<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ...................... to .....................
Commission file number: 0-16235
PHP HEALTHCARE CORPORATION
...............................................................................
(exact name of registrant as specified in its charter)
Delaware 54-1023168
...............................................................................
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11440 Commerce Park Drive, Reston, Virginia 22091
...............................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 758-3600
Securities registered pursuant Common Stock, $.01 par value
to Section 12(b) of the Act: Preferred Stock Purchase Rights
Each registered on the New York Stock
Exchange
Securities registered pursuant Common Stock, $.01 par value
to Section 12(g) of the Act: Preferred Stock Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of June 30, 1995 the aggregate market value of the Common Stock
held by non-affiliates of the Registrant was approximately $77.1 million. As
of June 30, 1995 the number of shares of Common Stock of the Registrant issued
and outstanding was 5,408,341.
<PAGE> 2
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its annual report on Form
10-K by restating such portions in their entirety as set forth in the pages
attached hereto:
Part III, Items 10 through 13.
<PAGE> 3
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item for executive officers is set
forth in Part I of this report under the heading "Executive Officers of the
Company".
The following sets forth certain information as of the date hereof
with respect to the Company's directors. The Board of Directors is classified
into three classes whose terms are staggered to expire in different years. The
term of office of one class of directors expires each year in rotation so that
one class is elected at each annual meeting of shareholders for a full three-
year term. The terms of three of the present directors expire at the 1995
annual meeting. The other six directors will continue in office for the
remainder of their terms as indicated below.
<TABLE>
<CAPTION>
Term as Director
Positions or Offices Served as Director Expires at the Annual
Name with the Company Continuously Since Meeting in Age
------------------------ ---------------------------------- ------------------ --------------------- ---
<C> <C> <C> <C> <C>
Charles H. Robbins President & Chairman of the Board 1976 1995 64
Jack M. Mazur Senior Executive Vice President 1976 1995 53
Michael D. Starr Executive Vice President and
Treasurer 1985 1995 51
George E. Schaefer, M.D. Senior Vice President, Medical
Affairs 1981 1997 72
Julien J. Lavoie Senior Vice President 1989 1996 63
Paul T. Cuzmanes None 1989 1997 50
Donald J. Ruffing None 1991 1996 74
Charles P. Reilly None 1991 1997 52
Joseph G. Mathews None 1993 1996 61
</TABLE>
The following are brief summaries of the business experience during at
least the past five years of each of the directors of the Company.
Charles H. Robbins founded the Company in 1976 and has been President
and Chairman of the Board since its inception. From 1973 to 1975 Mr. Robbins
was Vice President and Director of Operations of Tabershaw/Cooper Associates,
Inc., a medical consulting firm, and Technical Director, Health and Medical
Systems of Informatics Inc.; from 1971 to 1973 he was Manager, Medical
Information Systems of Computer Science Corporation; and from 1961 to 1970 he
held various positions with the Office of the Surgeon General of the United
States Army and the Army Medical Department. In those positions, Mr. Robbins
<PAGE> 4
was engaged in directing studies and developing programs relating to various
health care related activities.
Jack M. Mazur has been a director of the Company since 1976. From
1976 through May 1986 Mr. Mazur served as Assistant Secretary of the Company,
from June 1986 to October 1993 as Secretary of the Company, and from August
1989 to the present as Senior Executive Vice President of the Company. Prior
to August 1989, Mr. Mazur was engaged in the practice of law.
Michael D. Starr has been employed by the Company in various financial
and operational positions since 1976 and has been a director since 1985. Mr.
Starr was Controller of the Company from 1976 to 1981, Vice President, Finance
and Administration from 1981 to 1986, and has been Executive Vice President
since March 1986.
Julien J. Lavoie was Federal Program Manager of EDS Communications
Corporation, a contract services company, from 1987 to 1991, when he joined the
Company as Vice President. Previously, Mr. Lavoie served as President of
Productivity Management Services, Inc., a service company in the U.S.
government privatization program, from 1986 to 1987, and was Vice President
Integration Services for the Martin Marietta Data Systems Corporation, a major
government contractor, from 1983 to 1986.
Donald J. Ruffing is a retired Colonel in the U.S. Air Force. In 1990,
Mr. Ruffing served as a team member of the Peer and Application Reviews,
Refugee Mental Health Programs for the National Institute of Mental Health.
From 1980 to 1985, Mr. Ruffing served as a project manager for the Company at
St. Elizabeth's Hospital. Mr. Ruffing completed 32 years in medical services
management with the U.S. Air Force. Upon his retirement, he was the Chief of
the Air Force Medical Service Corps, Office of the Surgeon General, where he
was responsible for developing plans, policies and procedures for the
management of the Air Force Medical Service Corps.
Joseph G. Mathews joined the Company as a Director in July 1993. Since
1985, Mr. Mathews has owned and operated Joseph G. Mathews & Associates, an
insurance brokerage firm. Mr. Mathews' professional designations include
Chartered Financial Consultant and Master of Science Financial Services. In
addition to serving on the Company's Board, Mr. Mathews is a member of the
boards of directors of Lake of the Ozarks General Hospital, Mark Twain Bank,
Sanford Brown College and Learfield Communication. Mr. Mathews also serves on
the Lindenwood College Board.
George E. Schaefer, M.D. served as Vice President/Medical Director of
the Company from 1980 to 1993 and a director of the Company since 1981. Dr.
Schaefer currently serves as Vice President Medical Affairs. Prior to joining
the Company, Dr. Schaefer was a private consultant from 1978 to 1980. Dr.
Schaefer was Surgeon General of the United States Air Force from 1975 to 1978
and retired from the Air Force with the rank of Lieutenant General.
Dr. Schaefer held various positions with the Air Force, commencing as a Flight
Surgeon in 1947, through various command positions from 1949 to 1975, and
became Deputy Surgeon General and then Surgeon General of the Air Force in
1975.
Paul T. Cuzmanes is a partner with the law firm of Wilson, Elser,
Moskowitz, Edelman & Dicker and has been engaged in the practice of law since
1976. Mr. Cuzmanes specializes in health care law, commercial law and the
representation of municipalities. He is also a fellow in the American Society
of Pharmaceutical Law.
<PAGE> 5
Charles P. Reilly is the managing general partner of Shamrock
Investments, a financial advisory and investment firm that specializes in the
health care industry. From 1979 until founding Shamrock Investments in 1987,
Mr. Reilly served as Director, Senior Executive Vice President and Chief
Development Officer for American Medical International Corporation, a large
multi-hospital management company. In that position, Mr. Reilly was
responsible for the acquisition of new health care facilities and related
business both in the United States and abroad, oversaw the development of the
company's integrated health care services and facilities and directed the
activities of AMI Group Health Services, a division of American Medical
International Corporation. Mr. Reilly currently serves as Chairman of the
Board of Directors of Dynamic Health, Inc., an acute care hospital company, and
as a director of G & L Realty Corporation, a NYSE health care real estate
investment trust (REIT). Mr. Reilly has served as a director, trustee and
governing council member of the Federation of American Healthcare Systems, The
National Committee for Quality Health Care and the American Hospital
Association, and has previously served as a board director for several
corporations. From August 1994 to August 1995, Mr. Reilly was an officer of
the Company, serving as a member of the Executive Council.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange. Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
Based on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for the fiscal year, except as noted below,
the Company believes that all its officers, directors and greater than ten
percent shareholders complied with all filing requirements applicable to them
with respect to transactions during fiscal 1995. Mr. Cuzmanes sold certain
shares in March and April 1995, but did not report the dispositions until the
filing of Form 5 in August 1995.
<PAGE> 6
Item 11. Executive Compensation
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
------------
Annual Compensation Awards
------------------------------------- ------------
(a) (b) (c) (d) (e) (f) (g)
Name and Principal Position Year Salary ($) Bonus ($) Other Annual Options/SARS All Other
Compensation ($) Award(s) Compensation ($)
--------------------------- ---- ------------ --------- ---------------- ------------ ----------------
<C> <C> <C> <C> <C> <C> <C>
Charles H. Robbins, 1995 $500,000 $83,333 (1) 395,000 $11,827(2)
Chief Executive Officer 1994 500,000 -0- -0- 50,428
1993 500,000 -0- -0- 85,239
Jack M. Mazur, 1995 $400,000 $66,667 (1) 360,000 $ 9,688(3)
Senior Executive 1994 400,000 -0- -0- 7,673
Vice President 1993 400,000 -0- -0- 24,910
Michael D. Starr, 1995 $275,000 -0- (1) 145,000 $ 9,688(4)
Executive Vice President 1994 275,000 -0- -0- 3,969
1993 275,000 -0- -0- 19,932
John P. Cole 1995 $176,346(5) -0- (1) 15,000(6) $ 1,488(7)
Executive Vice President 1994 -0- -0- -0- -0-
1993 -0- -0- -0- -0-
Julien J. Lavoie, 1995 $154,800 -0- (1) 14,000 $11,237(8)
Senior Vice President 1994 154,800 -0- -0- 15,795
1993 154,800 -0- -0- 14,256
---------------
<FN>
Notes to Summary Compensation Table:
(1) Each of the named executive officers receives certain perquisites, including the use of Company automobiles; such
perquisites, however, do not exceed the lesser of $50,000 or 10% of such officer's salary and bonus.
(2) Includes $3,627 term life insurance premiums, $8,000 director's fees (accrued at April 30, 1995), and $200 in
401(k) Plan matching fees. Mr. Robbins has elected to be paid his director's fees in stock pursuant to the Directors'
Retainer Plan.
(3) Includes $1,488 term life insurance premiums, $8,000 director's fees (accrued at April 30, 1995), and $200 in
401(k) Plan matching fees. Mr. Mazur has elected to be paid his director's fees in stock pursuant to the Directors'
Retainer Plan.
(4) Includes $1,488 term life insurance premiums, $8,000 director's fees (accrued at April 30, 1995), and $200 in
401(k) Plan matching fees. Mr. Starr has elected to be paid his director's fees in stock pursuant to the Directors'
Retainer Plan.
(5) Salary shown is that from Mr. Cole's date of employment, September 29, 1994, through the end of the fiscal year.
<PAGE> 7
(6) Does not include options for 19,000 shares received by Mr. Cole upon the merger of JP Cole & Associates into the
Company in October 1994.
(7) Includes $1,488 term life insurance premiums.
(8) Includes $3,037 term life insurance premiums, $8,000 director's fees (accrued at April 30, 1995), and $200 in
401(k) Plan matching fees. Mr. Lavoie has elected to be paid his director's fees in stock pursuant to the Director's
Retainer Plan.
</TABLE>
Option Grants in 1995
During fiscal 1995, the Stock Option Committee and Board of Directors
considered and adopted an option repricing program for holders of options
granted under the Company's 1986 Stock Option Plan. In September 1994 the
program was implemented and each of the named executive officers surrendered
outstanding not-in-the-money options in return for an equal number of options
with an exercise price equal to 60% of the fair market value of the Company's
Common Stock which will vest ratably over a three-year period. Other options
were granted under the 1986 Stock Option Plan in fiscal year 1995. No stock
appreciation rights were granted.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
------------------------------------------------------------------------------- -----------------------------------
No. of % of Total
Securities Options
underlying Granted to Market
Options Employees Exercise Price Expiration
Name Granted in 1995 Price Grant Date Date 0% 5% 10%
------------------ ---------- ---------- ---------- ----------- ---------- ----------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Charles H. Robbins 270,000(1) 18.0% $ 6.075 $10.125 6/10/2004 1,093,500 2,812,741 5,450,393
125,000 8.3% $11.875 $11.875 11/18/2004 0 933,516 2,365,712
Jack M. Mazur 250,000(1) 16.7% $ 6.075 $10.125 6/10/2004 1,012,500 2,604,390 5,046,661
110,000 7.3% $11.875 $11.875 11/18/2004 0 821,494 2,081,826
Michael D. Starr 90,000(1) 6.0% $ 6.075 $10.125 6/10/2004 364,500 937,580 1,816,798
55,000 3.7% $11.875 $11.875 11/18/2004 0 410,747 1,040,913
John P. Cole 5,000 1.0% $ 9.00 $10.875 9/29/2004 28,125 130,713 288,104
Julien J. Lavoie 4,000(1) .3% $ 6.075 $10.125 6/10/2004 16,200 41,670 80,747
10,000 .7% $10.875 $11.875 11/18/2004 10,000 84,681 199,257
---------------
<FN>
(1) These shares represent options repriced in fiscal 1995 under the option repricing program adopted by the Company
in June 1994.
</TABLE>
<PAGE> 8
Repricing of Options/SARs
<TABLE>
<CAPTION>
Name and Principal Position Date of Options Market Original New Length of
Repricing Repriced (#) Value on Exercise Exercise Original
Repricing Price Price Option
Date Term
Remaining
at Repricing
(Years)
---------------------------------- ---------- ---------- ---------- ---------- ---------- ------------
<C> <C> <C> <C> <C> <C> <C>
Charles H. Robbins 6/10/94 160,000 $10.125 $22.50 $6.075 6.9
Chief Executive Officer 110,000 $10.125 $13.50 $6.075 7.8
Jack M. Mazur 6/10/94 150,000 $10.125 $22.50 $6.075 6.9
Senior Executive Vice President 100,000 $10.125 $13.50 $6.075 7.8
Michael D. Starr 6/10/94 50,000 $10.125 $22.50 $6.075 6.9
Executive Vice President 40,000 $10.125 $13.50 $6.075 7.8
John P. Cole
Executive Vice President N/A N/A N/A N/A N/A N/A
Julien J. Lavoie
Senior Vice President 6/10/94 4,000 $10.125 $13.50 $6.075 6.9
</TABLE>
Report of Stock Option Committee
During the last quarter of fiscal year 1994 and early fiscal 1995, the
Stock Option Committee considered the repricing of options outstanding under
the Company's Stock Option Plan (the "Plan"). The Committee considered the
fact that a large number of the outstanding options that would be affected by a
repricing were held by the Company's three top executive officers, Messrs.
Robbins, Mazur and Starr and the performance and working relationship of these
key executives. It was agreed that the continuation of the Company's growth
and future success were dependent on the continued efforts of these
individuals. The Committee believes that stock options provide meaningful
long-term incentive for key employees. Because of the significant decline in
the market price of the Company's stock which had occurred subsequent to the
grant of the then outstanding options, it was determined that these options
were not providing the incentive intended when granted. In addition, the top
executive officers had not received salary increases for the past several
years. The Committee concluded that repricing the outstanding options would be
an appropriate means to provide these executives with continuing incentive to
work for the long-term success of the Company.
<PAGE> 9
Although many of the options held by the key executive officers were
already vested, the Committee determined that a new vesting period should be
established for the repriced options. Accordingly, the Committee concluded
that it would make available to all persons holding not-in-the-money options
granted under the Plan the opportunity to surrender them for cancellation and
termination in exchange for newly granted options for an equal number of shares
at an exercise price equal to 60% of the then market price, subject to a new
vesting schedule (vesting ratably over a three-year period).
The Committee believes that the option repricing was an important
element in retaining key management employees to continue to implement the
Company's growth plans.
STOCK OPTION COMMITTEE
PAUL T. CUZMANES
DONALD J. RUFFING
JOSEPH G. MATHEWS
<PAGE> 10
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
(a) (b) (c) (d) (e)
Name Shares Acquired Value Number of Value of
on Exercise (#) Realized ($) Unexercised Unexercised
Options/SARs In-the-Money
at 4/30/95 Options/SARs
at 4/30/95
Exercisable/ Exercisable/
Unexercisable Unexercisable
-------------------- -------------------- -------------------- -------------------- --------------------
<C> <C> <C> <C> <C>
Charles H. Robbins -0- -0- -0-/395,000 -0-/4,479,125
Jack M. Mazur -0- -0- -0-/360,000 -0-/4,105,000
Michael D. Starr -0- -0- -0-/145,000 -0-/1,591,375
John P. Cole -0- -0- 7,500/26,500 76,875/271,625
Julien J. Lavoie -0- -0- 25,000/14,000 206,250/136,450
</TABLE>
401(k) Plan
The Company established the PHP Healthcare Corporation 401(k) Plan
(the "401(k) Plan") effective January 1, 1991, pursuant to which employees may
defer compensation for income tax purposes under Section 401(k) of the Internal
Revenue Code. Participant contributions will be invested at all times in any
or all of six funds at the direction of the participant. Participant
contributions will be matched up to $200 annually by the Company. The Company
contributed $200 to the 401(k) Plan during fiscal year 1995 on behalf of each
of the named executive officers, except Mr. Cole.
Director Compensation
Each director of the Company is paid $2,000 per quarter for his
services as a director, plus $650 for each special meeting of the Board. In
addition, each outside director is paid $1,200 for attending up to three
committee meetings annually and $500 for each additional committee meeting.
Each director is reimbursed for travel expenses relating to attending meetings
of the Board of Directors and its committees.
The Company has adopted a Directors' Retainer Plan. Commencing May 1,
1993, for any fiscal quarter each director of the Company may elect to have the
full amount of his retainer paid in the form of common stock of the Company.
The number of shares issued is calculated based on the then current market
value of the stock.
<PAGE> 11
Employment Agreements
The Company has entered into Employment Agreements with each of
Charles H. Robbins, Jack M. Mazur and Michael D. Starr. Under these
agreements, Mr. Robbins is employed as President and Chief Executive Officer,
Mr. Mazur is employed as Senior Executive Vice President and Mr. Starr is
employed as Executive Vice President. The agreements are each renewable
automatically on May 1 of each year unless terminated by either the executive
or the Company on ninety (90) days advance notice, or otherwise in accordance
with the agreements, except that no notice may be given by the Company sooner
than three years after a Change in Control (as defined in the agreements). The
agreements are currently in effect through April 30, 1996. In the event of
termination because of the executive's death or disability, the Company will
pay the executive or his estate a lump sum severance payment equal to one
year's salary and a pro rata bonus for the year in which the termination
occurs. In the event the Company terminates the agreement other than for
cause, death or disability or the executive terminates the agreement because of
certain adverse changes following a Change in Control of the Company, then
(a) the Company must pay the executive a lump sum amount equal to three times
the sum of the executive's base salary and bonus; (b) the executive is
entitled, for a period of three years, to continuation of coverage at the
Company's expense of the executive's disability, medical and dental benefits;
(c) all restrictions on any outstanding awards granted to the executive will
lapse and be immediately vested, all stock options will become fully
exercisable and the executive will have the right to require the company to
purchase for cash any shares of unrestricted stock and stock purchased upon the
exercise of any options.
The Company also has entered into an employment agreement with John P.
Cole. Under this agreement, Mr. Cole is employed as Executive Vice President
of the Company for a period of two years with an annual salary of $330,000.
Options to purchase 15,000 shares of the Company's common stock at $9.00 per
share were granted to Mr. Cole pursuant to this agreement. The options are
exercisable ratably over one year in increments of three months starting at the
grant date of September 29, 1994.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
None.
Compensation Committee Report
The Company's compensation program for executive officers is intended
to align executive compensation with the long-run profitability of the Company,
and thus with the interests of the shareholders. The Compensation Committee
works closely with the full Board of Directors and with management in
establishing and implementing compensation policies and principles. In
addition to base salary, compensation for the Company's executive officers may
include bonuses, stock options and certain other benefits, such as insurance
and use of Company automobiles.
<PAGE> 12
The Stock Option Committee is responsible for determining the
recipients and number of options, the timing of grants and the option exercise
prices, all in accordance with the terms of the Company's Stock Option Plan.
The Stock Option Committee considers the recommendations of management and of
the Compensation Committee. During late fiscal 1994 and fiscal 1995, the Stock
Option Committee and the Board of Directors considered the adoption of a
program to allow repricing of not-in-the-money options for all holders,
including the named executive officers. The program was adopted effective June
1994.
In considering base salary compensation for 1995, the Committee
focused principally on the fact that the Company was still undergoing changes
in connection with its efforts, begun in fiscal 1993, to develop and market
services in the commercial managed care market. Because fiscal 1994 financial
results had not yet fully reflected the benefits of these efforts, and in light
of the option repricing program, the Committee determined to recommend no
increase in the salary levels of its principal executive officers for 1995 and
to defer consideration of cash bonuses and new option grants to executive
officers until later in the fiscal year.
The Committee retained the other elements of the executive
compensation package (health and life insurance, use of the Company automobiles
and, for the senior executive officers, split dollar life insurance) for fiscal
1995.
In the third quarter of fiscal 1995, the Compensation Committee
considered financial and operational results of the first two quarters of 1995
and the extraordinary efforts expended by the Chief Executive Officer and the
Senior Executive Vice President to achieve those results. The Compensation
Committee recommended to the Board of Directors a cash bonus in the aggregate
sum of $150,000 to be allocated $83,333.35 to Mr. Robbins and $66,666.65 to Mr.
Mazur in consideration of their work for and guidance of the Company in its
restructuring efforts. In the Committee's view the recommended bonus amount
was appropriate in light of the Company's financial position and the
Committee's understanding of the compensation packages for executives of
comparable position and responsibility in the industry. The Committee did not
apply objective Company performance criteria in establishing the bonuses. The
Board approved the bonus, with Messrs. Robbins and Mazur abstaining.
<PAGE> 13
Also in the third quarter of fiscal 1995, the Compensation Committee
recommended to the Stock Option Committee that it consider option grants to the
Company's executive officers. The Committee believes that employee stock
ownership aligns employee and shareholder interests by focusing employees on
the creation of shareholder value in the short and long term. The Compensation
Committee recommended that option grants be made to the executive officers to
retain their unique and valuable contributions to the Company's short and long
term business plan and to provide them with further incentive to create short
and long term shareholder value. Acting on the Compensation Committee's
recommendation, the Stock Option Committee granted 125,000 stock options to
Mr. Robbins, 110,000 stock options to Mr. Mazur, and 55,000 stock options to
Mr. Starr, each at an exercise price equal to the then current market price.
In addition, the Stock Option Committee granted options to purchase 10,000
shares of Common Stock to Mr. Lavoie at an exercise price equal to $1.00 less
than the then current market price. These recommendations were based on the
subjective determination of the Compensation Committee as to the expected
relative contributions of the executive officers to the Company.
COMPENSATION COMMITTEE
CHARLES P. REILLY
JOSEPH G. MATHEWS
PAUL T. CUZMANES
<PAGE> 14
Stock Price Performance Graph
The line graph below compares yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return on the Standard and Poor's 500 Stock Index and the
Standard and Poor's Health Care Composite Index for the period of five years
commencing on April 30, 1990.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------
4/90 4/91 4/92 4/93 4/94 4/95
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PHP Healthcare Corporation 100 317 233 98 140 257
S&P 500 100 118 134 147 154 181
S&P Health Care Composite 100 147 166 141 135 189
</TABLE>
Item 12. Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth information as of July 31, 1995, with
respect to the beneficial ownership of Common Stock by each person known to the
Company to be the beneficial owner of more than 5% of its outstanding shares of
Common Stock, by each director of the Company, each named executive officer,
and by all directors and executive officers of the Company as a group. On
July 31, 1995 there were 5,408,341 shares of the Company's Common Stock issued
and outstanding. (Certain of the shares reported in the following table may be
deemed to be owned by more than one person here listed. As a result, those
shares are included in more than one entry on the table.)
<TABLE>
<CAPTION>
Name and Address No. of Shares Percent of Class
---------------------------------------------- ------------- ----------------
<C> <C> <C>
Voting Agreement Group (1) 1,807,378 30.9%
Charles H. Robbins and Ellen E. Robbins;
Jack M. Mazur and Lynn Mazur;
VACHR, Inc.; Michael D. Starr;
Shamrock Investments; Charles P. Reilly;
Michael E. Gallagher
11440 Commerce Park Drive
Reston, VA 22091
Shamrock Investments (2) 537,838 (3) 9.5%
Charles P. Reilly
Michael E. Gallagher
2049 Century Park East, Suite 3330
Los Angeles, CA 90067
<PAGE> 15
<CAPTION>
Name and Address No. of Shares Percent of Class
---------------------------------------------- ------------- ----------------
<C> <C> <C>
Bosko Djordjevic and Elizabeth A. Keck,
Trustee 326,500 6.0%
505 S. Beverly Drive, Suite 215
Beverly Hills, CA 90212
Charles H. Robbins 830,687 (4) 15.1%
Jack M. Mazur 85,962 (5) 1.6%
Michael D. Starr 96,884 (7) 1.8%
Charles P. Reilly 368,609 (8) 6.6%
John P. Cole 148,000 (9) 2.7%
George E. Schaefer, M.D. 22,967 (6)
4 Imperial Oaks
San Antonio, TX 78248
Julien J. Lavoie 29,008 (10) (6)
Joseph G. Mathews 2,909 (6)
3510 Highway O
Wright City, MO 63390
Donald J. Ruffing 2,479 (6)
11104 Woodlawn Boulevard
Upper Marlboro, MD 20772
Paul T. Cuzmanes 562 (6)
250 West Pratt Street
Baltimore, MD 21201
All directors and executive officers
as a group (11 persons) 1,488,181 (11) 25.6%
---------------
<FN>
(1) The persons listed are parties to a Voting Agreement dated as of
October 7, 1994, constitute a group within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended ("1934 Act") and jointly filed
a Schedule 13D with the Securities and Exchange Commission on October 11, 1994.
(2) The persons listed constitute a group (separate from the group above
listed) within the meaning of Section 13(d)(3) of the 1934 Act and jointly
filed a Schedule 13D with the Securities and Exchange Commission on October 11,
1994 reflecting the aggregate beneficial ownership of 303,353 shares of Common
Stock, options to purchase an additional 170,179 shares of Common Stock, and
promissory notes of the Company which are convertible into 55,555 shares of
Common Stock.
<PAGE> 16
(3) Does not include 1,269,540 shares which are deemed to be beneficially
owned by this group by virtue of its participation in the Voting Agreement
Group set forth above.
(4) Includes 150,000 shares owned by Mr. Robbins' spouse, Ellen E.
Robbins, as trustee for the benefit of their children. Includes 90,000 shares
which Mr. Robbins presently could acquire upon the exercise of options granted
by the Company. Does not include 976,691 shares which are deemed to be
beneficially owned by Mr. Robbins by virtue of his participation in the Voting
Agreement Group set forth above.
(5) Includes 83,333 shares which Mr. Mazur presently could acquire upon
the exercise of options granted by the Company. Does not include 256,007
shares, or 4.73% of the class, owned by VACHR, Inc., a corporation owned by Mr.
Mazur's spouse, Lynn Mazur, or the other 1,465,409 shares which are deemed to
be beneficially owned by Mr. Mazur by virtue of his participation in the Voting
Agreement Group set forth above. Does not include 14,000 shares owned by J&J
Investment Partnership, a partnership wholly owned by members of Mr. Mazur's
family and of which Mr. Mazur disclaims beneficial ownership.
(6) Represents less than 1% of the shares of the Company's outstanding
stock.
(7) Includes 30,000 shares which Mr. Starr presently could acquire upon
the exercise of options granted by the Company. Does not include 1,710,494
shares which are deemed to be beneficially owned by Mr. Starr by virtue of his
participation in the Voting Agreement Group set forth above.
(8) Includes 107,048 shares subject to options which Mr. Reilly could
acquire, 29,981 shares which may be acquired by Mr. Reilly upon conversion of a
promissory note of the Company, 11,250 shares which Mr. Reilly could acquire
upon the exercise of options granted by the Company to Shamrock Investments, a
partnership of which Mr. Reilly is the managing general partner, 3,087 shares
which may be acquired by Mr. Reilly upon conversion of a promissory note of the
Company issued to Shamrock Investments and 100,000 shares owned by Shamrock
Investments. See Item 13, "Certain Transactions and Business Relationships."
Does not include an additional 1,438,769 shares which are deemed to be
beneficially owned by Mr. Reilly by virtue of his participation in the Voting
Agreement Group set forth above.
(9) Includes 15,000 shares which Mr. Cole presently could acquire upon
the exercise of options granted by the Company.
(10) Includes 26,333 shares which Mr. Lavoie presently could acquire upon
the exercise of options granted by the Company.
(11) Does not include the shares that may be deemed to be owned by certain
of these persons as a result of their participation in the Voting Agreement
Group set forth above.
</TABLE>
Item 13. Certain Transactions and Business Relationships
From June 1990 until September 1994, the Company retained Shamrock
Investments ("Shamrock") as a financial advisor. Charles P. Reilly, a director
of the Company, is the managing general partner of Shamrock and Michael E.
<PAGE> 17
Gallagher is a general partner of Shamrock. In fiscal 1995, the Company paid
Shamrock $86,000 for financial advisory services. These arrangements were
terminated in September 1994 in connection with the employment by the Company
of Messrs. Reilly and Gallagher, discussed below.
On September 29, 1994, Paragon Ambulatory Surgery, Inc., a Delaware
corporation ("Paragon"), was merged into the Company. Since 1991, the Company
had owned 51% of the capital stock of Paragon. The remaining 49% was owned
principally by persons affiliated with Shamrock, including Messrs. Reilly and
Gallagher. The Company had provided management services to Paragon at cost and
had made loans to Paragon in connection with its acquisition of surgery
centers. As a result of the merger, the management services agreement was
terminated and Paragon's shareholders (other than the Company) received a total
of 190,000 treasury shares of the Company's Common Stock, promissory notes
issued by the Company in the total principal amount of $500,000 due in five
years and convertible after one year into Common Stock at a conversion price of
$9.00 per share, and promissory notes issued by the Company in the total
principal amount of $430,000 due on or before August 1, 1995. As shareholders
of Paragon, Messrs. Reilly and Gallagher received 54.0% and 40.5%,
respectively, of these shares of Common Stock and promissory notes. The terms
of the merger were determined through negotiations between management of the
Company and the Paragon shareholders (other than the Company) on the basis of
the value of the two surgery centers then owned and operated by Paragon,
Paragon's claims in certain then pending litigation arising out of the proposed
sale of those centers, and services provided to Paragon by certain of its
shareholders. The shares of Paragon common stock not already owned by the
Company represented approximately 44% of Paragon's outstanding shares. The
price at which the $500,000 promissory note is convertible into Common Stock
represents the fair market value of the Common Stock on the date a preliminary
agreement was reached, subject to approval by the Board of Directors of the
Company. On October 3, 1994, PHP sold the general partnership interest in the
two remaining surgery centers for $11,750,000 in cash and the assumption of
certain liabilities relating to the original acquisition of the centers.
Also on September 29, 1994, Shamrock purchased 100,000 treasury shares
of Common Stock from the Company, delivering in payment a five-year promissory
note of Shamrock dated as of September 29, 1994, in the principal amount of
$900,000, which is secured by the pledge of 150,000 shares of Common Stock (of
which 100,000 shares are owned by Shamrock, and 50,000 shares of Common Stock
are owned by Mr. Reilly and Mr. Gallagher), and by convertible notes payable of
$500,000 by the Company to the same parties. The terms of the purchase were
negotiated between management of the Company and Messrs. Reilly and Gallagher,
the general partners of Shamrock. The purchase price represents the fair
market value of the Common Stock on the date a preliminary agreement was
reached, subject to approval of the Board of Directors of the Company.
The Company, through its wholly-owned subsidiary, PHP Family
Healthcare Corporation, Inc., entered into agreements with JP Cole &
Associates, Inc. ("JP Cole") and its shareholders in 1993. At that time, Mr.
Reilly was a minority shareholder of JP Cole (owning approximately 17%).
Pursuant to a Sales and Services Agreement, the Company retained JP Cole as a
sales representative for marketing the Company's health care products and
services to private sector health care industry companies. The Agreement
provided for the payment of commissions related to successful marketing
efforts, as defined. In addition, the Company agreed to lend to JP Cole up to
$3,000,000, which loans could be converted into 83% of the capital stock of JP
Cole at the Company's option. At August 31, 1994, the cash advances to JP Cole
and accrued interest were approximately $800,000. The Company also entered
<PAGE> 18
into a Put-Call Agreement with the shareholders of JP Cole pursuant to which,
under certain circumstances, the Company could call their shares and the
shareholders could put their shares to the Company.
On October 3, 1994, JP Cole was merged into PHP Family Healthcare
Corporation, Inc. In connection with the merger, JP Cole's shareholders
received a total of 71,429 treasury shares of the Company's Common Stock,
promissory notes issued by the Company in total principal amount of $100,000
due on or before January 2, 1995, and options to acquire a total of 71,429
shares of Common Stock at an exercise price of $9.00 per share, which expire in
September 2004. Of these, 44,286 shares of Common Stock are held in escrow
subject to forfeiture if certain performance conditions are not met. Options
to purchase 44,286 shares of Common Stock will become exercisable only if
certain performance conditions are met by December 30, 1996, or a change of
control of the Company occurs prior to that date. As shareholders of JP Cole,
Messrs. Cole, Reilly and Gallagher received 70.0%, 17.1% and 12.9%,
respectively, of the Common Stock, promissory notes and options issued in
connection with the merger. They acquired their JP Cole shares as founders of
that company in August 1993 for $70,000, $17,100 and $12,900, respectively.
The terms of the merger were determined through negotiations between management
of the Company and the JP Cole shareholders on the basis of the value of the
revenues payable by the Company to JP Cole under the agreements described above
and amounts owned by the Company to the JP Cole shareholders. The exercise
price of the options represents the fair market value of the Company's Common
Stock on the date a preliminary agreement was reached, subject to approval by
the Board of Directors of the Company.
As of August 1, 1994, Messrs. Reilly and Gallagher entered into one-
year employment agreements with the Company pursuant to which they assisted the
Company's Executive Council in strategic planning, served along with Messrs.
Robbins, Mazur, and Starr as members of the Executive Committee of Management,
and performed other duties assigned by the Board of Directors of the Company.
Pursuant to these agreements, as of August 1, 1994, Messrs. Reilly and
Gallagher were employed at annual salaries of $1,000 each and were granted
options to purchase 68,571 and 51,429 shares of Common Stock, respectively, at
an exercise price of $9.00 per share which options expire in September 2004.
In connection with these employment agreements, the Company terminated its
agreement with Shamrock under which the Company received financial advisory
services. On September 29, 1994, Mr. Cole entered into a two-year employment
agreement with the Company pursuant to which he serves as Executive Vice
President of the Company. Pursuant to this agreement, Mr. Cole was granted
options to purchase 15,000 shares of Common Stock at an exercise price of $9.00
per share, which expire in September 2004. The foregoing options are
exercisable ratably over a one-year period and become exercisable immediately
in the event of a change of control of the Company. The exercise price of the
options represents the fair market value of the Common Stock on the date a
preliminary agreement was reached, subject to approval by the Board of
Directors of the Company.
On October 7, 1994, Messrs. Robbins and Mazur, and their spouses,
Messrs. Starr, Reilly and Gallagher and Shamrock entered into a Voting
Agreement under which the parties have agreed to cause their shares of Common
Stock to be voted, with respect to each matter put to a vote of the Company's
shareholders, in accordance with the two-thirds vote of the shares owned by the
parties on the date of the Voting Agreement. The parties entered into the
Voting Agreement in order to assure the continuation of the policies of the
current management of the Company, which they believe to be in the best
<PAGE> 19
interest of the Company and its shareholders. The Voting Agreement expires two
years after the date thereof, unless otherwise agreed by the parties.
The Company has adopted a Senior Executive Loan Program (the
"Program"), pursuant to which loans to senior executive officers may be made up
to three and one-half times the officer's annual salary. Each loan must be
repaid within one year and bears interest at two percent above the Company's
short-term borrowing rate. All loans are collateralized by the shares of the
Company's Common Stock owned by the senior executive officer. The due dates on
amounts outstanding were extended in 1995 for twelve months. Beginning in
fiscal year 1993, there were loans made under the Program to each of Charles H.
Robbins and Jack M. Mazur. The largest amount outstanding during fiscal 1995
to Mr. Robbins was $1,321,000 and to Mr. Mazur was $1,650,000. The interest
rate on these loans as of July 31, 1995 was 11.75%.
In accordance with the Board of Directors' approval, the Company makes
premium payments relating to certain insurance policies on behalf of certain
officers of the Company. These advances are owed to the Company and are
collateralized by assignment of the underlying cash surrender value and related
death benefit. During 1995, the officers signed promissory notes bearing
interest at 7% and due in April 2002 for the amounts advanced. The amount
outstanding as of April 30, 1995, to Mr. Robbins was $565,000, to Mr. Mazur was
$175,000, and to Mr. Starr was $145,000.
Paul Cuzmanes is a partner with the law firm of Wilson, Elser,
Moskowitz, Edelman & Dicker, which firm the Company retained in fiscal 1995.
For further information with respect to related party transactions,
see Note 10 of Notes to Consolidated Financial Statements.
<PAGE> 20
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PHP HEALTHCARE CORPORATION
Date: August 28, 1995 By: /s/ Anthony M. Picini
-------------------------------------
Anthony M. Picini
Senior Vice President and
Chief Financial Officer
