SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
Commission file No. 0-13849
RAMSAY HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0857352
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Entergy Corporation Building
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 70113
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 525-2505
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of the Registrant's Common Stock outstanding at
November 12, 1996 follows:
Common Stock, par value $0.01 per share - 8,307,131 shares
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - September 30, 1996 and
June 30, 1996 (unaudited)......................................... 1
Consolidated statements of operations - quarter ended September 30, 1996
and 1995 (unaudited).............................................. 3
Consolidated statements of cash flows - quarter ended September 30, 1996
and 1995 (unaudited).............................................. 4
Notes to consolidated financial statements - September 30, 1996
(unaudited)....................................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 8
Part II. OTHER INFORMATION
Item 5. Other Information................................................ 12
Item 6. Exhibits and Current Reports on Form 8-K......................... 13
SIGNATURES .............................................................. 14
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PART I. FINANCIAL INFORMATION
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30 June 30
1996 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents............. $ 6,015,000 $ 7,605,000
Patient accounts receivable, less
allowances for doubtful accounts
of $3,799,000 and $4,573,000 at
September 30, 1996 and June 30,
1996, respectively.................. 23,864,000 23,410,000
Amounts due from third-party
contractual agencies................ 3,737,000 6,479,000
Current portion of receivable
from affiliated company............. 1,765,000 1,412,000
Other receivables..................... 3,440,000 2,985,000
Deferred income taxes................. 1,398,000 1,398,000
Other current assets.................. 2,635,000 2,372,000
TOTAL CURRENT ASSETS................ 42,854,000 45,661,000
OTHER ASSETS
Cash held in trust.................... 584,000 745,000
Cost in excess of net asset value
of purchased businesses............. 586,000 591,000
Unamortized preopening and loan
costs.............................. 983,000 1,040,000
Receivable from affiliated company,
less current portion............... 6,799,000 6,795,000
Deferred income taxes................. 10,141,000 10,141,000
Other noncurrent assets............... 1,452,000 1,392,000
20,545,000 20,704,000
PROPERTY AND EQUIPMENT
Land.................................. 5,025,000 5,025,000
Building and improvements............. 69,576,000 69,200,000
Equipment, furniture and fixtures..... 20,603,000 20,325,000
95,204,000 94,550,000
Less accumulated depreciation......... 29,280,000 28,157,000
65,924,000 66,393,000
$ 129,323,000 $ 132,758,000
See notes to consolidated financial statements.
1
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30 June 30
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....................... $ 4,307,000 $ 4,990,000
Accrued salaries and wages............. 4,478,000 5,169,000
Other accrued liabilities.............. 5,055,000 4,412,000
Amounts due to third-party
contractual agencies.............. 9,305,000 8,435,000
Current portion of long-term
debt............................ 12,645,000 10,940,000
TOTAL CURRENT LIABILITIES............ 35,790,000 33,946,000
NONCURRENT LIABILITIES
Other accrued liabilities.............. 7,109,000 7,170,000
Long-term debt, less current
portion.............................. 39,531,000 44,664,000
Minority interests..................... 25,000 925,000
46,665,000 52,759,000
STOCKHOLDERS' EQUITY
Class B convertible preferred
stock, Series C, $1 par value
--authorized 152,321 shares;
issued 142,486 shares (liquidation
value of $7,244,000) including
accrued dividends of $91,000 ........ 233,000 233,000
Common Stock, $.01 par value--
authorized 20,000,000 shares;
issued 8,888,681 shares at
September 30, 1996 and 8,605,108
shares at June 30, 1996............. 89,000 86,000
Additional paid-in capital............. 100,563,000 99,899,000
Retained earnings (deficit)............ (50,118,000) (50,266,000)
Treasury Stock, at cost--581,550
shares at September 30, 1996
and June 30, 1996.................... (3,899,000) (3,899,000)
Total stockholders' equity ...... 46,868,000 46,053,000
$ 129,323,000 $ 132,758,000
See notes to consolidated financial statements.
2
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter Ended September 30
1996 1995
NET REVENUES $ 31,535,000 $ 29,129,000
Expenses:
Salaries, wages and benefits............ 16,616,000 16,239,000
Other operating expenses................ 11,024,000 9,556,000
Provision for doubtful accounts......... 889,000 956,000
Depreciation and amortization........... 1,313,000 1,335,000
Interest and other financing charges.... 1,545,000 1,726,000
TOTAL EXPENSES..................... 31,387,000 29,812,000
INCOME (LOSS) BEFORE MINORITY INTERESTS
AND INCOME TAXES........................ 148,000 (683,000)
Minority interests......................... --- (52,000)
INCOME (LOSS) BEFORE INCOME TAXES.......... 148,000 (631,000)
Benefit for income taxes................... --- (240,000)
NET INCOME (LOSS).................... $ 148,000 $ (391,000)
Income (loss) per common and dilutive
common equivalent share:
Primary................................. $0.01 $(0.06)
Fully diluted........................... $0.01 $(0.06)
Weighted average number of shares
outstanding:
Primary................................. 8,174,000 7,721,000
Fully diluted........................... 8,174,000 7,735,000
See notes to consolidated financial statements.
3
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended September 30
1996 1995
Cash Flows from Operating Activities
Net income (loss)........................... $ 148,000 $ (391,000)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization............ 1,386,000 1,526,000
Benefit for deferred income taxes........ --- (280,000)
Provision for doubtful accounts.......... 889,000 956,000
Management fees paid in common stock..... 189,000 ---
Minority interests....................... --- (52,000)
Cash flows from (increase) decrease
in operating assets:
Accounts receivable................... (1,343,000) (3,097,000)
Amounts due from third-party
contractual agencies................ 2,742,000 653,000
Other current assets.................. (583,000) 605,000
Other noncurrent assets............... (60,000) 3,000
Cash flows from increase (decrease)
in operating liabilities:
Accounts payable...................... (683,000) (796,000)
Accrued salaries, wages and other
liabilities......................... (109,000) (1,035,000)
Amounts due to third-party
contractual agencies................ 870,000 596,000
Total adjustments.................. 3,298,000 (921,000)
Net cash provided by
(used in) operating activities 3,446,000 (1,312,000)
Cash Flows from Investing Activities
Expenditures for property and
equipment............................. (654,000) (345,000)
Preopening costs......................... (23,000) (22,000)
Net cash used in investing
activities.................... (677,000) (367,000)
Cash Flows from Financing Activities
Loan costs............................... (101,000) (21,000)
Proceeds from exercise of stock
options and employee stock
purchase plan.......................... --- 90,000
Distributions to minority interests...... (900,000) (540,000)
Payments on debt......................... (3,428,000) (888,000)
Payment of preferred stock dividends..... (91,000) (91,000)
Cash held in trust....................... 161,000 130,000
Net cash used in financing
activities.................... (4,359,000) (1,320,000)
Net decrease in cash and cash equivalents... (1,590,000) (2,999,000)
Cash and cash equivalents at beginning of
period..................................... 7,605,000 9,044,000
Cash and cash equivalents at end of period.. $ 6,015,000 $ 6,045,000
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest................................. $ 1,254,000 $ 1,344,000
Income taxes............................. 13,000 0
See notes to consolidated financial statements.
4
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
NOTE 1
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation of the interim information are, unless
otherwise discussed in this report, of a normal recurring nature and have been
included. The Company's business is seasonal in nature and subject to general
economic conditions and other factors. Accordingly, operating results for the
quarter ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the year. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1996.
NOTE 2
At September 30, 1996, the Company's credit facilities included
$31,075,000 in senior secured notes and $1,615,386 in subordinated secured notes
(the 1990 Credit Facility), and approximately $20,000,000 in letters of credit
to support the Company's variable rate demand revenue bonds (the 1993 Credit
Facility). The senior secured notes bear interest at 11.6% and require
semi-annual principal payments of $3,531,250 from March 31, 1997 through
September 30, 1998 and $5,650,000 from March 31, 1999 through March 31, 2000.
The subordinated secured notes bear interest at 15.6% and are due in semi-annual
installments of $230,769 that began on March 31, 1994 and end on March 31, 2000.
The variable rate demand revenue bonds were issued in 1984 and 1985,
have terms of 30 years and require annual principal payments of $800,000
(through year 2000) and $900,000 to $1,200,000 from years 2001 to maturity. The
Company is required to maintain an irrevocable standby letter of credit for each
bond in an amount equal to the total principal payments due under the bond
(totalling $19,300,000 at September 30, 1996), plus approximately one quarter's
interest. Such letters of credit are provided in the 1993 Credit Facility.
In August 1996, the Company and banks supporting the 1993 Credit
Facility agreed to terms which extended its expiration date from February 1997
to August 1997. In connection with this extension, the Company agreed to reduce
the bank group's exposure under the 1993 Credit Facility to $17,145,835 (an
approximate $3 million reduction) by December 31, 1996 and to $15,000,000 by
July 1, 1997.
Under the 1993 and 1990 Credit Facilities, the Company is required to
meet certain covenants, including: (1) the maintenance of a minimum level of
consolidated tangible net worth; (2) the maintenance of a minimum working
capital ratio; and (3) the maintenance of certain fixed charge and debt service
5
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
coverage ratios. From time to time, the lenders under the 1993 and 1990 Credit
Facilities have agreed to waive or otherwise adjust certain of these ratios and
levels. In connection with these waivers and adjustments, the Company pays
additional fees and expenses. Further, as part of the waivers and adjustments
obtained as of June 30, 1996, the Company agreed to provide its Hillcrest
Hospital facility and related assets as additional collateral to the lenders and
agreed not to pay cash dividends in respect of its Common Stock or Class B
Preferred Stock, Series C.
A summary of the Company's debt obligations is as follows:
September 30 June 30
1996 1996
11.6% senior secured notes ................. $ 31,075,000 $ 34,169,000
Variable rate demand revenue bonds ......... 19,300,000 19,400,000
15.6% subordinated secured notes ........... 1,615,000 1,846,000
Other notes payable......................... 186,000 189,000
52,176,000 55,604,000
Less amounts due within one year............ 12,645,000 10,940,000
$ 39,531,000 $ 44,664,000
The Company has pledged substantially all of its real property as
collateral on its long-term debt.
NOTE 3
In April 1995, the Company sold and leased back the land, buildings
and fixed equipment of two of its inpatient facilities. The leases have a
primary term of 15 years (with three successive renewal options of 5 years each)
and currently require an aggregate annual minimum rental of $1.58 million,
payable monthly. Effective April 1 of each year, the lease payments are subject
to any upward adjustment (not to exceed 3% annually) in the consumer price index
over the preceding twelve months. Effective April 1995, the Company agreed to
lease an 80-bed facility near Salt Lake City, Utah for four years, with an
option to renew for an additional three years. The lease requires annual base
rental payments of $456,000, payable monthly, and percentage rental payments
equal to 2% of the net revenues of the facility, payable quarterly. The Company
leases office space for various other purposes over terms ranging from one to
five years. Annual rent expense related to noncancellable operating leases
totals approximately $3.0 million.
NOTE 4
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109. SFAS 109 requires recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. At
September 30, 1996, net operating loss carryovers of approximately $23,600,000
(of which $17,600,000 expires from 2000 to 2003, $3,800,000 expires in 2010 and
$2,200,000 expires in 2011) and alternative minimum tax credit carryovers of
6
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
approximately $1,500,000 are available to reduce future federal income taxes,
subject to certain annual limitations.
NOTE 5
In October 1993, the Company, through its subsidiary Ramsay Managed
Care, Inc. ("RMCI"), entered the managed mental health business through an
acquisition of Florida Psychiatric Management, Inc. The managed care division
expanded in June 1994 with the acquisition of a Phoenix, Arizona-based managed
mental health business and, in fiscal 1995, through the award of contracts in
Hawaii and West Virginia. On April 24, 1995, the Company distributed the stock
of RMCI held by it to the holders of record on April 21, 1995 of the Company's
Common and Preferred Stock. Subsequent to this distribution, which was recorded
at net book value, RMCI ceased being a subsidiary of the Company.
At September 30, 1996, total net cash advances made by the Company to
or on behalf of RMCI, including for purposes of partially funding acquisitions
and for working capital and other corporate purposes, totalled $8,564,000. Of
this amount, $6,000,000 is represented by an unsecured, interest- bearing (8%),
subordinated promissory note due from RMCI and issued on October 25, 1994. The
remaining amount, which is also unsecured, includes $480,000 of accrued interest
on the promissory note since October 1, 1995 and $2,084,000 of additional
amounts paid by RHCI on behalf of RMCI or charges by RHCI to RMCI for certain
administrative services. Of the $6,000,000 due on the subordinated promissory
note, approximately $1,765,000 is due on or before September 30,1997 and the
remainder is payable in 12 quarterly installments of approximately $353,000,
beginning December 31, 1997. RHCI has agreed that the payment of interest on the
subordinated promissory note for the period October 1, 1995 through September
30, 1997, as well as the $2,084,000 of additional amounts owed, will not be
required until after October 1, 1997, all on terms and conditions to be mutually
agreed to by RHCI and RMCI.
As previously announced, on October 1, 1996, the Company and RMCI
entered into an agreement and plan of merger providing for the merger of RMCI
into a wholly owned subsidiary of the Company. Following the merger, all amounts
owed by RMCI to the Company will become an intercompany payable and receivable
between RMCI and RHCI, respectively. The merger is subject to approval by the
shareholders of each company, the receipt of lender, governmental and other
consents and the declaration of effectiveness by the Securities and Exchange
Commission of a registration statement filed by the Company. Subject to the
satisfaction of these conditions, it is expected that the merger will be
consummated in March 1997.
7
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company pursues business expansion opportunities which are
consistent with its overall strategic plan and disposes of operations no longer
considered viable or consistent with this plan. Due to cost-containment
pressures imposed by managed care organizations, governmental and other third-
party payors, one of the Company's strategic objectives is to reduce its
dependence on acute psychiatric inpatient care revenues and to expand its less
intensive inpatient behavioral programs, including residential treatment and
youth-oriented correctional service programs, which require longer lengths of
stay.
Further, the Company is restructuring its outpatient services in an
effort to enhance the Company's relationship with managed care organizations and
increase the Company's outpatient revenues. In connection with this strategy and
as previously announced, on October 1, 1996, the Company and RMCI entered into
an agreement and plan of merger providing for the acquisition of RMCI by the
Company (see Note 5 in "Item 1. Financial Statements" above).
In connection with the "safe-harbor" provision of the Private
Securities Litigation Reform Act of 1995, the Company notes that this Quarterly
Report on Form 10-Q contains forward-looking statements about the Company. The
Company is hereby setting forth cautionary statements identifying important
factors that may cause the Company's actual results to differ materially from
any forward- looking statement. Some of the most significant factors include (i)
accelerating changes occurring in the health care industry, including
competition from consolidating and integrated health care provider systems, the
imposition of more stringent admission criteria by payors, increased payor
pressures to limit lengths of stay, limitations on reimbursement rates and
limitations on annual and lifetime patient health benefits, (ii) federal and
state governmental budgetary constraints which could have the effect of limiting
the amount of funds available to support governmental health care programs,
including Medicare and Medicaid, and (iii) statutory, regulatory and
administrative changes or interpretations of existing statutory and regulatory
provisions affecting the conduct of the Company's business and affecting current
and prior reimbursement for the Company's services. While the Company believes
that implementing the above-described strategies will enable the Company to
improve its operations and financial condition, there can be no assurance that
the Company will be successful in doing so.
Results of Operations
The following table sets forth, for the periods indicated, certain
items of the Company's Consolidated Statements of Operations as a percentage of
the Company's net revenues.
8
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Percentage of Net Revenues
Quarter Ended
September 30
1996 1995
Net revenues............................ 100.0 % 100.0 %
Expenses:
Salaries, wages and benefits....... 52.7 55.7
Other operating expenses........... 34.9 32.8
Provision for doubtful accounts.... 2.8 3.3
Depreciation and amortization...... 4.2 4.6
Interest expense................... 4.9 5.9
Total expenses.......................... 99.5 102.3
Income loss before minority interests
and income taxes....................... 0.5 % (2.3) %
Net revenues in the quarter ended September 30, 1996 were $31.5
million, compared to $29.1 million in the comparable quarter of the prior fiscal
year. Same facility net inpatient revenues increased 2% between periods (from
$22.2 million in the September 1995 quarter to $22.6 million in the current year
quarter) due to a 6% increase in acute psychiatric and residential treatment
admissions and patient days, offset by a 4% decrease between periods in the
Company's same facility net inpatient revenue per patient day. In addition, net
revenues related to subacute operations increased by $1.9 million between
periods (from $2.2 million in the prior year period, or 8% of total net revenues
of the Company, to $4.1 million in the current year period, or 13% of total net
revenues of the Company), as subacute patient days increased from 2,631 in the
prior year comparable quarter to 4,939 in the current year quarter. Net revenues
associated with outpatient and contract management services remained stable
between periods.
Salaries, wages and benefits in the quarter ended September 30, 1996
were $16.6 million, compared to $16.2 million in the comparable quarter of the
prior fiscal year. Same facility salaries, wages and benefits decreased $0.4
million (from $14.2 million to $13.8 million) between periods, or 3%, due to the
continued increase in residential treatment services, which are less labor
intensive than acute psychiatric services. The decrease in same facility
salaries, wages and benefits was offset by a $0.7 million increase in subacute
salaries, wages and benefits, due to the increase in subacute patient volume
between periods.
Other operating expenses in the quarter ended September 30, 1996 were
$11.0 million, compared to $9.6 million in the comparable quarter of the prior
fiscal year. Same facility other operating expenses remained stable between
periods at $8.0 million, whereas other operating expenses of the subacute units
increased by $1.4 million between periods due to the previously discussed
increase in subacute patient volume between periods.
The provision for doubtful accounts in the quarter ended September
30, 1996 totalled $0.9 million, which compares to the $1.0 million provision for
doubtful accounts in the prior year comparable quarter. Also, depreciation and
amortization expense in the quarters ended September 30, 1996 and 1995 totalled
$1.3 million.
9
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Interest expense decreased from $1.7 million in the quarter ended
September 30, 1995 to $1.5 million in the current year comparable quarter. Debt
levels were reduced between periods through regularly scheduled principal
payments on the Company's subordinated secured notes and variable rate demand
revenue bonds. Also, in the prior year comparable quarter, the Company recorded
interest expense in respect of borrowings under a working capital facility which
was paid off and cancelled in December 1995.
The Company did not record a provision for income taxes in the
current year quarter based on an adjustment to the deferred tax valuation
allowance recorded on deferred tax assets.
Financial Condition
The Company records amounts due to or from third-party contractual
agencies (Medicare, Medicaid and Blue Cross) based on its best estimate, using
the principles of cost reimbursement, of amounts to be ultimately received or
paid under current and prior years' cost reports filed (or to be filed) with the
appropriate intermediaries. Ultimate settlements and other lump-sum adjustments
due from and paid to these intermediaries occur at various times during the
fiscal year. At September 30, 1996, amounts due from Medicare, Medicaid and Blue
Cross totalled $2.7 million, $0.8 million and $0.2 million, respectively. Also
at September 30, 1996, amounts due to Medicare, Medicaid and Blue Cross totalled
$7.8 million, $0.9 million and $0.6 million, respectively. Changes in these
amounts since June 30, 1996 are the result of fiscal intermediary lump sum
adjustments, prior year cost report settlements and current year estimated
settlements recorded during the three months ended September 30, 1996.
During the three months ended September 30, 1996, amounts owed to
minority interests decreased by $0.9 million due to a final distribution made to
the minority partners in the Three Rivers Hospital Limited Partnership.
Subsequent to this distribution, the Three Rivers Hospital Limited Partnership
was dissolved.
The Company has net deferred tax assets totalling approximately $11.5
million, which includes a valuation allowance of $4.4 million, at September 30,
1996. Management has considered the effects of implementing tax planning
strategies, consisting of the sales of certain appreciated property, as the
primary basis for recognizing deferred tax assets at September 30, 1996. The
ultimate realization of deferred tax assets may be affected by changes in the
underlying values of the properties considered in the Company's tax planning
strategies, which values are dependent upon the operating results and cash flows
of the individual properties. The Company evaluates the realizability of its
deferred tax assets on a quarterly basis by reviewing its tax planning
strategies and the adequacy of its valuation allowance.
At September 30, 1996, the current portion of long-term debt was
$12.6 million, compared to $10.9 million at June 30, 1996. This increase
primarily resulted from the Company's commitment in August 1996 to reduce the
exposure of its bank group from approximately $17 million to $15 million by July
1, 1997.
In August 1996, a corporate affiliate of Paul J. Ramsay, the Chairman
of the Board of the Company, acquired through a private placement 275,546 shares
of Common Stock of the Company at a price of $2.75 per share. These shares were
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
issued for management fees due under a management agreement with another
corporate affiliate of Mr. Ramsay during 1997. The Company recorded the issuance
of these shares as prepaid management fees, which is included in prepaid and
other current assets in the accompanying balance sheet, and will amortize this
amount in its statement of operations ratably over the twelve months ending June
30, 1997.
On September 10, 1996, the Company entered into a letter agreement
with the corporate affiliates discussed above terminating the management
agreement effective July 1, 1997. In consideration for this termination, the
Company issued warrants to one of the corporate affiliates to purchase 250,000
shares of Common Stock at an exercise price of $2.63 per share. These warrants
are fully exercisable as of September 10, 1996 and expire on September 10, 2006.
Liquidity and Capital Resources
The Company's credit facilities include $31.1 million in senior
secured notes, approximately $20 million in letters of credit and $1.6 million
in subordinated secured notes. The senior secured notes bear interest at 11.6%
and require semi-annual principal payments of $3.5 million from March 31, 1997
through September 30, 1998 and $5.65 million from March 31, 1999 through March
31, 2000. The subordinated secured notes bear interest at 15.6% and require
semi-annual principal payments of $0.2 million through March 31, 2000. Required
annual principal payments on the variable rate demand revenue bonds total $0.8
million through year 2000 and $0.9 million to $1.2 million in years 2001 through
2015. In August 1996, the Company and the banks supporting the 1993 Credit
Facility agreed to terms which extended the expiration date of the 1993 Credit
Facility from February 15, 1997 to August 15, 1997. In connection with this
extension, the Company agreed to reduce the banks' exposure under the 1993
Credit Facility to $17,145,835 (an approximate $3 million reduction) by December
31, 1996 and to $15,000,000 by July 1, 1997.
The Company expects to satisfy its requirement to reduce the bank
group's exposure on December 31, 1996 through (a) proceeds from a working
capital facility secured by certain of the Company's receivables, (b) the
possible sale of the Company's facility in Fort Walton Beach, Florida, or (c ) a
transaction in which the Company would contribute one of its facilities to a new
entity which would be jointly owned by the Company and a medical/surgical
facility in the market area that the Company's facility is located. The
medical/surgical facility would contribute cash and other consideration to the
new entity. Through economies of scale, infrastructure savings and new business
opportunities of the new entity, the Company believes its income from the new
entity could approximate the income currently realized from this facility. In
connection with this transaction, the revenue bonds outstanding on the facility
would be redeemed or a substitute letter of credit would be issued, thereby
achieving the Company's commitment to reduce the exposure of its bank group by
approximately $3 million by December 31, 1996. At present, the Company does not
have a commitment for a working capital facility, has not entered into an
agreement to sell its Fort Walton Beach facility and has not entered into an
agreement in respect of the above-described joint venture transaction. There can
be no assurance that the Company will consummate any of the foregoing
transactions.
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RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
In May 1996, the Company signed a letter of intent to sell its Three
Rivers facility to an independent party. The Company expects to receive
approximately $2.2 million from the sale of this facility in December 1996. At
present, the Company has not entered into a definitive agreement to sell its
Three Rivers facility.
In response to market demands, the Company is currently converting an
additional 37 beds at its Texas facilities from psychiatric care to subacute
care. Future renovation costs associated with this project, which is expected to
be completed by January 1, 1997, will approximate $0.5 million. No other
commitments to make material capital expenditures exist at this time.
As part of the Company's business strategy, the Company intends to
refinance its debt during the next fiscal year to provide funds for growth and
working capital, as well as to reschedule the current level of principal
repayment required under the 1990 Credit Facility. At present, the Company does
not have a commitment from any lender to refinance its outstanding debt
obligations.
The Company's current primary cash requirements relate to its normal
operating expenses, the requirement to reduce its banks' credit exposure as
discussed above, principal payments on its senior secured notes, routine capital
improvements at its facilities and the above mentioned renovation project.
On the basis of its historical cash collection experience and
projected cash needs, the Company believes that its existing cash resources,
internally generated funds from operations, proceeds from the sale of Three
Rivers Hospital, debt reductions derived from the Company's business strategies
discussed above and a refinancing of the Company's outstanding debt will be
sufficient to meet its current cash requirements and future identifiable needs.
Further, the Company believes that the resolution of the matter with the State
of Louisiana discussed below in "Item 5. Other Information" will not have a
material adverse effect on its liquidity.
PART II - OTHER INFORMATION
Item 5. Other Information
During fiscal 1996, the State of Louisiana requested repayment of
disproportionate share payments received by two of the Company's Louisiana
facilities in fiscal years 1995 and 1994 totalling approximately $5,000,000. The
repayment requests related to a) alleged overpayments made to Three Rivers
Hospital because the State believed Three Rivers' actual annual inpatient volume
was less than its projection of annual inpatient volume made at the beginning of
its 1994 cost reporting year and b) alleged improper teaching hospital payments
made to Three Rivers Hospital and Bayou Oaks Hospital because the State believed
these facilities were not qualifying teaching hospitals at the time these
payments were made. The Company believes that certain of the calculations which
support the State's calculation of annual inpatient volume in 1994 are in error
and that other relevant factors affecting the State's calculation have not been
considered. Further, the Company believes that, based on its understanding of
the rules and regulations in place at the time the teaching hospital payments
were made, payments received as a result of the teaching classification were
appropriate.
12
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
On the basis of discussions to date between the Company and the
State, the Company believes that this matter may be settled for an amount
significantly less than the State's initial requests. Any settlement of this
matter will be contingent upon the execution of settlement documentation, the
terms of which have not been agreed upon. Further, there can be no assurance
that the Company and the State will agree on a settlement amount or the terms
and conditions of settlement documentation. The Company intends to vigorously
contest any position by the State of Louisiana which the Company considers
adverse and believes that an adequate reserve exists at September 30, 1996 for
the estimated amount which might be recovered from the Company as a result of
this matter.
Effective November 1, 1996, the Company amended the Rights Agreement
dated as of August 1, 1995, as amended by the Amendment thereto dated as of
October 3, 1995, between the Company and First Union National Bank of North
Carolina, as Rights Agent (as so amended, the "Agreement"), by excluding from
the definition of "Acquiring Person" in the Agreement persons who are elgible to
file a statement on Schedule 13G under Rule 13d-1(b) under the Securities
Exchange Act of 1934 who acquire beneficial ownership of less than 25% of the
Company's capital stock, unless and until the conditions set forth in Rule
13d-1(b) (3) or (4) exist. For a more complete description of the foregoing, see
Amendment No. 2 to the Agreement, attached hereto as Exhibit 10.101.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits required to be filed as part of this Quarterly Report
on Form 10-Q are as follows:
Exhibit 10.99
Employment Agreement dated August 12, 1996 by and between the
Company and Remberto Cibran
Exhibit 10.100
Services Agreement dated August 12, 1996 by and between the
Company and Healthlink Enterprises, Inc.
Exhibit 10.101
Amendement No. 2 dated as of November 1, 1996 to that certain
Rights Agreement dated as of August 1, 1995, as amended by that
certain Amendment dated as of October 3, 1995, between Ramsay
Health Care, Inc. and First Union National Bank of North
Carolina, as Rights Agent.
Exhibit 11
Computation of Net Income per Share
Exhibit 27
Financial Data Schedule
(b) Current Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during
the quarter ended September 30, 1996. Subsequent to September 30,
1996, the Company filed the following Current Report on Form 8-K
with the Commission:
* Form 8-K dated October 2, 1996 relating to the
proposed merger between the Company and Ramsay
Managed Care, Inc.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereupon duly authorized.
RAMSAY HEALTH CARE, INC.
Registrant
/s/ Carol C. Lang
Carol C. Lang
Chief Financial Officer
Date: November 19, 1996
14
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 12th day of August, 1996 by and between
RAMSAY HEALTH CARE, INC., a Delaware corporation (the "Company"), and REMBERTO
CIBRAN (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company wishes to retain the services of the Employee,
and the Employee wishes to serve in the employ of the Company, upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment.
1.1 The Company agrees to employ the Employee, and the Employee agrees
to serve in the employ of the Company, for the term set forth in Section 1.2, in
the position and with the responsibilities, duties and authority set forth in
Section 2 and on the other terms and conditions set forth in this Agreement.
1.2 The term of the Employee's employment under this Agreement
(including any extended term, the "term of this Agreement") shall commence on
the date hereof and shall terminate on August 11, 1999, unless extended or
sooner terminated in accordance with this Agreement.
1.3 As of January 31, 1999 and each subsequent January 31 during the
term of this Agreement (each, an "Automatic Renewal Date"), unless either party
shall have given a notice of non-extension on or prior to such Automatic Renewal
Date, the term of this Agreement shall be extended automatically for a period of
one (1) year to the anniversary of the expiration date of the then-current term
of this Agreement. Once a notice of non-extension shall have been given by
either party, there shall be no further automatic extension of this Agreement.
2. Position; Duties.
During the term of this Agreement, the Employee shall serve in the
positions of President and Chief Operating Officer of the Company. The Employee
shall perform, faithfully and diligently, such duties, and shall have such
<PAGE>
2
responsibilities, appropriate to such positions, as shall be assigned to him
from time to time by the Vice Chairman of the Board of Directors of the Company.
The Employee shall report directly to the Vice Chairman of the Board of
Directors of the Company. The Employee shall devote substantially all of his
attention to the performance of his duties and responsibilities hereunder during
the normal working hours of executive employees of the Company.
3. Salary; Bonus; Stock Options.
3.1 Salary. (a) During the term of this Agreement, in consideration of
the performance by the Employee of the services set forth in Section 2 and his
observance of the other covenants set forth herein, the Company shall pay the
Employee, and the Employee shall accept, a base salary at the rate of $300,000
per annum, payable in accordance with the standard payroll practices of the
Company.
(b) The base salary set forth in Section 3.1(a) above shall be
adjusted annually (but not decreased) on each anniversary date of this Agreement
by multiplying such base salary by a fraction, the numerator of which shall be
the Consumer Price Index for the July preceding the month in which such
adjustment is to be made, and the denominator of which shall be the Consumer
Price Index for the previous July. For purposes hereof, "Consumer Price Index"
shall mean the "Consumer Price Index for all Urban Consumers, Urban Wage Earners
and Clerical Workers-U.S. City Average (1982-84=100)" issued monthly by the
Bureau of Labor Statistics of the United States Department of Labor, or any
successor index thereto appropriately adjusted. The Employee shall be entitled
to such additional increases in base salary as shall be awarded from time to
time by the Board of Directors of the Company in its sole discretion.
3.2 Bonus. (a) In addition to the base salary provided for in Section
3.1, the Company shall pay to the Employee with respect to each fiscal year of
the Company ending during the term of this Agreement, subject to the provisions
of Section 3.2(c) hereof, a bonus in an amount equal to two percent (2%) of the
increase in "operating income" (as hereinafter defined) for such fiscal year
over operating income for the fiscal year of the Company ending June 30, 1996.
(b) For purposes of this Section 3.2, "operating income" shall mean
Income (Loss) Before Minority Interests, Income Taxes, Extraordinary Item and
Cumulative Effect of Accounting Change as shown in the audited financial
<PAGE>
3
statements of the Company and its subsidiaries for the applicable fiscal year,
excluding (i) the amount of the bonus determined in accordance with this Section
3.2; (ii) any loss on sales of closed facilities; (iii) charges for asset
impairment; (iv) restructuring charges; and (v) any other charges for write-offs
or reserves relating to periods prior to July 1, 1996.
(c) In the event of the termination of the employment of the Employee
pursuant to Section 6.3 (Due Cause) of this Agreement, the Employee shall not be
entitled to a bonus for the fiscal year of the Company in which such termination
takes place. In the event of the termination of the employment of the Employee
pursuant to Section 6.4 (Other Termination by the Company) or Section 6.6
(Change in Control) of this Agreement, the Employee shall be entitled to a full
bonus for the fiscal year of the Company in which such termination takes place.
In the event of the termination of the employment of the Employee pursuant to
Section 6.1 (Death), Section 6.2 (Disability) or Section 6.5 (Termination by
Employee) of this Agreement, the Employee shall be entitled to a bonus in an
amount equal to the bonus for the full fiscal year determined in accordance with
Section 3.2(a) multiplied by a fraction, the numerator of which is the number of
days in the fiscal year to the date of termination and the denominator of which
is 365. The Employee shall not be entitled to a bonus for any fiscal year of the
Company subsequent to the fiscal year in which the termination of his employment
takes place.
(d) In addition to the bonus provided for in Section 3.2(a), the
Company shall each year during the term of this Agreement pay the Employee an
additional bonus in such amount as shall be determined by the Board of Directors
of the Company.
(e) The bonus or bonuses provided for in this Section 3.2 shall be
paid to the Employee not later than ninety (90) days following the end of the
fiscal year of the Company to which such bonus relates.
3.3 Stock Options. (a) The Company shall cause to be granted to the
Employee as promptly as practicable after the date hereof, options to purchase
125,000 shares of the common stock, par value $.01 per share (the "Common
Stock"), of the Company at an exercise price per share equal to the fair market
value of the Common Stock on the date of grant (the "Options"). The Options
shall become exercisable in full nine years and six months following the date of
grant provided that the Option shall become exercisable in six months after the
<PAGE>
4
date of grant if at the time of exercise the closing price for the Common Stock
as quoted on one or more U.S. national securities exchanges, the NASDAQ National
Market System or the NASDAQ SmallCap Market or the average of the closing bid
and asked prices as quoted on the OTC Bulletin Board and/or the NQB Pink Sheets,
as the case may be, shall have equalled or exceeded $7.00 (subject to adjustment
for events affecting the Common Stock or the capital structure of the Company)
on at least twenty (20) trading days, which need not be consecutive, subsequent
to the date of grant. The Options shall be otherwise subject to the terms of the
Stock Option Plan of the Company pursuant to which the Options are granted.
(b) It is understood and agreed that the Employee shall continue to
retain options heretofore granted to him to purchase 75,000 shares of the Common
Stock of the Company and 125,000 shares of the common stock, $.01 par value, of
Ramsay Managed Care, Inc.
4. Expense Reimbursement.
During the term of this Agreement, the Company shall reimburse the
Employee for all reasonable and necessary out-of-pocket expenses incurred by him
in connection with the performance of his duties hereunder, upon the
presentation of proper accounts therefor in accordance with the Company's
policies and annual budget parameters.
5. Benefits.
5.1 Benefit Plans. During the term of this Agreement, the Employee
will be eligible to participate in all employee benefit plans and programs of
the Company, including, without limitation, group life insurance, disability,
401(k), stock option, stock purchase, group hospitalization, surgical and major
medical insurance plans of the Company, in accordance with the provisions of
such plans and programs as in effect from time to time. The Employee will also
be entitled to participate in other benefit programs made available to senior
executives of the Company.
5.2 Vacation; Sick Days; Leave of Absence. The Employee shall be
entitled to four (4) weeks' paid vacation and ten (10) paid sick days per year
and leaves of absence to attend professional and business activities, including
conventions and educational programs, all in accordance with Company policies in
effect from time to time for its executive employees. Any accrued and unused
vacation and sick days will be carried forward to the subsequent year or years.
<PAGE>
5
Upon any termination of the Employee's employment with the Company, the Employee
(or his estate) shall be paid for any vacation and sick days then accrued and
unused.
5.3 Automobile. During the term of this Agreement, the Company shall
provide the Employee with an automobile allowance in the amount of $1,760 per
month.
5.4 Disability Insurance. In addition to any other disability
insurance which may now or hereafter be provided by the Company under any group
contract or otherwise, the Company shall, during the term of this Agreement pay
directly or reimburse the Employee for premiums payable during the term of this
Agreement on the disability insurance policy described in Exhibit A hereto.
5.5 Club Dues. During the term of this Agreement, the Company shall
pay directly or reimburse the Employee for club dues in such reasonable amount
as shall be approved by the Company in advance on an annual basis. At the
request of the Employee, the Company shall advance to the Employee $10,000 for a
club membership deposit, such advance to be refunded by the Employee to the
Company upon termination of the Employee's employment with the Company.
6. Termination of Employment.
6.1 Death. In the event of the death of the Employee during the term
of this Agreement, the Company shall pay to the estate or other legal
representative of the Employee (a) the base salary provided for in Section 3
accrued to the date of death and not theretofore paid to the Employee, (b) any
bonus payable pursuant to Section 3.2 and (c) any compensation as would
otherwise have been payable to the Employee from the date of death to the end of
the month in which the Employee's death occurs. Rights and benefits of the
estate or other legal representative of the Employee under the benefit plans and
programs of the Company shall be determined in accordance with the provisions of
such plans and programs. Neither the estate or other legal representative of the
Employee nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 5 and 6.7.
6.2 Disability. If, during the term of this Agreement, the Employee
shall become incapacitated by reason of sickness, accident or other physical or
mental disability and shall be unable to perform his normal duties hereunder for
a cumulative period of three (3) months in any period of six (6) consecutive
months, the employment of the Employee hereunder may be terminated by the
<PAGE>
6
Company or the Employee. In the event of such termination, the Company shall (a)
pay to the Employee any bonus payable pursuant to Section 3.2 and (b) until the
first to occur of the expiration of a period of twenty-four (24) months from the
date of such termination or the death of the Employee, the Company shall pay to
the Employee an amount equal to the excess of the monthly base salary in effect
at the time of such termination over the aggregate monthly benefits payable to
the Employee under any disability plan or policy maintained by the Company and
the disability policy described in Section 5.4. Rights and benefits of the
Employee under the benefit plans and programs of the Company shall be determined
in accordance with the provisions of such plans and programs. Neither the
Employee nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 5, 6.7, 7, 8, 9 and 10.
6.3 Due Cause. The employment of the Employee hereunder may be
terminated by the Company at any time during the term of this Agreement for Due
Cause (as hereinafter defined). In the event of such termination, the Company
shall pay to the Employee (a) the base salary provided for in Section 3 accrued
to the date of such termination and not theretofore paid to the Employee and (b)
any bonus payable pursuant to Section 3.2. Rights and benefits of the Employee
under the benefit plans and programs of the Company shall be determined in
accordance with the provisions of such plans and programs. For purposes hereof,
"Due Cause" shall mean (i) the Employee's material breach by willful action or
inaction, of any of the material provisions of this Agreement, or (ii) the
Employee's conviction in a court of law of any felony, or of any crime or
offense concerning money or property of the Company; provided, however, that the
Employee shall be given written notice by a majority of the Board of Directors
of the Company that it intends to terminate the Employee's employment for Due
Cause, which written notice shall specify the act or acts upon which the
majority of the Board of Directors of the Company intends so to terminate the
Employee's employment, and the Employee shall then be given the opportunity,
within ten (10) days of his receipt of such notice, to have a meeting with the
Board of Directors of the Company to discuss such act or acts. If the basis of
such written notice is other than an act or acts described in clause (ii), the
Employee shall be given ten (10) days after such meeting within which to cease
or correct the performance (or nonperformance) giving rise to such written
notice and, upon failure of the Employee within such ten (10) days to cease or
correct such performance (or nonperformance), the Employee's employment by the
<PAGE>
7
Company shall automatically be terminated hereunder for Due Cause. Neither the
Employee nor the Company shall have any further rights or obligations under this
Agreement, except as provided in Sections 5, 6.7, 7, 8, 9 and 10.
6.4 Other Termination by the Company. The Company may terminate the
Employee's employment at any time for whatever reason it deems appropriate or
without reason. In the event of such termination, the Company shall (a) pay to
the Employee any bonus payable pursuant to Section 3.2 and (b) continue to pay
the base salary provided for in Section 3 (at the annual rate then in effect)
until the expiration of a period of twenty-four (24) months from the date of
such termination. Rights and benefits of the Employee under the benefit plans
and programs of the Company shall be determined in accordance with the
provisions of such plans and programs. Neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 5, 6.7, 7, 8, 9 and 10.
6.5 Termination by the Employee. The Employee may terminate his
employment with the Company during the term of this Agreement upon six (6)
months' prior written notice to the Company. In the event of such termination,
the Company shall pay to the Employee (a) the base salary provided for in
Section 3 accrued to the date of termination and not theretofore paid to the
Employee and (b) any bonus payable pursuant to Section 3.2. Rights and benefits
of the Employee under the benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. Neither
the Employee nor the Company shall have any further rights or obligations under
this Agreement, except as provided in Sections 5, 6.7, 7, 8, 9 and 10.
6.6 Change in Control. If, following a change in control of the
Company, if the employment of the Employee hereunder is terminated for any
reason whatsoever or for no reason, whether by the Employee or by the Company,
the Company shall pay to the Employee (a) severance pay in an amount equal to
twenty-four (24) months' base salary (at the highest annual rate in effect
during the one-year period ending on the date of termination of employment) and
(b) any bonus payable pursuant to Section 3.2. Such severance payment and bonus
shall be paid to the Employee in a cash lump sum on the date of termination of
employment. Rights and benefits of the Employee under the benefit plans and
programs of the Company shall be determined in accordance with the provisions of
such plans and programs. Neither the Employee nor the Company shall have any
<PAGE>
8
further rights or obligations under this Agreement, except as provided in
Sections 5, 6.7, 7, 8, 9 and 10. For purposes of this Agreement, a change in
control of the Company shall be deemed to have occurred if:
(A) a "person" (meaning an individual, a partnership, or other group
or association as defined in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934), other than RHHL (as hereinafter defined) or any affiliate thereof,
acquires fifty percent (50%) or more of the combined voting power of the
outstanding securities of the Company having a right to vote in elections of
directors; or
(B) Continuing Directors (as hereinafter defined) shall for any reason
cease to constitute a majority of the Board of Directors of the Company; or
(C) all or substantially all of the business of the Company is
disposed of by the Company to a party or parties other than a subsidiary or
other affiliate of the Company, in which the Company owns less than a majority
of the equity, pursuant to a partial or complete liquidation of the Company,
sale of assets (including stock of a subsidiary of the Company) or otherwise.
For purposes hereof, a sale or disposition of fifty percent (50%) or more of the
assets of the Company to a party or parties (other than a subsidiary or
affiliate of the Company as above described) shall be deemed a disposition of
substantially all of the business of the Company.
For purposes of this Agreement, the term "Continuing Director" shall
mean a member of the Board of Directors of the Company who either was a member
of the Board of Directors on the date hereof or who subsequently became a
Director and whose election was voted for by Ramsay Holdings HSA Limited
("RHHL") or by a Continuing Director with the acquiescence of RHHL. A Director
shall not be considered a Continuing Director for purposes of this Agreement if
his election was voted for by RHHL, or by a Continuing Director with the
acquiescence of RHHL, (i) pursuant to an agreement with, or at the direction,
request or suggestion of, any individual, firm or corporation in connection with
the purchase or other acquisition or receipt by such individual, firm or
corporation of all or any shares of capital stock of the Company or (ii) in
anticipation of the sale or other disposition by RHHL of all or any of its
shares of capital stock of the Company.
<PAGE>
9
6.7 Stock Options. In the event of termination of the Employee's
employment with the Company: (i) pursuant to Section 6.4 (Other Termination) or
6.6 (Change in Control) of this Agreement, the Company shall cause each stock
option heretofore granted by the Company to the Employee to become fully
exercisable and to remain exercisable until the later of August 11, 1999 or six
(6) months following the date of termination, unless such action, in the opinion
of counsel to the Company, would violate, or adversely affect the status of such
option or the plan (if any) pursuant to which such option was granted under,
Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934; or (ii)
pursuant to Section 6.1 (Death), 6.2 (Disability), 6.4 (Other Termination) or
6.6 (Change in Control) of this Agreement, the Company shall cause each stock
option heretofore granted by the Company to the Employee to become exercisable
by the Employee or the Employee's estate without regard to the requirement that
the price for the Common Stock shall have equalled or exceeded $7.00 per share
on at least twenty (20) trading days subsequent to the date of grant (as
described in Section 3.3 of this Agreement).
7. Confidential Information.
7.1 The Employee shall, during the term of this Agreement and at all
times thereafter, treat as confidential and, except as required in the
performance of his duties and responsibilities under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation any confidential material (as hereinafter
defined). The Employee agrees that all confidential material, together with all
notes and records of the Employee relating thereto, and all copies or facsimiles
thereof in the possession of the Employee, are the exclusive property of the
Company and the Employee agrees to return such material to the Company promptly
upon the termination of the Employee's employment with the Company.
7.2 For the purposes hereof, the term "confidential material" shall
mean all information acquired by the Employee in the course of the Employee's
employment with the Company in any way concerning the products, projects,
activities, business or affairs of the Company or the Company's customers,
including, without limitation, all information concerning trade secrets and the
products or projects of the Company and/or any improvements therein, all sales
and financial information concerning the Company, all customer and supplier
lists, all information concerning projects in research and development or
marketing plans for any such products or projects, and all information in any
<PAGE>
10
way concerning the products, projects, activities, business or affairs of
customers of the Company which is furnished to the Employee by the Company or
any of its agents or customers, as such; provided, however, that the term
"confidential material" shall not include information which (a) becomes
generally available to the public other than as a result of a disclosure by the
Employee, (b) was available to the Employee on a non-confidential basis prior to
his employment with the Company or (c) becomes available to the Employee on a
non-confidential basis from a source other than the Company or any of its agents
or customers provided that such source is not bound by a confidentiality
agreement with the Company or any of such agents or customers.
8. Interference With the Company.
8.1 The Employee acknowledges that the services to be rendered by him
to the Company are of a special and unique character. The Employee agrees that,
in consideration of his employment hereunder, the Employee will not (a) for a
period of one year commencing on the date of termination of his employment with
the Company, (i) solicit or endeavor to solicit patient referrals, either on his
own account or for any person, firm, corporation or other organization, from (x)
any person, including any physician, clinical psychologist, social worker or
consultant to the Company, who, during the period of the Employee's employment
with the Company, made patient referrals to the Company, or (y) any employee of
the Company, or (ii) solicit or entice or endeavor to solicit or entice away
from the Company any person who was a director, officer, employee or consultant
of the Company, either on his own account or for any person, firm, corporation
or other organization, whether or not such person would commit any breach of his
contract of employment by reason of leaving the service of the Company, and the
Employee agrees not to employ, directly or indirectly, any person who was a
director, officer or employee of the Company or who by reason of such position
at any time is or may be likely to be in possession of any confidential
information or trade secrets relating to the businesses or products of the
Company or (b) at any time, take any action or make any statement the effect of
which would be, directly or indirectly, to impair the good will of the Company
or the business reputation or good name of the Company or be otherwise
detrimental to the interests of the Company, including any action or statement
intended, directly or indirectly, to benefit a competitor of the Company.
8.2 The Employee and the Company agree that if, in any proceeding, the
court or other authority shall refuse to enforce the covenants herein set forth
<PAGE>
11
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
9. Inventions.
Any and all inventions, innovations or improvements ("inventions")
made, developed or created by the Employee (whether at the request or suggestion
of the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) during the period of his
employment with the Company which may be directly or indirectly useful in, or
relate to, the business of the Company, shall be promptly and fully disclosed by
the Employee to the Board of Directors of the Company and shall be the Company's
exclusive property as against the Employee, and the Employee shall promptly
deliver to an appropriate representative of the Company as designated by the
Board of Directors all papers, drawings, models, data and other material
relating to any inventions made, developed or created by him as aforesaid. The
Employee shall, at the request of the Company and without any payment therefor,
execute any documents necessary or advisable in the opinion of the Company's
counsel to direct issuance of patents or copyrights to the Company with respect
to such inventions as are to be the Company's exclusive property as against the
Employee or to vest in the Company title to such inventions as against the
Employee. The expense of securing any such patent or copyright shall be borne by
the Company.
10. Equitable Relief.
In the event of a breach or threatened breach by the Employee of any
of the provisions of Sections 7, 8 or 9 of this Agreement, the Employee hereby
consents and agrees that the Company shall be entitled to an injunction or
similar equitable relief from any court of competent jurisdiction restraining
the Employee from committing or continuing any such breach or threatened breach
or granting specific performance of any act required to be performed by the
Employee under any of such provisions, without the necessity of showing any
actual damage or that money damages would not afford an adequate remedy and
without the necessity of posting any bond or other security. Nothing herein
shall be construed as prohibiting the Company from pursuing any other remedies
at law or in equity which it may have. For purposes of Sections 7, 8, 9 and 10
of this Agreement, the term "Company" shall be deemed to include the
subsidiaries and affiliates of the Company.
<PAGE>
12
11. Successors and Assigns.
11.1 Assignment by the Company. The Company shall require any
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Section, "the Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law and this Agreement shall be
binding upon, and inure to the benefit of, the Company, as so defined.
11.2 Assignment by the Employee. The Employee may not assign this
Agreement or any part thereof without the prior written consent of a majority of
the Board of Directors of the Company; provided, however, that nothing herein
shall preclude one or more beneficiaries of the Employee from receiving any
amount that may be payable following the occurrence of his legal incompetency or
his death and shall not preclude the legal representative of his estate from
receiving such amount or from assigning any right hereunder to the person or
persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Employee (in
the event of his incompetency) or the Employee's estate.
12. Governing Law.
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
Delaware applicable to contracts to be performed entirely within such State. In
the event that a court of any jurisdiction shall hold any of the provisions of
this Agreement to be wholly or partially unenforceable for any reason, such
determination shall not bar or in any way affect the Company's right to relief
as provided for herein in the courts of any other jurisdiction. Such provisions,
as they relate to each jurisdiction, are, for this purpose, severable into
diverse and independent covenants. Service of process on the parties hereto at
the addresses set forth herein shall be deemed adequate service of such process.
<PAGE>
13
13. Entire Agreement.
This Agreement contains all the understandings and representations
between the parties hereto pertaining to the subject matter hereof and
supersedes all undertakings and agreements, whether oral or in writing, if any
there be, previously entered into by them with respect thereto.
14. Amendment; Modification; Waiver.
No provision of this Agreement may be amended or modified unless such
amendment or modification is agreed to in writing and signed by the Employee and
by a duly authorized representative of the Company other than the Employee.
Except as otherwise specifically provided in this Agreement, no waiver by either
party hereto of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar provision or condition at the same or any
prior or subsequent time, nor shall the failure of or delay by either party
hereto in exercising any right, power or privilege hereunder operate as a waiver
thereof to preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.
15. Arbitration.
Any controversy or claim arising out of or relating to this Agreement,
or any breach thereof, shall, except as provided in Section 10, be settled by
arbitration in accordance with the rules of the American Arbitration Association
then in effect and judgment upon such award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitration shall be held
in the area where the Company then has its principal place of business. The
arbitration award may include an award of attorneys' fees and costs.
16. Notices.
Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or at such other
address as such party may subsequently designate by like notice:
<PAGE>
14
If to the Company:
Ramsay Health Care, Inc.
One Alhambra Plaza
Suite 750
Coral Gables, Florida 33134
Attention: Vice Chairman of the Board
If to the Employee:
Mr. Remberto Cibran
11820 S.W. 92nd Avenue
Miami, Florida 33176
17. Severability.
Should any provision of this Agreement be held by a court or
arbitration panel of competent jurisdiction to be enforceable only if modified,
such holding shall not affect the validity of the remainder of this Agreement,
the balance of which shall continue to be binding upon the parties hereto with
any such modification to become a part hereof and treated as though originally
set forth in this Agreement. The parties further agree that any such court or
arbitration panel is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding additional
language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied
herein to the maximum extent permitted by law. The parties expressly agree that
this Agreement as so modified by the court or arbitration panel shall be binding
upon and enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
18. Key-Man Life Insurance.
The parties agree that the Company may, in its sole discretion,
maintain key man life insurance policies on the life of the Employee.
<PAGE>
15
19. Indemnification.
The Company and the Employee are simultaneously herewith entering into
an Indemnification Agreement which shall continue in full force and effect
during the term of this Agreement and thereafter as provided in such
Indemnification Agreement.
20. Authority.
The Company represents and warrants to the Employee that the execution
and delivery of this Agreement by the Company and the performance by the Company
of its covenants and agreements hereunder have been duly authorized by all
necessary corporate action and that this Agreement has been duly executed and
delivered on behalf of the Company.
21. Withholding.
Anything to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Employee or his beneficiaries, including
his estate, shall be subject to withholding of such amounts relating to taxes as
the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation.
22. Survivorship.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
23. Titles.
Titles of the sections of this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any section.
* * *
<PAGE>
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RAMSAY HEALTH CARE, INC.
By /s/ Luis Lamela
___________________________________________
Luis Lamela
By /s/ Remberto Cibran
___________________________________________
Remberto Cibran
<PAGE>
Exhibit A
Disability Policy
Insured: Remberto Cibran
Insurer: UNUM Life Insurance Company of America
Policy No.: LAD257591
1
SERVICES AGREEMENT
AGREEMENT made as of the 12th day of August, 1996 by and between
RAMSAY HEALTH CARE, INC., a Delaware corporation (the "Company"), and HEALTHLINK
ENTERPRISES, INC., a Florida corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, the Company wishes to retain the services of the Advisor, and
the Advisor wishes to provide services to the Company, upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Engagement.
1.1 The Company agrees to retain the Advisor as an independent
contractor, and the Advisor agrees to serve the Company as an independent
contractor, for the term set forth in Section 1.2, with the responsibilities,
duties and authority set forth in Section 2 and on the other terms and
conditions set forth in this Agreement. The Advisor shall make available such
individual or individuals as are required to perform Advisor's duties hereunder,
all of whom shall be subject to the advance written approval of the Company,
which approval may be granted or withheld by the Company in its sole discretion
(all such individuals hereinafter collectively referred to as the "Executive").
Carol C. Lang is hereby approved by the Company to act as an Executive for
purposes of performing the duties of the Advisor under this Agreement.
1.2 The term of the Advisor's engagement under this Agreement (the
"term of this Agreement") shall commence on the date hereof and shall terminate
on August 12, 1998, unless extended or sooner terminated in accordance with this
Agreement.
1.3 As of January 31, 1998 and each subsequent January 31 during the
term of this Agreement (each, an "Automatic Renewal Date"), unless either party
shall have given a notice of non-extension on or prior to such Automatic Renewal
Date, the term of this Agreement shall be extended automatically for a period of
one (1) year to the anniversary of the expiration date of the then-current term
of this Agreement. Once a notice of non-extension shall have been given by
either party, there shall be no further automatic extension of this Agreement.
<PAGE>
2
2. Duties.
During the term of this Agreement, the Advisor shall cause the
Executive to serve in the position of Chief Financial Officer of the Company.
The Advisor shall cause the Executive to perform, faithfully and diligently,
such duties and such responsibilities, appropriate to such position, as shall be
assigned from time to time by the President and Chief Operating Officer of the
Company. The Advisor shall cause the Executive to report directly to the
President and Chief Operating Officer of the Company. The Advisor shall cause
the Executive to devote such time to the performance of the Advisor's duties
hereunder as shall be equal to eighty percent (80%) of the normal working hours
of executive employees of the Company. The Company shall make available to the
Advisor, at no cost to the Advisor, the Company's office facilities, telephones
and personnel, including all necessary clerical assistance that may be required
to perform the services required hereunder.
3. Compensation; Bonus; Stock Options.
3.1 Compensation. (a) During the term of this Agreement, in
consideration of the performance by the Advisor of the services set forth in
Section 2 and the observance of the other covenants set forth herein, the
Company shall pay the Advisor, and the Advisor shall accept, a base compensation
at the rate of $240,000 per annum, payable in equal installments on a monthly or
more frequent basis.
(b) The base compensation set forth in Section 3.1(a) above shall be
adjusted annually (but not decreased) on each anniversary date of this Agreement
by multiplying such base compensation by a fraction, the numerator of which
shall be the Consumer Price Index for the July preceding the month in which such
adjustment is to be made, and the denominator of which shall be the Consumer
Price Index for the previous July. For purposes hereof, "Consumer Price Index"
shall mean the "Consumer Price Index for all Urban Consumers, Urban Wage Earners
and Clerical Workers-U.S. City Average (1982-84=100)" issued monthly by the
Bureau of Labor Statistics of the United States Department of Labor, or any
successor index thereto appropriately adjusted. The Advisor shall be entitled to
such additional increases in base compensation as shall be awarded from time to
time by the Board of Directors of the Company in its sole discretion.
3.2 Bonus. In addition to the base compensation set forth in Section
3.1, the Advisor shall receive an annual incentive bonus with respect to each
fiscal year of the Company ending during the term of this Agreement, in an
amount of up to 40% of the Advisor's base compensation, based on achievement of
targets established by the President or the Board of Directors in consultation
<PAGE>
3
with the Advisor (i) in the case of the fiscal year of the Company ending June
30, 1997, not later than October 15, 1996 and (ii) in the case of each other
fiscal year of the Company during the term of this Agreement, not later than
forty five (45) days after the commencement of each fiscal year of the Company.
The bonus with respect to each fiscal year shall be paid to the Advisor within
forty-five (45) days following the end of such fiscal year.
3.3 Stock Options. As part of the compensation to the Advisor
hereunder, the Company shall cause to be granted directly to the Executive, on
behalf of the Advisor, as promptly as practicable after the date hereof, options
to purchase 100,000 shares of the common stock, par value $.01 per share (the
"Common Stock"), of the Company at an exercise price per share equal to the fair
market value of the Common Stock on the date of grant (the "Options"). The
Options shall become exercisable in full nine (9) years and six (6) months
following the date of grant; provided that the Options shall become exercisable
in full beginning six (6) months after the date of grant if at the time of
exercise the closing price for the Common Stock as quoted on one or more U.S.
national securities exchanges, the NASDAQ National Market System or the NASDAQ
SmallCap Market or the average of the closing bid and asked prices as quoted on
the OTC Bulletin Board and/or the NQB Pink Sheets, as the case may be, shall
have equalled or exceeded $7.00 per share (subject to adjustment for events
affecting the Common Stock or the capital structure of the Company) on at least
twenty (20) trading days, which need not be consecutive, subsequent to the date
of grant. The Options shall be otherwise subject to the terms of the Stock
Option Plan of the Company pursuant to which the Options are granted.
4. Expense Reimbursement.
During the term of this Agreement, the Company shall reimburse the
Advisor for all reasonable and necessary out-of-pocket expenses incurred by it
in connection with the performance of its duties hereunder, upon the
presentation of proper accounts therefor in accordance with the Company's
policies and annual budget parameters.
5. Termination.
5.1 Death of Executive. In the event of the death of the Executive
during the term of this Agreement, the Company shall pay to the Advisor (a) the
base compensation provided for in Section 3 accrued to the date of death and not
theretofore paid to the Advisor and (b) any bonus payable pursuant to Section
3.2. Rights and benefits of the Advisor under any applicable benefit plans and
programs of the Company shall be determined in accordance with the provisions of
<PAGE>
4
such plans and programs. Neither the Advisor nor the Company shall have any
further rights or obligations under this Agreement, except as provided in
Section 5.7.
5.2 Disability of Executive. If, during the term of this Agreement,
the Executive shall become incapacitated by reason of sickness, accident or
other physical or mental disability and shall be unable to perform the normal
duties of Advisor hereunder for a cumulative period of three (3) months in any
period of six (6) consecutive months, the engagement of the Advisor hereunder
may be terminated by the Company or the Advisor. In the event of such
termination, the Company shall (a) pay to the Advisor any bonus payable pursuant
to Section 3.2 and (b) continue to pay to the Advisor the base compensation
provided for in Section 3 until the first to occur of (i) the expiration of a
period of six months from the date of such termination, (ii) the commencement of
payment of benefits to the Executive under any applicable disability plan or
policy maintained by the Company, or (iii) the death of the Executive. Rights
and benefits of the Advisor under any applicable benefit plans and programs of
the Company shall be determined in accordance with the provisions of such plans
and programs. Neither the Advisor nor the Company shall have any further rights
or obligations under this Agreement, except as provided in Sections 5.7, 6, 7, 8
and 9.
5.3 Due Cause. The engagement of the Advisor hereunder may be
terminated by the Company at any time during the term of this Agreement for Due
Cause (as hereinafter defined). In the event of such termination, the Company
shall pay to the Advisor (a) the base compensation provided for in Section 3
accrued to the date of such termination and not theretofore paid to the Advisor
and (b) any bonus payable pursuant to Section 3.2. Rights and benefits of the
Advisor under any applicable benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. For
purposes hereof, "Due Cause" shall mean (a) the Advisor's continuing material
breach for twenty (20) days following written notice thereof, by willful action
or inaction, of any of the material provisions of this Agreement, or (b) the
Advisor's or the Executive's conviction in a court of law of any felony, or of
any crime or offense concerning money or property of the Company or (c) that
Carol C. Lang shall have ceased to serve as the Executive hereunder (other than
pursuant to Section 5.1, 5.2, 5.4, 5.5 or 5.6 of this Agreement) and the Company
shall not have approved in its sole discretion the appointment of a successor
Executive. Neither the Advisor nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 5.7, 6, 7, 8
and 9.
<PAGE>
5
5.4 Other Termination by the Company. The Company may terminate the
Advisor's engagement at any time for whatever reason it deems appropriate or
without reason. In the event of such termination, the Company shall (a) pay to
the Advisor any bonus payable pursuant to Section 3.2 and (b) continue to pay
the base compensation provided for in Section 3 (at the annual rate then in
effect) until the later of (i) the last day of the then current term of this
Agreement or (ii) the last day of the six- month period beginning on the date of
such termination. Rights and benefits of the Advisor under any applicable
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs. Neither the Advisor nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 5.7, 6, 7, 8 and 9.
5.5 Termination by the Advisor. The Advisor may terminate its
engagement with the Company during the term of this Agreement upon three (3)
months' prior written notice to the Company. In the event of such termination,
the Company shall pay to the Advisor (a) the base compensation provided for in
Section 3 accrued to the date of termination and not theretofore paid to the
Advisor and (b) any bonus payable pursuant to Section 3.2. Rights and benefits
of the Advisor under any applicable benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. Neither the Advisor nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 6, 7, 8 and 9.
5.6 Change in Control. If, within a period of six (6) months following
a change in control of the Company, the engagement of the Advisor hereunder is
terminated for any reason whatsoever, whether by the Advisor or by the Company,
the Company shall pay to the Advisor (a) any bonus payable to the Advisor
pursuant to Section 3.2 and (b) severance pay in an amount equal to (x) the
greater of twelve (12) months' base compensation or the base compensation that
would have been payable to the Advisor from the date of termination to the last
day of the then-current term of this Agreement, if such termination is by the
Company, or (y) twelve (12) months' base compensation if such termination is by
the Advisor (in the case of both (x) and (y) at the highest annual rate in
effect during the one-year period ending on the date of termination of the
engagement). Such severance payment shall be made to the Advisor in a cash lump
sum on the date of termination of the engagement. Rights and benefits of the
Advisor under any applicable benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. Neither
the Advisor nor the Company shall have any further rights or obligations under
this Agreement, except as provided in Sections 5.7, 6, 7, 8 and 9. For purposes
of this Agreement, a change in control of the Company shall be deemed to have
occurred if:
<PAGE>
6
(A) a "person" (meaning an individual, a partnership, or other
group or association as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) , other than Paul J. Ramsay or RHHL (as defined below) or
any affiliate(s) of either thereof, acquires fifty percent (50%) or more of the
combined voting power of the outstanding securities of the Company having a
right to vote in elections of directors; or
(B) Continuing Directors (as hereinafter defined) shall for any
reason cease to constitute a majority of the Board of Directors of the Company;
or
(C) all or substantially all of the business of the Company is
disposed of by the Company to a party or parties other than a subsidiary or
other affiliate of the Company, in which the Company owns less than a majority
of the equity (by both voting control and value), pursuant to a partial or
complete liquidation of the Company, sale of assets (including stock of a
subsidiary of the Company) or otherwise.
For purposes of this Agreement, the term "Continuing Director" shall
mean a member of the Board of Directors of the Company who either was a member
of the Board of Directors on the date hereof or who subsequently became a
Director and whose election was voted for by Ramsay Holdings HSA Limited
("RHHL") or by a Continuing Director with the acquiescence of RHHL. A Director
shall not be considered a Continuing Director for purposes of this Agreement if
his election was voted for by RHHL, or by a Continuing Director with the
acquiescence of RHHL, (i) pursuant to an agreement with, or at the direction,
request or suggestion of, any individual, firm or corporation in connection with
the purchase or other acquisition or receipt by such individual, firm or
corporation of all or any shares of capital stock of the Company or (ii) in
anticipation of the sale or other disposition by RHHL of all or any of its
shares of capital stock of the Company.
5.7 Stock Options. In the event of termination of the Advisor's
engagement with the Company: (i) pursuant to Section 5.4 (Other Termination) or
5.6 (Change in Control) of this Agreement, the Company shall cause each stock
option heretofore granted by the Company to the Executive, on behalf of the
Advisor, to become fully exercisable (and to remain exercisable until August 12,
1998 or for the maximum period permitted by the plan or agreement pursuant to
which such option was granted) unless such action, in the opinion of counsel to
the Company, would violate, or adversely affect the status of such option or the
<PAGE>
7
plan (if any) pursuant to which such option was granted under, Rule 16b-3 under
Section 16 of the Securities Exchange Act of 1934; or (ii) pursuant to Section
5.1 (Death) or 5.2 (Disability) of this Agreement, the Company shall cause each
stock option heretofore granted by the Company to the Executive, on behalf of
the Advisor, to become exercisable without regard to the requirement that the
closing price for the Common Stock as quoted on the NASDAQ National Market
System shall have equalled or exceeded $7.00 per share on at least twenty (20)
trading days subsequent to August 12, 1996.
6. Confidential Information.
6.1 The Advisor shall, during the term of this Agreement and at all
times thereafter, treat as confidential and, except as required in the
performance of its duties and responsibilities under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation any confidential material (as hereinafter
defined). The Advisor agrees that all confidential material, together with all
notes and records of the Advisor relating thereto, and all copies or facsimiles
thereof in its possession, are the exclusive property of the Company and the
Advisor agrees to return such material to the Company promptly upon the
termination of the Advisor's engagement with the Company.
6.2 For the purposes hereof, the term "confidential material" shall
mean all information acquired by the Advisor in the course of the Advisor's
engagement with the Company in any way concerning the products, projects,
activities, business or affairs of the Company or the Company's customers,
including, without limitation, all information concerning trade secrets and the
products or projects of the Company and/or any improvements therein, all sales
and financial information concerning the Company, all customer and supplier
lists, all information concerning projects in research and development or
marketing plans for any such products or projects, and all information in any
way concerning the products, projects, activities, business or affairs of
customers of the Company which is furnished to the Advisor by the Company or any
of its agents or customers, as such; provided, however, that the term
"confidential material" shall not include information which (a) becomes
generally available to the public other than as a result of a disclosure by the
Advisor, (b) was available to the Advisor on a non-confidential basis prior to
its engagement with the Company or (c) becomes available to the Advisor on a
non-confidential basis from a source other than the Company or any of its agents
or customers provided that such source is not bound by a confidentiality
agreement with the Company or any of such agents or customers.
<PAGE>
8
7. Interference With the Company.
7.1 The Advisor acknowledges that the services to be rendered by the
Advisor to the Company are of a special and unique character. The Advisor agrees
that, in consideration of the Advisor's engagement hereunder, the Advisor will
not (a) for a period of one year commencing on the date of termination of the
Advisor's engagement with the Company, (i) solicit or endeavor to solicit
patient referrals, either on its own account or for any person, firm,
corporation or other organization, from (x) any person, including any physician,
clinical psychologist, social worker or consultant to the Company, who, during
the period of the Advisor's engagement with the Company, made patient referrals
to the Company, or (y) any employee of the Company, or (ii) solicit or entice or
endeavor to solicit or entice away from the Company any person who was a
director, officer, employee or consultant of the Company, either on its own
account or for any person, firm, corporation or other organization, whether or
not such person would commit any breach of his contract of employment by reason
of leaving the service of the Company, and the Advisor agrees not to employ,
directly or indirectly, any person who was a director, officer or employee of
the Company and who by reason of such position at any time is or may be likely
to be in possession of any confidential information or trade secrets relating to
the businesses or products of the Company or (b) at any time, take any action or
make any statement the effect of which would be, directly or indirectly, to
impair the good will of the Company or the business reputation or good name of
the Company or be otherwise detrimental to the interests of the Company,
including any action or statement intended, directly or indirectly, to benefit a
competitor of the Company.
7.2 The Company acknowledges that the Advisor is currently engaged in
the medical consulting business (the "Advisor's Existing Business") and that the
Advisor will continue to be engaged in such business during the term of this
Agreement. The Company further acknowledges that to the extent the Advisor's
Existing Business does not conflict with the provisions of Section 7.1, the
Advisor may, subject to the provisions of Section 2 of this Agreement, continue
the Advisor's Existing Business during the term of this Agreement and the
Company shall have no interest in or right to participate in the Advisor's
Existing Business.
7.3 The Advisor and the Company agree that if, in any proceeding, the
court or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
<PAGE>
9
8. Inventions.
Except for inventions, innovations or improvements ("inventions")
developed by Advisor in the Advisor's Existing Business, any and all inventions
made, developed or created by the Advisor, provided that such inventions are
capable of being properly copyrighted, trademarked or patented, (whether at the
request or suggestion of the Company or otherwise, whether alone or in
conjunction with others, and whether during regular hours of work or otherwise)
during the period of its engagement with the Company which may be directly or
indirectly useful in, or relate to, the business of the Company, shall be
promptly and fully disclosed by the Advisor to the Board of Directors of the
Company and shall be the Company's exclusive property as against the Advisor,
and the Advisor shall promptly deliver to an appropriate representative of the
Company as designated by the Board of Directors all papers, drawings, models,
data and other material relating to any inventions made, developed or created by
him as aforesaid. The Advisor shall, at the request of the Company and without
any payment therefor, execute any documents necessary or advisable in the
opinion of the Company's counsel to direct issuance of patents or copyrights to
the Company with respect to such inventions as are to be the Company's exclusive
property as against the Advisor or to vest in the Company title to such
inventions as against the Advisor. The expense of securing any such patent or
copyright shall be borne by the Company.
9. Equitable Relief.
In the event of a breach or threatened breach by the Advisor of any
of the provisions of Sections 6, 7 or 8 of this Agreement, the Advisor hereby
consents and agrees that the Company shall be entitled to an injunction or
similar equitable relief from any court of competent jurisdiction restraining
the Advisor and/or the Executive from committing or continuing any such breach
or threatened breach or granting specific performance of any act required to be
performed by the Advisor under any of such provisions, without the necessity of
showing any actual damage or that money damages would not afford an adequate
remedy and without the necessity of posting any bond or other security. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies at law or in equity which it may have. For purposes of Sections 6, 7, 8
and 9 of this Agreement, the term "Company" shall be deemed to include the
subsidiaries and affiliates of the Company.
<PAGE>
10
10. Successors and Assigns.
10.1 Assignment by the Company. The Company shall require any
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Section, "the Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law and this Agreement shall be
binding upon, and inure to the benefit of, the Company, as so defined.
10.2 Assignment by the Advisor. The Advisor may not assign this
Agreement or any part thereof without the prior written consent of a majority of
the Board of Directors of the Company.
11. Governing Law.
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
Delaware applicable to contracts to be performed entirely within such State. In
the event that a court of any jurisdiction shall hold any of the provisions of
this Agreement to be wholly or partially unenforceable for any reason, such
determination shall not bar or in any way affect the Company's right to relief
as provided for herein in the courts of any other jurisdiction. Such provisions,
as they relate to each jurisdiction, are, for this purpose, severable into
diverse and independent covenants. Service of process on the parties hereto at
the addresses set forth herein shall be deemed adequate service of such process.
12. Entire Agreement.
This Agreement contains all the understandings and representations
between the parties hereto pertaining to the subject matter hereof and
supersedes all undertakings and agreements, whether oral or in writing, if any
there be, previously entered into by them with respect thereto.
13. Amendment; Modification; Waiver.
No provision of this Agreement may be amended or modified unless such
amendment or modification is agreed to in writing and signed by duly authorized
representatives of the Company and the Advisor. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
<PAGE>
11
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time,
nor shall the failure of or delay by either party hereto in exercising any
right, power or privilege hereunder operate as a waiver thereof to preclude any
other or further exercise thereof or the exercise of any other such right, power
or privilege.
14. Arbitration.
Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof, shall, except as provided in Section 9, be
settled by arbitration in accordance with the rules of the American Arbitration
Association then in effect and judgment upon such award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitration shall be held in the area where the Company then has its principal
place of business. The arbitration award may include an award of attorneys' fees
and costs.
15. Notices.
Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or at such other
address as such party may subsequently designate by like notice:
If to the Company:
Ramsay Health Care, Inc. One Alhambra Plaza Suite 750 Coral Gables,
Florida 33134 Attention: President
If to the Advisor or the Executive:
Healthlink Enterprises, Inc.
Suite 3160
200 South Biscayne Boulevard
Miami, Florida 33131
Attention: Carol C. Lang
All notices given in accordance herewith shall be deemed received on the date of
delivery, if hand delivered, and three (3) business days after the date of
mailing, if mailed by certified mail, return receipt requested.
<PAGE>
12
16. Severability.
Should any provision of this Agreement be held by a court or
arbitration panel of competent jurisdiction to be enforceable only if modified,
such holding shall not affect the validity of the remainder of this Agreement,
the balance of which shall continue to be binding upon the parties hereto with
any such modification to become a part hereof and treated as though originally
set forth in this Agreement. The parties further agree that any such court or
arbitration panel is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding additional
language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied
herein to the maximum extent permitted by law. The parties expressly agree that
this Agreement as so modified by the court or arbitration panel shall be binding
upon and enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
17. Indemnification.
17.1 In the event the Advisor becomes involved in any action,
proceeding, or investigation in connection with any matter referred to in this
Agreement or in any manner arising from the transactions contemplated hereby,
the Company will defend and hold harmless the Advisor for its reasonable
investigation expenses incurred in connection therewith, including its
reasonable legal, appellate and other expenses, except to the extent such
action, proceeding or investigation results in a finding that the Advisor acted
in a grossly negligent manner or in bad faith in performing the services which
are the subject of this Agreement. The Company also will indemnify and hold
harmless the Advisor against any losses, claims, rights, damages or liabilities
to which the Advisor may become subject in connection with or related to any
matter referred to in this Agreement, including its reasonable legal, appellate
and other expenses, except to the extent that any such loss, right, claim,
damage or liability has been determined by a final judgment of a court of
competent jurisdiction to have resulted from the gross negligence or bad faith
of the Advisor in performing the services which are the subject of this
Agreement. Under any such circumstance, the Company shall defend the Advisor,
<PAGE>
13
unless a conflict of interest arises, in which case the Advisor shall be
entitled to retain counsel of its own selection which shall be independent of
the counsel of the Company.
17.2 The reimbursement and indemnity obligations of the Company under
this Section 17 and the payment obligations of the Company under Section 18
shall be in addition to any liability which the Company may otherwise have, and
shall extend upon the same terms and conditions to the partners, officers,
employees, agents, controlling persons and affiliated companies of the Advisor,
including the Executive, and shall be binding upon any successors and assigns of
the Company. The foregoing provision shall survive any termination or expiration
of the authorization provided by this Agreement.
18. Advance of Defense Expenses.
In the event of any action, proceeding or claim against the Advisor
or the Executive arising out of the Executive serving or having served in any
capacity as an officer and/or director of the Company, which in the Executive's
sole judgment requires her to retain counsel (such choice of counsel to be made
in her sole and absolute discretion) or otherwise expend her personal funds for
her defense in connection therewith, the Company shall be obligated to advance
to the Executive (or pay directly to her counsel) counsel fees and other costs
associated with the Executive's defense of such action, proceeding or claim;
provided, however, that in such event the Executive shall first agree in
writing, without posting bond or collateral, to repay all sums paid or advanced
to her pursuant to this Section 18 in the event that the final disposition of
such action, proceeding or claim is one for which the Executive would not be
entitled to indemnification pursuant to the provisions of the laws of the State
of Delaware or the Certificate of Incorporation or By-laws of the Company.
19. Withholding.
All payments required to be made by the Company hereunder to the
Advisor shall be treated as payments to an independent contractor and shall be
subject to withholding of such amounts relating to taxes as the Company may
reasonably determine it should withhold pursuant to any applicable law or
regulation. The Company shall not withhold any amounts with respect to the
compensation payable to employees of the Advisor, including the Executive. The
Advisor shall withhold and remit all taxes and other amounts relating to the
compensation payable to employees of the Advisor, including the Executive, as
are required pursuant to applicable law or regulation.
<PAGE>
14
20. Survivorship.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
21. Titles.
Titles of the sections of this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any section.
* * *
<PAGE>
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
THE COMPANY:
RAMSAY HEALTH CARE, INC.
By/s/ Remberto Cibran
Remberto Cibran
President
THE ADVISOR:
HEALTHLINK ENTERPRISES, INC.
By/s/ Carol C. Lang
Carol C. Lang
President
The undersigned hereby joins in this Agreement for
purposes of guaranteeing the performance by the
Advisor of its obligations hereunder. The
undersigned also agrees that the provisions of
Sections 6 through 9 of this Agreement shall apply
to the undersigned, in her individual capacity,
and to the Advisor.
/s/ Carol C. Lang
Carol C. Lang
AMENDMENT No. 2 dated as of November 1, 1996 (this "Amendment") made
by Ramsay Health Care, Inc. a Delaware corporation (the "Company"), to that
certain Rights Agreement dated as of August 1, 1995, as amended by that certain
Amendment dated as of October 3, 1995 (as so amended, the "Agreement"), between
the Company and First Union National Bank of North Carolina (the "Rights
Agent").
WHEREAS, the Company has determined that the definition of "Acquiring
Person" in the Agreement should be amended to provide an exception for persons
who are eligible to file a statement on Schedule 13G under Rule 13d-1(b) under
the Securities Exchange Act of 1934 who acquire less than 25% of the Common
Shares (as defined in the Agreement), unless and until the conditions set forth
in Rule 13d-1(b) (3) or (4) exist;
WHEREAS, the Company desires to provide certainty to its
shareholders, the securities markets and the Rights Agent in respect of the
terms of the Agreement and to further the purposes and intent of the Agreement;
and
WHEREAS, in order to effect the foregoing, the Company has determined
to amend the Agreement pursuant to Section 27 of the Agreement as set forth
below.
NOW, THEREFORE, effective as of the date hereof, the Agreement is
hereby amended pursuant to Section 27 thereof as follows:
1. Section 1(a) of the Agreement is hereby deleted and replaced with
the following:
"(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of
20% or more of the Common Shares of the Company then outstanding, but
shall not include the Company, any Subsidiary (as such term is
hereinafter defined) of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any Person holding Common
Shares for or pursuant to the terms of any such plan. Notwithstanding
the foregoing, (i) no Person shall become an "Acquiring Person" solely
as the result of (x) an acquisition after the date hereof of Common
Shares by the Company which, by reducing the number of Common Shares
outstanding, increases the proportionate number of shares beneficially
owned by such Person to 20% (or in the case of a 13G Person (as
hereinafter defined), 25%) or more of the Common Shares of the Company
then outstanding or (y) the acquisition of Beneficial Ownership of 20%
(or in the case of a 13G person, 25%) or more of the Common Shares of
the Company then outstanding in the good faith belief that such
acquisition would not (A) cause such Beneficial Ownership to exceed
20% (or in the case of a 13G Person, 25%) of the Common Shares then
outstanding and such Person relied in good faith in computing the
percentage of its Beneficial Ownership on publicly filed reports or
documents of the Company which are inaccurate or out-of-date or (B)
otherwise cause a Distribution Date to occur; (ii) subject to the
proviso in this clause (ii), no Person (an "Acquiror") shall become an
"Acquiring Person" as a result of the acquisition after the date
hereof by an Acquiror from Paul J. Ramsay or from any Person who is an
Affiliate or Associate of Paul J. Ramsay at the time of such
acquisition (collectively, the "Ramsay Persons") of (1) any of the
shares of Class B Preferred Stock currently held by any Ramsay Person
or (2) any Common Shares issued pursuant to options or other rights to
purchase Common Shares currently held by any Ramsay Person; (3) any
Common Shares issued pursuant to the Class B Preferred Stock currently
held by any Ramsay Person or (4) any Common Shares currently held by
any Ramsay Person; provided that, at the time of such acquisition, the
Acquiror (together with all of such Person's Affiliates and
Associates) are not the Beneficial Owners of more than 1% of the
Common Shares of the Company then outstanding and provided further
that, following such acquisition, the Acquiror (together with all of
such Person's Affiliates and Associates) do not become the Beneficial
Owners of an additional 1% or more of the Common Shares of the Company
then outstanding, (iii) subject to the proviso in this clause (iii),
none of the Ramsay Persons shall become an "Acquiring Person" in the
event that any Ramsay Person (together with all other Ramsay Persons)
become the Beneficial Owners after the date hereof of additional
Common Shares; provided that the number of Common Shares of the
Company of which all Ramsay Persons are the Beneficial Owners does not
exceed one Common Share less than 50% of the Common Shares of the
Company then outstanding, and (iv) no Person who or which is eligible
to file a statement with the Securities and Exchange Commission on
Schedule 13G under Rule 13d-1(b), as in effect on November 1, 1996
(the "Amendment Date"), under the Exchange Act (as hereinafter
defined) with respect to such Person's beneficial ownership of Common
Shares (a "13G Person") shall become an "Acquiring Person" after the
Amendment Date if and for so long as such 13G Person, together with
all Affiliates and Associates of such 13G Person, shall not be the
Beneficial Owner of 25% or more of the Common Shares of the Company
then outstanding; provided, however, that if such Person or any such
Person's Affiliates or Associates becomes subject to Rules 13d-1(a)
and 13d-2(a), as in effect on the Amendment Date, pursuant to Rule
13d-1(b) (3) or (4), as in effect on the Amendment Date, then such
Person shall no longer be a "13G Person" and if such Person at such
time would be an Acquiring Person but for this clause (iv), such
Person shall immediately become an Acquiring Person, in each case
without regard to the ten day periods referred to in Rule 13d-1(b) (3)
and (4), as in effect on the Amendment Date. Notwithstanding clause
(i) of the prior sentence, if any Person that is not an Acquiring
Person due to such clause (i) does not reduce its percentage of
Beneficial Ownership of Common Shares to below 20% (or in the case of
a 13G Person, 25%) by 5:00 P.M. New York City time on the tenth
Business Day after notice (including telephonic or facsimile) from the
Company (the date of notice being the first day) that such Person's
Beneficial Ownership of Common Shares so exceeds 20% (on in the case
of a 13G person, 25%), such Person shall, at the end of such ten
Business Day period, become an Acquiring Person (and such clause (i)
shall no longer apply to such Person). For purposes of this
definition, the determination whether any Person acted in "good faith"
shall be conclusively determined by the Board of Directors of the
Company, acting by a vote of those directors of the Company whose
approval would be required to redeem the Rights under Section 23."
2. This Amendment shall be deemded to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State, without regard to any
conflict of laws principles which would apply the laws of any other
jurisdiction.
3. The Agreement, as amended hereby, is hereby ratified, confirmed and
continued in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed as of the date first above written.
RAMSAY HEALTH CARE, INC.
BY /s/ B.G. Cibran
____________________________
Name: Bert Cibran
Title: President & C.O.O.
Exhibit 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(unaudited)
Quarter Ended
September 30
1996 1995
PRIMARY
Weighted average common shares outstanding....... 8,173,731 7,721,142
Class B convertible preferred stock, Series C.... ---* --- *
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES.................... 8,173,731 7,721,142
Net Income (Loss) Available to Common
Shareholders............................... $ 57,000** $ (482,000)**
NET INCOME (LOSS) PER SHARE................. $0.01 $(0.06)
FULLY DILUTED
Weighted average common shares outstanding....... 8,173,731 7,735,328
Class B convertible preferred stock, Series C.... ---* --- *
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES.................... 8,173,731 7,735,328
Net Income (Loss) Available to Common
Shareholders............................... $ 57,000** $ (482,000)**
NET INCOME (LOSS) PER SHARE................. $ 0.01 $(0.06)
* The Class B convertible preferred stock, Series C were anti-dilutive in the
quarters ended September 30, 1996 and 1995 and, accordingly, were not
considered in the calculation of earnings per share in these quarters.
** Net income (loss) reported for the period was decreased (increased) by
dividends related to the Class B convertible preferred stock, Series C,
totalling $91,000.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> Ramsay Health Care, Inc.
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<S> <C>
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<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1996
<PERIOD-END> Sep-30-1996
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0
233,000
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