<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
RAMSAY HEALTH CARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
RAMSAY HEALTH CARE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 19, 1998
The Annual Meeting of Stockholders of RAMSAY HEALTH CARE, INC. ("RHCI"
or the "Company") will be held at the HYATT REGENCY CORAL GABLES, CORAL GABLES,
FLORIDA 33134 at 10:00 A.M., local time, on November 19, 1998, for the following
purposes, as more fully described in the accompanying Proxy Statement:
1. To elect seven directors for the ensuing year;
2. To consider and take action upon a proposal to ratify
the Board of Directors' selection of Ernst & Young
LLP to serve as independent auditors for the fiscal
year ending June 30, 1999; and
3. To transact such other business as may properly come
before the meeting or any adjournment or adjournments
thereof.
Only RHCI stockholders of record at the close of business on October
15, 1998 will be entitled to notice of and to vote at the meeting, or any
adjournment or adjournments thereof. A list of the stockholders entitled to vote
at the meeting may be examined at the offices of RHCI, One Alhambra Plaza, Suite
750, Coral Gables, Florida during the ten-day period preceding the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY. NO POSTAGE IS REQUIRED WHEN MAILED IN THE
UNITED STATES. THE PROXY IS REVOCABLE AT ANY TIME. IF YOU ARE PRESENT AT THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE. YOUR
BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF THE NOMINEES FOR DIRECTORS AND FOR
THE OTHER PROPOSALS TO BE CONSIDERED AT THE MEETING.
By Order of the Board of Directors,
Paul J. Ramsay
October 28, 1998 Chairman of the Board
<PAGE> 3
RAMSAY HEALTH CARE, INC.
Columbus Center
One Alhambra Plaza, Suite 750
Coral Gables, Florida 33134
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held
November 19, 1998
GENERAL
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Ramsay Health Care, Inc. ("RHCI" or the
"Company") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held at the time and place and for the purposes specified in the accompanying
Notice of Annual Meeting of Stockholders and at any adjournment or adjournments
thereof. When the enclosed proxy is properly executed and returned, the shares
that it represents will be voted at the Meeting in accordance with the
instructions thereon. In the absence of any such instructions, the shares
represented thereby will be voted IN FAVOR of the nominees for directors listed
on the proxy and IN FAVOR of each other proposal set forth in this Proxy
Statement and presented to the stockholders of RHCI for approval. Management
does not know of any other business to be brought before the Meeting not
described herein, but it is intended that as to such other business, a vote may
be cast pursuant to the proxy in accordance with the best judgment of the person
or persons acting thereunder. It is anticipated that the proxy materials will be
mailed to the stockholders of RHCI on or about October 30, 1998.
It is important that proxies be returned promptly. Stockholders who do
not expect to attend the Meeting in person are urged to mark, sign and date the
accompanying form of proxy and mail it in the enclosed return envelope, which
requires no postage if mailed in the United States, so that their votes can be
recorded.
Any stockholder who executes and delivers a proxy may revoke it at any
time prior to its use by (i) giving written notice of such revocation to RHCI,
care of the Secretary, Columbus Center, One Alhambra Plaza, Suite 750, Coral
Gables, Florida 33134 prior to the Meeting; (ii) executing and delivering a
proxy bearing a later date to RHCI, care of the Secretary, Columbus Center, One
Alhambra Plaza, Suite 750, Coral Gables, Florida 33134 prior to the Meeting; or
(iii) appearing at the Meeting and voting in person.
1998 ANNUAL REPORT
RHCI's 1998 Annual Report on Form 10-K for the fiscal year ended June
30, 1998 is enclosed with this Proxy Statement.
2
<PAGE> 4
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by RHCI. Officers,
directors, and employees of RHCI may solicit proxies by telephone, telecopier or
in person. RHCI has also engaged the services of Corporate Communications, Inc.
and First Union National Bank of North Carolina to assist in the solicitation
and tabulation of proxies. RHCI estimates that these entities will receive fees
totalling approximately $6,000, plus expenses, in connection with these
services.
VOTING
Holders of record of issued and outstanding shares of (i) common stock,
$.01 par value (the "Common Stock"), of RHCI, (ii) class B preferred stock,
series C, $1.00 par value (the "Series C Preferred Stock"), of RHCI, (iii) class
B preferred stock, series 1996, $1.00 par value (the "Series 1996 Preferred
Stock"), of RHCI, in each case as of October 15, 1998 (the "Record Date"), will
be entitled to notice of and to vote at the Meeting, in each case, as described
below. On the Record Date, there were issued and outstanding 10,877,982 shares
of Common Stock, 142,486 shares of Series C Preferred Stock, 100,000 shares of
Series 1996 Preferred Stock.
Each share of Common Stock is entitled to one vote with respect to each
matter to be voted on at the Meeting. Each share of Series C Preferred Stock and
each share of Series 1996 Preferred Stock is entitled to 10 votes with respect
to each matter to be voted on at the Meeting, voting together with the Common
Stock as a single class.
Directors are elected by a plurality of votes cast by the holders of
shares of Common Stock, Series C Preferred Stock and Series 1996 Preferred
Stock, voting as a single class. Adoption of proposal 2 will require the
affirmative vote of a majority of the votes cast by the holders of outstanding
shares of Common Stock, Series C Preferred Stock and Series 1996 Preferred Stock
present and voting thereon at the Meeting, voting as a single class. Abstentions
and broker non-votes (as hereinafter defined) will be counted as present for the
purpose of determining the presence of a quorum. For the purpose of determining
the vote required for approval of matters to be voted on at the Meeting,
abstentions will be treated as being "present" and "entitled to vote" on the
matter and, thus, an abstention has the same legal effect as a vote against the
matter. However, in the case of a broker non-vote or where a stockholder
withholds authority from his proxy to vote the proxy as to a particular matter,
such shares will not be treated as "present" and "entitled to vote" on the
matter and, thus, a broker non-vote or the withholding of a proxy's authority
will have no effect on the outcome of the vote on the matter. A "broker
non-vote" refers to shares of Common Stock represented at the Meeting in person
or by proxy by a broker or nominee where such broker or nominee (i) has not
received voting instructions on a particular matter from the beneficial owners
or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on such matter.
Ramsay Holdings HSA Limited ("Ramsay Holdings") and Paul Ramsay
Holdings Pty. Limited ("Holdings Pty.") are the holders of all of the 142,486
issued and outstanding shares of Series C Preferred Stock, and Paul Ramsay
Hospitals Pty. Limited ("Hospitals Pty.;" Ramsay Holdings, Holdings Pty. and
Hospitals Pty., collectively, the "Ramsay Affiliates") is the holder
3
<PAGE> 5
of all of the 100,000 issued and outstanding shares of Series 1996 Preferred
Stock. Ramsay Holdings is the holder of 1,588,177 shares of Common Stock,
Holdings Pty. is the holder of 613,324 shares of Common Stock and Hospitals Pty.
is the holder of 916,666 shares of Common Stock. The Ramsay Affiliates are
corporations controlled by Paul J. Ramsay, the Chairman of the Board of RHCI. In
addition, Mr. Ramsay holds 17,750 shares of Common Stock directly. Accordingly,
as of the Record Date, Mr. Ramsay, Ramsay Holdings, Holdings Pty. and Hospitals
Pty. had an approximate 41.8% voting interest in RHCI, and held 100% of the
number of issued and outstanding shares of all series of voting Class B
Preferred Stock, par value $1.00 per share (the "Class B Preferred Stock"). To
the best of RHCI's knowledge, Mr. Ramsay, Ramsay Holdings, Holdings Pty. and
Hospitals Pty. will vote their shares of Common Stock, Series C Preferred Stock,
and Series 1996 Preferred Stock in favor of each of the proposals presented at
the Meeting. See "Certain Relationships and Related Transactions," "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of Management"
below.
4
<PAGE> 6
1. ELECTION OF DIRECTORS
Seven directors will be elected at the Meeting. It is the intention of
each of the persons named in the accompanying proxy to vote the shares
represented thereby in favor of the seven nominees listed in the following
table, unless contrary instructions are given. All of the nominees are presently
serving as directors. In case any nominee is unable or declines to serve, such
persons reserve the right to vote the shares represented by such proxy for
another person duly nominated by the Board of Directors in his stead or, if no
other person is so nominated, to vote such shares only for the remaining
nominees. The Board of Directors has no reason to believe that any person
nominated will be unable or will decline to serve. The directors elected by the
stockholders will serve until the next Annual Meeting of Stockholders and until
their respective successors are duly elected and qualified.
Certain information concerning the nominees for election of directors
is set forth below. Such information was furnished by them to RHCI.
PRINCIPAL OCCUPATIONS FOR PAST FIVE
NAME AND AGE YEARS AND CERTAIN OTHER DIRECTORSHIPS
Aaron Beam, Jr.(54) Executive Vice President and Chief Financial
Officer of HEALTHSOUTH Corporation (provider
of medical rehabilitation services) since
prior to 1993; Director of HEALTHSOUTH
Corporation since 1993; Director of RHCI
since 1991.
Peter J. Evans (49) Financial consultant to a number of
Australian companies; Partner, P.J. Evans &
Co., a chartered accounting firm in
Australia, since prior to 1993; Director of
Ramsay Health Care Pty. Limited (or its
predecessors) (owner and operator of
hospitals in Australia), and Prime
Television Limited (operator of an
Australian television network); Director of
RHCI since 1989.
Thomas M. Haythe (59) Partner, Haythe & Curley (attorneys) since
prior to 1993; Director of Guest Supply,
Inc. (provider of hotel guest room
amenities, accessories and products),
Novametrix Medical Systems Inc.
(manufacturer of electronic medical
instruments), and Westerbeke Corporation
(manufacturer of marine engine products);
Director of RHCI since 1987.
Luis E. Lamela (48) Chief Executive Officer of RHCI since
January 1998; Vice Chairman of the Board of
RHCI since January 1996; Chief Executive
Officer of CAC Medical Centers, a division
of United HealthCare of Florida, since May
1994; President and Chief Executive Officer
of Ramsay - HMO, Inc. from prior to 1993 to
May 1994; Director of RHCI since 1996.
5
<PAGE> 7
Paul J. Ramsay (62) Chairman of the Board of RHCI since July
1988; President of RHCI from February 1988
to July 1988; Chairman of the Board of RHCI
from November 1987 to February 1988;
involved in the health care industry for
more than 25 years; Chairman of the Board of
Ramsay Health Care Pty. Limited (or its
predecessors), and Prime Television Limited;
Director of RHCI since 1987.
Steven J. Shulman (47) President and Chief Executive Officer of
Prudential Health Care, Inc. since 1997;
President of the Pharmacy and Disease
Management Group of Value Health, Inc.
(provider of specialty managed care
programs) from September 1995 to 1997;
Executive Vice President of Value Health,
Inc. since prior to 1992 to September 1995;
Director of Value Health, Inc. and
Novametrix Medical Systems Inc.; Director of
RHCI since 1991.
Michael S. Siddle (49) Managing Director (Chief Executive Officer)
of Ramsay Health Care Pty. Limited (or its
predecessors) since prior to 1993; various
executive positions with corporations
controlled by Paul J. Ramsay since prior to
1993; Director of Prime Television Limited;
Director of RHCI since 1987.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of RHCI met seven times in fiscal 1998. All of
the directors named above attended at least 75% of the meetings of the Board of
Directors and meetings of the committees of the Board of Directors on which such
director served held during the time that such person served, other than Mr.
Shulman.
RHCI had five standing committees during fiscal 1998: the Executive
Operating Committee, the Audit Committee, the Compensation and Conflict of
Interest Committee, the Quality Assurance Committee and the Independent
Directors Committee.
The Executive Operating Committee presently is composed of Messrs.
Evans, Haythe, Lamela and Ramsay. The Committee's function is to act in the
place and stead of the Board of Directors to the extent permitted by law on
matters which require Board action between meetings of the Board of Directors.
The Executive Operating Committee did not meet during fiscal 1998.
The Audit Committee presently is composed of Messrs. Beam, Evans and
Haythe. The Audit Committee's functions include reviewing the results of the
reports and audits by RHCI's independent public accountants and making
recommendations to the Board of Directors with respect to accounting practices
and procedures and internal controls. The Audit Committee of RHCI met once
during fiscal 1998.
The Compensation and Conflict of Interest Committee (the "Compensation
Committee") presently is composed of Messrs. Beam, Evans and Haythe. The
Compensation Committee's functions include reviewing and recommending
remuneration arrangements for senior officers
6
<PAGE> 8
and for members of the Board of Directors, adopting compensation plans in which
officers and directors are eligible to participate, granting stock options under
RHCI's stock option plans, acting on important personnel matters, nominating
senior officers, resolving matters involving possible conflicts of interest and
providing for management succession. The Compensation and Conflict Committee met
once during fiscal 1998.
The Quality Assurance Committee presently is composed of Messrs. Lamela
and Beam. The Committee's functions are to review and monitor the clinical
functions of RHCI, to administer peer review and a case management system, and
to implement a professional education program. The Quality Assurance Committee
did not meet during fiscal 1998.
The Independent Directors Committee presently is composed of Messrs.
Beam, Haythe and Shulman. The Committee's function is to review all transactions
between RHCI and persons affiliated with Paul J. Ramsay or any entity in which
Paul J. Ramsay directly or indirectly has an equity interest. The Independent
Directors Committee did not meet during fiscal 1998.
RHCI does not have a nominating committee and has established no
procedures whereby nominees for director may be recommended by stockholders.
COMPENSATION OF DIRECTORS
It is RHCI's policy to pay directors who are not employees of RHCI an
annual fee of $12,000 and a fee of $3,000 for each of the first four meetings of
the Board of Directors attended during the year, with no additional compensation
to be paid for attendance at additional meetings.
For the fiscal year ended June 30, 1998, RHCI paid Messrs. Ramsay,
Evans, Beam, Shulman and Haythe $24,000 for services rendered in connection with
RHCI's Board of Directors' Meetings. Mr. Siddle was paid $21,000 and Mr. Lamela
was paid $6,000 for his attendance at Board of Directors' Meetings prior to
entering into an employment agreement with the Company.
7
<PAGE> 9
EXECUTIVE COMPENSATION
The following table and footnotes set forth information for the fiscal
years ended June 30, 1998, 1997 and 1996 concerning the compensation paid or
awarded to the Chief Executive Officer and the other most highly compensated
executive officers of RHCI.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ --------------
FISCAL SECURITIES
YEAR OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND ENDED SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
PRINCIPAL POSITION JUNE 30 ($) ($) ($) (#) ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Luis E. Lamela(1) 1998 235,045 (2) 16,118 105,000 6,000(5)
Vice Chairman of the 1997 -- -- -- -- --
Board and Chief 1996 -- -- -- -- --
Executive Officer
Bert G. Cibran(6) 1998 301,152 200,000 21,120(3) -- 12,358(8)
President & Chief 1997 268,124 -- 18,679(3) 275,000(17) 19,005(9)
Operating Officer 1996 -- -- -- -- --
Carol C. Lang(10) 1998 240,000 100,000(7) -- -- --
Executive Vice President 1997 212,493 -- -- 200,000(4) 5,000(11)
and Chief Financial 1996 -- -- -- -- --
Officer
Martin Lazoritz, M.D.(12) 1998 271,063 -- -- -- --
1997 275,857 24,000 -- 178,000(17) 77,002(13)
1996 -- -- -- -- --
John A. Quinn(14) 1998 155,598 33,000(7) 4,800(3) -- --
Senior Vice President 1997 155,598 -- 4,800(3) 20,000(4)(17) 86,366(15)
1996 155,598 20,000 4,800(3) 20,000(18) --
</TABLE>
- --------------------
(1) In January 1998, Mr. Lamela became Chief Executive Officer of RHCI. See
"Employment and Other Agreements" below.
(2) Bonus for fiscal 1998 has not yet been determined. The Company is
contractually obligated to pay certain bonuses. See "Employment and
Other Agreements" below.
(3) Represents automobile allowance.
(4) Represents options to purchase shares of Common Stock of the Company.
(5) Represents directors fees paid to Mr. Lamela prior to his employment
with the Company paid in fiscal 1998.
(6) In August 1996, Mr. Cibran became President and Chief Operating Officer
of RHCI. See "Employment and Other Agreements" below.
(7) Represents fiscal 1997 bonus paid during fiscal 1998. Fiscal 1998
bonuses have not yet been determined.
8
<PAGE> 10
(8) Represents premiums paid of $4,493 related to a long-term disability
policy and club membership fees of $7,865.
(9) Represents premiums paid of $5,363 related to a long-term disability
policy and club membership fees of $13,642.
(10) In August 1996, Ms. Lang became Executive Vice President and Chief
Financial Officer of RHCI. See "Employment and Other Agreements". On
August 18, 1998, Ms. Lang and the Company agreed to terminate the
services agreement pursuant to which Ms. Lang serves as an executive
officer of RHCI, and on July 1, 1998, Marcio C. Cabrera became
Executive Vice President and Chief Financial Officer of RHCI.
(11) Represents consulting fees paid to Ms. Lang prior to the date she
became Executive Vice President and Chief Financial Officer of RHCI.
(12) In February 1997, Dr. Lazoritz became Executive Vice President and
Chief Medical Officer of RHCI. Throughout the 1997 fiscal year, Dr.
Lazoritz was the Executive Vice President of Ramsay Managed Care, Inc.
The compensation set forth in the table reflects the total compensation
paid to Dr. Lazoritz by RHCI and Ramsay Managed Care, Inc. during the
fiscal year ended June 30, 1997 and 1998. On June 30, 1998, the Company
and Dr. Lazoritz agreed to terminate his employment agreement. See
"Employment and Other Agreements".
(13) Represents premiums paid of $6,286 related to a long-term disability
policy and a pay-out of accrued but unused vacation of $70,716.
(14) On June 30, 1998, Mr. Quinn and the Company agreed to terminate his
employment agreement.
(15) During fiscal 1997, Mr. Quinn sold two houses in connection with
Company relocations. This amount represents reimbursement for losses
incurred by Mr. Quinn in connection with these sales.
(16) Represents options awarded to Mr. Lamela during fiscal 1998 in
connection with his employment agreement. This amount does not include
394,999 options and warrants issued to Mr. Lamela prior to his
employment with RHCI and 450,045 warrants issued to Mr. Lamela in
connection with RHCI's purchase of Summa Healthcare Group, Inc. See
"Other Arrangements."
(17) Amounts do not include options and warrants to purchase shares of
Common Stock issued in connection with the Merger (as defined in
"Certain Relationships and Related Transactions" below).
(18) Represents options to purchase shares of Common Stock granted in fiscal
1996. Does not include the repricing in fiscal 1996 of options to
purchase an aggregate of 60,692 shares of Common Stock.
The following table and footnotes set forth the grant of stock options
to the executive officer named in the Summary Compensation Table during the
fiscal year ended June 30, 1998. The amounts shown for the named executive
officer as potential realizable values are based on arbitrarily assumed
annualized rates of stock price appreciation of five percent and ten percent
over the exercise price of the options during the full terms of the options. No
gain to the optionees is possible without an increase in stock price which will
benefit all stockholders proportionately. These potential realizable values are
based solely on arbitrarily assumed rates of appreciation required by applicable
Securities and Exchange Commission (the "SEC") regulations. Actual gains, if
any, on option exercises and holdings of Common Stock are dependent on the
future performance of the Common Stock and overall stock market conditions.
There can be no assurance that the potential realizable values shown in this
table will be achieved.
9
<PAGE> 11
STOCK OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------------------- ----------------------
% OF TOTAL
OPTIONS EXERCISE
GRANTED TO OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---------------------------- ---------------- --------------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Luis E. Lamela (1) 105,000 100% 4.375 07/30/07 288,950 732,250
</TABLE>
(1) Does not include 450,045 warrants issued to Mr. Lamela in connection
with RHCI's purchase of Summa Healthcare Group, Inc. or 394,999 options
and warrants issued to Mr. Lamela prior to his employment with RHCI.
See "Employment and Other Agreements" and "Other Arrangements" below.
10
<PAGE> 12
The following table and footnotes summarize stock options exercised
during fiscal 1998 and the number and value of options held by the executive
officers named in the Summary Compensation Table at June 30, 1998.
STOCK OPTION EXERCISES IN FISCAL 1998 AND
STOCK OPTION VALUES AT JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT JUNE 30, 1998 (#) AT JUNE 30, 1998 ($) (1)
ON VALUE ------------------------------ -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Luis E. Lamela (2) -- -- 450,045 499,999 -- --
Bert G. Cibran -- -- 50,000 325,000 -- --
Carol C. Lang -- -- 33,333 166,667 -- --
Martin Lazoritz, M.D. -- -- 33,333 166,667 -- --
John A. Quinn -- -- 6,667 74,025 -- --
</TABLE>
- -------------------
(1) In-the-money options are those where the fair market value of the
underlying Common Stock exceeds the exercise price of the option. The
value of in-the-money options is determined in accordance with
regulations of the Securities and Exchange Commission by subtracting the
aggregate exercise price of the options from the aggregate year-end value
of the underlying Common Stock.
(2) Represents 105,000 options awarded to Mr. Lamela in connection with his
employment agreement, 394,999 options and warrants issued to Mr. Lamela
prior to his employment with RHCI and 450,045 warrants issued to Mr.
Lamela in connection with RHCI's purchase of Summa Healthcare Group, Inc.
See "Employment and Other Agreements" and "Other Arrangements" below.
EMPLOYMENT AND OTHER AGREEMENTS
In October 1997, RHCI entered into an employment agreement with Luis E.
Lamela to serve as RHCI's Vice Chairman of the Board and Chief Executive
Officer, providing for the payment of an initial annual base salary of $400,000,
subject to increases determined by the Board of Directors and minimum annual
increases based on the Consumer Price Index. In addition, Mr. Lamela is entitled
to an annual bonus in an amount equal to the greater of (i) $400,000 or (ii)
five percent of any increase in operating income for the applicable fiscal year
over operating income for the 1997 fiscal year. The agreement is for an initial
term of two years with annual renewals thereafter. Pursuant to the employment
agreement, RHCI agreed to provide Mr. Lamela an automobile allowance and options
to purchase 105,000 shares of Common Stock. In addition, Mr. Lamela's employment
by RHCI may be terminated by either RHCI or Mr. Lamela; however, in the event
RHCI terminates Mr. Lamela's employment without due cause, RHCI must continue to
pay Mr. Lamela his base salary in effect at the time of such termination for 24
months after the date of such termination and any bonus payable. The agreement
also provides for a lump sum cash payment to Mr. Lamela of his bonus and 36
11
<PAGE> 13
months' base salary upon termination of his employment for any reason following
certain change of control events involving RHCI.
In February 1997, RHCI entered into an employment agreement with Martin
Lazoritz, M.D. to serve as RHCI's Executive Vice President and Chief Medical
Officer, providing for the payment of an initial annual base salary of $275,000,
subject to annual increases determined by the Board of Directors and minimum
annual increases based on the Consumer Price Index. In addition, Dr. Lazoritz is
entitled to an annual bonus to be determined by the Board of Directors. The
employment agreement is for an initial term of three years commencing in June
1997, with annual renewals thereafter. Pursuant to the employment agreement,
RHCI agreed to provide Dr. Lazoritz options to purchase 100,000 shares of Common
Stock. Dr. Lazoritz's employment by RHCI may be terminated by either RHCI or Dr.
Lazoritz; however, in the event RHCI terminates Dr. Lazoritz's employment
without due cause, RHCI must continue to pay Dr. Lazoritz his base salary in
effect at the time of such termination for 12 months after the date of such
termination and any bonus payable. The agreement also provides for a lump sum
cash payment to Dr. Lazoritz of 12 months' base salary upon termination of his
employment for any reason following certain change of control events involving
RHCI. On June 30, 1998, the Company and Dr. Lazoritz agreed to terminate his
employment agreement. In consideration for the termination of his employment,
the Company has agreed to pay Dr. Lazoritz $400,000, and certain employee
benefits, in equal monthly installments during fiscal 1999.
In September 1996, RHCI entered into an employment agreement with Brent
J. Bryson, Senior Vice President of RHCI, providing for the payment of an
initial annual base salary of $180,000, subject to annual review by the Board of
Directors. The agreement also provides for the payment of a bonus of up to two
percent of the improvement in operating income of assigned operations, based
upon the achievement by RHCI and Mr. Bryson of certain performance targets. In
addition, the agreement provides for an automobile allowance, the reimbursement
of certain relocation expenses and options to purchase 60,000 shares of Common
Stock. Pursuant to the agreement, if RHCI terminates the agreement for any
reason other than due cause, RHCI must continue to pay Mr. Bryson his base
salary in effect at the time of such termination for six months after the date
of such termination. On June 30, 1998, the Company and Mr. Bryson agreed to
terminate his employment agreement. In consideration for the termination of his
employment, the Company has agreed to pay Mr. Bryson $149,000, and certain
employee benefits, during the six month period ending December 31, 1998.
In August 1996, RHCI entered into an employment agreement with Bert G.
Cibran, President and Chief Operating Officer of RHCI, providing for the payment
of an initial annual base salary of $300,000, subject to annual increases
determined by the Board of Directors and minimum annual increases based on the
Consumer Price Index. Mr. Cibran's current annual salary is $300,000. In
addition, Mr. Cibran is entitled to an annual bonus in an amount equal to two
percent of any increase in operating income over the preceding fiscal year. The
agreement is for an initial term of three years with annual renewals thereafter.
Pursuant to the employment agreement, RHCI agreed to provide Mr. Cibran an
automobile allowance and options to purchase 125,000 shares of Common Stock. In
addition, Mr. Cibran's employment may be terminated by either RHCI or Mr.
Cibran; however, in the event RHCI terminates Mr. Cibran's employment without
due cause, RHCI must continue to pay Mr. Cibran his base salary in effect at the
time of such termination for 24 months after the date of such termination and
any bonus payable. The
12
<PAGE> 14
agreement also provides for a lump sum cash payment to Mr. Cibran of his bonus
and 24 months' base salary upon termination of his employment for any reason
following certain change of control events involving RHCI.
In August 1996, RHCI entered into a services agreement with HealthLink
Enterprises, Inc., a Florida corporation ("HealthLink"), pursuant to which
HealthLink agreed to make available to RHCI the services of Carol C. Lang,
Executive Vice President and Chief Financial Officer of RHCI. Prior to entering
into the services agreement, HealthLink acted as a consultant to RHCI. The
services agreement provides for the payment of an initial annual base
compensation to HealthLink of $240,000, subject to annual increases determined
by the Board of Directors and minimum annual increases based on the Consumer
Price Index. The services agreement is for an initial term of two years with
annual renewals thereafter. In addition, HealthLink is entitled to a bonus of up
to 40% of the base compensation, based on the achievement of targets set by the
President of RHCI or the Board of Directors. In addition, pursuant to the
services agreement, RHCI agreed to provide Ms. Lang with options to purchase
100,000 shares of Common Stock. The services agreement may be terminated by RHCI
or, upon three months notice, by HealthLink; however, in the event RHCI
terminates the agreement without due cause, RHCI must pay any bonus due and
continue to pay the base compensation in effect at the time of such termination
until the later of the end of the term of the services agreement or six months
after the date of termination. The services agreement also provides for a lump
sum cash payment to HealthLink of any bonus due and the greater of (a) 12
months' base compensation or (b) the base compensation that would have been
payable to HealthLink from the date of termination to the last day of the
services agreement, upon the termination of the services agreement for any
reason following certain change of control events involving RHCI. On August 18,
1998, the Company and Ms. Lang agreed to terminate the services agreement
between HealthLink and RHCI. In consideration for the termination of the service
agreement, the Company has agreed to pay HealthLink $420,000 December 1, 1998,
and upon completion of such payments, Ms. Lang has agreed to cancel options to
purchase 200,000 shares of Common Stock held by her.
In August 1996, RHCI entered into a three-year employment agreement
with Reynold J. Jennings, at the time, an Executive Vice President of RHCI,
providing for the payment of an initial annual base salary of $275,000 and an
annual bonus in an amount equal to two percent of any increase in operating
income over the preceding fiscal year. The employment agreement also gives Mr.
Jennings the right to require RHCI to repurchase options covering 124,830 shares
of Common Stock at a price of $3.20 per share (as adjusted for stock dividends
or splits). Mr. Jennings resigned his employment with RHCI in February 1997 to
accept other employment, in breach of his employment agreement with RHCI. In
such case, under the employment agreement, RHCI is required to make payments to
Mr. Jennings of approximately $400,000, less approximately $100,000 owing by Mr.
Jennings to RHCI in respect of split-dollar life insurance premiums paid by RHCI
and less any damages caused by Mr. Jennings' breach of his employment agreement.
In March 1997, Mr. Jennings commenced arbitration and court proceedings (in the
United States District Court for the Eastern District of Louisiana) against RHCI
in which he claims his employment was wrongfully terminated by RHCI and seeks
damages of approximately $2,300,000. Subsequently, the court proceedings have
been stayed pending the completion of arbitration proceedings to be held in
Coral Gables, Florida. RHCI intends to vigorously defend the proceedings.
13
<PAGE> 15
In January 1992, RHCI entered into employment agreements with Wallace
E. Smith, Senior Vice President of RHCI, and John A. Quinn, Senior Vice
President of RHCI, for the payment of initial annual base salaries to Mr. Smith
and Mr. Quinn of $125,000 and $115,000, respectively, subject to annual review
by the Board of Directors. The base salaries of Mr. Smith and Mr. Quinn have
been increased periodically since the inception of the agreements and, for the
fiscal year ended June 30, 1998, their base salaries were $160,608 and $155,598,
respectively. The agreements also provide for the payment to Mr. Smith and Mr.
Quinn of a bonus of up to 30% of their respective base salaries based upon the
attainment of certain performance targets, as well as a discretionary amount
based on job performance and approved by the Compensation Committee. In
addition, the agreements provide for an automobile allowance and the
reimbursement of certain relocation expenses. Pursuant to the agreements, if
RHCI terminates Mr. Smith or Mr. Quinn for any reason other than due cause, the
executive will be entitled to continue to receive his base salary in effect at
the time of such termination for a period of six months after the date of such
termination. On June 30, 1998, the Company and Mr. Quinn agreed to terminate his
employment agreement. In addition, in October 1998, the Company and Mr. Smith
agreed to terminate his employment agreement. In consideration for the
termination of Mr. Quinn's employment agreement, the Company has agreed to pay
him $145,000 and certain employee benefits, during the six month period ended
December 31, 1998. In addition, in consideration for the termination of Mr.
Smith's employment agreement, the Company agreed to pay him approximately
$80,000 and certain employee benefits during the period commencing on October
12, 1998 and ending on April 12, 1999.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires RHCI's
directors and executive officers, and persons who own more than ten percent of
Common Stock, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock. Executive officers, directors and greater
than ten percent stockholders are required by SEC regulations to furnish RHCI
with copies of all Section 16(a) reports they file.
To RHCI's knowledge, based solely on a review of the copies of such
reports furnished to RHCI and representations that no other reports were
required, during the fiscal year ended June 30, 1998, all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
ten percent stockholders were complied with, except that Luis E. Lamela failed
to make a timely filing of one Form 4 regarding one transaction, Daniel A. Sims
failed to make a timely filing of two Forms 4, each regarding one transaction,
and Jorge Rico and Carol Lang failed to make a timely filing of a statement on
Form 5 regarding one transaction each. Steven Shulman failed to make a timely
filing of Form 5 regarding two transactions. All such persons have subsequently
filed the required reports.
14
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH RAMSAY AFFILIATES:
The Ramsay Affiliates are corporations controlled by RHCI's Chairman of
the Board, Paul J. Ramsay. At October 15, 1998, Paul J. Ramsay, Ramsay Holdings,
Holdings Pty. and Hospitals Pty. owned of record approximately 28.8% of the
issued and outstanding shares of Common Stock, 100% of the issued and
outstanding shares of Series C Preferred Stock, and Series 1996 Preferred Stock,
and had an approximate 41.8% voting interest in RHCI.
AGREEMENTS IN CONNECTION WITH REFINANCING:
In September 1997, in connection with the refinancing of RHCI's then
existing bank, institutional and certain affiliate indebtedness, RHCI entered
into a Preferred Stock Purchase Agreement with Holdings Pty. pursuant to which
Holdings Pty. purchased 4,000 shares of Class B Preferred Stock Series 1997-A
(the "Series 1997-A Preferred Stock") at a purchase price of $4,000,000, paid
(i) $2,784,333 in cash and (ii) by offset against amounts owed by RHCI to
Holdings Pty. or its corporate affiliates as (a) accrued and unpaid dividends on
Series C Preferred Stock and Series 1996 Preferred Stock ($611,085), (b)
indebtedness owed to a corporate affiliate of Holdings Pty. under the Hospitals
Pty. Facility ($250,000), and (c) accrued and unpaid interest and net commitment
fees ($354,582) in respect of such indebtedness. The Series 1997-A Preferred
Stock bears cumulative dividends at an annual rate of 9% (payable subject to
certain restrictions set forth in credit documentation to which RHCI is a
party), has a liquidation preference of $1,000 per share, is optionally
redeemable by RHCI at any time at a redemption price equal to $1,000 per share
plus all accrued and unpaid dividends thereon (the "Redemption Price"), and is
mandatorily redeemable by RHCI following June 30, 1998 at the Redemption Price
in the event that RHCI has satisfied certain financial and operational
conditions in its credit documentation.
In September 1997, in connection with a refinancing of RHCI's then
existing indebtedness, RHCI entered into a Subordinated Note Purchase Agreement
with Holdings Pty. pursuant to which Holding Pty. purchased $2,500,000 in
principal amount of RHCI's Series B Subordinated Bridge Notes due September 30,
2005, initially bearing interest at a rate of 11% per annum. The purchase of the
Series B Subordinated Bridge Notes was funded with the proceeds of a concurrent
repayment of principal of $2,500,000 owed by RMCI to a corporate affiliate of
Holdings Pty. under the Hospitals Pty. Facility.
In September 1997, in connection with the refinancing of RHCI's then
existing indebtedness, RHCI entered into a Common Stock Purchase Agreement (the
"Common Stock Purchase Agreement") with Holdings Pty. pursuant to which Holdings
Pty. agreed to purchase shares of Common Stock at a purchase price of $5.17 per
share (the 30-day average of the closing price of the Common Stock prior to the
date of such Agreement) in the event that RHCI incurs obligations to make
certain payments to the State of Louisiana and to the extent that such payments
are in excess of $1,300,000 in the aggregate and such excess exceeds $500,000 in
any fiscal year. On October 13, 1998, the Common Stock Purchase Agreement was
amended to reduce the purchase price from $5.17 per share to $1.55 per share.
15
<PAGE> 17
OTHER ARRANGEMENTS:
On March 25, 1998, the Company entered into a Junior Subordinated Note
Purchase Agreement (the "Junior Subordinated Note"), with a corporate affiliate
of Mr. Ramsay in an aggregate principal amount of $5,000,000, plus accrued
interest. The Junior Subordinated Note bears interest at a rate of 12.5%.
RHCI entered into an indemnification agreement with its directors and
executive officers. These agreements provide that the directors and executive
officers will be indemnified to the fullest possible extent permitted by
Delaware law against all expenses (including attorneys' fees), judgments, fines,
penalties, taxes and settlement amounts paid or incurred by them in any action
or proceeding (including any action by or in the right of RHCI, or any of its
subsidiaries or affiliates) on account of their service as directors, officers,
employees, fiduciaries or agents of RHCI, or any of its subsidiaries or
affiliates and their service at the request of RHCI, or any of its respective
subsidiaries or affiliates as directors, officers, employees, fiduciaries or
agents of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise.
Thomas M. Haythe, a director of RHCI, is a partner of the New York City
law firm of Haythe & Curley, which firm rendered legal services to RHCI during
fiscal year 1998 and will continue to render legal services to RHCI in the
future.
RHCI amended its consulting agreement on February 1, 1997 with Summa
Healthcare Group, Inc. ("Summa"), a company of which Luis E. Lamela, the Vice
Chairman of the Board of RHCI, is the principal stockholder. Under the
consulting agreement, Summa provided RHCI with advisory and consulting services
in connection with strategic planning, business development and investor
relations for a fee of $30,000 per month, as well as a success fee to be
negotiated in good faith between RHCI and Summa with respect to any significant
transactions involving RHCI as to which Summa rendered substantial consulting or
advisory services. During the fiscal years ended June 30, 1997 and 1998, RHCI
paid Summa $237,500 and $90,000, respectively, in connection with its advisory
and consulting services. In connection with a similar consulting agreement
between Summa and RMCI, as a result of the merger between Ramsay Managed Care,
Inc. ("RMCI") and RHCI (the "Merger"), RHCI assumed RMCI's obligation to pay
$200,000 in success fees to Summa for Summa's services in connection with the
Merger and the sale by RMCI prior to the Merger of its HMO subsidiary (the "HMO
Sale"). Prior to the Summa Merger (as defined below), Summa assigned the right
to receive these fees to Mr. Lamela. The fees are payable by RHCI following June
30, 1998 in the event that RHCI satisfies certain financial and operational
conditions under its credit documentation.
On July 1, 1997, RHCI, Ramsay Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of RHCI, and Summa entered into an Agreement and
Plan of Merger, pursuant to which Summa merged with and into Ramsay Acquisition
Corp. in October 1997, whereupon Summa became a wholly owned subsidiary of RHCI
(the "Summa Merger"). The aggregate consideration paid by RHCI in the Summa
Merger consisted of $300,000 in cash, 250,000 shares of Common Stock and
warrants to purchase an aggregate of 500,000 shares of Common Stock at $3.25 per
share (of which, Mr. Lamela received $270,027 in cash, 225,023 shares of Common
Stock and warrants to purchase 450,045 shares of Common Stock).
16
<PAGE> 18
As a result of the Merger, RHCI assumed an obligation of RMCI to pay
$100,000 in success fees to Peter J. Evans, a director of RHCI. These fees are
payable to Mr. Evans for his services to RMCI in connection with the Merger. Mr.
Evans has been paid $50,000 of these fees, and the remaining $50,000 is payable
following June 30, 1998 in the event that RHCI satisfies certain financial and
operational conditions under its credit documentation.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Aaron Beam, Jr., Peter J. Evans and Thomas M. Haythe. Mr. Haythe is a partner of
the New York City law firm of Haythe & Curley, which firm rendered legal
services to RHCI during the last fiscal year and will continue to render legal
services to RHCI in the future. See "Certain Relationships and Related
Transactions" above.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation arrangements for executive officers of RHCI. RHCI's executive
compensation program is designed to attract, motivate, reward and retain
individuals with the executive and management skills needed to achieve RHCI's
business objectives. The compensation program accomplishes this goal by
providing RHCI's executives with incentives which reward achievement of both
short- and long-term objectives that contribute to the growth and profitability
of RHCI, and which link executive pay with the interests of RHCI's stockholders.
RHCI's executive compensation program consists of base salary, bonuses
and stock options. RHCI's salary levels are determined by comparisons with
companies of similar size and complexity in the behavioral health care industry.
Salary increases are determined in light of the financial performance of RHCI,
the individual performance of the executive and any increased responsibilities
assumed by the executive. The salaries for RHCI's Chief Executive Officer, and
President and Chief Operating Officer, were determined pursuant to the terms of
their employment agreements with RHCI, which in turn were based on the foregoing
considerations.
The employment agreements for RHCI's Chief Executive Officer, and
President and Chief Operating Officer, provide for bonuses based upon any
increase in operating income, as defined in the applicable agreement, of RHCI.
Bonuses for RHCI's executives for the fiscal year ended June 30, 1998 have not
yet been determined.
RHCI may also award bonuses to other executives based on the level of
financial performance achieved by RHCI and the individual accomplishments of the
executive, as evaluated by the Chief Executive Officer or the President of RHCI.
Annual bonuses are paid to the chief executive officers of each of RHCI's
facilities, based on (a) the financial performance of his/her facility compared
to budgeted and prior year performance, (b) the overall results of RHCI and (c)
the attainment of certain quality of care levels.
17
<PAGE> 19
RHCI periodically grants stock options to its executive officers and
other key employees. Stock option grants are intended to provide RHCI's
executives and other key employees with a significant incentive to work to
maximize stockholder value. The Compensation Committee believes that by
providing RHCI's executives and key employees who have substantial
responsibility for the management and growth of RHCI with an opportunity to
profit from increases in the value of the Common Stock, the interests of RHCI's
stockholders and executives will be most closely aligned.
THE COMPENSATION AND CONFLICT OF INTEREST
COMMITTEE OF THE BOARD OF DIRECTORS
Aaron Beam, Jr.
Peter J. Evans
Thomas M. Haythe
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return on
the Common Stock to the NASDAQ Stock Market-U.S. Index and a peer group. The
peer group companies consist of Comprehensive Care Corporation, Magellan Health
Services, Inc. and Res-Care Inc. RHCI believes that these peer companies, which
are engaged in the behavioral health and youth services industry, are most
comparable to RHCI's historical business, within the parameters set by the SEC.
The graph assumes that $100 was invested in Common Stock, the NASDAQ Stock
Market U.S. Index, the 1998 peer group and the 1997 peer group on June 30, 1993
and that all dividends were reinvested.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------------------------
6/93 6/94 6/95 6/96 6/97 6/98
<S> <C> <C> <C> <C> <C> <C>
RAMSAY HEALTH CARE, INC 100.00 108.00 71.09 50.18 56.45 33.45
PEER GROUP 100.00 128.68 97.43 138.74 171.44 166.45
NASDAQ STOCK MARKET (U.S.) 100.00 100.96 134.77 173.03 210.38 277.61
</TABLE>
18
<PAGE> 20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The stockholders (including any "group," as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) who, to the knowledge
of the Board of Directors owned beneficially more than five percent of any class
of the outstanding voting securities of RHCI as of October 2, 1998 and their
respective stockholdings as of such date (according to information furnished by
them to RHCI), are set forth in the following table. Except as indicated in the
footnotes to the table, all of such shares are owned with sole voting and
investment power.
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE NUMBER OF PERCENTAGE
BENEFICIAL OWNER OF CLASS SHARES OWNED (1) OF CLASS (1)
---------------- -------- ---------------- ------------
<S> <C> <C> <C>
Paul J. Ramsay Common 6,017,443 (2) 44.46%
Paul Ramsay Group Series C Preferred 142,486 (3) 100.00%
154 Pacific Highway Series 1996 Preferred 100,000 (3) 100.00%
St. Leonards, NSW 2065
Australia
Ramsay Holdings HSA Limited Common 2,301,207 (3) 44.06%
c/o Haythe & Curley Series C Preferred 71,303 (3) 50.00%
237 Park Avenue
New York, New York 10017
Paul Ramsay Holdings Pty. Limited Common 3,876,361 (3) 31.44%
c/o Haythe & Curley Series C Preferred 71,183 (3) 50.00%
237 Park Avenue
New York, New York 10017
Paul Ramsay Hospitals Pty. Limited Common 5,934,693 (3) 19.85%
c/o Haythe & Curley Series 1996 Preferred 100,000 (3) 100.00%
237 Park Avenue
New York, New York 10017
Heartland Advisors, Inc. Common 1,779,672 (4) 16.36%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Luis E. Lamela Common 856,068 (5) 7.48%
One Alhambra Plaza, Suite 750
Coral Gables, Florida 33134
Princeton Services, Inc. Common 662,069 (6) 6.08%
Fund Assets Management, L.P.
Merrill Lynch Special
Value Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
</TABLE>
- -------------------
(1) Includes all shares that each named person is entitled to receive
within 60 days, through the exercise of any option, warrant, conversion
right, or similar arrangement. Such shares are deemed to be owned and
outstanding by such person individually for purposes of calculating the
number of shares owned and the percentage of class for each such named
person, but are not deemed outstanding for purposes of such
calculations for any other named person.
19
<PAGE> 21
(2) Mr. Ramsay's beneficial ownership of Common Stock consists of (i)
17,750 shares of Common Stock owned directly by Mr. Ramsay, (ii) 65,000
shares of Common Stock issuable upon the exercise of exercisable
options owned directly by Mr. Ramsay, (iii) 2,301,207 shares of Common
Stock beneficially owned by Ramsay Holdings, (iv) 3,876,361 shares of
Common Stock beneficially owned by Holdings Pty., which includes all
shares beneficially owned by Ramsay Holdings, and (v) 5,934,693 shares
of Common Stock beneficially owned by Hospitals Pty., which includes
all shares beneficially owned by Ramsay Holdings and Holdings Pty. The
shares beneficially owned by Ramsay Holdings consist of 1,588,177
shares of Common Stock owned of record by Ramsay Holdings and 713,030
shares of Common Stock issuable upon the conversion of 71,303 shares of
Series C Preferred Stock owned of record by Ramsay Holdings. The shares
beneficially owned by Holdings Pty. consist of 613,324 shares of Common
Stock owned of record by Holdings Pty., 250,000 shares of Common Stock
issuable upon the exercise of exercisable warrants to purchase shares
of Common Stock held by Holdings, Pty., 711,830 shares of Common Stock
issuable upon the conversion of 71,183 shares of Series C Preferred
Stock owned of record by Holdings Pty., and the 2,301,207 shares of
Common Stock beneficially owned by Ramsay Holdings. The shares
beneficially owned by Hospitals Pty. consist of 916,666 shares of
Common Stock owned of record by Hospitals Pty., 141,666 shares of
Common Stock issuable upon the exercise of exercisable warrants to
purchase shares of Common Stock held by Hospitals Pty., 1,000,000
shares of Common Stock issuable upon the conversion of 100,000 shares
of Series 1996 Preferred Stock owned of record by Hospitals Pty., and
the 3,876,361 shares of Common Stock beneficially owned by Holdings
Pty. Does not include 25,000 shares of Common Stock issuable upon the
exercise of options granted to Mr. Ramsay, which are not currently
exercisable, or 533,333 shares of Common Stock issuable upon the
exercise of warrants held by Hospitals Pty., which are not currently
exercisable.
(3) These shares are included in the beneficial ownership of Paul J. Ramsay
and are included in footnote (2) above.
(4) Information as to the holdings of Heartland Advisors, Inc. ("HAI") is
based upon a report on Schedule 13G filed with the Securities and
Exchange Commission. Such report indicates that HAI owned 1,169,600
shares with sole voting power and 1,577,900 shares with sole
dispositive power. Such report indicates that HAI is an investment
adviser registered under the Investment Advisers Act of 1940.
(5) Includes 115,000 shares of Common Stock issuable upon the exercise of
exercisable options to purchase shares of Common Stock held by Mr.
Lamela and 450,045 shares of Common Stock issuable upon the exercise of
exercisable warrants to purchase shares of Common Stock held by Mr.
Lamela. See "Certain Relationships and Related Transactions-Agreements
in Connection with Refinancing" for information concerning an agreement
by Mr. Lamela not to exercise exercisable options and warrants.
(6) Information as to the holdings of Princeton Services, Inc. ("PSI"),
Fund Asset Management, L.P. ("FAM") and Merrill Lynch Special Value
Fund, Inc. ("MLSVFI") is based upon a report on Schedule 13G filed with
the Securities and Exchange Commission. Such report indicates that
629,300 shares were owned by PSI with shared voting and dispositive
power and 574,500 shares were owned by FAM and MLSVFI with shared
voting and dispositive power. PSI and its affiliates disclaim any
beneficial interest in such shares, other than shares held by PSI and
its affiliates in proprietary accounts.
On September 23, 1998, Holdings Pty. and Nottoway Properties, Inc.
entered into a secured credit facility with The Chase Manhattan Bank (the "Chase
Facility"), the proceeds of which were used, in part, to refinance in full the
secured demand loan facility (the "Coutts Facility") with Coutts Bank
(Switzerland), Ltd., successor to Coutts & Co. AG ("Coutts"). As security for
the Coutts Facility, Holdings Pty. and Ramsay Holdings had pledged to Coutts,
among other items, 1,679,898 of the shares of Common Stock held by Holdings Pty.
and Ramsay Holdings and the 142,486 shares of Series C Preferred Stock held by
Holdings Pty. and Ramsay Holdings (collectively, the "Pledged Stock"). Upon
entering into the Chase Facility, all outstanding indebtedness to Coutts was
fully repaid and the pledged stock was released.
20
<PAGE> 22
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of October 2, 1998, the number of
shares of Common Stock beneficially owned by each of RHCI's directors and
nominees for directors, each executive officer named in the Summary Compensation
Table, and all directors and executive officers as a group, based upon
information obtained from such persons.
<TABLE>
<CAPTION>
NAME OF TITLE OF NUMBER OF PERCENTAGE
BENEFICIAL OWNER CLASS SHARES OWNED(1) OF CLASS(1)
---------------- -------- --------------- -----------
<S> <C> <C> <C>
Paul J. Ramsay Common 6,017,443 (2) 44.46%
Series C Preferred 142,486 (3) 100.00%
Series 1996 Preferred 100,000 (3) 100.00%
Aaron Beam, Jr. Common 43,616 (4) *
Peter J. Evans Common 66,083 (5) *
Thomas M. Haythe Common 79,783 (6) *
Luis E. Lamela Common 856,068 (7) 7.48%
Steven J. Shulman Common 39,417 (8) *
Michael S. Siddle Common 42,750 (9) *
Bert G. Cibran Common 50,833 (10) *
Carol C. Lang Common 33,333 (11) *
John A. Quinn Common 10,333 (12) *
Wallace E. Smith Common 56,447 (13) *
All directors and executive Common 7,422,027 (2)(3)(4) 51.22%
officers as a group (5)(6)(7)(8)
(17 persons) (9)(10)(11)
(12)(13)
</TABLE>
- -------------------
* Indicates ownership percentage of less than one percent (1%).
(1) Includes all shares that each named person is entitled to receive
within 60 days, through the exercise of any option, warrant, conversion
right, or similar arrangement. Such shares are deemed to be owned and
outstanding by such person individually, and by all directors and
officers as a group, for purposes of calculating the number of shares
owned and the percentage of class for each such named person and the
group, but are not deemed to be outstanding for purposes of such
calculations for any other named person.
(2) Mr. Ramsay's beneficial ownership of Common Stock consists of (i)
17,750 shares of Common Stock owned directly by Mr. Ramsay, (ii) 65,000
shares of Common Stock issuable upon the exercise of exercisable
options owned directly by Mr. Ramsay, (iii) 2,301,207 shares of Common
Stock beneficially owned by Ramsay Holdings, (iv) 3,876,361 shares of
Common Stock beneficially owned by Holdings Pty., which includes all
shares beneficially owned by Ramsay Holdings, and (v) 5,934,693 shares
of Common Stock beneficially owned by Hospitals Pty., which includes
all shares beneficially owned by Ramsay Holdings and Holdings Pty. The
shares beneficially owned by Ramsay Holdings consist of 1,588,177
shares of Common
21
<PAGE> 23
Stock owned of record by Ramsay Holdings and 713,030 shares of Common
Stock issuable upon the conversion of 71,303 shares of Series C
Preferred Stock owned of record by Ramsay Holdings. The shares
beneficially owned by Holdings Pty. consist of 613,324 shares of Common
Stock owned of record by Holdings Pty., 250,000 shares of Common Stock
issuable upon the exercise of exercisable warrants to purchase shares
of Common Stock held by Holdings Pty., 711,830 shares of Common Stock
issuable upon the conversion of 71,183 shares of Series C Preferred
Stock owned of record by Holdings Pty., and the 2,301,207 shares of
Common Stock beneficially owned by Ramsay Holdings. The shares
beneficially owned by Hospitals Pty. consist of 916,666 shares of
Common Stock owned of record by Hospitals Pty., 141,666 shares of
Common Stock issuable upon the exercise of exercisable warrants to
purchase shares of Common Stock held by Hospitals Pty., 1,000,000
shares of Common Stock issuable upon the conversion of 100,000 shares
of Series 1996 Preferred Stock owned of record by Hospitals Pty., and
the 3,876,361 shares of Common Stock beneficially owned by Holdings
Pty. Does not include 25,000 shares of Common Stock issuable upon the
exercise of options granted to Mr. Ramsay, which are not currently
exercisable, or 533,333 shares of Common Stock issuable upon the
exercise of warrants held by Hospitals Pty., which are not currently
exercisable.
(3) These shares are included in the beneficial ownership of Paul J. Ramsay
and are included in footnote (2) above.
(4) Includes 23,333 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Mr. Beam.
(5) Includes 48,333 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Mr. Evans.
(6) Includes 5,000 shares of Common Stock held in a Keough Plan for the
benefit of Mr. Haythe and 25,000 shares of Common Stock issuable upon
the exercise of currently exercisable options to purchase shares of
Common Stock held by Mr. Haythe.
(7) Includes 115,000 shares of Common Stock issuable upon the exercise of
exercisable options to purchase shares of Common Stock held by Mr.
Lamela and 450,045 shares of Common Stock issuable upon the exercise of
exercisable warrants to purchase shares of Common Stock held by Mr.
Lamela. See "Certain Relationships and Related Transactions-Agreements
in Connection with Refinancing" for information concerning an agreement
by Mr. Lamela not to exercise exercisable options and warrants.
(8) Includes 25,000 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Mr. Siddle.
(9) Includes 21,667 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Mr. Shulman.
(10) Includes 50,000 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Mr. Cibran and including 833 shares of Common Stock issuable upon
the exercise of currently exercisable warrants to purchase shares of
Common Stock held by Mr. Cibran.
(11) Includes 33,333 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Ms. Lang.
(12) Includes 6,667 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock held
by Mr. Quinn and 666 shares of Common Stock issuable upon the exercise
of currently exercisable warrants to purchase shares of Common Stock
held by Mr. Quinn.
(13) Includes 54,417 shares of Common Stock issuable upon the exercise of
currently exercisable options to purchase shares of Common Stock by Mr.
Smith and 1,000 shares of Common Stock issuable upon the exercise of
currently exercisable warrants to purchase shares of Common Stock held
by Mr. Smith.
22
<PAGE> 24
2. RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP to serve as
independent auditors for RHCI for the fiscal year ending June 30, 1999. The
Board of Directors considers Ernst & Young LLP to be eminently qualified.
Although it is not required to do so, the Board of Directors is
submitting its selection of RHCI's auditors for ratification at the Meeting, in
order to ascertain the views of stockholders regarding such selection. If the
selection is not ratified, the Board of Directors will reconsider its selection.
The Board of Directors recommends that stockholders vote FOR
ratification of the selection of Ernst & Young LLP to audit the financial
statements of RHCI for RHCI's fiscal year ending June 30, 1999. It is the
intention of the persons named in the accompanying form of proxy to vote the
shares represented thereby in favor of such ratification unless otherwise
instructed in such proxy.
A representative of Ernst & Young LLP will be present at the Meeting
with the opportunity to make a statement if such representative desires to do so
and will be available to respond to appropriate questions.
3. OTHER MATTERS
The Board of Directors does not know of any other matters that may be
brought before the Meeting. However, if any such other matters are properly
presented for action, it is the intention of the persons named in the
accompanying form of proxy to vote the shares represented thereby in accordance
with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next Annual
Meeting of Stockholders of RHCI must be received by RHCI at its principal
executive offices by July 5, 1999 in order to be considered for inclusion in
RHCI's proxy statement relating to such meeting. In the event that a stockholder
fails to notify RHCI by September 17, 1999 of an intent to be present at RHCI's
1999 Annual Meeting of Stockholders in order to present a proposal for a vote,
RHCI will have the right to exercise its discretionary authority to vote against
the proposal, if presented, without including any information about the proposal
in its proxy materials.
October 28, 1998
23
<PAGE> 25
RAMSAY HEALTH CARE, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 19, 1998
The undersigned, a stockholder of RAMSAY HEALTH CARE, INC., does hereby
appoint Luis E. Lamela and Bert G. Cibran, or either of them, with full power of
substitution, the undersigned's proxies, to appear and vote all shares of Common
Stock, Class B Preferred Stock, Series C and Class B Preferred Stock, Series
1996, which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held at the Hyatt Regency Coral Gables, Coral Gables, Florida
33134, on Thursday, November 19, 1998 at 10:00 A.M., Eastern Standard Time, or
at any adjournment thereof, upon such matters as may properly come before the
Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxies or their substitutes to vote
as specified below on each of the following matters and in accordance with their
best judgment on any other matters which may properly come before the Meeting.
1. Election of Directors [ ] FOR all the nominees listed (except as
marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for the
nominees listed below.
Aaron Beam, Jr., Peter J. Evans, Thomas M. Haythe, Luis E. Lamela, Paul J.
Ramsay, Steven J. Shulman and Michael S. Siddle
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- -------------------------------------------------------------------------------
2. Ratification of appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending June 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH ITEM.
(continued on other side)
(TO BE SIGNED ON REVERSE SIDE)
(continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO ANY OF THE ITEMS, THEY WILL BE VOTED IN FAVOR OF THE ITEM(S)
FOR WHICH NO DIRECTION IS INDICATED.
IMPORTANT: Before returning this
proxy, please sign your name or
names on the line(s) below exactly
as shown thereon. Executors,
shareholders, trustees, guardians
or corporate officers should
indicate their full titles when
signing. Where shares are
registered in the name of joint
tenants or trustees, such joint
tenants or trustees should sign.
Dated: ____________________ , 1998
----------------------------------
Name
----------------------------(L.S.)
----------------------------(L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
