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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22,1999
REGISTRATION NO. 333-70819
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RAMSAY YOUTH SERVICES, INC.
(formerly known as Ramsay Health Care, Inc.)
(Exact name of Registrant as specified in its charter)
DELAWARE 63-0857352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)) Identification Number)
COLUMBUS CENTER
ONE ALHAMBRA PLAZA
SUITE 750
CORAL GABLES, FLORIDA 33134
(305) 569-6993
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
LUIS E. LAMELA
CHIEF EXECUTIVE OFFICER
RAMSAY YOUTH SERVICES, INC.
COLUMBUS CENTER
ONE ALHAMBRA PLAZA
SUITE 750
CORAL GABLES, FLORIDA 33134
(305) 569-6993
(Name,address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS
SENT TO AGENT FOR SERVICE, SHOULD BE SENT TO:
Bradley P. Cost, Esq.
Haythe & Curley
237 Park Avenue
New York, New York 10017
(212) 880-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plan, please check the following
box. [ ]
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If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act , please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [X]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate offering Amount of
securities to be registered registered(1) per share(1) price(1) registration fee(2)
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<S> <C> <C> <C> <C>
Common Stock ($.01 par value).......... 1,070,371 $6.09375 $6,522,573 $1,813.28
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act, based upon the
average of the high and low sale price of the registrant's Common Stock
on the Nasdaq Stock Market on January 14, 1999. The shares and the
price per share have been adjusted to reflect the one-for-three reverse
stock split which became effective on March 15, 1999.
(2) Previously paid.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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SUBJECT TO COMPLETION, DATED APRIL 22, 1999
1,070,371 SHARES OF COMMON STOCK
RAMSAY YOUTH SERVICES, INC.
Ramsay Youth Services, Inc. (formerly known as Ramsay Health Care,
Inc.) provides and manages treatment and educational programs for troubled
children and adolescents. Several of our stockholders are offering and selling a
total of 1,070,371 shares of our common stock under this prospectus. The shares
offered under this prospectus are being offered on behalf of the selling
stockholders. The selling stockholders may sell their shares at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices or at negotiated prices.
The common stock is listed on The Nasdaq Stock Market under the symbol
"RYOU." On April 7, 1999, the closing sale price of the common stock as reported
on The Nasdaq Stock Market was $7.50 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF FACTORS THAT
YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD UNDER THIS
PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is April 22, 1999
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TABLE OF CONTENTS
PAGE
<TABLE>
<CAPTION>
<S> <C>
Risk Factors................................................................................................3
The Company.................................................................................................9
Recent Transactions in Common Stock........................................................................10
Use of Proceeds............................................................................................11
Selling Securityholders....................................................................................11
Plan of Distribution.......................................................................................13
Description of Common Stock................................................................................14
Incorporation of Certain Information by Reference..........................................................15
Legal Matters..............................................................................................16
Experts....................................................................................................16
Available Information......................................................................................16
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RISK FACTORS
You should be aware of various risks before you invest in our common
stock, including those risks described below. You should carefully consider
these risk factors together with all of the other information included in this
prospectus before you decide to purchase shares of our common stock.
CHANGE IN STRATEGIC DIRECTION FROM A FULL RANGE BEHAVIORAL HEALTH SERVICES
PROVIDER TO AN AT-RISK YOUTH SERVICES PROVIDER
In February 1998, we announced a change in our strategic direction in
order to focus on becoming a leader in providing and managing treatment and
educational programs for troubled youths and adolescents. Since that time, we
have pared down operations through the sale of businesses and assets, including
our behavioral managed care business and a number of inpatient psychiatric
hospital facilities, which we decided were not essential to our objectives in
the youth services field. As a result of our changes in strategic direction and
the related sales of assets, we no longer provide a full range of behavioral
health services, but have concentrated existing operations on the at-risk youth
service industry. Currently, we are a significantly smaller company focused on a
narrower market.
DEPENDENCE ON MANAGEMENT AND OTHER QUALIFIED PERSONNEL
The successful operation of our business depends on the services of our
key members of management. Luis E. Lamela is the President and Chief Executive
Officer of Ramsay. Bert G. Cibran is the Chief Operating Officer of Ramsay.
Marcio Cabrera is an Executive Vice President and the Chief Financial Officer of
Ramsay. If we lost the full-time services of these or other key managers, it
could have a material adverse effect on our business and results of operations,
and we cannot predict whether we would be able to find replacements with the
necessary skills or experience.
PROFESSIONAL LIABILITY RISKS AND INCREASE IN LEGAL CLAIMS
We, along with other physicians, hospitals and healthcare providers,
have been subject to an increasing number of legal claims in recent years. Legal
claims against Ramsay have increased by $1.8 million over the last five years.
We maintain professional liability insurance coverage with maximum coverage of
$25,000,000, subject to a deductible of $250,000 per claim. Although we believe
that our insurance is sufficient for our needs, a significant award of claims or
damages could adversely affect our financial condition and results of
operations.
POSSIBLE REQUIREMENT TO REPAY LOUISIANA MEDICAID DISPROPORTIONATE SHARE PAYMENTS
During fiscal years 1994 and 1995, our Three Rivers facility received
Medicaid payments in an amount which the State of Louisiana believes was more
than we earned. We believe that Medicaid correctly reimbursed us and that the
State of Louisiana should reassess their determination.
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Also, during fiscal years 1994 and 1995, certain private psychiatric
facilities in Louisiana, including our Three Rivers and Bayou Oaks facilities,
received additional payments from the State due to their classification in
Louisiana as teaching hospitals. The State of Louisiana again believes that the
State made improper payments to certain facilities, including ours. Based on our
understanding of the rules and regulations in place at the time these payments
were made, we believe that the payments received as a result of the teaching
classification were appropriate.
The State of Louisiana has asked us to pay them approximately
$5,000,000 in connection with the aforementioned disputes. We expect this matter
to be settled for a much smaller amount. It is possible that we will not be able
to agree with the State of Louisiana on a settlement on terms or conditions
which we think are fair. If we cannot reach a settlement of these claims with
the State of Louisiana, Ramsay may have to proceed with litigation which is
likely to be costly and time consuming. We cannot predict the outcome of these
matters at this time.
POSSIBLE OBLIGATION TO MAKE CONTINGENT PAYMENTS AND INDEMNIFICATION PAYMENTS TO
PURCHASERS OF RAMSAY'S BUSINESSES
As a result of our change in strategic direction, we sold businesses
and assets which we decided were not essential to our objectives. The
documentation effecting these sales contains various adjustments in the purchase
prices for the businesses and assets that we sold and various agreements on our
part to indemnify the buyers against certain risks and contingencies. These
purchase price adjustments and indemnifications could require us to pay these
buyers significant amounts in the future. We cannot predict the extent, if any,
of these payments.
IF ROTECH SUCCEEDS IN ITS DEMAND FOR INDEMNIFICATION FROM RAMSAY, RAMSAY MAY
HAVE TO MAKE A SUBSTANTIAL CASH PAYMENT TO ROTECH
Prior to our merger with Ramsay Managed Care, Inc., Ramsay Managed Care
sold its HMO subsidiary, Apex Healthcare, Inc., which, as a licensed HMO in
Louisiana, Alabama and Mississippi, managed and provided prepaid healthcare
services to its members. On September 29, 1997, Ramsay Managed Care received a
demand for indemnification by the purchaser, RoTech Medical Corporation.
RoTech's complaint contains two causes of action, one for contractual
indemnity and one for breach of contract, and it sets forth seven alleged
breaches by Ramsay Managed Care pertaining to misrepresentations about the
financial condition of Ramsay Managed Care. The purchase agreement requires
Ramsay to indemnify RoTech for damages arising out of a breach of, or
misrepresentation in, the agreement, including attorneys' fees and costs. The
complaint seeks damages totalling approximately $5.8 million, an amount in
excess of the purchase price that RoTech paid for Apex. Ramsay served an answer,
affirmative defenses and counterclaims in the amount of $2 million on December
15, 1997. RoTech answered the counterclaims on January 8, 1998.
Ramsay believes that it has defenses to the complaint, although several
of the claims present potential risks to Ramsay. The most significant of these
are RoTech's claims with
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respect to the disallowance of certain of the assets of Apex's subsidiaries as
admitted assets by the Louisiana and Alabama Departments of Insurance, which
claims total over $2 million. While Ramsay has defenses to these claims, there
is a risk that RoTech could convince a jury that misrepresentations were made,
or that disclosures were inadequate. In addition, RoTech's claim with respect to
understated accounts payable and overstated assets, which totals approximately
$440,000, would be difficult to defend if RoTech has credible back-up
documentation supporting the claim. The aggregate damages sought with respect to
these claims total approximately $2.5 million. Moreover, of course, even if
Ramsay is successful in reducing these damages, or even eliminating certain of
the claims, there could be significant legal expenses associated with the
defense of this case.
The possibility of any payment by Ramsay to RoTech before June 30, 1999
as a result of a judgment against Ramsay is remote. Although we intend to
contest vigorously any position which we consider adverse, we cannot predict the
outcome of these matters at this time.
THE FAILURE OF RAMSAY AND ITS SUPPLIERS OR OTHER THIRD PARTY BUSINESSES TO BE
YEAR 2000 COMPLIANT COULD HAVE AN ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Many existing computer programs were designed and developed without
considering the upcoming change in the century, which could lead to the failure
of computer applications or create erroneous results by or at the year 2000.
This issue is referred to as the "Year 2000 Issue." The Year 2000 Issue is a
broad business issue, whose impact extends beyond traditional computer hardware
and software to possible failure of automated plant systems and instrumentation,
as well as to business third parties. Also, there can be no guarantee that third
parties of business important to us will successfully reprogram or replace, and
test, all of their own computer hardware, software and process control systems
to ensure such systems are Year 2000 compliant. Failure by us, suppliers or
other third party businesses important to us, and/or other constituents such as
governments to become Year 2000 compliant on a timely basis could have a
material adverse effect on our financial position and results of operations.
DILUTION DUE TO ISSUANCE OF ADDITIONAL COMMON STOCK TO FINANCE ACQUISITIONS
Ramsay intends to pursue growth of its business through acquisitions
and to finance these acquisitions partially through the issuance of additional
common stock. The issuance of additional shares of common stock in acquisition
transactions could decrease the value of the shares of common stock outstanding.
MINIMAL TRADING VOLUME OF COMMON STOCK
The trading volume for our common stock, as reported on The Nasdaq
Stock Market, averaged 29,383 shares per week during the three month period
ended December 31, 1998. As a result, purchasers of our common stock may be
unable to sell the common stock at the time or at the price desired. While
Ramsay is not aware of any shareholders that are currently having difficulty
selling their shares due to low trading volume, the trading volume of the common
stock is lower than many other similarly situated companies listed on the Nasdaq
Stock Market.
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STATE REGISTRATION REQUIRED FOR SALES OF SHARES MAY RESTRICT TRANSFERABILITY OF
SHARES
Under some state securities laws, shares of common stock may not be
sold unless they are qualified for sale or are exempt from the registration
requirements of the state in which the prospective purchaser lives. We will use
our best efforts to register and qualify our common stock under the state
securities laws in which we believe we need to do so. Failure to register and
qualify our common stock under applicable state securities laws may indefinitely
restrict the ability of a shareholder in a particular state to transfer his or
her shares.
FAILURE TO BE SUCCESSFUL EXPANDING WITHIN AND MEETING THE NEW DEMANDS OF THE
AT-RISK YOUTH INDUSTRY
Our business strategy is to take maximum advantage of existing
operations through focusing on, and expanding within, the at-risk youth
industry. Our aim is to achieve this expansion by establishing or acquiring
additional residential treatment centers and group homes, or companies which own
these types of facilities, and establishing or acquiring companies which provide
educational services. We may not be successful in expanding within this
industry, and our business may not be profitable once we have expanded within
it. Also, the at-risk youth industry will subject us to new management demands
and expose us to differing areas of liability. For example, providing services
solely for at-risk youth will likely require heightened supervision of the
children and young adults under Ramsay's care. Even a momentary lapse in
appropriate supervision could expose Ramsay to liability.
RISKS RELATING TO ACQUISITIONS AND ABILITY TO FINANCE AND COMPLETE ACQUISITIONS
One way we may expand in the at-risk youth industry is to acquire
companies already engaged in the provision of treatment and educational services
for troubled youth. This will subject us to a number of risks, including the
possible increase in our indebtedness, the possible inability to integrate the
operations of the acquired business with ours, the diversion of our management's
attention from their other business activities and the potential inability to
retain key managers and employees of any acquired business. In addition, we
cannot predict whether we will actually make acquisitions of complimentary
businesses or how many businesses we will actually acquire. Failure to complete
acquisitions may negatively affect Ramsay's growth. Finally, our credit facility
restricts our ability to make acquisitions and we cannot predict whether the
necessary consents from our lenders will be obtained in order to make any
acquisitions.
Ramsay's credit facility with Fleet Capital Corporation limits Ramsay's
ability to make and finance acquisitions. Ramsay's credit facility consists of:
* a term loan of $8,000,000
* a revolving credit facility equal to the lesser of $8,000,000 or
the borrowing base of Ramsay's receivables
* an acquisition loan commitment of up to $6,000,000
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The acquisition loan commitment begins on March 1, 1999 and expires
October 29, 1999. acquisition loan requests cannot be less than $500,000.
Amounts repaid with respect to the acquisition loans may not be reborrowed.
IF WE CANNOT COMPLY WITH CHANGING FEDERAL, STATE AND LOCAL REGULATIONS RELATING
TO PATIENT REFERRALS THE GOVERNMENT COULD FINE US, SUSPEND OUR OPERATIONS,
EXCLUDE US FROM PARTICIPATION IN GOVERNMENT REIMBURSEMENT PROGRAMS OR REVOKE OUR
LICENSES
Various Federal, state and local laws regulate our businesses and
frequently change. These laws regulate many aspects of our business, including
licensure, billing, financial and payment relationships, referrals, direct
employment of licensed healthcare professionals, conduct of operations, the
non-profit status of hospitals and other entities with whom we do business, and
certification under Medicare and Medicaid. We expect to comply with applicable
regulatory requirements, although there can be no assurance that we will. If we
cannot comply with these, or other regulations, the government could fine us,
temporarily suspend our operations, exclude us from participation in government
reimbursement or payment programs or revoke our licenses. We cannot predict how
these laws or regulations will change or how such a change might effect our
operations.
Existing Federal laws governing Medicare, as well as some state laws,
regulate certain aspects of the relationship between providers such as us, and
their referral sources, including physicians, hospitals and other health care
providers. The Social Security Act and several of its healthcare laws, prohibit
providers and others from receiving compensation for either making a referral
for or ordering a Medicare-covered service or item. These laws also prohibit
physicians, subject to several exceptions, from making referrals to several
entities (including hospitals) in which they will benefit financially. Violation
of these laws is punishable by civil and criminal penalties and exclusion from
the Medicare program. In addition, some states have passed similar legislation
which prohibits the referral of patients who pay directly for their own care. We
believe that we are currently in compliance with these laws, although it is
possible that we are not as these laws are often complicated and vague.
IF THE COST OF PROVIDING SERVICES TO OUR PATIENTS EXCEEDS THE AMOUNT OF
REIMBURSEMENT WE RECEIVE FROM THIRD-PARTY PAYORS, OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS WOULD SUFFER
We receive our operating revenues mostly from third-party reimbursement
and payment programs, including commercial insurance programs (approximately
14%), government insurance programs such as Medicare and Medicaid and other
governmental payment and aid programs (approximately 81%). It is possible that
payments under these provisions may not cover all of the costs of the services
provided. Also, changes in the reimbursement and payment policies of these
programs may adversely affect our financial condition and results of operations.
Our business has been and will continue to be affected by the actions
and policies of payors for these services. Payors are continually trying to
revise payment procedures in their favor. For example, payors try to monitor
spending in order to keep costs down through several methods, including
prescreening patients before they receive care and continually monitoring the
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patients while they are receiving care. It is possible that these actions could
adversely affect our financial condition and results of operations.
RAMSAY HAS NEVER DECLARED CASH DIVIDENDS ON ITS COMMON STOCK AND IS NOT LIKELY
TO DECLARE DIVIDENDS IN THE FUTURE
We have never declared any cash dividends on our common stock. In
addition, under the terms of our credit facility, we are not allowed to do so in
the future. We expect to use our future earnings to support the continued growth
of our business, not to return it to our stockholders in the form of a dividend.
A decision to declare a cash dividend on our common stock is exclusively that of
our board of directors, and then, only if our credit facility allows it.
POSSIBLE INSTABILITY OF STOCK PRICE
We believe that several factors may affect the market price of our
common stock. For example, announcements regarding healthcare and educational
reform measures and other providers, reductions in projected government
healthcare and educational spending, and variations in our financial results
could cause the market price of our common stock to increase or decrease. Any
negative announcements regarding reform measures or program spending or about
our earnings could decrease the market price of our common stock. As a result,
the market for our common stock may have price fluctuations unrelated to our
operating performance. Trading volume fluctuations could occur as a result of
any reduction in the price of our common stock.
DEPENDENCE ON PAYMENTS FROM SUBSIDIARIES
We are a holding company which earns money only through the operations
of our subsidiaries. Therefore, we have to rely upon payments from our
subsidiaries to meet our obligations. Our subsidiaries' ability to pay us will
be subject to, among other things, applicable state laws which limit the
subsidiaries' ability to pay dividends to us to the amount of profits that these
subsidiaries earn. Also, creditors of our subsidiaries have first priority over
our subsidiaries' funds.
Some of the information in this prospectus may contain forward-looking
statements. You can identify these statements by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward-looking" information. When considering these forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. The risk factors noted in this section and other
factors noted throughout this prospectus could cause our actual results to
differ materially from those contained in any forward-looking statement.
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THE COMPANY
GENERAL
Ramsay Youth Services, Inc. is a leading provider and manager of
diversified treatment and educational programs for at-risk and troubled youth in
residential and non-residential settings nationwide.
On February 19, 1998, Ramsay announced a change in strategic direction
in order to focus on becoming a leader in the at-risk youth industry. To that
end, in February 1998, management identified for divestiture those businesses
and facilities which were not essential to its strategic objectives in the youth
services field. In June 1998, Ramsay sold its behavioral managed care business
and its Greenbrier facility for an aggregate amount of $21.6 million and in
September 1998, we completed the sales of a number of inpatient psychiatric
hospitals for $29.6 million. We applied the net proceeds from these sales to
reduce $41.5 million of indebtedness and to redeem $2.5 million of Series 1997
preferred stock, all held by an unaffiliated financial institution. The
remaining business represents Ramsay's youth service operations and is comprised
of seven youth facilities with 713 beds and six group homes with 66 beds. Ramsay
also provides a range of outpatient services and day treatment programs tailored
for the at-risk and troubled youth population.
Throughout its youth facilities and group homes, Ramsay offers
specialized services to those adolescents affected with behavioral disorders,
psychoses, emotional disorders, as well as sexual and juvenile offenders. Within
these environments, clinical and program teams incorporate therapeutic,
educational and vocational services with cognitive, behavioral and social
rehabilitation programs. These highly structured programs assist troubled youth
in learning how to change ineffective or violent behavior and cope with the
difficulties and stresses of life. Ramsay's specialized services and programs
are geared toward the following populations:
* juvenile offenders
* adolescent females
* children and adolescents with emotional and behavioral disorders
* sexual offenders
* substance abusers
* youth with developmental disabilities.
In response to state, community and agencies' needs to secure
appropriate placements for special needs youth, Ramsay offers residential
treatment facilities, group homes, special education programs and
community-based services. The primary objective of our programs is to provide
the optimal opportunity for habitation and integration of at-risk and troubled
youth into their communities as responsible individuals and productive citizens.
On January 13, 1999, Ramsay's board of directors approved a
one-for-three reverse stock split which became effective on March 15, 1999. As a
result, all common share and per share amounts included in this document have
been restated to show the effects of this reverse stock split.
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FORWARD-LOOKING STATEMENTS
In connection with the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995, we note that this prospectus
(including the documents incorporated by reference) contains forward-looking
statements about Ramsay. Ramsay is setting forth in this prospectus cautionary
statements identifying important factors that may cause our actual results to
differ materially from those set forth in any forward-looking statements or
information made by or on behalf of or concerning Ramsay. Some of the most
significant factors include the following:
* accelerating changes occurring in the at-risk youth industry,
including competition from consolidating and integrated provider
systems and limitations on reimbursement rates
* federal and state governmental budgetary constraints which could
have the effect of limiting the amount of funds available to
support governmental programs
* statutory, regulatory and administrative changes or
interpretations of existing statutory and regulatory provisions
affecting the conduct of Ramsay's business and affecting current
and prior reimbursement for Ramsay's services
* Ramsay's inability to successfully implement its new strategic
direction of providing treatment and education programs for
at-risk and troubled youth
* the other matters set forth under the caption "RISK FACTORS"
above.
RECENT TRANSACTIONS IN COMMON STOCK
On October 30, 1998, Ramsay completed the private placement of an
aggregate of 1,070,371 shares of common stock to its Chief Executive Officer,
Paul Ramsay Holdings Pty. Limited, a corporate affiliate of Paul J. Ramsay, the
Chairman of the Board of Ramsay and its principal stockholder, and other
unrelated persons, all at a price per share of $3 3/8, the closing bid price of
the common stock on The Nasdaq Stock Market on October 26, 1998 (the date of the
various subscription agreements). These shares are included in the shares of
common stock covered by this prospectus.
In addition, on October 30, 1998, Ramsay issued 177,778 shares of
common stock to Ramsay Holdings, in exchange for $600,000 of principal amount of
junior subordinated indebtedness that Ramsay owed to Ramsay Holdings. As part of
the exchange agreement entered into between Ramsay and Ramsay Holdings to affect
the foregoing exchange, Ramsay agreed to issue additional shares of common stock
to Ramsay Holdings in exchange for $4 million of Ramsay's Class B preferred
stock, Series 1997-A (together with all accrued and unpaid dividends thereon)
and an additional $400,000 of principal amount of junior subordinated
indebtedness owed by Ramsay to Ramsay Holdings. This latter exchange was
effected on December 1, 1998 at a price per share of $3 3/8 (the closing bid
price of the common stock on The Nasdaq Stock Market on October 26, 1998, the
date of the exchange agreement) after the expiration of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of
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1976. In the latter exchange, we issued 1,428,740 additional shares of common
stock to Ramsay Holdings.
On December 8, 1998, Ramsay completed the acquisition of The Rader
Group, Inc. for $1 million in cash and earn-out payments payable in the future
if certain earning targets are achieved. In addition, one of Ramsay's
subsidiaries entered into an employment agreement with Bill T. Rader. As part of
the employment arrangement, Mr. Rader received 33,333 shares of common stock,
which shares are included in the shares of common stock this prospectus covers.
On December 16, 1998, Ramsay entered into an agreement with Ramsay
Holdings, Ramsay Holdings HSA Limited and Paul Ramsay Hospitals Pty. Limited to:
* Convert Ramsay's Class B preferred stock, Series C and Class B
preferred stock, Series 1996 (together with accrued and unpaid
dividends thereon of $618,908) into an aggregate of 1,198,756
shares of common stock.
* Exchange $6,883,553 of principal amount of junior subordinated
indebtedness owed by Ramsay (together with accrued and unpaid
interest thereon of $123,219) for 1,384,054 shares of common
stock. This exchange was effected at a price per share of $5 1/16
(the closing bid price of the common stock on The Nasdaq Stock
Market on December 16, 1998, the date of the agreement).
USE OF PROCEEDS
Ramsay will not receive any of the proceeds from the sale of the shares
offered in this prospectus. However, we received $3,500,000 when we originally
sold 1,037,038 of the shares of the common stock covered by this prospectus.
This amount was used for several corporate purposes.
SELLING SECURITYHOLDERS
The following selling securityholders beneficially own as of January 1,
1999 and may offer under this prospectus the number of shares of common stock
set forth opposite their respective names. The shares offered under this
prospectus may be offered from time to time by the selling securityholders named
below, their nominees, transferees or their donees. The selling securityholders
are under no obligation to sell all or any portion of the shares pursuant to
this prospectus. In addition, because the selling securityholders are not
obligated to sell all or a portion of their shares pursuant to this prospectus,
Ramsay is unable to ascertain the number of shares of common stock that will be
beneficially owned by each selling securityholder following the termination of
the offering.
Some of the selling securityholders have a relationship with Ramsay.
Luis E. Lamela has been the Chief Executive Officer of Ramsay since January 1998
and a director of Ramsay since 1996. The figures in the following table for Paul
Ramsay Holdings Pty. Limited include all shares beneficially owned by Paul
Ramsay Holdings HSA Limited, a Barbados corporation, a wholly owned subsidiary
of Ramsay Holdings and a corporate affiliate of Mr. Ramsay, but do not include
798,246 shares of common stock beneficially owned by Paul Ramsay Hospitals Pty.
Limited,
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an Australian corporation and the parent corporation of Ramsay Holdings. Haythe
& Curley has served as counsel to Ramsay since 1987, and Thomas M. Haythe, a
member of that firm, has been a director of Ramsay since 1987. See "LEGAL
MATTERS."
Ramsay will incur expenses in respect of this offering in an amount
estimated to be $50,000 in the aggregate. Except as otherwise provided in this
prospectus (including the footnotes to the table below), no selling
securityholder has held any position or office or had any other material
relationship with Ramsay within the past three years. The selling
securityholders will receive all of the proceeds from the sale of the shares
offered hereby. Ramsay will not receive any proceeds from the sale of such
shares. See "USE OF PROCEEDS" and "PLAN OF DISTRIBUTION."
The information in the table below concerning the selling
securityholders is based on information provided to, or known by, Ramsay.
Information concerning the selling securityholders may change from time to time
after the date of this prospectus. See "RISK FACTORS," "PLAN OF DISTRIBUTION"
and "DESCRIPTION OF CAPITAL STOCK."
<TABLE>
<CAPTION>
Shares of Shares of
Shares Of Common Stock Common Stock
Common Stock Acquirable Acquirable
Shares Of Common Offered Upon Upon
Stock Owned Prior Pursuant Exercise of Exercise of
Name of Selling Securityholder To Offering To Offering Options Warrants
- ------------------------------ ----------- ----------- ------- --------
<S> <C> <C> <C> <C>
Dauphin Capital Partners I, LP.................... 444,444 444,444 ----- ------
1921 West Joppa Road, Reston, MD 21204-1848
Luis E. Lamela.................................... 393,304 296,296 38,333 150,015
Paul Ramsay Holdings Pty. Limited................. 4,637,691 160,000 83,333 ------
Moises Hernandez, M.D. ........................... 59,259 59,259 ----- ------
Bill T. Rader..................................... 33,333 33,333 ----- ------
Thomas Hodapp..................................... 29,630 29,630 ----- ------
Haythe & Curley................................... 29,630 29,630 ----- ------
Sanford R. Robertson.............................. 14,816 14,816 ----- ------
Aaron Beam........................................ 9,724 2,963 7,777 ------
TOTAL........................................ 1,070,371
</TABLE>
12
<PAGE> 15
PLAN OF DISTRIBUTION
All of the shares offered under this prospectus are being offered on
behalf of the selling securityholders. The shares are comprised of 1,037,038
shares of common stock issued by Ramsay in a private placement in October 1998
and 33,333 shares of common stock issued by Ramsay in connection with employment
arrangements entered into in connection with an acquisition Ramsay completed in
December 1998. See "RECENT TRANSACTIONS IN COMMON STOCK."
The selling security holders may effect sales of the shares directly to
purchasers as principals or through one or more underwriters, brokers, dealers
or agents from time to time in one or more transactions (which may involve block
transactions). Any sales of the shares may be effected through the Nasdaq Stock
Market, in private transactions or otherwise. The selling security holders may
sell the shares at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. If the selling
securityholders effect sales through underwriters, brokers, dealers or agents,
such firms may receive compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers of the shares for
whom they may act as agent, principal or both. The selling security holders will
select those persons who act as broker-dealers or underwriters in connection
with the sale of the shares and may have other business relationships with, and
perform services for, Ramsay. Any selling securityholder, underwriter or
broker-dealer who participates in the sale of the shares may be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act. Any
commissions received by any underwriter or broker-dealer and any profit on any
sale of the shares as principal may be deemed to be underwriting discounts and
commissions under the Securities Act.
The anti-manipulation provisions of Rules 101 through 104 under the
Exchange Act of 1934 may apply to purchases and sales of shares of common stock
by the selling securityholders. In addition, there are restrictions on
market-making activities by persons engaged in the distribution of the common
stock.
Under the securities laws of certain states, the shares may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the shares may not be able to be sold unless the common stock
has been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
Ramsay is required to pay expenses incident to the registration,
offering and sale of the shares pursuant to this offering. Ramsay has also
agreed to indemnify the selling securityholders, their partners, officers,
directors and each of their controlling persons, if any, against certain
liabilities, including liabilities under the Securities Act. Ramsay estimates
that its expenses in connection with the offering will be approximately $50,000
in the aggregate.
Ramsay has advised the selling securityholders that if a particular
offer of shares is to be made on terms constituting a material change from the
information set forth above, then to the extent required, a prospectus
supplement must be distributed setting forth such terms and related information
must be used.
13
<PAGE> 16
DESCRIPTION OF COMMON STOCK
Ramsay's authorized capital stock consists of 30,000,000 shares of
common stock, $.01 par value, 800,000 shares of Class A preferred stock, $1.00
par value, and 2,000,000 shares of Class B preferred stock, $1.00 par value,
issuable in series.
At January 1, 1999, Ramsay had issued and outstanding 8,885,692 shares
of common stock. Each outstanding share of common stock is entitled to one vote
on all matters submitted to a vote of stockholders. The common stock does not
have cumulative voting rights. Presently outstanding shares of common stock are
fully paid and non-assessable. In the event of any liquidation, dissolution or
winding-up of the affairs of Ramsay, the holders of common stock will be
entitled to share ratably in its assets remaining after provision for payment of
creditors and after the liquidation preference of any Class B preferred stock
outstanding at the time.
Subject to the rights of the holders of the Class B preferred stock, no
shares of which are issued or outstanding on the date hereof, the holders of the
common stock are entitled to receive dividends when and if declared by the board
of directors out of funds legally available for that purpose. Ramsay's ability
to pay dividends is restricted under the terms of certain loan agreements to
which Ramsay is a party.
The transfer agent for the common stock is First Union National Bank of
North Carolina.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Ramsay's certificate of incorporation, as amended, includes provisions
to eliminate the personal liability of Ramsay's directors to the fullest extent
permitted by Delaware law. Under current law, such exculpation generally extends
to breaches of fiduciary duty, except for the following:
* breaches of such person's duty of loyalty
* acts or omissions not in good faith or which involve intentional
misconduct
* those instances where an improper personal benefit was received
* the declaration of dividends in violation of applicable law.
Ramsay's by-laws provide that Ramsay shall indemnify to the fullest
extent permitted by Delaware law any person who is, or is threatened to be, made
a party to any action because he or she is or was a director or officer of
Ramsay.
It is the position of the Securities and Exchange Commission that to
the extent indemnification for liabilities arising under the Securities Act is
allowed for any director or officer of Ramsay under Delaware law, its
certificate of incorporation or by-laws as a means of indemnifying any of them
against those liabilities, that indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
14
<PAGE> 17
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Ramsay is entitled to incorporate certain documents filed with the
Securities and Exchange Commission into this prospectus simply by referencing
those documents in this prospectus. That means the information in those
documents will be deemed to have been disclosed in this prospectus as if it was
fully set forth in this prospectus and, by virtue of receiving this prospectus,
you will be deemed to have had access to that information.
The following documents filed by Ramsay with the Securities and
Exchange Commission as required by the Exchange Act are incorporated by
reference into this prospectus and made a part of this prospectus as of their
respective dates:
1. Ramsay's transition report on Form 10-K for the six months
ended December 31, 1998, filed with the Securities and Exchange
Commission on March 29, 1999.
All documents Ramsay files under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and before the termination of
the offering shall be deemed to be incorporated by reference into this
prospectus. These documents shall be deemed to be a part of this prospectus from
their respective filing dates. Statements contained in this prospectus shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent set forth below. Statements contained in a document incorporated, or
deemed to be incorporated, by reference in this prospectus shall also be deemed
to be modified or superseded for purposes of this prospectus to the extent set
forth below. Both of these types of statements shall be modified or superseded
to the extent that a statement contained in this prospectus, or in any
subsequently filed document, which also is, or is deemed to be, incorporated by
reference in this prospectus, modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part of
this prospectus, except as so modified or superseded.
Ramsay will provide, without charge, to each person to whom a copy of
this prospectus is delivered, upon the request of any such person, a copy of any
or all of the documents incorporated by reference herein (excluding the exhibits
to such documents). Requests for copies should be directed to Ramsay Youth
Services, Inc., Columbus Center, One Alhambra Plaza, Suite 750, Coral Gables,
Florida 33134, Attention: Secretary.
15
<PAGE> 18
LEGAL MATTERS
The law firm of Haythe & Curley, New York, New York will pass upon the
validity of the shares of common stock offered under this prospectus. Haythe &
Curley is also one of the selling securityholders and Thomas M. Haythe, a member
of that firm, is a director of Ramsay. See "SELLING SECURITYHOLDERS."
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Transition report on form 10-K for the six
month period ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements are incorporated by reference in reliance
on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
AVAILABLE INFORMATION
Ramsay has filed with the Securities and Exchange Commission under the
Securities Act a registration statement on Form S-3. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement, certain items of which are
contained in exhibits and schedules as permitted by the rules and regulations of
the Securities and Exchange Commission.
Ramsay is subject to the informational requirements of the Exchange Act
and, as a result, files certain periodic reports, proxy statements and other
information with the Securities and Exchange Commission. Reports and other
information filed by Ramsay may be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at its principal
offices located at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following regional offices of the Securities
and Exchange Commission: Seven World Trade Center, 13th Floor, New York, New
York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60601.
Copies of such material may be obtained by mail from the Public Reference
Section of the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Securities and
Exchange Commission maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including Ramsay.
Material filed by Ramsay can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION OR
REPRESENTATIONS PROVIDED IN THIS PROSPECTUS. WE HAVE AUTHORIZED NO ONE TO
PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THE DOCUMENT.
16
<PAGE> 19
================================================================================
1,070,371 SHARES
COMMON STOCK
RAMSAY YOUTH SERVICES, INC.
--------------------------------------
PROSPECTUS
--------------------------------------
April 22, 1999
================================================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred and borne by
Ramsay in connection with the sale of the shares offered hereby. All amounts
shown are estimates, except for the Securities and Exchange Commission and
Nasdaq Stock Market filing fees.
Securities and Exchange Commission filing fee ................... $ 1,813
Nasdaq Stock Market additional share listing fee ................ $ 906
Legal fees and expenses ......................................... $25,000
Accounting fees and expenses .................................... $10,000
Miscellaneous ................................................... $12,281
-------
Total fees and expenses .................................... $50,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, among other
things, and subject to certain conditions, authorizes Ramsay to indemnify its
officers and directors against certain liabilities and expenses incurred by such
persons in connection with the claims made against them as a result of their
being an officer or director. Ramsay's By-Laws provide that Ramsay shall
indemnify any person who is or was a director or officer of Ramsay and is a
party or is threatened to be made a party to any action or proceeding to the
fullest extent permitted by Delaware law.
Article IV, Section 4.1 of Ramsay's By-laws provides, in part, as
follows:
Each person who was or is a party or is threatened to be made a party
or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason of the fact that
he is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director, officer or fiduciary of another
corporation, partnership, joint venture, trust of other enterprise, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than said Law permitted the corporation to provide prior
to such amendment), against all expenses, liability and loss, (including
attorneys' fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonable believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
II-1
<PAGE> 21
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as a part of this
registration statement:
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
5.1 Opinion of Haythe & Curley (regarding the validity
of the shares of Common Stock).
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (included on page II-3).
ITEM 17. UNDERTAKINGS.
(a) Ramsay hereby undertakes the following:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of Ramsay's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Ramsay pursuant to the foregoing provisions, or otherwise, Ramsay has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Ramsay of expenses incurred
or paid by a director, officer or controlling person of Ramsay in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, Ramsay
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against the public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-2
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act, Ramsay Youth
Services certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Coral Gables, State of Florida, on April 22, 1999.
RAMSAY YOUTH SERVICES, INC.
By: /s/ Luis E. Lamela
------------------------------------
(Luis E. Lamela
Chief Executive Officer and
Principal Executive Officer)
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Date Signature/Title
---- ---------------
Dated: April 22, 1999 /s/ Luis E. Lamela
---------------------------------
Luis E. Lamela
Chief Executive Officer,
Principal Executive Officer and
Director
Dated: April 22, 1999 /s/ Marcio Cabrera
---------------------------------
Marcio Cabrera
Principal Financial Officer
and Principal Accounting Officer
Dated: April 22, 1999 /s/ Paul J. Ramsay*
---------------------------------
Paul J. Ramsay
Chairman of the Board and Director
Dated: April 22, 1999 /s/ Aaron Beam, Jr.*
---------------------------------
Aaron Beam, Jr.
Director
Dated: April 22, 1999 /s/ Peter J. Evans*
---------------------------------
Peter J. Evans
Director
II-3
<PAGE> 23
Dated: April 22, 1999 /s/ Thomas M. Haythe*
---------------------------------
Thomas M. Haythe
Director
Dated: April 22, 1999 /s/ Steven J. Shulman*
---------------------------------
Steven J. Shulman
Director
Dated: April 22, 1999 /s/ Michael S. Siddle*
---------------------------------
Michael S. Siddle
Director
*By Luis E. Lamela, attorney-in-fact
/s/ Luis E. Lamela
- -------------------------------------------
Luis E. Lamela
II-4
<PAGE> 24
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
5.1* Opinion of Haythe & Curley (regarding the validity of
the shares of Common Stock).
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1* Power of Attorney (included on page II-3).
- ------------------------------------
* Previously filed.
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to the Registration Statement (Form S-3 No. 33-70819) and
related Prospectus of Ramsay Youth Services, Inc. for the registration of
1,070,371 shares of its common stock and to the incorporation by reference
therein of our report dated March 15, 1999, with respect to the consolidated
financial statements of Ramsay Youth Services, Inc. included in its Transition
report (Form 10-K) for the six month period ended December 31, 1998, filed with
the Securities and Exchange Commission.
Ernst & Young LLP
April 22, 1999
