shares issued or issuable in
respect of outstanding awards and (iii) the exercise price, grant price or
purchase price relating to any award, and the Compensation Committee may also
provide for cash payments relating to awards. The Compensation Committee may
also adjust performance conditions and other terms of awards in response to
these kinds of events or to changes in applicable laws, regulations or
accounting principles. The Incentive Plan provides that, in connection with any
merger or consolidation in which the Company is not the surviving corporation or
any sale or transfer by the Company of all or substantially all its assets or
any tender offer or exchange offer for or the acquisition, directly or
indirectly, by any person or group of all or a majority of the then outstanding
voting securities of the Company, all outstanding options under the Incentive
Plan will become exercisable in full on and after (i) 15 days prior to the
effective date of such merger, consolidation, sale, transfer or acquisition or
(ii) the date of commencement of such tender offer or exchange offer, as the
case may be.
Eligibility. Any employee, including any officer or employee-director
of, or consultant or other individual providing services to, the Company and its
subsidiaries or affiliated companies is eligible to receive awards under the
Incentive Plan. Directors of the Company who are not employees are eligible for
grants of stock options under the Incentive Plan.
Administration. The Incentive Plan will be administered by the
Compensation Committee of the Board of Directors. Subject to the terms and
conditions of the Incentive Plan, the
26
<PAGE>
Compensation Committee is authorized to designate participants who are
employees, directors or consultants of the Company and its subsidiaries and
affiliated companies, determine the type and number of awards to be granted, set
terms and conditions of such awards, prescribe forms of award agreements,
interpret the Incentive Plan, specify rules and regulations relating to the
Incentive Plan, and make all other determinations which may be necessary or
advisable for the administration of the Incentive Plan.
The Incentive Plan provides that in the event that any member of the
Compensation Committee is not a "disinterested person" as defined in Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act"), as in effect at
April 30, 1991, the maximum number of shares of Common Stock which may be
subject to options granted to all directors is 500,000 and the maximum number of
shares of Common Stock which may be subject to options granted to each director
is 150,000.
Stock Options and SARs. The Compensation Committee is authorized to
grant stock options, including both incentive stock options ("ISOs"), which can
result in potentially favorable tax treatment to the participant, and
nonqualified stock options, and also to grant SARs entitling the participant to
receive the excess of the fair market value of a share on the date of exercise
or other specified date over the grant price of the SAR. The exercise price per
share of Common Stock subject to an option and the grant price of an SAR is
determined by the Compensation Committee, provided that the exercise price may
not be less than the fair market value of the Common Stock on the date of grant.
The term of each such option or SAR, the times at which each such option or SAR
shall be exercisable, and provisions requiring forfeiture of unexercised options
at or following termination of employment, generally will be fixed by the
Compensation Committee, except no ISO or SAR relating thereto will have a term
exceeding ten years. Options may be exercised by payment of the exercise price
in cash, or in Common Stock, outstanding awards or other property (including
notes or obligations to make payment on a deferred basis, such as through
"cashless exercises") having a fair market value equal to the exercise price, as
the Compensation Committee may determine from time to time. Methods of exercise
and settlement and other terms of the SARs will be determined by the
Compensation Committee.
Restricted Stock. The Incentive Plan also authorizes the Compensation
Committee to grant restricted stock. Restricted stock is an award of shares
which may not be disposed of by participants and which may be forfeited in the
event of certain terminations of employment prior to the end of a restriction
period established by the Compensation Committee. Such an award would entitle
the participant to all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any dividends thereon,
unless otherwise determined by the Compensation Committee.
Performance Awards. The Incentive Plan also authorizes the
Compensation Committee to grant to eligible employees performance awards. A
performance award is an award which consists of a right (i) denominated or
payable in cash, Common Stock, other securities or other property (including,
without limitation, restricted securities), and (ii) which shall confer on the
holder thereof rights valued as determined by the Compensation Committee and
payable to, or exercisable by, the holder of the performance award upon the
achievement of such performance goals during such performance periods as the
Compensation Committee shall establish. Subject to the terms of the Incentive
Plan and any applicable award agreement, performance goals to be achieved during
any performance period, the length of any performance period, the amount of
27
<PAGE>
any performance award granted and the amount of any payment or transfer to be
made pursuant to any performance award will be determined by the Compensation
Committee and by the other terms and conditions of any performance award.
Other Stock-Based Awards. In order to enable the Company to respond
to business, economic and regulatory developments, and to trends in executive
compensation practices, the Incentive Plan authorizes the Compensation Committee
to grant awards that are denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to Common Stock. The
Compensation Committee determines the terms and conditions of such awards,
including consideration to be paid to exercise awards in the nature of purchase
rights, the period during which awards will be outstanding, and forfeiture
conditions and restrictions on awards.
Other Terms of Awards. The flexible terms of the Incentive Plan will
permit the Compensation Committee to impose performance conditions with respect
to any award. Such conditions may require that an award be forfeited, in whole
or in part, if performance objectives are not met, or require that the time of
exercisability or settlement of an award be linked to achievement of performance
conditions.
No awards may be granted under the Incentive Plan after June 30, 2005.
Awards may be settled in cash, stock, other awards or other property,
in the discretion of the Compensation Committee. The Compensation Committee may
condition the payment of an award on the withholding of taxes and may provide
that a portion of the Common Stock or other property to be distributed will be
withheld (or previously acquired Common Stock or other property surrendered by
the participant) to satisfy withholding and other tax obligations. Awards
granted under the Incentive Plan may not be pledged or otherwise encumbered and
are not transferable except by will or by the laws of descent and distribution
to a guardian or legal representative designated to exercise such person's
rights and receive distributions under the Incentive Plan upon such person's
death, or otherwise if permitted under Rule 16b-3 and by the Compensation
Committee.
Awards under the Incentive Plan are generally granted for no
consideration other than services. The Compensation Committee may, however,
grant awards alone or in addition to, in tandem with or in substitution for any
other award under the Incentive Plan, other awards under other Company plans, or
other rights to payment from the Company. Awards granted in addition to or in
tandem with other awards may be granted either at the same time or at different
times. If an award is granted in substitution for another award, the
participant must surrender such other award in consideration for the grant of
the new award.
The Board may amend, modify or terminate the Incentive Plan at any
time provided that, unless required by law, (i) the number of shares of Common
Stock available under the Incentive Plan may not be amended without stockholder
approval (subject to certain provisions relating to adjustment as discussed
above) and (ii) no amendment or termination of the Incentive Plan may, without a
participant's consent, adversely affect any rights already accrued under the
Incentive Plan by the participant. In addition, no amendment or modification
shall, unless previously approved by the stockholders (where such approval is
necessary to satisfy then applicable requirements of federal securities laws,
the Internal Revenue Code of 1986, as amended (the "Code"), or rules of any
stock exchange on which the Common Stock is listed)
28
<PAGE>
(i) in any manner affect the eligibility requirements of the Incentive Plan,
(ii) increase the number of shares of Common Stock subject to any option, (iii)
change the purchase price of the shares of Common Stock subject to any option,
(iv) extend the period during which awards may be granted under the Incentive
Plan or (v) materially increase the benefits to participants under the Incentive
Plan.
Unless earlier terminated by the Board of Directors, the Incentive
Plan will terminate when no shares remain available for issuance and the Company
has no further obligation with respect to any outstanding award.
The Incentive Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), nor is the
Incentive Plan a qualified plan within the meaning of Section 401(a) of the
Code.
No awards have been granted under the Incentive Plan.
Federal Income Tax Implications of the Plan. The following
description summarizes the material federal income tax consequences arising with
respect to the issuance and exercise of awards granted under the Incentive Plan.
The grant of an option or SAR (including a stock-based award in the nature of a
purchase right) will create no tax consequences for the participant or the
Company. A participant will not have taxable income upon exercising an ISO
(except that the alternative minimum tax may apply) and the Company will receive
no deduction at that time. Upon exercising an option other than an ISO
(including a stock-based award in the nature of a purchase right), the
participant must generally recognize ordinary income equal to the difference
between the exercise price and fair market value of the freely transferable and
nonforfeitable Common Stock acquired on the date of exercise, and upon
exercising an SAR, the participant must generally recognize ordinary income
equal to the cash or the fair market value of the freely transferable and
nonforfeitable Common Stock received. In each case, the Company will be
entitled to a deduction equal to the amount recognized as ordinary income by the
participant.
A participant's disposition of shares acquired upon the exercise of an
option, SAR or other stock-based award in the nature of a purchase right
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in such
shares (or the exercise price of the option in the case of shares acquired by
exercise of an ISO and held for the applicable ISO holding periods). Generally,
there will be no tax consequences to the Company in connection with a
disposition of shares acquired under an option or other award, except that the
Company will be entitled to a deduction (and the participant will recognize
ordinary taxable income) if shares acquired upon exercise of an ISO are disposed
of before the applicable ISO holding periods have been satisfied.
With respect to other awards granted under the Incentive Plan that may
be settled either in cash or in Common Stock or other property that is either
not restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of Common Stock or other property received.
The Company will be entitled to a deduction for the same amount. With respect
to awards involving stock or other property that is restricted as to
transferability and subject to a substantial risk of forfeiture, the participant
must generally recognize ordinary income equal to the fair market value of the
shares or other property received at the first time the shares or other
29
<PAGE>
property become transferable or not subject to a substantial risk of forfeiture,
whichever occurs earlier. The Company will be entitled to a deduction in an
amount equal to the ordinary income recognized by the participant. A
participant may elect under Section 83(b) of the Code to be taxed at the time of
receipt of shares or other property rather than upon lapse of restrictions on
transferability or the substantial risk of forfeiture, but if the participant
subsequently forfeits such shares or property he would not be entitled to any
tax deduction, including as a capital loss, for the value of the shares or
property on which he previously paid tax. Such election must be made and filed
with the Internal Revenue Service within thirty days of the receipt of the
shares or other property.
Section 162(m) of the Code limits deductibility of certain
compensation for each of the Chief Executive Officer of the Company and the
additional four executive officers who are highest paid and employed at year end
to $1 million per year, effective for tax years beginning on or after January 1,
1994. The Company anticipates that action will be taken with respect to awards
under the Incentive Plan to ensure deductibility.
The Compensation Committee may condition the payment of an award on
the withholding of taxes and may provide that a portion of the Common Stock or
other property to be distributed will be withheld (or previously acquired stock
or other property surrendered by the participant) to satisfy withholding and
other tax obligations.
The foregoing summarizes the material federal income tax consequences
arising with respect to the issuance and exercise of awards granted under the
Incentive Plan. Different tax rules may apply with respect to participants who
are subject to Section 16 of the Exchange Act, when they acquire Common Stock in
a transaction deemed to be a nonexempt purchase under that statute or within six
months of an exempt grant of a derivative security under the Incentive Plan.
This summary does not address the effects of other federal taxes or taxes
imposed under state, local or foreign tax laws.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR APPROVAL OF THE INCENTIVE PLAN. IT IS THE INTENTION OF THE PERSONS NAMED IN
THE ACCOMPANYING FORM OF PROXY TO VOTE THE SHARES REPRESENTED THEREBY IN FAVOR
OF SUCH APPROVAL UNLESS OTHERWISE INSTRUCTED IN SUCH PROXY.
3. RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP to serve as
independent auditors for the Company for the fiscal year ending June 30, 1996.
The Board of Directors considers Ernst & Young LLP to be eminently qualified.
Although it is not required to do so, the Board of Directors is
submitting its selection of the Company's auditors for ratification at the
Meeting, in order to ascertain the views of stockholders regarding such
selection. If the selection is not ratified, the Board of Directors will
reconsider its selection.
The Board of Directors recommends that stockholders vote FOR
ratification of the selection of Ernst & Young LLP to examine the financial
statements of the Company for the
30
<PAGE>
Company's fiscal year ending June 30, 1996. It is the intention of the persons
named in the accompanying form of Proxy to vote the shares represented thereby
in favor of such ratification unless otherwise instructed in such Proxy.
A representative of Ernst & Young LLP will be present at the Meeting
with the opportunity to make a statement if such representative desires to do so
and will be available to respond to appropriate questions.
4. OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that may be brought before the Meeting. However, if any such other
matters are properly presented for action, it is the intention of the persons
named in the accompanying form of Proxy to vote the shares represented thereby
in accordance with their best judgment on such matters.
Stockholder Proposals
Stockholder proposals intended to be presented at the next Annual
Meeting of Stockholders of the Company must be received by the Company by June
7, 1996, in order to be considered for inclusion in the Company's proxy
statement relating to such meeting.
October 5, 1995
31
<PAGE>
EXHIBIT A
RAMSAY HEALTH CARE, INC.
1995 LONG TERM INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this Ramsay Health Care, Inc. 1995
Long Term Incentive Plan (the "Plan") are to encourage selected employees,
officers, directors and consultants of, and other individuals providing services
to, Ramsay Health Care, Inc. (together with any successor thereto, the
"Company") and its Affiliates (as defined below) to acquire a proprietary
interest in the growth and performance of the Company, to generate an increased
incentive to contribute to the Company's future success and prosperity thus
enhancing the value of the Company for the benefit of its stockholders, and to
enhance the ability of the Company and its Affiliates to attract and retain
exceptionally qualified individuals upon whom, in large measure, the sustained
progress, growth and profitability of the Company depend.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or through one or more
intermediaries, is controlled by the Company and (ii) any entity in which the
Company has a significant equity interest, as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Security, Performance Award, or Other Stock-Based Award granted under the Plan.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause", as used in connection with the termination of a Participant's
employment, shall mean (i) with respect to any Participant employed under a
written employment agreement with the Company or an Affiliate of the Company
which agreement includes a definition of "cause," "cause" as defined in such
agreement or, if such agreement contains no such definition, a material breach
by the Participant of such agreement, or (ii) with respect to any other
Participant, the failure to perform adequately in carrying out such
Participant's employment responsibilities, including any directives from the
Board, or engaging in such behavior in his personal or business life as to lead
the Committee in its reasonable judgment to determine that it is in the best
interests of the Company to terminate his employment.
"Common Stock" shall mean the common stock of the Company, $.01 par value.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder.
"Committee" shall mean the Compensation and Conflict of Interest Committee
or any other committee of the Board designated by the Board to administer the
Plan and composed of not less than three outside directors.
"Common Shares" shall mean any or all, as applicable, of the Common Stock
and such other securities or property as may become the subject of Awards, or
become subject to Awards, pursuant to an adjustment made under Section 4(b) of
the Plan and any other securities of the Company or any Affiliate or any
successor that may be so designated by the Committee.
"Employee" shall mean any employee of the Company or of any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean (A) with respect to any property other than
the Common Shares, the fair market value of such property determined by such
methods or procedures as shall be established from time to time by the
Committee; and (B) with respect to the Common Shares, the last sale price
regular way on the date
<PAGE>
of reference, or, in case no sale takes place on such date, the average of the
high bid and low asked prices, in either case on the principal national
securities exchange on which the Common Shares are listed or admitted to
trading, or if the Common Shares are not listed or admitted to trading on any
national securities exchange, the last sale price reported on the National
Market System of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on such date, or the average of the closing high bid
and low asked prices in the over-the-counter market reported on NASDAQ on such
date, whichever is applicable, or if there are no such prices reported on NASDAQ
on such date, as furnished to the Committee by any New York Stock Exchange
member selected from time to time by the Committee for such purpose. If there
is no bid or asked price reported on any such date, the Fair Market Value shall
be determined by the Committee in accordance with the regulations promulgated
under Section 2031 of the Code, or by any other appropriate method selected by
the Committee.
"Good Reason", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company, "good reason" as defined in such written agreement or, if such
agreement contains no such definition, a material breach by the Company of such
agreement, or (ii) with respect to any other Participant, a failure by the
Company to pay such Participant any amount otherwise vested and due and a
continuation of such failure for 30 business days following notice to the
Company thereof.
"Incentive Stock Option" shall mean an option granted under Section 6(a) of
the Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option. Any
stock option granted by the Committee which is not designated an Incentive Stock
Option shall be deemed a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section 6(e)
of the Plan.
"Participant" shall mean any individual granted an Award under the Plan.
"Performance Award" shall mean any right granted under Section 6(d) of the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.
"Released Securities" shall mean securities that were Restricted Securities
but with respect to which all applicable restrictions have expired, lapsed or
been waived in accordance with the terms of the Plan or the applicable Award
Agreement.
"Restricted Securities" shall mean any Common Shares granted under Section
6(c) of the Plan, any right granted under Section 6(c) of the Plan that is
denominated in Common Shares or any other Award under which issued and
outstanding Common Shares are held subject to certain restrictions.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule or regulation
thereto as in effect from time to time.
"Stock Appreciation Right" shall mean any right granted under Section 6(b)
of the Plan.
SECTION 3. Administration. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee or other individual under the Plan; (iii) determine the number
and classification of Common Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Common Shares, other securities, other Awards or other
property, or canceled,
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forfeited or suspended, and the method or methods by which Awards may be
settled, exercised, canceled, forfeited or suspended; (vi) determine
requirements for the vesting of Awards or performance criteria to be achieved in
order for Awards to vest; (vii) determine whether, to what extent and under what
circumstances cash, Common Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award under the Plan shall
be deferred either automatically or at the election of the holder thereof or of
the Committee; (viii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (x) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
shareholder and any Employee. Notwithstanding the foregoing, the maximum number
of Awards which may be granted to any one Participant under this Plan shall not
exceed 150,000 Common Shares, subject to the adjustments provided in Section
4(b) hereof and no Awards under this Plan shall be granted after June 30, 2005.
SECTION 4. Common Shares Available for Awards.
(a) Common Shares Available. Subject to adjustment as provided in Section
4(b):
(i) Calculation of Number of Common Shares Available. The number of Common
Shares available for granting Awards under the Plan shall be 500,000, any or all
of which may be or may be based on Common Stock, any other security which
becomes the subject of Awards, or any combination thereof. Initially 500,000
shares of Common Stock shall be reserved for Awards hereunder. Further, if,
after the effective date of the Plan, any Common Shares covered by an Award
granted under the Plan or to which such an Award relates, are forfeited, or if
an Award otherwise terminates or is canceled without the delivery of Shares or
of other consideration, then the Common Shares covered by such Award or to which
such Award relates, or the number of Common Shares otherwise counted against the
aggregate number of Common Shares available under the Plan with respect to such
Award, to the extent of any such forfeiture, termination or cancellation, shall
again be, or shall become, available for granting Awards under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4,
(A) if an Award is denominated in or based upon Common Shares, the number
of Common Shares covered by such Award or to which such Award relates shall be
counted on the date of grant of such Award against the aggregate number of
Common Shares available for granting Awards under the Plan and against the
maximum number of Awards available to any Participant; and
(B) Awards not denominated in Common Shares may be counted against the
aggregate number of Common Shares available for granting Awards under the Plan
and against the maximum number of Awards available to any participant in such
amount and at such time as the Committee shall determine under procedures
adopted by the Committee consistent with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted for,
other Awards may be counted or not counted under procedures adopted by the
Committee in order to avoid double counting. Any Common Shares that are
delivered by the Company, and any Awards that are granted by, or become
obligations of, the Company, through the assumption by the Company or an
Affiliate of, or in substitution for, outstanding awards previously granted by
an acquired company shall, in the case of Awards granted to Participants who are
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, be counted against the Common Shares available for granting Awards under
the Plan.
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(iii) Sources of Common Shares Deliverable Under Awards. Any Common
Shares delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Common Shares or of treasury Common Shares.
(b) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Common Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Common Shares or other securities of the
Company, issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of Common Shares (or other securities or property) which
thereafter may be made the subject of Awards, (ii) the number and kind of Common
Shares (or other securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, that the number of Common Shares subject to any Award
denominated in Common Shares shall always be a whole number.
In connection with any merger or consolidation in which the Company is not
the surviving corporation and which results in the holders of the outstanding
voting securities of the Company (determined immediately prior to such merger or
consolidation) owning less than a majority of the outstanding voting securities
of the surviving corporation (determined immediately following such merger or
consolidation), or any sale or transfer by the Company of all or substantially
all its assets or any tender offer or exchange offer for or the acquisition,
directly or indirectly, by any person or group of all or a majority of the then
outstanding voting securities of the Company, all outstanding Options under the
Plan shall become exercisable in full, notwithstanding any other provision of
the Plan or of any outstanding options granted thereunder, on and after (i) the
fifteenth day prior to the effective date of such merger, consolidation, sale,
transfer or acquisition or (ii) the date of commencement of such tender offer or
exchange offer, as the case may be. The provisions of the foregoing sentence
shall apply to any outstanding Options which are Incentive Stock Options to the
extent permitted by Section 422(d) of the Code and such outstanding Options in
excess thereof shall, immediately upon the occurrence of the event described in
clause (i) or (ii) of the foregoing sentence, be treated for all purposes of the
Plan as Non-Qualified Stock Options and shall be immediately exercisable as such
as provided in the foregoing sentence.
SECTION 5. Eligibility. Any Employee, including any officer or employee-
director of the Company or of any Affiliate, and any consultant of, or other
individual providing services to, the Company or any Affiliate shall be eligible
to be designated a Participant. A non-employee director shall be eligible to
receive Non-Qualified Stock Options under the Plan.
SECTION 6. Awards.
(a) Options. The Committee is hereby authorized to grant to eligible
individuals options to purchase Common Shares (each, an "Option") which shall
contain the following terms and conditions and with such additional terms and
conditions, in either case not inconsistent with the provisions of the Plan, as
the Committee shall determine:
(i) Exercise Price. The purchase price per Common Share purchasable under
an Option shall be determined by the Committee; provided, however, that such
purchase price shall not be less than the Fair Market Value of a Common Share on
the date of grant of such Option, or such other price as required under
Subsection 6(a)(iv) hereof.
(ii) Time and Method of Exercise. Subject to the terms of Section
6(a)(iii), the Committee shall determine the time or times at which an Option
may be exercised in whole or in part, and the method or methods by which, and
the form or forms (including, without limitation, cash, Common Shares,
outstanding Awards, or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the relevant exercise price) in
which, payment of the exercise price with respect thereto may be made or deemed
to have been made.
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(iii) Exercisability Upon Death, Retirement and Termination of Employment.
Subject to the condition that no Option may be exercised in whole or in part
after the expiration of the Option period specified in the applicable Award
Agreement:
(A) Subject to the terms of paragraph (D) below, upon the death of a
Participant while employed or within 3 months of retirement or disability as
defined in paragraph (B) below, the person or persons to whom such Participant's
rights with respect to any Option held by such Participant are transferred by
will or the laws of descent and distribution may, prior to the expiration of the
earlier of: (1) the outside exercise date determined by the Committee at the
time of granting the Option, or (2) nine months after such Participant's death,
purchase any or all of the Common Shares with respect to which such Participant
was entitled to exercise such Option immediately prior to such Participant's
death, and any Options not so exercisable will lapse on the date of such
Participant's death;
(B) Subject to the terms of paragraph (D) below, upon termination of a
Participant's employment with the Company (x) as a result of retirement pursuant
to a retirement plan of the Company or an Affiliate or disability (as determined
by the Committee) of such Participant, (y) by the Company other than for Cause,
or (z) by the Participant with Good Reason, such Participant may, prior to the
expiration of the earlier of: (1) the outside exercise date determined by the
Committee at the time of granting the Option, or (2) three months after the date
of such termination, purchase any or all of the Common Shares with respect to
which such Participant was entitled to exercise any Options immediately prior to
such termination, and any Options not so exercisable will lapse on such date of
termination;
(C) Subject to the terms of paragraph (D) below, upon termination of a
Participant's employment with the Company under any circumstances not described
in paragraphs (A) or (B) above, such Participant's Options shall be canceled to
the extent not theretofore exercised;
(D) Upon (i) the death of the Participant, or (ii) termination of the
Participant's employment with the Company (x) by the Company other than for
Cause (y) by the Participant with Good Reason or (z) as a result of retirement
or disability as defined in paragraph (B) above, the Company shall have the
right to cancel all of the Options such Participant was entitled to exercise at
the time of such death or termination (subject to the terms of paragraphs (A) or
(B) above) for a payment in cash equal to the excess, if any, of the Fair Market
Value of one Common Share on the date of death or termination over the exercise
price of such Option for one Common Share times the number of Common Shares
subject to the Option and exercisable at the time of such death or termination;
and
(E) Upon expiration of the respective periods set forth in each of
paragraphs (A) through (C) above, the Options of a Participant who has died or
whose employment has been terminated shall be canceled to the extent not
theretofore canceled or exercised.
(F) For purposes of paragraphs (A) through (D) above, the period of
service of an individual as a director or consultant of the Company or an
Affiliate shall be deemed the period of employment.
(iv) Incentive Stock Options. The following provisions shall apply only to
Incentive Stock Options granted under the Plan:
(A) No Incentive Stock Option shall be granted to any eligible Employee
who, at the time such Option is granted, owns securities possessing more than
ten percent (10%) of the total combined voting power of all classes of
securities of the Company or of any Affiliate, except that such an Option may be
granted to such an Employee if at the time the Option is granted the option
price is at least one hundred ten percent (110%) of the Fair Market Value of the
Common Shares (determined in accordance with Section 2) subject to the Option,
and the Option by its terms is not exercisable after the expiration of five (5)
years from the date the Option is granted; and
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(B) To the extent that the aggregate Fair Market Value of the Common
Shares with respect to which Incentive Stock Options (without regard to this
subsection) are exercisable for the first time by any individual during any
calendar year (under all plans of the Company and its Affiliates) exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options. This
subsection shall be applied by taking Options into account in the order in which
they were granted. If some but not all Options granted on any one day are
subject to this subsection, then such Options shall be apportioned between
Incentive Stock Option and Non-Qualified Stock Option treatment in such manner
as the Committee shall determine. For purposes of this subsection, the Fair
Market Value of any Common Shares shall be determined, in accordance with
Section 2, as of the date the Option with respect to such Common Shares is
granted.
(v) Terms and Conditions of Options Granted to Directors. Notwithstanding
any provision contained in the Plan to the contrary, during any period when any
member of the Committee shall not be a "disinterested person" as defined in Rule
16b-3, as such Rule was in effect at April 30, 1991, then, the terms and
conditions of Options granted under the Plan to any director of the Company
during such period shall be as follows:
(A) The price at which each Common Share subject to an option may be
purchased shall, subject to any adjustments which may be made pursuant to
Section 4, in no event be less than the Fair Market Value of a Common Share on
the date of grant, and provided further that in the event the option is intended
to be an Incentive Stock Option and the optionee owns on the date of grant
securities possessing more than ten percent (10%) of the total combined voting
power of all classes of securities of the Company or of any Affiliate, the price
per share shall not be less than one hundred ten percent (110%) of the Fair
Market Value per Common Share on the date of grant.
(B) The Option may be exercised to purchase Common Shares covered by the
Option not sooner than six (6) months following the date of grant. The Option
shall terminate and no Common Shares may be purchased thereunder more than ten
(10) years after the date of grant, provided that if the Option is intended to
be an Incentive Stock Option and the Optionee owns on the date of grant
securities possessing more than ten percent (10%) of the total combined voting
power of all classes of securities of the Company or of any Affiliate, the
Option shall terminate and no Common Shares may be purchased thereunder more
than five (5) years after the date of grant.
(C) The maximum number of Common Shares which may be subject to options
granted to all directors pursuant to this Section 5(j) shall be 500,000 shares
in the aggregate. The maximum number of Common Shares which may be subject to
options granted to any director of the Company shall be 150,000 shares.
(b) Stock Appreciation Rights. The Committee is hereby authorized to grant
to eligible Employees "Stock Appreciation Rights." Each Stock Appreciation
Right shall consist of a right to receive the excess of (i) the Fair Market
Value of one Common Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related to any Incentive
Stock Option, at any time during a specified period before or after the date of
exercise over (ii) the grant price of the right as specified by the Committee,
which shall not be less than one hundred percent (100%) of the Fair Market Value
of one Common Share on the date of grant of the Stock Appreciation Right (or, if
the Committee so determines, in the case of any Stock Appreciation Right
retroactively granted in tandem with or in substitution for another Award, on
the date of grant of such other Award). Subject to the terms of the Plan and
any applicable Award Agreement, the grant price, term, methods of exercise,
methods of settlement, and any other terms and conditions of any Stock
Appreciation Right granted under the Plan shall be as determined by the
Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Securities.
(i) Issuance. The Committee is hereby authorized to grant to eligible
Employees "Restricted Securities" which shall consist of the right to receive,
by purchase or otherwise, Common
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Shares which are subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote such Common
Shares or the right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or times, in
such installments or otherwise, as the Committee may deem appropriate.
(ii) Registration. Restricted Securities granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate, including,
without limitation, book-entry registration or issuance of a stock certificate
or certificates. In the event any stock certificate is issued in respect of
Restricted Securities granted under the Plan, such certificate shall be
registered in the name of the Participant and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Securities.
(iii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of a Participant's employment for any reason during the applicable
restriction period, all of such Participant's Restricted Securities which had
not become Released Securities by the date of termination of employment shall be
forfeited and reacquired by the Company; provided, however, that the Committee
may, when it finds that a waiver would be in the best interests of the Company,
waive in whole or in part any or all remaining restrictions with respect to such
Participant's Restricted Securities. Unrestricted Common Shares, evidenced in
such manner as the Committee shall deem appropriate, shall be issued to the
holder of Restricted Securities promptly after such Restricted Securities become
Released Securities.
(d) Performance Awards. The Committee is hereby authorized to grant to
eligible Employees "Performance Awards." Each Performance Award shall consist of
a right, (i) denominated or payable in cash, Common Shares, other securities or
other property (including, without limitation, Restricted Securities), and (ii)
which shall confer on the holder thereof rights valued as determined by the
Committee and payable to, or exercisable by, the holder of the Performance
Award, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to
the terms of the Plan and any applicable Award Agreement, the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award granted, the termination of a
Participant's employment and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee and by
the other terms and conditions of any Performance Award. The Committee shall
issue performance goals prior to the commencement of the performance period to
which such performance goals pertain.
(e) Other Stock-Based Awards. The Committee is hereby authorized to grant
to eligible Employees "Other Stock Based Awards." Each Other Stock-Based Award
shall consist of a right (i) which is other than an Award or right described in
Section 6(a), (b), (c) or (d) above and (ii) which is denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
Common Shares (including, without limitation, securities convertible into Common
Shares) as are deemed by the Committee to be consistent with the purposes of the
Plan; provided, however, that such right shall comply, to the extent deemed
desirable by the Committee, with Rule 16b-3 and applicable law. Subject to the
terms of the Plan and any applicable Award Agreement, the Committee shall
determine the terms and conditions of Other Stock-Based Awards. Common Shares
or other securities delivered pursuant to a purchase right granted under this
Section 6(e) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms, including, without limitation,
cash, Common Shares, other securities, other Awards, other property, or any
combination thereof, as the Committee shall determine.
(f) General.
(i) No Cash Consideration for Awards. Awards may be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution for any other Award, except that in no event
shall an Incentive Stock Option be granted together with a Non-Qualified Stock
Option in such a manner that the exercise of one Option affects the right to
exercise the other.
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Awards granted in addition to or in tandem with other Awards may be granted
either at the same time as or at a different time from the grant of such other
awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan and
of any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may be
made in such form or forms as the Committee shall determine, including, without
limitation, cash, Common Shares, other securities, other Awards, or other
property, or any combination thereof, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case in accordance
with rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments. In
accordance with the above, the Committee may elect (i) to pay a Participant (or
such Participant's permitted transferee) upon the exercise of an Option in whole
or in part, in lieu of the exercise thereof and the delivery of Common Shares
thereunder, an amount of cash equal to the excess, if any, of the Fair Market
Value of one Common Share on the date of such exercise over the exercise price
of such Option for one Common Share times the number of Common Shares subject to
the Option or portion thereof so exercised or (ii) to settle other stock
denominated Awards in cash.
(iv) Limits on Transfer of Awards.
(A) No award (other than Released Securities), and no right under any such
Award, may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant otherwise than by will or by the laws
of descent and distribution (or, in the case of Restricted Securities, to the
Company) and any such purported assignment, alienation, pledge, attachment, sale
or other transfer or encumbrance shall be void and unenforceable against the
Company or any Affiliate.
(B) Each award, and each right under any Award, shall be exercisable
during the Participant's lifetime only by the Participant or, if permissible
under applicable law, by the Participant's guardian or legal representative.
(v) Terms of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any Option exceed a period of ten years from the date of its grant.
(vi) Rule 16b-3 Six-Month Limitations. To the extent required in order to
maintain the exemption provided under Rule 16b-3 only, any equity security
offered pursuant to the Plan must be held for at least six months after the date
of grant, and with respect to any derivative security issued pursuant to the
Plan, at least six months must elapse from the date of acquisition of such
derivative security to the date of disposition of the derivative security (other
than upon exercise or conversion) or its underlying equity security. Terms used
in the preceding sentence shall, for the purposes of such sentence only, have
the meanings, if any, assigned or attributed to them under Rule 16b-3.
(vii) Common Share Certificates. All certificates for Common Shares
delivered under the Plan pursuant to any Award of the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the Plan or the rules, regulations, and other requirements
of the Securities and Exchange Commission, any stock exchange upon which such
Common Shares are then listed, and any applicable Federal or state securities
laws, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(viii) Delivery of Common Shares or Other Securities and Payment by
Participant of Consideration. No Common Shares or other securities shall be
delivered pursuant to any Award until payment in full of any amount required to
be paid pursuant to the Plan or the applicable Award Agreement is received by
the Company. Such payment may be made by such method or methods and in such
form or forms as the Committee shall determine, including, without limitation,
cash, Common Shares, other securities, other Awards or other property, or any
combination thereof; provided that the combined value, as determined by the
Committee, of all cash and cash equivalents and the Fair Market Value of any
such
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Common Shares or other property so tendered to the Company, as of the date of
such tender, is at least equal to the full amount required to be paid pursuant
to the Plan or the applicable Award Agreement to the Company.
SECTION 7. Amendments; Adjustments and Termination. Except to the extent
prohibited by applicable law and unless otherwise expressly provided in an Award
Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any stockholder,
Participant, other holder or beneficiary of an Award, or other Person; provided,
however, that, subject to the Company's rights to adjust Awards under Sections
7(c) and (d), any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any Participant, or any other holder
or beneficiary of any Award theretofore granted, shall not to that extent be
effective without the consent of such Participant, other holder or beneficiary
of an Award, as the case may be; and provided further, however, that
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the stockholders of the Company no such amendment, alteration,
suspension, discontinuation, or termination shall be made that would:
(i) increase the total number of Common Shares available for Awards under
the Plan, except as provided in Section 4 hereof; or
(ii) otherwise cause the Plan to cease to comply with any tax or regulatory
requirement, including for these purposes any approval or other requirement
which is or would be a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act.
(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
any Award theretofore granted, prospectively or retroactively; provided,
however, that, subject to the Company's rights to adjust Awards under Sections
7(c) and (d), any amendment, alteration, suspension, discontinuation,
cancellation or termination that would impair the rights of any Participant or
holder or beneficiary of any Award theretofore granted, shall not to that extent
be effective without the consent of such Participant or holder or beneficiary of
an Award, as the case may be.
(c) Adjustment of Awards Upon Certain Acquisitions. In the event the
Company or any Affiliate shall assume outstanding employee awards or the right
or obligation to make future such awards in connection with the acquisition of
another business or another corporation or business entity, the Committee may
make such adjustments, not inconsistent with the terms of the Plan, in the terms
of Awards as it shall deem appropriate in order to achieve reasonable
comparability or other equitable relationship between the assumed awards and the
Awards granted under the Plan as so adjusted.
(d) Adjustments of Awards Upon the Occurrence of Certain Unusual or Non-
recurring Events. The Committee is hereby authorized to make adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of
unusual or non-recurring events (including, without limitation, the events
described in Section 4(b) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 8. General Provisions.
(a) No Rights to Awards. No Employee or other Person shall have any claim
to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with
respect to each recipient.
(b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify, waive rights with respect to, alter,
discontinue, suspend, or terminate Awards; provided,
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however, that, no such delegation shall be permitted with respect to Awards held
by Employees who are officers or directors of the Company for purposes of
Section 16 of the Exchange Act, or any successor section thereto or who are
otherwise subject to such Section.
(c) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
(d) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted, from any payment due or transfer made under any
Award or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Common Shares, other securities, other Awards,
or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(f) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(g) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable Federal law.
(h) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as
to any Person or Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws, or
if it cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(j) No Fractional Common Shares. No fractional Common Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Common Shares or whether such fractional
Common Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.
SECTION 9. Adoption, Approval and Effective Date of the Plan. The Plan
shall be considered adopted and shall become effective on the date the Plan is
approved by the Board; provided, however, that the Plan and any Awards granted
under the Plan shall be void, if the stockholders of the Company shall not have
approved the adoption of the Plan within twelve (12) months after the effective
date, by a majority of votes cast thereon at a meeting of stockholders duly
called and held for such purpose.
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RAMSAY HEALTH CARE, INC.
PROXY--ANNUAL MEETING OF STOCKHOLDERS--NOVEMBER 10, 1995
The undersigned, a stockholder of RAMSAY HEALTH CARE, INC., does hereby
appoint Paul J. Ramsay and Gregory H. Browne, or either of them, with full
power of substitution, the undersigned's proxies, to appear and vote all shares
of Common Stock or Class B Convertible Preferred Stock, Series C of the Company
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
to be held on Friday, November 10, 1995 at 10:00 A.M., Central Standard Time,
or at any adjournment thereof, upon such matters as may properly come before
the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxies or their substitutes to vote as
specified below on each of the following matters and in accordance with their
best judgment on any other matters which may properly come before the Meeting.
1. Election of Directors
[_] FOR all the nominees listed (except as marked to the
contrary below).
[_] WITHHOLD AUTHORITY to vote for the nominees listed below.
Aaron Beam, Jr., Gregory H. Browne, Peter J. Evans, Robert E. Galloway, Thomas
M. Haythe, Reynold J. Jennings, Paul J. Ramsay, Steven J. Shulman and Michael
S. Siddle
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- -----------------------------------------------------------------------
2.Approval of the Ramsay Health Care, Inc. 1995 Long Term Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3.Ratification of appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending June 30, 1996.
FOR [_] AGAINST [_] ABSTAIN [_]
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH ITEM.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO ANY OF ITEMS 1, 2 OR 3, THEY WILL BE VOTED IN FAVOR OF THE
ITEM(S) FOR WHICH NO DIRECTION IS INDICATED.
IMPORTANT: Before returning this Proxy,
please sign your name or names on the
line(s) below exactly as shown thereon.
Executors, shareholders, trustees,
guardians or corporate officers should
indicate their full titles when signing.
Where shares are registered in the name of
joint tenants or trustees, such joint
tenants or trustees should sign.
Dated: _______________________________, 1995
____________________________________________
Entity Name
______________________________________(L.S.)
______________________________________(L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
