AMENDMENT No. 2 dated as of November 1, 1996 (this  "Amendment") made
by Ramsay Health Care,  Inc. a Delaware  corporation  (the  "Company"),  to that
certain Rights  Agreement dated as of August 1, 1995, as amended by that certain
Amendment dated as of October 3, 1995 (as so amended, the "Agreement"),  between
the  Company  and First  Union  National  Bank of North  Carolina  (the  "Rights
Agent").

           WHEREAS, the Company has determined that the definition of "Acquiring
Person" in the  Agreement  should be amended to provide an exception for persons
who are eligible to file a statement on Schedule 13G under Rule  13d-1(b)  under
the  Securities  Exchange  Act of 1934 who  acquire  less than 25% of the Common
Shares (as defined in the Agreement),  unless and until the conditions set forth
in Rule 13d-1(b) (3) or (4) exist;

           WHEREAS,   the   Company   desires  to  provide   certainty   to  its
shareholders,  the  securities  markets  and the Rights  Agent in respect of the
terms of the Agreement and to further the purposes and intent of the  Agreement;
and

           WHEREAS, in order to effect the foregoing, the Company has determined
to amend the  Agreement  pursuant  to Section 27 of the  Agreement  as set forth
below.

           NOW,  THEREFORE,  effective as of the date hereof,  the  Agreement is
hereby amended pursuant to Section 27 thereof as follows:

           1. Section 1(a) of the Agreement is hereby  deleted and replaced with
      the following:

               "(a)  "Acquiring  Person"  shall mean any Person (as such term is
          hereinafter  defined) who or which,  together with all  Affiliates and
          Associates  (as such terms are  hereinafter  defined) of such  Person,
          shall be the Beneficial Owner (as such term is hereinafter defined) of
          20% or more of the Common Shares of the Company then outstanding,  but
          shall  not  include  the  Company,  any  Subsidiary  (as such  term is
          hereinafter  defined) of the Company, any employee benefit plan of the
          Company or any Subsidiary of the Company, or any Person holding Common
          Shares for or pursuant to the terms of any such plan.  Notwithstanding
          the foregoing, (i) no Person shall become an "Acquiring Person" solely
          as the result of (x) an  acquisition  after the date  hereof of Common
          Shares by the Company  which,  by reducing the number of Common Shares
          outstanding, increases the proportionate number of shares beneficially
          owned  by such  Person  to 20% (or in the  case  of a 13G  Person  (as
          hereinafter defined), 25%) or more of the Common Shares of the Company
          then outstanding or (y) the acquisition of Beneficial Ownership of 20%
          (or in the case of a 13G person,  25%) or more of the Common Shares of
          the  Company  then  outstanding  in the good  faith  belief  that such
          acquisition  would not (A) cause such  Beneficial  Ownership to exceed
          20% (or in the case of a 13G  Person,  25%) of the Common  Shares then
          outstanding  and such  Person  relied in good faith in  computing  the
          percentage of its  Beneficial  Ownership on publicly  filed reports or
          documents of the Company which are  inaccurate or  out-of-date  or (B)
          otherwise  cause a  Distribution  Date to occur;  (ii)  subject to the
          proviso in this clause (ii), no Person (an "Acquiror") shall become an
          "Acquiring  Person"  as a result  of the  acquisition  after  the date
          hereof by an Acquiror from Paul J. Ramsay or from any Person who is an
          Affiliate  or  Associate  of  Paul  J.  Ramsay  at the  time  of  such
          acquisition  (collectively,  the "Ramsay  Persons")  of (1) any of the
          shares of Class B Preferred  Stock currently held by any Ramsay Person
          or (2) any Common Shares issued pursuant to options or other rights to
          purchase  Common Shares  currently held by any Ramsay Person;  (3) any
          Common Shares issued pursuant to the Class B Preferred Stock currently
          held by any Ramsay Person or (4) any Common Shares  currently  held by
          any Ramsay Person; provided that, at the time of such acquisition, the
          Acquiror   (together   with  all  of  such  Person's   Affiliates  and
          Associates)  are  not the  Beneficial  Owners  of more  than 1% of the
          Common  Shares of the Company then  outstanding  and provided  further
          that,  following such acquisition,  the Acquiror (together with all of
          such Person's  Affiliates and Associates) do not become the Beneficial
          Owners of an additional 1% or more of the Common Shares of the Company
          then  outstanding,  (iii) subject to the proviso in this clause (iii),
          none of the Ramsay  Persons shall become an "Acquiring  Person" in the
          event that any Ramsay Person  (together with all other Ramsay Persons)
          become  the  Beneficial  Owners  after the date  hereof of  additional
          Common  Shares;  provided  that the  number  of  Common  Shares of the
          Company of which all Ramsay Persons are the Beneficial Owners does not
          exceed  one Common  Share  less than 50% of the  Common  Shares of the
          Company then outstanding,  and (iv) no Person who or which is eligible
          to file a statement  with the  Securities  and Exchange  Commission on
          Schedule  13G under Rule  13d-1(b),  as in effect on  November 1, 1996
          (the  "Amendment  Date"),  under  the  Exchange  Act  (as  hereinafter
          defined) with respect to such Person's beneficial  ownership of Common
          Shares (a "13G Person")  shall become an "Acquiring  Person" after the
          Amendment  Date if and for so long as such 13G Person,  together  with
          all  Affiliates  and  Associates of such 13G Person,  shall not be the
          Beneficial  Owner of 25% or more of the Common  Shares of the  Company
          then outstanding;  provided,  however, that if such Person or any such
          Person's  Affiliates or Associates  becomes  subject to Rules 13d-1(a)
          and  13d-2(a),  as in effect on the Amendment  Date,  pursuant to Rule
          13d-1(b)  (3) or (4), as in effect on the  Amendment  Date,  then such
          Person  shall no longer be a "13G  Person"  and if such Person at such
          time would be an  Acquiring  Person  but for this  clause  (iv),  such
          Person  shall  immediately  become an Acquiring  Person,  in each case
          without regard to the ten day periods referred to in Rule 13d-1(b) (3)
          and (4), as in effect on the Amendment  Date.  Notwithstanding  clause
          (i) of the prior  sentence,  if any  Person  that is not an  Acquiring
          Person  due to such  clause  (i) does not  reduce  its  percentage  of
          Beneficial  Ownership of Common Shares to below 20% (or in the case of
          a 13G  Person,  25%) by 5:00  P.M.  New York  City  time on the  tenth
          Business Day after notice (including telephonic or facsimile) from the
          Company  (the date of notice  being the first day) that such  Person's
          Beneficial  Ownership of Common  Shares so exceeds 20% (on in the case
          of a 13G  person,  25%),  such  Person  shall,  at the end of such ten
          Business Day period,  become an Acquiring  Person (and such clause (i)
          shall  no  longer  apply  to  such  Person).   For  purposes  of  this
          definition, the determination whether any Person acted in "good faith"
          shall be  conclusively  determined  by the Board of  Directors  of the
          Company,  acting by a vote of those  directors  of the  Company  whose
          approval would be required to redeem the Rights under Section 23."

          2. This  Amendment  shall be deemded  to be a contract  made under the
     laws of the State of Delaware and for all purposes shall be governed by and
     construed in accordance with the laws of such State applicable to contracts
     made and to be performed entirely within such State,  without regard to any
     conflict  of laws  principles  which  would  apply  the  laws of any  other
     jurisdiction.

          3. The Agreement, as amended hereby, is hereby ratified, confirmed and
     continued in full force and effect.

           IN WITNESS  WHEREOF,  the  Company has caused  this  Amendment  to be
executed as of the date first above written.


                                                  RAMSAY HEALTH CARE, INC.



                                                  BY  /s/  B.G. Cibran
                                                    ____________________________
                                                    Name:  Bert Cibran
                                                    Title: President & C.O.O.