<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 20, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHP HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 54-1023168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
11440 COMMERCE PARK DRIVE, RESTON, VIRGINIA 22091
(703) 758-3600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JACK M. MAZUR, PRESIDENT
11440 COMMERCE PARK DRIVE, RESTON, VIRGINIA 22091
(703) 758-3600
(Name, address, including zip code, and telephone number, including area code,
of registrant's agent for service)
------------------------------
Please send copies of all communications to:
ANDREW P. VARNEY, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
1001 PENNSYLVANIA AVENUE, N.W., SUITE 800
WASHINGTON, D.C. 20004-2505
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: FROM TIME TO TIME
AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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. /X/
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. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
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>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
6 1/2% Convertible Subordinated
Debentures due 2002............ $ 69,000,000 100%(1) $ 69,000,000(1) $ 23,793.10
Common Stock, par value $.01 per
share.......................... 3,499,937(2)(3) N/A N/A $ 8,677.07(4)
Total Registration Fee.......... -- -- -- $ 32,470.17(4)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes (i) 2,532,110 shares of Common Stock initially issuable upon
conversion of the Debentures being registered hereunder, and (ii) 967,827
shares of Common Stock.
(3) Plus such additional indeterminate number of shares as may become issuable
upon conversion of the Debentures being registered hereunder by means of
adjustment in the conversion price.
(4) Pursuant to Rule 457(i) there is no filing fee with respect to the shares of
common stock issuable upon conversion of the Debentures because no
additional consideration will be received in connection with the exercise of
the conversion privilege. With respect to the 967,827 shares of common stock
offered hereby which are not issuable upon conversion of the Debentures,
pursuant to Rule 457(c), the registration fee has been calculated based upon
a price of $26.00 per share, the average of the high and low prices reported
on the NYSE on February 12, 1996.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PHP HEALTHCARE CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-3 ITEM NUMBER HEADING CAPTION OR LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Front Cover Page; Cross-Reference Sheet; Outside
Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... The Company, Risk Factors, Ratio of Earnings to Fixed
Charges
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Not Applicable
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Selling Securityholders
8. Plan of Distribution................................. Plan of Distribution
9. Description of Securities to be Registered........... Description of Debentures; Description of Capital
Stock
10. Interests of Named Experts and Counsel............... Not Applicable
11. Material Changes..................................... Not Applicable
12. Incorporation of Certain Information by Reference.... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<TABLE>
<S> <C> <C>
PROSPECTUS SUBJECT TO COMPLETION, DATED FEBRUARY 20, 1996
</TABLE>
PHP HEALTHCARE CORPORATION
$69,000,000 PRINCIPAL AMOUNT OF 6 1/2% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2002
(Interest payable June 15 and December 15)
3,499,937 SHARES OF COMMON STOCK
------------------
This Prospectus relates to (i) $69,000,000 aggregate principal amount of
6 1/2% Convertible Subordinated Debentures due 2002 (the "Debentures") of PHP
Healthcare Corporation, a Delaware corporation ("PHP" or the "Company"), (ii)
2,532,110 shares of the Common Stock, par value $.01 per share (the "Common
Stock"), of the Company which are initially issuable upon conversion of the
Debentures plus such additional indeterminate number of shares of Common Stock
as may become issuable upon conversion of the Debentures as a result of
adjustments to the conversion price (the "Conversion Shares"), and (iii) an
additional 967,827 shares of Common Stock (including shares issuable upon the
exercise of options or the conversion of convertible securities) (the
"Additional Shares"). The Conversion Shares and the Additional Shares are
collectively referred to herein as the "Shares." The Debentures, the Conversion
Shares and the Additional Shares that are being registered hereby are to be
offered for the account of the holders thereof (the "Selling Securityholders").
The Debentures were acquired from the Company by Smith Barney Inc. and Dean
Witter Reynolds Inc. (the "Initial Purchasers") in December 1995 in connection
with a private offering (the "Debenture Offering"). See "Description of the
Debentures." The Additional Shares were acquired from the Company by Shamrock
Investments, Charles P. Reilly, Michael E. Gallagher, Jonathan J. Spees and John
P. Cole in September 1994 in connection with the issuance of Common Stock to
Shamrock Investments and the merger of J.P. Cole & Associates, Inc. and Paragon
Ambulatory Surgery, Inc. into the Company.
The Debentures are convertible into Common Stock of the Company at any time
after the 60th day following the date of original issuance of the Debentures and
at or before maturity, unless previously redeemed, at a conversion price of
$27.25 per share, subject to adjustment in certain events. On February 16, 1996,
the closing price of the Common Stock on the New York Stock Exchange was $26 3/4
per share. The Common Stock is traded under the symbol PPH.
The Debentures do not provide for a sinking fund. The Debentures are
redeemable at the option of the Company, in whole or in part, at the redemption
prices set forth in this Prospectus, together with accrued interest, except that
no redemption may be made prior to December 17, 1998. Upon a Repurchase Event
(as defined herein), each holder of Debentures shall have the right, at the
holder's option, to require the Company to repurchase such holder's Debentures
at a purchase price equal to 100% of the principal amount thereof, plus accrued
interest. See "Description of Debentures -- Certain Rights to Require Repurchase
of Debentures."
The Debentures are unsecured obligations of the Company and are subordinated
to all present and future Senior Indebtedness (as defined herein) of the Company
and will be effectively subordinated to all indebtedness and liabilities of
subsidiaries of the Company. The Indenture does not restrict the incurrence of
any other indebtedness or liabilities by the Company or its subsidiaries. See
"Description of Debentures -- Subordination."
The Debentures have been designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market. For a
description of certain income tax consequences to holders of the Debentures, see
"Certain United States Federal Income Tax Consequences." The Initial Purchasers
have advised the Company that they intend to make a market in the Debentures.
The Initial Purchasers, however, are not obligated to do so and any such market
making may be discontinued at any time without notice, in the sole discretion of
the Initial Purchasers. No assurance can be given that any market for the
Debentures will develop or be maintained.
The Debentures and the Conversion Shares are being registered to permit
public secondary trading of the Debentures and, upon conversion, the underlying
Common Stock, by the holders thereof from time to time after the date of this
Prospectus. The Company has agreed, among other things, to bear all expenses
(other than underwriting discounts, selling commissions and fees and the
expenses of counsel and other advisors to the holders of the Debentures or the
underlying Common Stock) in connection with the registration and sale of the
Debentures and the underlying Common Stock covered by this Prospectus. The
holders of the Additional Shares have agreed to pay their own expenses and bear,
on a pro rata basis, all incremental registration expenses that result from the
inclusion of the Additional Shares in the Registration Statement of which this
Prospectus is a part.
The Company will not receive any of the proceeds from the sales of the
Debentures or the Shares by the Selling Securityholders. The Debentures and the
Shares may be offered in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. In addition, the Shares
may be offered from time to time through ordinary brokerage transactions on the
New York Stock Exchange. See "Plan of Distribution." The Selling Securityholders
may be deemed to be "Underwriters" as defined in the Securities Act of 1933, as
amended (the "Securities Act"). If any broker-dealers are used by the Selling
Securityholders, any commissions paid to broker-dealers and, if broker-dealers
purchase any Debentures or Shares as principals, any profits received by such
broker-dealers on the resale of the Debentures or Shares may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Securityholders may be deemed to be underwriting
commissions.
------------------------------
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and
at the Commission's Regional Offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington D.C. 20549, at prescribed rates. Such materials can also be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The Company has filed with the Commission a registration statement on Form
S-3 (such registration statement, together with all amendments and exhibits
thereto, being hereinafter referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), for the
registration under the Securities Act of the Debentures and Shares offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is hereby made to the
Registration Statement for further information with respect to the Company and
the securities offered hereby. Statements contained herein concerning the
provisions of documents filed as exhibits to the Registration Statement are
necessarily summaries of such documents, and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission. Copies of the Registration Statement and the exhibits may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and made a part hereof: the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1995 and the Company's Amendment to that Form 10-K for the
fiscal year ended April 30, 1995 on Form 10-K/A; the Company's Quarterly Reports
on Form 10-Q for the quarters ended July 31, 1995 and October 31, 1995; the
Company's Current Reports on Form 8-K dated January 17, 1995, March 22, 1995,
December 1, 1995, December 22, 1995, and January 11, 1996; and the description
of the Company's Common Stock contained in the Company's Registration Statement
on Form 8-A dated July 20, 1992, including any amendments or reports filed for
the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents which have been incorporated by reference in this
Prospectus, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents so incorporated.
Requests for such copies should be directed to: Anthony M. Picini, Senior Vice
President, PHP Healthcare Corporation, 11440 Commerce Park Drive, Reston,
Virginia 22091, telephone (703) 758-3600.
2
<PAGE>
THE COMPANY
PHP Healthcare Corporation ("PHP" or the "Company") designs, develops and
operates patient-oriented Integrated Systems of Care ("ISOCs") which serve the
needs of managed care organizations, self-insured employers, health care
providers and provider systems, and government agencies. The Company develops
and operates each integrated system by: (i) developing and maintaining a network
of physicians, hospitals, and other providers; (ii) organizing and managing the
individual and group practices of physicians who participate in the network;
(iii) operating information systems to coordinate and integrate the services,
measure outcomes, and provide financial results of the system; and (iv) entering
into contracts with various third party payors, such as health maintenance
organizations ("HMOs"), insurers, or employee health benefit plans on behalf of
the network. The Company manages 15 ISOCs for its clients and has two more ISOCs
under development, owns a 30,000-member Medicaid HMO primarily serving the
District of Columbia, and manages inpatient and outpatient health care services
under 34 government contracts, providing care in over 70 health care facilities.
As of October 31, 1995, the Company contracted with or employed over 3,000
physicians.
PHP was organized as a Delaware corporation in January 1986 and succeeded to
the business of a predecessor corporation by merger in March 1986. The Company's
corporate headquarters is located at 11440 Commerce Park Drive, Reston,
Virginia, 22091, and its telephone number at that address is (703) 758-3600.
Unless the context otherwise requires, all references herein to the "Company"
include PHP and its subsidiaries.
3
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus and in the
documents incorporated herein by reference, prospective purchasers of the
Debentures and the Shares should carefully consider the factors set forth below
before purchasing the Debentures or the Shares.
RECENT ENTRY INTO COMMERCIAL MANAGED HEALTH CARE MARKET
Until fiscal 1994, PHP operated almost exclusively as a provider of health
care services to federal, state and local government agencies. During the past
two fiscal years, however, the Company has invested significant resources in
developing its ISOC product for the commercial managed health care market in
order to refocus its business from that of a government contractor to a full
service managed care company. There can be no assurance that the Company's
strategy will continue to be successful or that modifications to its strategy
will not be required.
HISTORICAL LOSSES
The Company reported net losses of $3,756,000 and $9,334,000 for the fiscal
years ended April 30, 1993 and 1994, respectively. Although the Company was
profitable for the fiscal year ended April 30, 1995 and for the six months ended
October 31, 1995, there can be no assurance that it will continue to operate
profitably, or have earnings or cash flow sufficient to comply with the
financial covenants to which it is subject or to cover its fixed charges,
including those attributable to the Debentures. As a consequence of the losses
reported in fiscal 1993 and 1994, the Company failed to comply with certain
financial covenants under its credit agreement. The Company obtained waivers for
such noncompliance and the Company's bank modified the applicable financial
covenants. In the future, any failure by the Company to comply with the
financial covenants contained in its credit agreement (or in any replacement
credit facility) could result in a default under such facility which could have
the effect of blocking payments on the Debentures and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON CERTAIN CONTRACTS
For the year ended April 30, 1995, and for the six months ended October 31,
1995, 39% and 38%, respectively, of the Company's revenues, and an even greater
percentage of the Company's gross profits, were derived from two contracts.
These contracts are with the District of Columbia Department of Human Services
(concerning the Company's Medicaid HMO in the District of Columbia) and with
Medigroup, Inc., a wholly owned subsidiary of Blue Cross and Blue Shield of New
Jersey, Inc. ("BCBSNJ") (concerning the development and management of ten ISOCs
in New Jersey), and accounted for 22% and 17%, respectively, of the Company's
revenues in fiscal 1995. For the six months ended October 31, 1995, revenues
derived from these contracts represented 29% and 9%, respectively, of the
Company's revenue. The loss of either of these contracts would have a material
adverse effect on the Company's business, financial condition and results of
operations.
The agreement with BCBSNJ provides BCBSNJ the right to terminate the
agreement upon 90 days notice without cause upon the payment of a termination
fee to the Company. The agreement also contains provisions permitting
termination by BCBSNJ for cause in the event of a material breach by PHP or upon
the occurrence of certain other circumstances, including PHP's failure to cause
all ten centers to be fully operational by March 31, 1995. Although nine of the
ten centers were fully operational by March 31, 1995, one center was not fully
operational until September 1995. The Company believes, for various reasons,
that BCBSNJ may not validly terminate the agreement based upon the date of
completion of the tenth center. The parties have also discussed the possibility
of renegotiating the agreement or otherwise altering their relationship on a
mutually agreeable basis, although no specific proposal is presently under
consideration. There can be no assurance that BCBSNJ will not seek to terminate
the agreement based upon the date of completion of the tenth center or on any
other basis or that, if BCBSNJ does seek to do so, the Company will be
successful in preventing such a termination.
4
<PAGE>
The Company's accounts receivable as of October 31, 1995 include amounts due
from the District of Columbia Department of Human Services and the United States
Department of Health and Human Services as follows: approximately $8,000,000
related to the cost settlement for the three-year contract period ended
September 30, 1994, and approximately $3,000,000 related to the cost settlement
for the one-year contract period ended September 30, 1995. These amounts are
subject to audit and the audits are expected to be completed during the current
fiscal year. In addition, as a result of the current federal budget and the
District of Columbia's fiscal difficulties, the Company has past due amounts
from the District of Columbia and the Department of Health and Human Services of
approximately $4.3 million due January 1, 1996, and an additional $4.3 million
due February 1, 1996. The Company cannot predict when or whether these amounts
will be paid. The failure of the Company to collect these amounts would have a
material adverse effect on the Company's business, financial condition and
results of operations.
CAPITATED NATURE OF REVENUE
The Company provides a portion of its services on a capitated basis, and the
Company intends to negotiate additional capitated agreements with managed care
organizations or assume such contracts in connection with its affiliation with
primary care practices. Such contracts, typically referred to as "shared risk"
contracts, are arrangements between the Company and a managed care organization
under which the Company agrees to provide certain health care services, as
required by members of such managed care organization, in exchange for a fixed
fee per member per month. Under these contracts, the Company bears the risk that
the cost of the services it is required to provide will exceed the fixed fees it
is entitled to receive. In order for such shared-risk contracts to be profitable
for the Company, the Company must effectively manage the utilization rate of
primary care services, specialty physician services, and hospital services
delivered to members of the managed care organization. There can be no assurance
that the Company will receive fees under such shared-risk arrangements which
will permit it to recover the costs of the health care services it will be
required to provide.
DEPENDENCE ON PRIMARY CARE PHYSICIANS
Primary care physicians are a key operating component of the Company's
integrated system of care. The Company competes for exclusive primary care
physician affiliations with a variety of systems including group practices,
individual practice associations ("IPAs"), health maintenance organizations
("HMOs"), practice management companies and hospitals. Most primary care
physicians have traditionally practiced independently or in small single
specialty groups. The competitive and operational disadvantages to the physician
of this type of practice structure have compelled many of these physicians to
evaluate alternatives. The process of negotiating these affiliations is often
competitive, complex and time consuming. There can be no assurance that the
Company will continue to be able to identify and secure affiliations with a
sufficient number of primary care physicians to operate its ISOCs effectively.
LIMITATIONS ON REIMBURSEMENT
A major portion of the Company's revenues are derived from third party
payors, such as governmental programs, private insurance plans and managed care
organizations. In particular, for the year ended April 30, 1995 and the six
months ended October 31, 1995, approximately 22% and 29%, respectively, of the
Company's revenues were derived from the Medicaid program, a cooperative state-
federal program for medical assistance to the needy. Reflecting a trend in the
health care industry, third party payors increasingly are negotiating with
health care providers such as the Company concerning the prices charged for
medical services, with the goal of lowering reimbursement and utilization rates.
There can be no assurance that any future reduction in reimbursement rates would
be offset through enhanced operating efficiencies, or that any such enhancement
of operating efficiencies would occur. Third party payors may also deny
reimbursement if they determine that a treatment was not performed in accordance
with the cost-effective treatment methods established by such payors, was
experimental, or for other reasons. In addition, funding for governmental
programs, such as Medicaid, is under increased scrutiny.
5
<PAGE>
The U.S. Congress has passed a fiscal year 1996 budget reconciliation bill
that provides for reductions in the rate of spending increases over the next
seven years of approximately $270 billion in the Medicare program and $165
billion in the Medicaid program. The bill provides for, among other things,
converting the federal share of the Medicaid program to a block grant and
gradually reducing the overall growth of the federal share from approximately
ten percent annually to approximately four percent by fiscal year 2000. The
annual increase in the federal share would vary from state to state based on a
variety of factors. Although the initial reconciliation bill was vetoed by the
President, no assurance can be given that reductions in the rate of increase in
spending for these programs, if ultimately signed into law, would not have a
material adverse effect on the Company's operations. Any loss of revenue caused
by trends in the health care industry toward cost containment and oversight
could have a material adverse effect on the Company's business.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems are critical to its ability to
manage care efficiently and to be competitive in the market. The Company relies
on these systems to support practice operations and to facilitate the management
and monitoring of clinical performance. Clinical guidelines, practice protocols,
case management and utilization review systems are all essential to the
Company's ability to secure, and operate profitably under, capitated and
shared-risk contracts. There can be no assurance that the Company will be able
to refine and enhance these systems to keep them current and competitive.
DEPENDENCE ON GOVERNMENT CONTRACTS
Contracts with various federal, state and local government agencies
(excluding agreements concerning the Company's Medicaid HMO in the District of
Columbia) account for approximately 50% of the Company's revenues. These
contracts are obtained primarily through the competitive bidding process as
governed by applicable federal and state statutes and regulations, and generally
may be modified or terminated for the convenience of the government agency at
any time during the term of the contract. Contracts are generally awarded for a
base period of less than one year and corresponding with the government agency's
fiscal year, have two-to-four one-year renewals at the option of the government
agency, and are subject to appropriation of funds annually by the appropriate
legislative body. There is, therefore, no assurance that the Company will be
able to retain its contracts or, if retained, that all of such contracts will be
fully funded.
Under the competitive bidding process, unsuccessful bidders may protest the
award of a contract to another bidder in accordance with a government appeals
process if they believe the award was improper. Such protests could result in
the rebidding, delay or loss of contracts. In addition, contracts with
government agencies are generally complex in nature and subject contractors to
extensive regulation under federal, state and local law. For example, government
contractors are subject to audits which can result in adjustments to contract
costs and fees.
The Company believes that it has complied in all material respects with
applicable government regulations. In certain circumstances in which a
contractor has not complied with the terms of a contract or with regulations or
statutes, the contractor may be debarred or suspended from obtaining future
contracts for a specified period of time. Any such suspension or debarment of
the Company could have a material adverse effect upon the Company's business.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the skill and efforts of its senior
management. The loss of key management personnel or the inability to attract,
retain and motivate sufficient numbers of qualified management personnel could
adversely affect the Company's business.
COMPETITION
The managed care industry is highly competitive and is subject to continuing
changes in how services are provided and how providers are selected and paid.
Increased enrollment in prepaid health care plans due to health care reform or
for other reasons, increased participation by physicians in
6
<PAGE>
group practices and other factors may attract new entrants into the managed care
industry and result in increased competition for the Company. Certain of the
Company's competitors are significantly larger and better capitalized, provide a
wider variety of services, may have greater experience in providing health care
management services and may have longer established relationships with payors.
EXPOSURE TO PROFESSIONAL LIABILITY
Due to the nature of the Company's business, there are asserted from time to
time medical malpractice lawsuits and other claims against the Company, some of
which are currently pending, which subjects the Company to the attendant risk of
substantial damage awards. The most significant source of potential liability in
this regard is the negligence of physicians employed or contracted by the
Company. To the extent such physicians are employees of the Company or were
regarded as agents of the Company in the practice of medicine, the Company
would, in most instances, be held liable for their negligence. In addition, the
Company could be found in certain instances to have been negligent in performing
its management services under contractual arrangements, even if no agency
relationship with the physician were found to exist. In some cases, the
Company's contracts with hospitals and third party payors require the Company to
indemnify such other parties for losses resulting from the negligence of
physicians who were employed or managed by or affiliated with the Company.
The Company maintains professional and general liability insurance on a
claims made basis in amounts deemed appropriate by management, based on
historical claims and the nature and risks of its business. There can be no
assurances, however, that an existing or future claim or claims will not exceed
the limits of available insurance coverage, that any insurer will remain solvent
and able to meet its obligations to provide coverage for any such claim or
claims or that such coverage will continue to be available or available with
sufficient limits and at a reasonable cost to adequately and economically insure
the Company's operations in the future. A judgment against the Company in excess
of such coverage could have a material adverse effect on the Company.
HEALTH CARE REGULATION
The health care industry is subject to extensive federal regulation relating
to licensure, conduct of operations and prices for services.
The laws of many states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws vary from state to state, have been subject to limited judicial and
regulatory interpretation, and are enforced by the courts and by regulatory
authorities with broad discretion. Although the Company seeks to structure its
operations so as to comply with these laws, there can be no assurance that the
Company's present or future operations will not be successfully challenged as
violating, or determined to have violated, such laws, or that the enforceability
of the provisions of agreements governing such operations will not be limited.
Any such result could have a material adverse effect on the Company.
The laws in most states also regulate the business of insurance and the
operation of HMOs. Many states also regulate the establishment and operation of
networks of health care providers. Although the Company seeks to structure its
operations so as to comply with these laws in the states in which it does
business, there can be no assurance that future interpretations of insurance
laws and health care network laws by the regulatory authorities in these states
or in the states into which the Company may expand will not require licensure or
a restructuring of some or all of the Company's operations. The Company's
Medicaid HMO is not presently subject to licensure requirements in the District
of Columbia. However, legislation has been proposed which would require the
licensure of HMOs in the District of Columbia and subject the Company to
additional regulatory requirements. The Company is unable to predict what HMO
legislation or regulation, if any, will be adopted in the District of Columbia
and what effect, if any, such legislation or regulation would have on the
Company's business. No assurance can be given that future HMO legislation or
regulation in the District of Columbia or in other states will not have a
material adverse effect on the Company's business, financial condition or
results of operation.
7
<PAGE>
Anti-fraud and abuse amendments codified under the Social Security Act of
1935, as amended (the "Social Security Act"), prohibit certain business
practices and relationships that may affect the provision and cost of health
care services reimbursable under the Medicare and Medicaid programs. These
amendments include anti-kickback provisions prohibiting the solicitation,
payment, receipt or offering of any direct or indirect remuneration for the
referral of Medicare or Medicaid patients or for the ordering or providing of
Medicare or Medicaid covered services, items or equipment. Sanctions for
violating the anti-kickback provisions include criminal penalties and civil
sanctions, including fines and possible exclusion from the Medicare and Medicaid
programs. In addition, Section 1877 of the Social Security Act (the "Stark law")
restricts physician referrals to certain providers, including hospitals, with
which they have a financial arrangement. Sanctions for violation of the Stark
law include civil money penalties and exclusion from the Medicare and Medicaid
programs. The Stark law and the anti-kickback provisions of the Social Security
Act are broadly worded and often vague, and the future interpretation of these
provisions and their applicability to the Company's operations cannot be
predicted with certainty. Although the Company seeks to arrange its business
relationships so as to comply with these laws, there can be no assurance that
the Company's present or future operations will not be accused of violating, or
be determined to have violated, such provisions. Any such result could have a
material adverse effect on the Company.
HEALTH CARE REFORM
In recent years, an increasing number of legislative proposals have been
introduced in Congress and in some state legislatures that would effect major
changes in the health care system, either nationally or at the state level. The
Company is unable to predict what health care reform legislation, if any, will
be adopted and what effect, if any, such legislation may have on the Company's
business. No assurance can be given that future health care reform legislation
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
Provisions in the fiscal year 1996 reconciliation bill passed by Congress,
if signed into law, would eliminate the federally mandated individual
entitlement to Medicaid benefits and give the states wide latitude in setting
eligibility standards and benefit levels. In addition, the bill would reduce for
a number of states the level of state spending necessary to qualify for the
maximum federal matching. Such changes, if adopted, could result in a reduction
in the number of individuals participating in the Medicaid program. No assurance
can be given that such changes would not have a material adverse effect on the
Company's business.
SUBSTANTIAL INDEBTEDNESS
The Company's indebtedness is substantial in relation to its stockholders'
equity. At October 31, 1995, the Company's total long-term debt, net of current
portion, accounted for 49% of its total capitalization. As adjusted to give
effect to the Debenture Offering and the application of the net proceeds
therefrom, such debt accounted for 73% of the Company's total capitalization.
SUBORDINATION OF DEBENTURES
The Debentures are subordinate in right of payment to all current and future
Senior Indebtedness of the Company. Senior Indebtedness includes all secured
indebtedness of the Company (other than claims of trade creditors of the
Company), whether existing on or created or incurred after the date of the
issuance of the Debentures, that is not made subordinate to or pari passu with
the Debentures by the instrument creating the indebtedness. At October 31, 1995,
the aggregate amount of Senior Indebtedness outstanding and the aggregate amount
of indebtedness and other liabilities of the Company and its subsidiaries to
which the Debentures are effectively subordinated was approximately $42.8
million. As of October 31, 1995, after giving effect to the repayment of $21.2
million of indebtedness with proceeds from the Debenture Offering, the Company
will have approximately $21.5 million of indebtedness outstanding which
constitutes Senior Indebtedness or to which the Debentures are effectively
subordinated. The Indenture does not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee. By reason of such subordination of the Debentures,
in the event of the insolvency, bankruptcy,
8
<PAGE>
liquidation, reorganization, dissolution or winding up of the business of the
Company or upon a default in payment with respect to any Senior Indebtedness of
the Company or an event of default with respect to such indebtedness resulting
in the acceleration thereof, the assets of the Company will be available to pay
the amounts due on the Debentures only after all Senior Indebtedness of the
Company has been paid in full. In addition, holders of the Debentures are
effectively subordinated to the claims of creditors of the Company's
subsidiaries. In the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any subsidiary of
the Company, creditors of such subsidiary generally will have the right to be
paid in full before any distribution is made to the Company or the holders of
the Debentures.
LIMITATIONS ON REPURCHASE OF DEBENTURES UPON A REPURCHASE EVENT
In the event of a Repurchase Event, which includes a Change in Control and a
Termination of Trading (each as defined herein) each holder of Debentures will
have the right, at the holder's option, to require the Company to repurchase all
or a portion of such holder's Debentures at a purchase price equal to 100% of
the principal amount thereof plus accrued interest to the repurchase date. The
Company's ability to repurchase the Debentures upon a Repurchase Event may be
limited by the terms of the Company's Senior Indebtedness and the subordination
provisions of the Indenture. Further, the ability of the Company to repurchase
Debentures upon a Repurchase Event will be dependent on the availability of
sufficient funds and compliance with applicable securities laws. Accordingly,
there can be no assurance that the Company will be able to repurchase the
Debentures upon a Repurchase Event. The term "Repurchase Event" is limited to
certain specified transactions and may not include other events that might
adversely affect the financial condition of the Company or result in a downgrade
of the credit rating of the Debentures, nor would the requirement that the
Company offer to repurchase the Debentures upon a Repurchase Event necessarily
afford holders of the Debentures protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company. See "Description of Debentures."
ABSENCE OF PUBLIC MARKET
There is no existing market for the Debentures and there can be no assurance
as to the liquidity of any markets that may develop for the Debentures, the
ability of the holders to sell their Debentures or the price at which holders of
the Debentures may be able to sell their Debentures. Future trading prices of
the Debentures will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results, the price of the
Common Stock and the market for similar securities. The Initial Purchasers have
informed the Company that the Initial Purchasers intend to make a market in the
Debentures; however, the Initial Purchasers are not obligated to do so and any
such market making activity may be terminated at any time without notice to the
holders of the Debentures. See "Description of the Debentures -- Registrations
Rights; Liquidated Damages." The Debentures are eligible for trading in the
PORTAL Market; however, the Company does not intend to apply for listing of the
Debentures on any securities exchange.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock has experienced a high degree of
volatility. There can be no assurance that such volatility will not continue or
become more pronounced. In addition, recently the stock market has experienced,
and is likely to experience in the future, significant price and volume
fluctuations which could adversely affect the market price of the Common Stock
without regard to the operating performance of the Company. The Company believes
that factors such as quarterly fluctuations in the financial results of the
Company or its competitors and general conditions in the industry, the overall
economy and the financial markets could cause the price of the Common Stock to
fluctuate substantially.
CONTROL BY MANAGEMENT AND CERTAIN STOCKHOLDERS
Certain of the Company's executive officers and directors and related
entities (collectively, the "Voting Group") currently hold an aggregate of
approximately 25% of the outstanding Common Stock (excluding shares issuable
upon the exercise of options or the conversion of convertible securities) and
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<PAGE>
have entered into a voting agreement (the "Voting Agreement") under which they
have agreed to act together under certain circumstances. Assuming full
conversion of the Debentures, the Voting Group will hold approximately 21% of
the outstanding Common Stock. The Voting Agreement currently provides that it
will terminate on October 7, 1996. If the Voting Group acts together, they may
exercise a controlling influence over the outcome of matters submitted to the
Company's stockholders for approval. Moreover, the Voting Group collectively may
have the power to delay, defer or prevent a change in control of the Company.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Company's certificate of incorporation, by-laws
and Delaware law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. These provisions include a classified Board of Directors, the
ability of the Board of Directors to authorize the issuance, without further
stockholder approval, of preferred stock with rights and privileges which could
be senior to the Common Stock, elimination of the stockholders' ability to take
any action without a meeting, and establishment of certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at stockholders' meetings. In addition,
the Company has distributed preferred stock purchase rights which could cause
substantial dilution to a person or group that attempts to acquire a controlling
interest in the Company. The Company is also subject to Section 203 of the
Delaware General Corporation Laws which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that such stockholder became an "interested
stockholder." See "Description of Capital Stock."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sales of the
Debentures or the Shares by the Selling Securityholders. See "Selling
Securityholders" for a list of those persons and entities receiving the proceeds
from the sales of the Debentures or the Shares.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30 OCTOBER 31
- ----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1994 1995
- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
4.36x 7.15x (1.58)x (1.89)x 1.41x 1.21x 3.24x
</TABLE>
The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings from continuing operations before income taxes, minority interest
and extraordinary items plus fixed charges. Fixed charges consist of interest
expense, amortization of financing costs and the estimated interest component of
rent expense.
10
<PAGE>
DESCRIPTION OF DEBENTURES
The Debentures were issued under an indenture dated as of December 15, 1995
(the "Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"). The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Indenture,
including the definition therein of certain terms. Wherever particular sections
or defined terms of the Indenture are referred to, such sections or defined
terms are incorporated herein by reference. Copies of the Indenture are
available from the Company upon request at the address provided on page 3
herein.
GENERAL
The Debentures are unsecured obligations of the Company, are limited to
$69,000,000 in aggregate principal amount (including the Initial Purchasers'
over-allotment option) and mature on December 15, 2002. The Debentures bear
interest at the rate per annum shown on the front cover of this Prospectus from
the date of original issuance of Debentures pursuant to the Indenture or from
the most recent Interest Payment Date to which interest has been paid or
provided for, payable semi-annually on June 15 and December 15 of each year,
commencing June 15, 1996, to the Person in whose name the Debenture (or any
predecessor Debenture) is registered at the close of business on the preceding
June 1 or December 1, as the case may be. Interest on the Debentures will be
paid on the basis of a 360-day year of twelve 30-day months.
Principal of, premium, if any, and interest on, the Debentures is payable
(i) in respect of Debentures held of record by the Depository Trust Company
("DTC") or its nominee in same day funds on or prior to the payment dates with
respect to such amounts and (ii) in respect of Debentures held of record by
holders other than DTC or its nominee, at the office of the Trustee in New York,
New York, and the Debentures may be surrendered for transfer, exchange or
conversion at the office of the Trustee in New York, New York. In addition, with
respect to Debentures held of record by holders other than DTC or its nominee,
payment of interest may be made, at the option of the Company, by check mailed
to the address of the persons entitled thereto as it appears in the register for
the Debentures on the Regular Record Date for such interest.
The Debentures are issued only in registered form, without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for any transfer or exchange of the Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses (including the fees and expenses of the Trustee)
payable in connection therewith. The Company is not required (i) to issue,
register the transfer of or exchange any Debentures during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption and ending at the close of business on the day of such mailing, or
(ii) to register the transfer of or exchange any Debenture selected for
redemption in whole or in part, except the unredeemed portion of Debentures
being redeemed in part.
All moneys paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Debenture which remain
unclaimed for two years after such principal, premium or interest become due and
payable may be repaid to the Company. Thereafter, the Holder of such Debenture
may, as an unsecured general creditor, look only to the Company for payment
thereof.
The Indenture does not contain any provisions that would provide protection
to Holders of the Debentures against a sudden and dramatic decline in credit
quality of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "Certain Rights to Require
Repurchase of Debentures."
CONVERSION RIGHTS
The Debentures are convertible into Common Stock at any time after the 60th
day following the date of original issuance of the Debentures and prior to
redemption or final maturity, initially at the
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<PAGE>
conversion price of $27.25 per share. The right to convert Debentures which have
been called for redemption will terminate at the close of business on the second
business day preceding the Redemption Date. See "Optional Redemption" below.
The conversion price is subject to adjustment upon the occurrence of any of
the following events: (i) the subdivision, combination or reclassification of
outstanding shares of Common Stock; (ii) the payment in shares of Common Stock
of a dividend or distribution on any class of capital stock of the Company;
(iii) the issuance of rights or warrants to all holders of Common Stock
entitling them to acquire shares of Common Stock at a price per share less than
the Current Market Price; (iv) the distribution to holders of Common Stock of
shares of capital stock other than Common Stock, evidences of indebtedness, cash
or assets (including securities, but excluding dividends or distributions paid
exclusively in cash and dividends, distributions, rights and warrants referred
to above); (v) a distribution consisting exclusively of cash (excluding any cash
distributions referred to in (iv) above) to all holders of Common Stock in an
aggregate amount that, together with (A) all other cash distributions (excluding
any cash distributions referred to in (iv) above) made within the 12 months
preceding such distribution and (B) any cash and the fair market value of other
consideration payable in respect of any tender offer by the Company or a
subsidiary of the Company for the Common Stock consummated within the 12 months
preceding such distribution, exceeds 12.5 percent of the Company's market
capitalization (being the product of the Current Market Price times the number
of shares of Common Stock then outstanding) on the date fixed for determining
the stockholders entitled to such distribution; and (vi) the consummation of a
tender offer made by the Company or any subsidiary of the Company for the Common
Stock which involves an aggregate consideration that, together with (X) any cash
and other consideration payable in respect of any tender offer by the Company or
a subsidiary of the Company for the Common Stock consummated within the 12
months preceding the consummation of such tender offer and (Y) the aggregate
amount of all cash distributions (excluding any cash distributions referred to
in (iv) above) to all holders of the Common Stock within the 12 months preceding
the consummation of such tender offer, exceeds 12.5 percent of the Company's
market capitalization at the date of consummation of such tender offer. No
adjustment of the conversion price will be required to be made until cumulative
adjustments amount to at least one percent of the conversion price, as last
adjusted. Any adjustment that would otherwise be required to be made shall be
carried forward and taken into account in any subsequent adjustment.
In addition to the foregoing adjustments, the Company will be permitted to
reduce the conversion price as it considers to be advisable in order that any
event treated for federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the Common Stock or, if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event. In the case of any consolidation or merger of the Company with any
other corporation (other than one in which no change is made in the Common
Stock), or any sale or transfer of all or substantially all of the assets of the
Company, the Holder of any Debenture then outstanding will, with certain
exceptions, have the right thereafter to convert such Debenture only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Debenture might have been converted immediately
prior to such consolidation, merger, sale or transfer; and adjustments will be
provided for events subsequent thereto that are as nearly equivalent as
practical to the conversion price adjustments described above.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon the then
Closing Price at the close of business on the day of conversion. If any
Debentures are surrendered for conversion during the period from the close of
business on any Regular Record Date through and including the next succeeding
Interest Payment Date (except any such Debentures called for redemption), such
Debentures when surrendered for conversion must be accompanied by payment in
next day funds of an amount equal to the interest thereon which the registered
Holder on such Regular Date is to receive. Except as described in the
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<PAGE>
preceding sentence, no interest will be payable by the Company on converted
Debentures with respect to any Interest Payment Date subsequent to the date of
conversion. No other payment or adjustment for interest or dividends is to be
made upon conversion.
The Indenture provides that, in the event of the occurrence of certain
events affecting the rights (the "Rights") distributed pursuant to the Company's
Rights Agreement, dated as of April 10, 1992, with Riggs National Bank, NA (the
"Rights Agreement"), appropriate adjustments to the conversion price will be
made. In lieu of any such adjustment, the Company may amend the Rights Agreement
to provide that upon conversion of the Debentures the holder thereof will
receive, in addition to the Common Stock issuable upon such conversion, the
Rights which attached to such shares of Common Stock or would have attached to
such shares if the Rights had not become separated from the Common Stock
pursuant to the provisions of the Rights Agreement.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Debentures are, to the extent set forth in the Indenture, subordinated in right
of payment to the prior payment in full of all Senior Indebtedness. If there is
a payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
or provision for such payment in money or money's worth before the Holders of
the Debentures will be entitled to receive any payment in respect of the
principal of or premium, if any, or interest on the Debentures. In the event of
the acceleration of the Maturity of the Debentures, the holders of all Senior
Indebtedness will first be entitled to receive payment in full in cash of all
amounts due thereon or provision for such payment in money or money's worth
before the Holders of the Debentures will be entitled to receive any payment for
the principal of or premium, if any, or interest on the Debentures. No payments
on account of principal of or premium, if any, or interest on the Debentures or
on account of the purchase or acquisition of Debentures may be made if there has
occurred and is continuing a default in any payment with respect to Senior
Indebtedness, any acceleration of the maturity of any Senior Indebtedness of if
any judicial proceeding is pending with respect to any such default.
Senior Indebtedness is defined in the Indenture as (a) all secured
indebtedness of the Company for money borrowed, excluding the claims of trade
creditors of the Company, whether outstanding on the date of execution of the
Indenture or thereafter created, incurred or assumed, except any such other
indebtedness that by the terms of the instrument or instruments by which such
indebtedness was created or incurred expressly provides that it (i) is junior in
right of payment to the Debentures or (ii) ranks PARI PASSU in right of payment
with the Debentures, and (b) any amendments, renewals, extensions,
modifications, refinancings and refundings of any of the foregoing. The term
"indebtedness for money borrowed" when used with respect to the Company is
defined to mean (i) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money (including without limitation fees,
penalties and other obligations in respect thereof), whether or not evidenced by
bonds, debentures, notes or other written instruments, (ii) any deferred payment
obligation of, or any such obligation guaranteed by, the Company for the payment
of the purchase price of property or assets evidenced by a note or similar
instrument, and (iii) any obligation of, or any such obligation guaranteed by,
the Company for the payment of rent or other amounts under a lease of property
or assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Company under generally accepted
accounting principles.
The Debentures are obligations exclusively of the Company. A portion of the
operations of the Company are currently conducted through subsidiaries, which
are separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Debentures or to make any
funds available therefor, whether by dividends, loans or other payments. In
addition,
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<PAGE>
the payment of dividends and certain loans and advances to the Company by such
subsidiaries may be subject to certain statutory or contractual restrictions,
are contingent upon the earnings of such subsidiaries and are subject to various
business considerations.
The Debentures are effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's subsidiaries. Any right of the Company to receive assets of any
such subsidiary upon the liquidation or reorganization of any such subsidiary
(and the consequent right of the Holders of the Debentures to participate in
those assets) will be effectively subordinated to the claims of that
subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security interest in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness. At October 31, 1995, the aggregate amount of Senior Indebtedness
outstanding and the aggregate amount of indebtedness and other liabilities of
the Company and its subsidiaries to which the Debentures are effectively
subordinated was approximately $42.8 million. The Company also expects to incur
Senior Indebtedness from time to time in the future.
OPTIONAL REDEMPTION
The Debentures are redeemable, at the Company's option, in whole or from
time to time in part, at any time on or after December 17, 1998, upon not less
than 15 nor more than 60 days' notice mailed to each Holder of Debentures to be
redeemed at its address appearing in the Security Register and prior to Maturity
at the following Redemption Prices (expressed as percentages of the principal
amount) plus accrued interest to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the 12-month period beginning December 15, in the year
indicated (December 17, in the case of 1998), the redemption price shall be:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ------------------------------------------------------------------ ----------------
<S> <C>
1998.............................................................. 103.71%
1999.............................................................. 102.79%
2000.............................................................. 101.86%
2001.............................................................. 100.93%
</TABLE>
No sinking fund is provided for the Debentures.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, or permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties substantially as an entirety
to the Company, unless (a) if applicable, the Person formed by such
consolidation or into which the Company is merged or the Person or corporation
which acquires the properties and assets of the Company substantially as an
entirety is a corporation, partnership or trust organized and validly existing
under the laws of the United States or any state thereof or the District of
Columbia and expressly assumes payment of the principal of and premium, if any,
and interest on the Debentures and performance and observance of each obligation
of the Company under the Indenture, (b) after consummating such consolidation,
merger, transfer or lease, no Default or Event of Default will occur and be
continuing, (c) such consolidation, merger or acquisition does not adversely
affect the validity or enforceability of the Debentures and (d) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, transfer or lease
complies with the provisions of the Indenture.
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<PAGE>
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF DEBENTURES
In the event of any Repurchase Event (as defined below) occurring after the
date of issuance of the Debentures and on or prior to Maturity, each Holder of
Debentures will have the right, at the Holder's option, to require the Company
to repurchase all or any part of the Holder's Debentures on the date (the
"Repurchase Date") that is 30 days after the date the Company gives notice of
the Repurchase Event as described below at a price (the "Repurchase Price")
equal to 100% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. On or prior to the Repurchase Date, the Company
shall deposit with the Trustee or a Paying Agent an amount of money sufficient
to pay the Repurchase Price of the Debentures which are to be repaid on the
Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase Event, as
provided for below, or to repurchase the Debentures when required under the
preceding paragraph will result in an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event, the
Company is obligated to mail to all Holders of Debentures a notice of the
occurrence of such Repurchase Event, the Repurchase Date, the date by which the
repurchase right must be exercised, the Repurchase Price for Debentures and the
procedures which the Holder must follow to exercise this right. To exercise the
repurchase right, the Holder of a Debenture must deliver, on or before the close
of business on the Repurchase Date, irrevocable written notice to the Company
(or an agent designated by the Company for such purpose) and to the Trustee of
the Holder's exercise of such right, together with the certificates evidencing
the Debentures with respect to which the right is being exercised, duly endorsed
for transfer.
A "Repurchase Event" shall have occurred upon the occurrence of a Change in
Control (as defined below) or a Termination of Trading (as defined below).
A "Change in Control" shall occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case, other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of capital stock entitled to vote generally in
the election of directors of the continuing or surviving corporation immediately
after such consolidation or merger in substantially the same proportion as their
ownership of Common Stock immediately before such transaction; (iii) any person,
or any persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with any affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50%
of the total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of directors of the Company; (iv) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of 662 3% of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (v) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution.
15
<PAGE>
A "Termination of Trading" shall occur if the Common Stock (or other common
stock into which the Debentures are then convertible) is neither listed for
trading on a U.S. national securities exchange nor approved for trading on an
established automated over-the-counter trading market in the United States.
The right to require the Company to repurchase Debentures as a result of the
occurrence of a Repurchase Event could create an event of default under Senior
Indebtedness of the Company, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Debentures. See
"Subordination." Failure by the Company to repurchase the Debentures when
required will result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions. The
Company's ability to pay cash to the Holders of Debentures upon a repurchase may
be limited by certain financial covenants contained in the Company's Senior
Indebtedness.
In the event a Repurchase Event occurs and the Holders exercise their rights
to require the Company to repurchase Debentures, the Company intends to comply
with applicable tender offer rules under the Exchange Act, including Rules 13e-4
and 14e-1, as then in effect, with respect to any such purchase.
The foregoing provisions would not necessarily afford Holders of the
Debentures protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders. In addition, the
foregoing provisions may discourage open market purchases of the Common Stock or
a non-negotiated tender or exchange offer for such stock and, accordingly, may
limit a stockholder's ability to realize a premium over the market price of the
Common Stock in connection with any such transaction.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Debentures: (a) default in the payment of principal of or any premium on any
Debenture when due (even if such payment is prohibited by the subordination
provisions of the Indenture); (b) default in the payment of any interest on any
Debenture when due, which default continues for 30 days (even if such payment is
prohibited by the subordination provisions of the Indenture); (c) failure to
provide timely notice of a Repurchase Event as required by the Indenture; (d)
default in the payment of the Repurchase Price in respect of any Debenture on
the Repurchase Date therefor (even if such payment is prohibited by the
subordination provisions of the Indenture); (e) default in the performance of
any other covenant of the Company in the Indenture continued for 60 days after
written notice by the Trustee or Holders of at least 25% in aggregate principal
amount of the Outstanding Debentures as provided in the Indenture; (f) default
under any bond, debenture, note or other evidence of indebtedness for money
borrowed by the Company or any subsidiary of the Company or under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or any
subsidiary of the Company, whether such indebtedness now exists or shall
hereafter be created, which default shall constitute a failure to pay the
principal of indebtedness in excess of $5,000,000 when due and payable after the
expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $5,000,000 becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 30 days after there shall
have been given to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of the Outstanding
Debentures a written notice specifying such default and requiring the Company to
cause such indebtedness to be discharged or cause such acceleration to be
rescinded or annulled; and (g) certain events in bankruptcy, insolvency or
reorganization of the Company or any subsidiary of the Company.
If an Event of Default with respect to the Debentures shall occur and be
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Debentures may
16
<PAGE>
declare the principal of and premium, if any, on all such Debentures to be due
and payable immediately, but if the Company cures all Events of Default (except
the nonpayment of interest on, premium, if any, and principal of any Notes) and
certain other conditions are met, such declaration may be canceled and past
defaults may be waived by the Holders of a majority in principal amount of
Outstanding Debentures. If an Event of Default shall occur as a result of an
event of bankruptcy, insolvency or reorganization of the Company or any
subsidiary of the Company, the aggregate principal amount of the Debentures
shall automatically become due and payable. The Company is required to furnish
to the Trustee annually a statement as to the performance by the Company of
certain of its obligations under the Indenture and as to any default in such
performance. The Indenture provides that the Trustee may withhold notice to the
Holders of the Debentures of any continuing default (except in the payment of
the principal of or premium, if any, or interest on any Debentures) if the
Trustee considers it in the interest of Holders of the Debentures to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture may be made by the Company and
the Trustee without the consent of the Holders to: (a) cause the Indenture to be
qualified under the Trust Indenture Act; (b) evidence the succession of another
Person to the Company and the assumption by any such successor of the covenants
of the Company herein and in the Debentures; (c) add to the covenants of the
Company for the benefit of the Holders or an additional Event of Default, or
surrender any right or power conferred upon the Company; (d) secure the
Debentures; (e) make provision with respect to the conversion rights of Holders
in the event of a consolidation, merger or sale of assets involving the Company,
as required by the Indenture; (f) evidence and provide for the acceptance of
appointment by a successor Trustee with respect to the Debentures; or (g) cure
any ambiguity, correct or supplement any provision which may be defective or
inconsistent with any other provision, or make any other provisions with respect
to matters or questions arising under the Indenture which shall not be
inconsistent with the provisions of the Indenture, PROVIDED, HOWEVER, that no
such modification or amendment may adversely affect the interest of the Holders
in any material respect.
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Outstanding Debentures; PROVIDED, HOWEVER, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debenture, (a) change the Stated Maturity of the principal of, or
any installment of interest on, such Debenture, (b) reduce the principal amount
of, or premium, if any, or interest on, such Debenture, (c) adversely affect the
right to convert such Debenture or modify the subordination provisions in the
Indenture in a manner adverse to the Holders, (d) change the place or currency
of payment of principal of, or premium, if any, or interest on, such Debenture,
(e) adversely affect the right to require the Company to repurchase Debentures,
(f) impair the right to institute suit for the enforcement of any such payment
on or with respect to such Debenture, or (g) reduce the percentage in principal
amount of Outstanding Debentures, the consent of whose Holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults.
The Holders of a majority in aggregate principal amount of the Outstanding
Debentures may, on behalf of all Holders of Debentures, waive compliance by the
Company with certain restrictive provisions of the Indenture. The Holders of a
majority in aggregate principal amount of the Outstanding Debentures may, on
behalf of all Holders of Debentures, waive any past default under the Indenture
with respect to the Debentures, except a default in the payment of principal of,
or premium, if any, or interest or in respect of a provision which under the
Indenture cannot be modified or amended without consent of the Holder of each
Outstanding Debenture.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while
Debentures remain Outstanding if (a) all Outstanding Debentures will become due
and payable at their scheduled
17
<PAGE>
maturity within one year or (b) all Outstanding Debentures are scheduled for
redemption within one year, and in either case the Company has deposited with
the Trustee an amount sufficient to pay and discharge all Outstanding Debentures
on the date of their scheduled maturity or the scheduled date of redemption.
DELIVERY AND FORM OF DEBENTURES
The Debentures were sold to Qualified Institutional Buyers (each, a "QIB")
in reliance on Rule 144A under the Securities Act and were initially deposited
with, or on behalf of, The Depository Trust Company ("DTC") and registered in
the name of Cede & Co., as DTC's nominee, in the form of a global Debenture (the
"Rule 144A Global Debenture"). Interests in the Rule 144A Global Debenture will
be shown in, and transfers thereof will be effected only through, records
maintained by DTC and its participants ("participants"). Only QIBs may elect to
hold Debentures through the Depository. Debentures purchased by (i)
institutional accredited investors that are not QIBs and (ii) persons outside
the United States in offshore transactions pursuant to Regulation S under the
Securities Act ("Regulation S Purchasers") are represented by Debentures issued
in definitive registered form without coupons (the "Certificated Debentures").
Only Debentures held by Qualified Institutional Buyers may be represented by the
Rule 144A Global Debenture. The Rule 144A Global Debenture will be (i) reduced
in principal amount to reflect the subsequent transfer by owners of beneficial
interest in the Rule 144A Global Debenture to a Regulation S Purchaser or
another person who is not a Qualified Institutional Buyer or (ii) increased in
principal amount to reflect the subsequent transfer of a Certificated Debenture
to a Qualified Institutional Buyer from a Regulation S Purchaser or another
person who is not a Qualified Institutional Buyer. Transfer of the Debentures,
whether as an interest in the Rule 144A Global Debenture or as Certificated
Debentures, must be made in accordance with the Indenture.
PAYMENTS OF PRINCIPAL AND INTEREST
The Indenture requires that payments in respect of the Debentures (including
principal, premium, if any, and interest) held of record by DTC (including
Debentures evidenced by the Rule 144A Global Debenture) be made in same day
funds. Payments in respect of the Debentures held of record by holders other
than DTC may, at the option of the Company, be made by check and mailed to such
holders of record as shown on the register for the Debentures.
GOVERNING LAW
The Indenture and Debentures are governed by and construed in accordance
with the laws of the State of New York, without giving effect to such State's
conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries may maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of business.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement between the Company and the
Initial Purchasers, the Company has filed with the Commission a registration
statement on Form S-3 (the "Shelf Registration Statement"), of which this
Prospectus is a part, to cover resales of Transfer Restricted Securities (as
defined below) by the holders thereof who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration
Statement. For purposes of the foregoing, "Transfer Restricted Securities" means
each Debenture and any underlying share of Common Stock until the date on which
such Debenture or underlying share of Common Stock has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement, the date on which such Debenture or underlying share of
Common Stock is distributed to the public pursuant to Rule 144 under the
Securities Act or on the date such Debenture or share of Common Stock may be
sold or transferred pursuant to Rule 144(k) (or any similar provisions then in
force).
18
<PAGE>
The Registration Rights Agreement provides that if (i) the applicable Shelf
Registration Statement is not filed with the Commission on or prior to 60 days
after the Closing Date, or the applicable Shelf Registration Statement has not
been declared effective by the Commission within 90 days after the Closing Date
or (ii) the Shelf Registration Statement shall cease to be effective without
being succeeded immediately by an additional registration statement filed and
declared effective (each such event referred to in clauses (i) and (ii), a
("Registration Default"), the Company will pay liquidated damages to each Holder
of Transfer Restricted Securities. The amount of liquidated damages payable
during any period during which a Registration Default shall have occurred and be
continuing is that amount which is equal to one-quarter of one percent (25 basis
points) per annum per $1,000 principal amount of Debentures or $.07 per annum
per share of Common Stock (subject to adjustment in the event of stock splits,
stock recombinations, stock dividends and the like) constituting Transfer
Restricted Securities. All accrued liquidated damages shall be paid to holders
of Debentures by wire transfer of immediately available funds or by federal
funds check by the Company on each Damages Payment Date (as defined in the
Registration Rights Agreement). Following the cure of a Registration Default,
liquidated damages will cease to accrue with respect to such Registration
Default.
Holders of the Debentures will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in connection
with the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Debentures and Common Stock
included in the Shelf Registration Statement.
The Company shall cause the Shelf Registration Statement to be effective for
a period of three years from the effective date thereof or such shorter period
that will terminate when each of the Transfer Restricted Securities covered by
the Registration Statement ceases to be a Transfer Restricted Security.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Registration Rights
Agreement. Copies of the Registration Rights Agreement are available from the
Company upon request.
ABSENCE OF PUBLIC MARKET
There is no existing market for the Debentures and there can be no assurance
as to the liquidity of any markets that may develop for the Debentures, the
ability of the holders to sell their Debentures or at what price holders of the
Debentures will be able to sell their Debentures. Future trading prices of the
Debentures will depend upon many factors including, among other things,
prevailing interest rates, the Company's operating results, the price of the
Common Stock and the market for similar securities. The Initial Purchasers have
informed the Company that they intend to make a market in the Debentures offered
hereby; however, the Initial Purchasers are not obligated to do so and any such
market making activity may be terminated at any time without notice to the
holders of the Debentures. See "Registration Rights; Liquidated Damages." The
Debentures have been designated for trading in the PORTAL Market; however, the
Company does not intend to apply for listing of the Debentures on any securities
exchange.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, par value $.01 per share, and 500,000 shares of Preferred Stock,
par value $.01 per share. No shares of Preferred Stock are outstanding. Certain
Preferred Stock Purchase Rights were distributed pursuant to a dividend
distribution declared April 10, 1992, and 50,000 shares of Preferred Stock were
designated and reserved as Series A Junior Participating Preferred Stock for
issuance upon exercise of such rights. As of January 31, 1995, 10,934,080 shares
of Common Stock (including 88,572 shares held in escrow) were outstanding and
held by approximately 950 shareholders of record.
19
<PAGE>
COMMON STOCK
Subject to the prior rights of any shares of Preferred Stock which may be
issued in the future, the holders of the Common Stock are entitled to receive
dividends as and when declared by the Board of Directors out of funds legally
available for dividends, and, in the event of liquidation, dissolution or
winding up of the Company, to share ratably in all assets remaining after
payment of liabilities. The holders of the Common Stock are entitled to one vote
for each share of Common Stock held of record on all matters submitted to a vote
of shareholders. Since holders of Common Stock do not have cumulative voting
rights, holders of more than 50% of the outstanding shares of Common Stock
present and voting at an annual meeting at which a quorum is present can elect
all the directors of the Company. The holders of Common Stock have no preemptive
rights or conversion rights and are not subject to further calls or assessments
by the Company. There are no redemption or sinking fund provisions applicable to
the Common Stock.
The Transfer Agent for the Company's Common Stock is The Bank of New York.
PREFERRED STOCK
The Board of Directors is authorized to issue shares of Preferred Stock from
time to time in one or more classes or series and to fix by resolution or
resolutions (without further stockholder action) the voting rights, if any, and
the designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions thereof,
including, without limitation, the dividend rights, conversion rights, rights
and terms of redemption (including sinking fund provisions) and liquidation
rights of each such class or series. In addition, the Board of Directors is
empowered to determine the number of shares constituting each class and series
of Preferred Stock and, subject to compliance with applicable law, to increase
or decrease the number of shares of each such class or series. The Board of
Directors may, without shareholder approval, issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of holders
of Common Stock.
PREFERRED STOCK PURCHASE RIGHTS
The description of certain Preferred Stock Purchase Rights distributed
pursuant to a dividend distribution declared by the Company's Board of Directors
on April 10, 1992, and of the shares of Series A Junior Participating Preferred
Stock reserved for issuance upon exercise of such Rights, is incorporated by
reference to Item 1 of the Company's Form 8-A, dated April 10, 1992, filed with
the Securities and Exchange Commission on April 13, 1992.
The Preferred Stock Purchase Rights have certain anti-takeover effects. The
Rights will cause substantial dilution to a person or group that attempts to
acquire the Company without conditioning the offer on a substantial number of
the Rights being acquired. The Rights should not interfere with any merger or
other business combination approved by the Board of Directors since the Rights
may be redeemed by the Company.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND BY-LAWS
The Company's Certificate of Incorporation (as amended, the "Certificate")
provides that the Board of Directors consists of three classes of directors
serving for staggered three-year terms. As a result, one-third of the Company's
Board of Directors will be elected each year. The classified board provision
could prevent a party who acquires control of a majority of the outstanding
voting stock of the Company from obtaining control of the Board of Directors
until the second annual stockholders meeting following the date the acquirer
obtains the controlling interest. Subject to the rights of holders of Preferred
Stock of the Company, any vacancy on the Board of Directors may be filled only
by the remaining directors then in office.
The Company has 500,000 authorized and unissued shares of Preferred Stock.
The Certificate grants the Board of Directors broad power to establish the
designations, powers, preferences and rights of any series of Preferred Stock.
Such stock could be used by the Board of Directors for defensive purposes,
including its issuance or sale to third parties or use in recapitalization
transactions.
20
<PAGE>
In order for a stockholder to nominate a candidate for director, under the
Company's By-laws, timely notice of the nomination must be given to the Company
in advance of the meeting. Such notice must be given in respect to an election
to be held at an annual meeting of stockholders not less than 90 days before the
anniversary of the immediately preceding annual meeting, and must be given in
respect to an election to be held at a special meeting of stockholders within 10
days after the notice of the meeting is given to stockholders. The stockholder
filing the notice of nomination must describe various matters regarding the
nominee, including such information as name, address, occupation and shares
held.
In order for a stockholder to bring other business before an annual
stockholder meeting, timely notice must be received by the Company not less than
60 days nor more than 90 days before the meeting (but if the Company gives less
than 70 days notice of the meeting, then such notice must be received within 10
days after the notice of the meeting is mailed or other public disclosure of the
meeting is made). Such notice must include a description of the proposed
business, the reasons therefore, and other specified matters.
Under the By-laws, special meetings of stockholders may be called only by
the Board of Directors or the President of the Company, and may not be called by
stockholders. In addition, the Certificate provides that any action required or
permitted to be taken by the stockholders of the Company at an annual or special
meeting of stockholders must be effected at a duly called meeting and may not be
taken or effected by a written consent of the stockholders in lieu thereof.
The By-laws may be amended by the Board of Directors or by affirmative vote
of the holders of two-thirds of the stock issued and outstanding and entitled to
vote thereon. Certain provisions of the Certificate, including provisions
concerning the classified Board of Directors and the ability of stockholders to
take action only at an annual or special meeting of stockholders, may only be
amended by the affirmative vote of the holders of two-thirds of the stock issued
and outstanding and entitled to vote thereon. The foregoing summary is qualified
in its entirety by reference to the full text of the Company's Certificate and
By-laws.
These provisions are designed in part to make it more difficult and
time-consuming to obtain majority control of the Board of Directors of the
Company or otherwise to bring a matter before stockholders without the Board's
consent, and thus reduce the vulnerability of the Company to an unsolicited
takeover proposal. These provisions are designed to enable the Company to
develop its business in a manner which will foster its long-term growth, with
the threat of a takeover not deemed by the Board to be in the best interest of
the Company and its stockholders and the potential disruption entailed by such a
threat reduced to the extent practicable. On the other hand, these provisions
may have an adverse effect on the ability of stockholders to influence the
governance of the Company and the possibility of stockholders receiving a
premium above market price for their securities from a potential acquiror who is
unfriendly to management.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law which
restricts certain business combinations between the Company and an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) or its affiliates or associates for a period of three
years following the date on which the stockholder becomes an "interested
stockholder." The restrictions do not apply if (i) prior to an interested
stockholder becoming such, the Board of Directors approves either the business
combination or the transaction in which the stockholder becomes an interested
stockholder (ii) upon consummation of the transaction in which any person
becomes an interested stockholder, such interested stockholder owns at least 85%
of the voting stock of the Company outstanding at the time the transaction
commences (excluding shares owned by certain employee stock ownership plans and
persons who are both directors and officers of the Company) or (iii) on or
subsequent to the date an interested stockholder becomes such, the business
combination is both
21
<PAGE>
approved by the Board of Directors and authorized at an annual or special
meeting of the Company's stockholders, not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock not owned
by the interested stockholder.
REGISTRATION RIGHTS
In September 1994, the Company entered into registration rights agreements
with certain stockholders in connection with the issuance of common stock to
Shamrock Investments and the merger of J.P. Cole & Associates, Inc. and Paragon
Ambulatory Surgery, Inc. into the Company. Under these registration rights
agreements, Shamrock Investments has the right to demand one registration on
Form S-3 of the shares of Common Stock held by it. In addition, Shamrock
Investments, Charles P. Reilly, Michael E. Gallagher, Jonathan Spees and John P.
Cole have certain "piggy-back" registration rights under the Securities Act with
respect to the Common Stock held by such stockholders. Accordingly, if the
Company proposes to effect certain registrations of its securities under the
Securities Act, the Company is required to notify such stockholders and to
include in such registration all of the shares of Common Stock requested to be
included by such stockholders, subject to the right of an underwriter
participating in the offering to limit the number of shares included in such
registration. The Company shall not be required to include such shares in an
underwriting unless the holders thereof enter into an underwriting agreement
upon terms and conditions agreed upon by the Company and the underwriter (except
as to monetary obligations of the holders not contemplated by the registration
rights agreements). Any such stockholders requesting registration shall pay
their own expenses and shall bear, on a pro rata basis with other requesting
stockholders, all incremental registration expenses that result from the
inclusion of such shares in a registration.
The Company may delay, suspend or withdraw any registration or qualification
of securities required pursuant to the registration rights agreements for a
period not exceeding 120 days if the Company determines in good faith that any
such registration would adversely affect an offering or contemplated offering of
any securities of the Company or any other contemplated material corporate
event. In addition, the Company shall not be required to effect more than one
registration in any twelve-month period in which such stockholders were afforded
the opportunity to register securities.
The holders of such registration rights, covering in the aggregate 967,827
shares of Common Stock (including shares issuable upon the exercise of options
or the conversion of convertible securities), may request that the Company
include some or all of the registrable securities held by them in the Shelf
Registration Statement. See "Description of Debentures -- Registration Rights;
Liquidated Damages."
SELLING SECURITYHOLDERS
The following table sets forth certain information as of February 15, 1996
(except as otherwise indicated) as to the security ownership of the Selling
Securityholders. Except as set forth below, none of the Selling Securityholders
has had a material relationship with the Company or any of its predecessors or
affiliates within the past three years.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SHARES OF COMMON
OF DEBENTURES STOCK
BENEFICIALLY OWNED PRINCIPAL BENEFICIALLY OWNED
PRIOR TO OFFERING AMOUNT OF PRIOR TO OFFERING
---------------------------- DEBENTURES ------------------------------
NAME AMOUNT PERCENT BEING SOLD NUMBER PERCENT
- ------------------------------------------ --------------- ----------- --------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
General Motors Employees Domestic Group
Trust.................................... $ 13,800,000 20.00 $ 13,800,000 514,122 4.43
Bankers Trust Company (1)................. $ 5,780,000 8.38 $ 5,780,000 212,110 1.90
Oppenheimer Main Street Income & Growth
Fund..................................... $ 5,000,000 7.25 $ 5,000,000 183,486 1.65
Allstate Insurance Company................ $ 4,000,000 5.80 $ 4,000,000 146,789 1.32
Forest Fulcrum Fund LP.................... $ 2,850,000 4.13 $ 2,850,000 104,587 *
SBC Capital Markets Inc................... $ 2,800,000 4.06 $ 2,800,000 102,752 *
<CAPTION>
SHARES OF COMMON
STOCK UNDERLYING
DEBENTURES BEING
SOLD AND
NAME ADDITIONAL SHARES
- ------------------------------------------ -----------------
<S> <C>
General Motors Employees Domestic Group
Trust.................................... 506,422
Bankers Trust Company (1)................. 212,110
Oppenheimer Main Street Income & Growth
Fund..................................... 183,486
Allstate Insurance Company................ 146,789
Forest Fulcrum Fund LP.................... 104,587
SBC Capital Markets Inc................... 102,752
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SHARES OF COMMON
OF DEBENTURES STOCK
BENEFICIALLY OWNED PRINCIPAL BENEFICIALLY OWNED
PRIOR TO OFFERING AMOUNT OF PRIOR TO OFFERING
---------------------------- DEBENTURES ------------------------------
NAME AMOUNT PERCENT BEING SOLD NUMBER PERCENT
- ------------------------------------------ --------------- ----------- --------------- ----------------- -----------
Oregon Equity Fund........................ $ 2,500,000 3.62 $ 2,500,000 91,743 *
<S> <C> <C> <C> <C> <C>
Tennessee Consolidated Retirement......... $ 2,500,000 3.62 $ 2,500,000 91,743 *
Paul Berkman and Company.................. $ 1,800,000 2.61 $ 1,800,000 66,055 *
OCM Convertible Trust..................... $ 1,580,000 2.29 $ 1,580,000 57,981 *
SAIF Corporation.......................... $ 1,550,000 2.25 $ 1,550,000 56,880 *
Societe Generale Bonafide Arbitrage....... $ 1,500,000 2.17 $ 1,500,000 57,981 *
Delaware State Employees' Retirement
Fund..................................... $ 1,260,000 1.83 $ 1,260,000 46,238 *
Forest Fulcrum Fd Ltd..................... $ 1,150,000 1.66 $ 1,150,000 42,201 *
Offshore Strategies, Ltd.................. $ 1,100,000 1.59 $ 1,100,000 40,367 *
Commonwealth Life Insurance Co. Stock TRAC
(Teamsters 1)............................ $ 1,000,000 1.45 $ 1,000,000 36,697 *
Delta Airlines Master Trust............... $ 920,000 1.33 $ 920,000 33,761 *
Nicholas-Applegate Income & Growth........ $ 900,000 1.30 $ 900,000 33,027 *
San Diego County Employees Retirement
Acct..................................... $ 800,000 1.16 $ 800,000 29,537 *
Templeton Global Hedged Convert Ltd....... $ 800,000 1.16 $ 800,000 29,537 *
Central State Southeast & Southwest
Pension Fund............................. $ 790,000 1.14 $ 790,000 28,990 *
JMG Convertible Investments, L.P.......... $ 750,000 1.09 $ 750,000 27,523 *
McMahan Securities Co. L.P................ $ 750,000 1.09 $ 750,000 27,523 *
State of Delaware Retirement.............. $ 750,000 1.09 $ 750,000 27,523 *
Massachusetts Pension Reserve Investment
Management Board......................... $ 670,000 * $ 670,000 24,587 *
31 West Fund L.P.......................... $ 500,000 * $ 500,000 18,348 *
Ince and Company.......................... 450,000 * $ 450,000 16,513 *
Templeton Global Hedged Convert L.P....... $ 450,000 * $ 450,000 16,513 *
Weirton Convertible....................... $ 430,000 * $ 430,000 15,779 *
Declaration of Trust for Defined Benefit
Plan of ICI American Holdings............ $ 390,000 * $ 390,000 14,312 *
ICI American Holdings Pension............. $ 350,000 * $ 350,000 12,844 *
Zeneca Holdings Pension................... $ 350,000 * $ 350,000 12,884 *
State Employees' Retirement Fund of the
State of Delaware........................ $ 330,000 * $ 330,000 12,110 *
Harris Trust & Savings Bank, Trustee for
the Harris Trust and Savings Bank Trust
for Collective Investment of Employee
Benefit Accounts -- Convertible Fund..... $ 300,000 * $ 300,000 11,009 *
Declaration of Trust for Defined Benefit
Plan of Zeneca Holdings Inc.............. $ 255,000 * $ 255,100 9,357 *
<CAPTION>
SHARES OF COMMON
STOCK UNDERLYING
DEBENTURES BEING
SOLD AND
NAME ADDITIONAL SHARES
- ------------------------------------------ -----------------
Oregon Equity Fund........................ 91,743
<S> <C>
Tennessee Consolidated Retirement......... 91,743
Paul Berkman and Company.................. 66,055
OCM Convertible Trust..................... 57,981
SAIF Corporation.......................... 56,880
Societe Generale Bonafide Arbitrage....... 57,981
Delaware State Employees' Retirement
Fund..................................... 46,238
Forest Fulcrum Fd Ltd..................... 42,201
Offshore Strategies, Ltd.................. 40,367
Commonwealth Life Insurance Co. Stock TRAC
(Teamsters 1)............................ 36,697
Delta Airlines Master Trust............... 33,761
Nicholas-Applegate Income & Growth........ 33,027
San Diego County Employees Retirement
Acct..................................... 29,537
Templeton Global Hedged Convert Ltd....... 29,537
Central State Southeast & Southwest
Pension Fund............................. 28,990
JMG Convertible Investments, L.P.......... 27,523
McMahan Securities Co. L.P................ 27,523
State of Delaware Retirement.............. 27,523
Massachusetts Pension Reserve Investment
Management Board......................... 24,587
31 West Fund L.P.......................... 18,348
Ince and Company.......................... 16,513
Templeton Global Hedged Convert L.P....... 16,513
Weirton Convertible....................... 15,779
Declaration of Trust for Defined Benefit
Plan of ICI American Holdings............ 14,312
ICI American Holdings Pension............. 12,844
Zeneca Holdings Pension................... 12,884
State Employees' Retirement Fund of the
State of Delaware........................ 12,110
Harris Trust & Savings Bank, Trustee for
the Harris Trust and Savings Bank Trust
for Collective Investment of Employee
Benefit Accounts -- Convertible Fund..... 11,009
Declaration of Trust for Defined Benefit
Plan of Zeneca Holdings Inc.............. 9,357
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SHARES OF COMMON SHARES OF COMMON
OF DEBENTURES STOCK STOCK UNDERLYING
BENEFICIALLY OWNED PRINCIPAL BENEFICIALLY OWNED DEBENTURES BEING
PRIOR TO OFFERING AMOUNT OF PRIOR TO OFFERING SOLD AND
------------------------- DEBENTURES ------------------------------ ADDITIONAL
NAME AMOUNT PERCENT BEING SOLD NUMBER PERCENT SHARES
- --------------------------------- ------------ ----------- ------------ ----------------- ----------- ----------------
Laterman & Co............................. $ 250,000 * $ 250,000 9,174 *
<S> <C> <C> <C> <C> <C> <C>
Laterman Strategies 90's L.P..... $ 250,000 * $ 250,000 9,174 * 9,174
WAFRA Discretionary.............. $ 250,000 * $ 250,000 9,174 * 9,174
PB International CV.............. $ 200,000 * $ 200,000 7,339 * 7,339
Thermo Electron Balanced
Investment Fund................. $ 175,000 * $ 175,000 6,422 * 6,422
San Diego City Employees
Retirement System............... $ 170,000 * $ 170,000 6,238 * 6,238
Firebird Overseas, Ltd........... $ 150,000 * $ 150,000 5,804 * 5,504
Bank of America Convertible
Securities Fund................. $ 150,000 * $ 150,000 5,504 * 5,504
NALCO Chemical Retirement
Trust........................... $ 150,000 * $ 150,000 5,504 * 5,504
Magus Int'l Limited.............. $ 100,000 * $ 100,000 3,669 * 3,669
Kapiolani Medical Center......... $ 100,000 * $ 100,000 3,669 * 3,669
Bankers Trust FBO Los Angeles
County Metro Transit
Authority....................... $ 100,000 * $ 100,000 3,669 * 3,669
Bankers Trust FBO Presbyterian
Healthcare...................... $ 100,000 * $ 100,000 3,669 * 3,669
Wachovia Bank of NC, Custodian
for Wake Forest University...... $ 100,000 * $ 100,000 3,669 * 3,669
Hillside Capital................. $ 85,000 * $ 85,000 3,119 * 3,119
Occidental College............... $ 50,000 * $ 50,000 1,834 * 1,834
Hillside Master Trust............ $ 35,000 * $ 35,000 1,284 * 1,284
Fleet Bank of MA, Custodian for
Museum of Fine Arts............. $ 20,000 * $ 20,000 733 * 733
Other Selling Securityholders
(2)............................. $ 5,460,000 7.91 $ 5,460,000 200,366 1.80 200,366
Voting Group (3)(4)(5) 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.... -- -- -- 3,808,089(6) 31.73 755,717(7)(10)
Shamrock Group (3)(5)(8) Charles
P. Reilly; Michael E. Gallagher;
Shamrock Investments............ -- -- -- 1,075,675(9) 9.43 755,717(10)
Charles P. Reilly (3)(5)(11)..... -- -- -- 508,545(12)(13) 4.54 313,945(13)
Michael E. Gallagher (3)(5)(14).. -- -- -- 338,457(15)(16) 3.05 235,599(16)
Shamrock Investments (3)(5)...... -- -- -- 228,673(17)(18) 2.09 206,173(18)
John P. Cole (3)(5)(19).......... -- -- -- 350,000(20)(21) 3.18 200,000(21)
Jonathan J. Spees (3)(22)........ -- -- -- 12,110 * 12,110
<CAPTION>
Laterman & Co............................. 9,174
<S> <C>
</TABLE>
- ------------------------
* Less than 1%.
24
<PAGE>
(1) $5,780,000 aggregate principal amount of Debentures are beneficially owned
by clients of Bankers Trust Company and held by Bankers Trust Company as
custodian for these clients. Information regarding these clients will be
added by supplement to this Prospectus.
(2) Information regarding these persons or entities will be added by supplement
to this Prospectus.
(3) Information is as of February 19, 1996.
(4) The persons listed are parties to a Voting Agreement dated as of October 7,
1994, pursuant to which they have agreed to act together under certain
circumstances. See "Risk Factors -- Control by Management and Certain
Stockholders." These persons constitute a group (the "Voting Group") within
the meaning of Section 13(d)(3) of the Exchange Act and have jointly filed
a Schedule 13D with the Securities and Exchange Commission. For additional
information regarding the relationship between the members of the Voting
Group and the Company, see Items 10-13 of the Company's Annual Report on
Form 10-K/A for the fiscal year ended April 30, 1995, which is incorporated
herein by reference.
(5) Each member of the Voting Group and certain other officers and directors of
the Company (including Mr. Cole) have agreed that prior to April 12, 1996,
they will not, without the prior written consent of Smith Barney Inc.,
sell, offer to sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exchangeable for any
shares of Common Stock.
(6) For additional information regarding the beneficial ownership of shares by
members of the Voting Group, see Item 12 ("Security Ownership of Certain
Beneficial Owners and Management") of the Company's Annual Report on Form
10-K/A for the fiscal year ended April 30, 1995, which is incorporated
herein by reference.
(7) Does not include any shares beneficially owned by Charles H. Robbins, Ellen
E. Robbins, Jack M. Mazur, Lynn Mazur, VACHR, Inc. or Michael D. Starr,
other than the shares referred to in note 10 in which such persons have no
pecuniary interest.
(8) Shamrock Investments, Charles P. Reilly and Michael E. Gallagher constitute
a group (separate from the Voting Group, the "Shamrock Group") within the
meaning of Section 13(d)(3) of the Exchange Act and have jointly filed a
Schedule 13D with the Securities and Exchange Commission. For additional
information regarding the relationship between members of the Shamrock
Group and the Company, see Item 13 ("Certain Transactions and Business
Relationships") of the Company's Annual Report on Form 10-K/A for the
fiscal year ended April 30, 1995, which is incorporated herein by
reference.
(9) Includes 508,545 shares beneficially owned by Mr. Reilly (see notes 12 and
13 below), 338,457 shares beneficially owned by Mr. Gallagher (see notes 15
and 16 below) and 228,673 shares beneficially owned by Shamrock Investments
(see notes 17 and 18 below). Excludes additional shares referred to in note
6 deemed to be beneficially owned by the members of the Shamrock Group by
virtue of their participation in the Voting Group.
(10) Includes 313,945 shares beneficially owned by Mr. Reilly (see note 13
below), 235,599 shares beneficially owned by Mr. Gallagher (see note 16
below) and 206,173 shares beneficially owned by Shamrock Investments (see
note 18 below).
(11) Mr. Reilly joined the Company as a Director in 1991. He is the managing
general partner of Shamrock Investments. From August 1994 to August 1995,
Mr. Reilly was an employee of the Company, serving as chairman of the
Company's Executive Council.
(12) Includes 137,142 shares issuable upon the exercise of stock options granted
to Mr. Reilly in connection with his employment agreement and an additional
52,500 shares issuable upon the exercise of stock options granted to Mr.
Reilly.
(13) Includes 205,074 shares issued to Mr. Reilly and 59,963 shares issuable
upon the conversion of convertible notes issued to Mr. Reilly in connection
with the merger of Paragon Ambulatory Surgery, Inc. into the Company (the
"Paragon Merger"). Also includes 24,454 shares issued to Mr. Reilly and
24,454 shares issuable upon the exercise of stock options granted to Mr.
Reilly in connection with the merger of J.P. Cole & Associates, Inc. into
the Company (the "Cole Merger"). Of the shares and options issued to Mr.
Reilly in connection with the Cole Merger, 15,162 shares are held in escrow
subject to forfeiture unless certain performance conditions are met, and
25
<PAGE>
15,162 options 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. Excludes additional shares referred to
in notes 6, 15, 16, 17 and 18 deemed to be beneficially owned by Mr. Reilly
by virtu
(14) Mr. Gallagher is a general partner of Shamrock Investments. From August
1994 to August 1995, Mr. Gallagher was employed by the Company as a member
of its Executive Council. He previously served as Chief Executive Officer
of Paragon Ambulatory Surgery, Inc., which was merged into the Company on
September 29, 1994.
(15) Includes 102,858 shares issuable upon the exercise of stock options granted
to Mr. Gallagher in connection with his employment agreement.
(16) Includes 153,816 shares to Mr. Gallagher and 44,975 shares issuable upon
the conversion of convertible notes issued to Mr. Gallagher in connection
with the Paragon Merger. Also includes 18,404 shares issued to Mr.
Gallagher and 18,404 shares issuable upon the exercise of stock options
granted to Mr. Gallagher in connection with the Cole Merger. Of the shares
and options issued to Mr. Gallagher in connection with the Cole Merger,
11,410 shares are held in escrow subject to forfeiture unless certain
performance conditions are met, and 11,410 options will become exercisable
only if certain performance conditions are met by December 30, 1996 or a
chance of control of the Company occurs prior to that date. Excludes
additional shares referred to in notes 6, 12, 13, 17, and 18 deemed to be
beneficially owned by Mr. Gallagher by virtue of his participation in the
Shamrock Group and the Voting Group.
(17) Includes 22,500 shares issuable upon the exercise of stock options granted
to Shamrock Investments.
(18) Inclues 6,173 shares issuable upon conversion of convertible promissory
notes held by Shamrock Investments. Also includes 200,000 shares issued to
Shamrock Investments pursuant to the Stock Purchase Agreement, dated as of
September 29, 1994, by and between the Company and Shamrock Investments.
Excludes additional shares referred to in notes 6, 12, 13, 15, and 16
deemed to be beneficially owned by Shamrock Investments by virtue of its
participation in the Voting Group.
(19) Mr. Cole joined the Company in 1993. On September 29, 1994, Mr. Cole
entered into an employment agreement with the Company pursuant to which he
serves as an Executive Vice President of the Company and heads the
marketing of the Company's commercial products and services. He previously
served as President of J.P. Cole and Associates, Inc., a health care
marketing firm, which was merged into PHP Family Healthcare Corporation, a
wholly-owned subsidiary of the Company, on October 3, 1994.
(20) Includes 30,000 shares issuable upon the exercise of stock options granted
to Mr. Cole in connection with his employment agreement. Also includes
84,000 shares held by Mr. Cole's spouse, and 74,000 shares held jointly by
Mr. Cole and his spouse.
(21) Includes 100,000 shares issued to Mr. Cole and 100,000 shares issuable upon
the exercise of stock options granted to Mr. Cole in connection with the
Cole Merger. Of the shares and options issued to Mr. Cole in connection
with the Cole Merger, 62,000 shares are held in escrow subject to
forfeiture unless certain performance conditions are met, and 62,000
options 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.
(22) Mr. Spees has been an employee of Shamrock Investments for each of the last
three years.
The preceding table has been prepared based upon information furnished to
the Company by The Depository Trust Company ("DTC"), IBJ Schroder Bank & Trust
Company, trustee under the Indenture, and by or on behalf of the Selling
Securityholders.
Information concerning the Selling Securityholders may change from time to
time and will be set forth in Supplements to this Prospectus. As of the date of
this Prospectus, the aggregate principal amount of Debentures outstanding is
$69,000,000.
26
<PAGE>
Because the Selling Securityholders may offer all or some of the Debentures
and shares of Common Stock issued upon conversion thereof pursuant to the
offering contemplated by this Prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the Debentures or shares of Common Stock that will be held by the Selling
Securityholders after completion of this offering, no estimate can be given as
to the principal amount of Debentures or shares of Common Stock that will be
held by the Selling Securityholders after completion of this offering. See "Plan
of Distribution."
PLAN OF DISTRIBUTION
The Debentures and the Shares are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the date of this Prospectus. The Company has agreed, among other things,
to bear all expenses (other than underwriting discounts, selling commissions and
fees and expenses of counsel and other advisors to holders of the Debentures and
the underlying Common Stock) in connection with the registration and sale of the
Debentures and the Conversion Shares covered by this Prospectus. The holder of
the Additional Shares have agreed to pay their own expenses and to bear, on a
pro rata basis, with other Selling Securityholders, all investment expenses that
result from the inclusion of the Additional Shares.
The Company will not receive any of the proceeds from the offering of
Debentures and the Shares by the Selling Securityholders. The Company has been
advised by the Selling Securityholders that the Selling Securityholders may sell
all or a portion of the Debentures and Shares beneficially owned by them and
offered hereby from time to time on any exchange on which the securities are
listed on terms to be determined at the times of such sales. The Selling
Securityholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the Selling Securityholders may from time to time
offer the Debentures or shares of Common Stock beneficially owned by them
through underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, commissions or concessions from the Selling
Securityholders and the purchasers of the Debentures or shares or Common Stock
from whom they may act as agent. The aggregate proceeds to the Selling
Securityholders from the sale of the Debentures of shares or Common Stock
offered by them hereby will be the purchase price of such Debentures or shares
of Common Stock less discounts and commissions, if any.
The Debentures and the Shares may be sold from time to time in one or more
transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the holders of such securities or by agreement between such
holders and underwriters or dealers who may receive fees or commissions in
connection therewith.
The outstanding Common Stock is listed for trading on the New York Stock
Exchange, and the Shares of Common Stock have been approved for listing on the
New York Stock Exchange. The Initial Purchasers have advised the Company that
they are making and currently intend to continue making a market in the
Debentures; however, they are not obligated to do so and any such market-making
may be discontinued at any time without notice, in the sole discretion of the
Initial Purchasers. The Company does not intend to apply for listing of the
Debentures on any securities exchange. Accordingly, no assurance can be given as
to the development of liquidity of any trading market that may develop for the
Debentures. See "Risk Factors -- No Prior Public Market for the Debentures."
In order to comply with the securities laws of certain states, if
applicable, the Debentures and Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Debentures and Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
The Selling Securityholders and any broker and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or the Shares may
27
<PAGE>
be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by such broker-dealers, agents or
underwriters any profit on the resale of the Debentures or the Shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Debentures
or Shares described herein, and any Selling Securityholder may transfer, devise
or gift such securities by other means not described herein.
The Debentures were originally sold to Smith Barney Inc. and Dean Witter
Reynolds Inc. in December 1995 in a private placement. The Company agreed to
indemnify and hold Smith Barney Inc. and Dean Witter Reynolds Inc. harmless
against certain liabilities under the Securities Act that could arise in
connection with the sale of the Debentures by Smith Barney Inc. and Dean Witter
Reynolds Inc. The Company and the Selling Securityholders are obligated to
indemnify each other against certain liabilities arising under the Securities
Act.
The Company will use its best efforts to cause the registration statement to
which this Prospectus relates to become effective as promptly as is practicable
and to keep the registration statement effective for a period of three years
from the effective date thereof, or until the Shelf Registration Statement is no
longer required for transfer of the Debentures or the underlying Common Stock.
The Company is permitted to suspend the use of this Prospectus in connection
with the sales of Debentures and Conversion Shares by holders upon the happening
of an event or if there exists any fact that makes any statement of material
fact made in this Prospectus untrue or that requires the making of additions to
or changes in the Prospectus in order to make the statements herein not
misleading until such time as the Company advises the Selling Securityholders
that use of the Prospectus may be resumed, in which case the period of time
during which the Company is required to maintain the effectiveness of the Shelf
Registration Statement shall be extended. Expenses of preparing and filing the
registration statement and all post-effective amendments will be borne by the
Company.
28
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Debentures. This discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations, Internal Revenue Service ("IRS") rulings, and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect) or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be relevant to holders of the Debentures or shares of
Common Stock and does not deal with tax consequences arising under the laws of
any foreign, state or local jurisdiction. This discussion is for general
information only, and does not purport to address all of the tax consequences
that may be relevant to particular purchasers in light of their personal
circumstances, or to certain types of purchasers (such as certain financial
institutions, insurance companies, tax-exempt entities, dealers in securities or
persons who hold the Debentures or Common Stock in connection with a straddle)
who may be subject to special rules. This discussion assumes that each holder
holds the Debentures and the shares of Common Stock received upon conversion
thereof as capital assets.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any holder
who is not a United States person. The term "United States person" means a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or any state thereof, or an estate or trust,
the income of which is includible in income for United States federal income tax
purposes regardless of its source.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN
THIS OFFERING, OWNERSHIP AND DISPOSITION OF THE DEBENTURES, INCLUDING CONVERSION
OF THE DEBENTURES, AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE
ON SUCH TAX CONSEQUENCES.
OWNERSHIP OF THE DEBENTURES
INTEREST ON DEBENTURES. Interest paid on a Debenture will be taxable to a
holder as ordinary interest income in accordance with the holder's method of tax
accounting at the time that such interest is accrued or (actually or
constructively) received. The Company anticipates that the Debentures will not
be issued with original issue discount ("OID") within the meaning of the Code.
CONSTRUCTIVE DIVIDEND. Certain corporate transactions, such as
distributions of cash to holders of Common Stock, may cause a deemed
distribution to the holders of the Debentures if the conversion price or
conversion ratio of the Debentures is adjusted to reflect such corporate
transaction. Such deemed distributions will be taxable as a dividend, return of
capital, or capital gain in accordance with the earnings and profits rules
discussed under "Dividends on Shares of Common Stock."
SALE OR EXCHANGE OF DEBENTURES OR SHARES OF COMMON STOCK. In general, a
holder of a Debenture will recognize gain or loss upon the sale, redemption,
retirement or other disposition of the Debenture measured by the difference
between the amount of cash and the fair market value of any property received
(except to the extent attributable to the payment of accrued interest) and the
holder's adjusted tax basis in the Debenture. A holder's tax basis in a
Debenture generally will equal the cost of the Debenture to the holder increased
by the amount of market discount, if any, previously taken into income by the
holder or decreased by any bond premium theretofore amortized by the holder with
respect to the Debenture. (For the basis and holding period of shares of Common
Stock, see "Conversion of Debentures.") In general, each holder of Common Stock
into which the Debentures have been converted will recognize gain or loss upon
the sale, exchange, redemption, or other disposition of the Common Stock under
rules similar to those applicable to the Debentures. Special rules may apply to
redemptions of Common Stock which may result in the amount paid being treated as
a dividend. Subject to the market discount rules discussed below, the gain or
loss on the disposition of the
29
<PAGE>
Debentures or shares of Common Stock will be capital gain or loss and will be
long-term gain or loss if the Debentures or shares of Common Stock have been
held for more than one year at the time of such disposition.
CONVERSION OF DEBENTURES. A holder of a Debenture will not recognize gain
or loss on the conversion of the Debenture into shares of Common Stock, except
to the extent that the Common Stock issued upon the conversion is attributable
to accrued interest on the Debenture. The holder's aggregate tax basis in the
shares of Common Stock received upon conversion of the Debenture will be equal
to the holder's aggregate basis in the Debenture exchanged therefor (less any
portion thereof allocable to cash received in lieu of a fractional share). The
holding period of the shares of Common Stock received by the holder upon
conversion of the Debenture will include the period during which the holder held
the Debenture prior to the conversion.
Cash received in lieu of a fractional share of Common Stock should be
treated as a payment in exchange for such fractional share. Gain or loss
recognized on the receipt of cash paid in lieu of such fractional shares
generally will equal the difference between the amount of cash received and the
amount of tax basis allocable to the fractional shares.
MARKET DISCOUNT. The resale of a Debenture may be affected by the "market
discount" provisions of the Code. For this purpose, the market discount on a
Debenture will generally be equal to the amount, if any, by which the stated
redemption price at maturity of the Debenture immediately after its acquisition
exceeds the holder's tax basis in the debenture. Subject to a de minimis
exception, these provisions generally require a holder of a Debenture acquired
at a market discount to treat as ordinary income any gain recognized on the
disposition of such Debenture to the extent of the "accrued market discount" on
such Debenture at the time of disposition. In general, market discount on a
Debenture will be treated as accruing on a straight-line basis over the term of
such Debenture, or, at the election of the holder, under a constant yield
method.
In addition, any holder of a Debenture acquired at a market discount may be
required to defer the deduction of a portion of the interest on any indebtedness
incurred or maintained to purchase or carry the Debenture until the Debenture is
disposed of in a taxable transaction. The foregoing rule will not apply if the
holder elects to include accrued market discount in income currently.
If a holder acquires the Debenture at a market discount and receives Common
Stock upon conversion of the Debenture, the amount of accrued market discount
with respect to the converted Debenture through the date of the conversion will
be treated, under regulations to be issued, as ordinary income on the
disposition of the Common Stock.
DIVIDENDS ON SHARES OF COMMON STOCK. Distributions on shares of Common
Stock will constitute dividends for United States federal income tax purposes to
the extent of current or accumulated earnings and profits of the Company as
determined under United States federal income tax principles. Dividends paid to
holders that are United States corporations may qualify for the
dividends-received deduction. Individuals, partnerships, trusts, and certain
corporations, including certain foreign corporations, are not entitled to the
dividends-received deduction.
To the extent, if any, that a holder receives a distribution on shares of
Common Stock that would otherwise constitute a dividend for United States
federal income tax purposes but that exceeds current and accumulated earnings
and profits of the Company, such distribution will be treated first as a
non-taxable return of capital reducing the holder's basis in the shares of
Common Stock. Any such distribution in excess of the holder's basis in the
shares of Common Stock will be treated as a capital gain.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
INTEREST ON DEBENTURES. Generally, interest paid on the Debentures to a
Non-U.S. Holder will not be subject to United States federal income tax if: (i)
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder; (ii) the Non-U.S.
30
<PAGE>
Holder does not actually or constructively own 10% or more of the total voting
power of all classes of stock of the Company entitled to vote and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; and (iii) the beneficial owner, under
penalty of perjury, certifies that he or she is not a United States person and
provides his or her name and address. If certain requirements are satisfied, the
certification described in paragraph (iii) above may be provided by a securities
clearing organization, a bank, or other financial institution that holds
customers' securities in the ordinary course of its trade or business. For this
purpose, the holder of a Debenture would be deemed to own constructively the
Common Stock into which it could be converted. If a holder is not exempt from
tax under these rules, he or she will be subject to United States federal income
tax withholding at a rate of 30% unless the interest is effectively connected
with the conduct of a United States trade or business, in which case the
interest will be subject to the United States federal income tax on net income
that applies to United States persons generally. Non-U.S. Holders should consult
applicable income tax treaties, which may provide different rules.
SALE OR EXCHANGE OF DEBENTURES OR SHARES OF COMMON STOCK. A Non-U.S. Holder
generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition (including a redemption) of a
Debenture or shares of Common Stock received upon conversion thereof (including
the receipt of cash in lieu of a fractional share upon such conversion) unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-U.S. Holder, or (ii) in the case of a
Non-U.S. Holder who is a nonresident alien individual and holds the Common Stock
as a capital asset, such holder is present in the United States for 183 or more
days in the taxable year and certain other circumstances are present. If the
Company is a "United States real property holding corporation," a Non-U.S.
Holder may be subject to federal income tax with respect to gain realized on the
disposition of such Debentures or Common Stock, and the proceeds of disposition
would be subject to withholding. Any amount withheld pursuant to these rules
will be creditable against such Non-U.S. Holder's United States federal income
tax liability and may entitle such Non-U.S. Holder to a refund upon furnishing
the required information to the Internal Revenue Service. Non-U.S. Holders
should consult applicable income tax treaties, which may provide different
rules.
CONVERSION OF DEBENTURES. A Non-U.S. Holder generally will not be subject
to United States federal income tax on the conversion of a Debenture into shares
of Common Stock. To the extent a Non-U.S. Holder receives cash in lieu of a
fractional share on conversion, such cash may give rise to gain that would be
subject to the rules described above with respect to the sale or exchange of a
Debenture or Common Stock.
DIVIDENDS ON SHARES OF COMMON STOCK. Generally, any distribution on shares
of Common Stock to a Non-U.S. Holder will be subject to United States federal
income tax withholding at a rate of 30% unless the dividend is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Holder, in which case the dividend will be subject to the United
States federal income tax on net income that applies to United States persons
generally (and, with respect to corporate holders and under certain
circumstances, the branch profits tax). Non-U.S. Holders should consult any
applicable income tax treaties, which may provide for a lower rate of
withholding or other rules different from those described above. A Non-U.S.
Holder may be required to satisfy certain certification requirements in order to
claim treaty benefits or otherwise claim a reduction of or exemption from
withholding under the foregoing rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS. Information reporting and backup withholding may apply to
payments of interest or dividends on or the proceeds of the sale or other
disposition of the Debentures or shares of Common Stock made by the Company with
respect to certain noncorporate U.S. holders. Such U.S. holders generally will
be subject to backup withholding at a rate of 31% unless the recipient of such
payment supplies a taxpayer identification number, certified under penalties of
perjury, as well as certain other
31
<PAGE>
information, or otherwise establishes, in the manner prescribed by law, an
exemption from backup withholding. Any amount withheld under backup withholding
is allowable as a credit against the U.S. holder's federal income tax, upon
furnishing the required information.
NON-U.S. HOLDERS. Generally, information reporting and backup withholding
of United States federal income tax at a rate of 31% may apply to payments of
principal, interest and premium (if any) to Non-U.S. Holders if the payee fails
to certify that he or she is a Non-U.S. person or if the Company or any of its
paying agents has actual knowledge that the payee is a United States person.
The 31% backup withholding tax generally will not apply to dividends paid to
foreign holders outside the United States that are subject to 30% withholding
discussed above or that are not so subject because a tax treaty applies that
reduces or eliminates such withholding. In that regard, under temporary
regulations, dividends payable at an address located outside of the United
States to a foreign holder are not subject to the backup withholding rules.
The payment of the proceeds on the disposition of Debentures or shares of
Common Stock to or through the United States office of a United States or
foreign broker will be subject to information reporting and backup withholding
at a rate of 31% unless the owner provides the certification described above or
otherwise establishes an exemption. The proceeds of the disposition by a
Non-U.S. Holder of Debentures or shares of Common Stock to or through a foreign
office of a broker will not be subject to backup withholding. However, if such
broker is a U.S. person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income from all sources
for certain periods is from activities that are effectively connected with a
United States trade or business, information reporting will apply unless such
broker has documentary evidence in its files of the owner's foreign status and
has no actual knowledge to the contrary or unless the owner otherwise
establishes an exemption. Both backup withholding and information reporting will
apply to the proceeds from such dispositions if the broker has actual knowledge
that the payee is a U.S. holder.
LEGAL MATTERS
The validity of the issuance of the Debentures and the Shares offered hereby
will be passed upon for the Company by Fried, Frank, Harris, Shriver & Jacobson
(a partnership including professional corporations), Washington, D.C. 20004.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company as of and for the year
ended April 30, 1995, incorporated by reference in this Prospectus and in the
Registration Statement from the Company's 1995 Form 10-K and Form 8-K/A dated
January 11, 1996, have been audited by Coopers & Lybrand L.L.P., independent
certified public accountants, as stated in its reports incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. Coopers & Lybrand L.L.P.'s report included in the Company's Form 8-K/A
dated January 11, 1996 includes an explanatory paragraph regarding the
adjustments described in the first paragraph of Note 8 to those consolidated
financial statements that were applied to retroactively restate the 1995, 1994
and 1993 consolidated financial statements and footnotes thereto included in
that Form 8-K/A for the effects of a two-for-one stock split effected as a stock
dividend in November 1995. With respect to the unaudited interim financial
information as of October 31, 1995, and for the three-month and six-month
periods then ended incorporated by reference in this Prospectus and Registration
Statement, Coopers & Lybrand L.L.P. has reported that it has applied limited
procedures in accordance with professional standards for a review of such
information. However, its separate report included in the Company's quarterly
report on Form 10-Q for the quarter ended October 31, 1995, and incorporated by
reference herein, states that Coopers & Lybrand L.L.P. did not audit and it does
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on its report on such information should be restricted in
light of the limited nature of the review procedures applied. Coopers & Lybrand
L.L.P. is not subject to the liability provisions of Section 11 of the
Securities Act for its report on unaudited
32
<PAGE>
interim financial information because that report is not a "report" or "part" of
the Prospectus or Registration Statement prepared or certified by Coopers &
Lybrand L.L.P. within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of the Company as of April 30, 1994
and 1993 and for each of the years in the two-year period ended April 30, 1994,
incorporated by reference in this Prospectus and in the Registration Statement
from the Company's 1995 Form 10-K, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as stated in their report incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The consolidated financial statements of the Company as
of April 30, 1994 and 1993 and for each of the years in the two-year period
ended April 30, 1994, incorporated by reference in this Prospectus and
Registration Statement from the Company's Form 8-K/A dated January 11, 1996, but
prior to the adjustments described in the first paragraph of Note 8 to those
consolidated financial statements that were applied to retroactively restate the
1994 and 1993 consolidated financial statements and footnotes thereto for the
effects of a 2-for-1 stock split effected as a stock dividend in November 1995,
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as stated in their report appearing therein, and upon the authority
of said firm as experts in accounting and auditing.
On January 9, 1995, the Company solicited Statements of Qualifications from
several independent accounting firms, including KPMG Peat Marwick LLP, the
Company's public accountants for the fiscal years ended April 30, 1994 and April
30, 1993, to provide audit services for its consolidated financial statements
for the year ended April 30, 1995. On January 11, 1995, KPMG Peat Marwick LLP
indicated that it had decided not to stand for re-appointment and, therefore,
would not submit a Statement of Qualifications. The decision to solicit
proposals to perform audit services was recommended by the Audit Committee and
approved by the Board of Directors.
The audit reports of KPMG Peat Marwick LLP on the Company's consolidated
financial statements as of and for the fiscal years ended April 30, 1994 and
1993 did not contain an adverse opinion or a disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting principle
except with respect to the Company's adoption of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, in fiscal year ended April 30, 1994. In addition,
during fiscal year 1993 and 1994 and any subsequent interim period during which
KPMG Peat Marwick LLP served as the Company's independent public accountants,
there were no disagreements with KPMG Peat Marwick LLP on any matter of
accounting principles, or practices, financial statement disclosure, or auditing
scope or procedures which, if not satisfied to KPMG Peat Marwick LLP's
satisfaction, would have caused it to make a reference to the subject matter of
the disagreement in connection with its reports. In connection with its audit of
the Company's consolidated financial statements for the fiscal year ended April
30, 1994, KPMG Peat Marwick LLP issued a letter relating to internal controls to
the Board of Directors that identified what KPMG Peat Marwick LLP considered to
be a reportable condition relating to timely financial reporting and the
Company's accounting decision-making process.
On March 17, 1995, the Company engaged Coopers & Lybrand L.L.P. as the
Company's independent accounting firm to provide audit services for the
Company's consolidated financial statements.
33
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company.................................... 3
Risk Factors................................... 4
Use of Proceeds................................ 10
Ratio of Earnings to Fixed Charges............. 10
Description of Debentures...................... 11
Description of Capital Stock................... 19
Selling Securityholders........................ 22
Plan of Distribution........................... 26
Certain United States Federal Income Tax
Consequences................................. 28
Legal Matters.................................. 31
Independent Public Accountants................. 31
</TABLE>
PHP HEALTHCARE
CORPORATION
$69,000,000
6 1/2% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2002
AND
3,499,937 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
FEBRUARY , 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the Debentures and the Common Stock being registered. All amounts are estimates
except the registration fee.
<TABLE>
<S> <C>
Commission Registration Fee................................... $ 32,470.17
Printing and engraving expenses............................... $ 10,000.00
Legal fees and expenses....................................... $ 50,000.00
Trustee's fees (including counsel fees)....................... $ 3,700.00
Accounting fees and expenses.................................. $ 10,000.00
Miscellaneous................................................. $ 10,000.00
-----------
Total..................................................... $116,170.17
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceedings, 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, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (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 reasonably 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.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such
II-1
<PAGE>
persons' heirs, executors and administrators; and empowers the corporation to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
Section 145.
Article IX of the Company's By-laws provides that the Company shall
indemnify its directors and officers to the fullest extent authorized by the
DGCL.
Section 102(b)(7) of DGCL provides that a certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director provided that such provision shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. Article X of the Company's
Certificate of Incorporation limits the liability of directors to the fullest
extent permitted by Section 102(b)(7).
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S>
.14 Indenture dated as of December 15, 1995 between the Company and IBJ Schroder Bank & Trust Company.
4.2 Form of 6 1/2% Convertible Subordinated Debentures due 2002 (included in Indenture filed as Exhibit
4.1).
4.3 Registration Rights Agreement, dated as of December 13, 1995, between the Company and Smith Barney
Inc. and Dean Witter Reynolds Inc.
4.4 Stock Purchase Agreement, dated as of September 29, 1994, by and between the Company and Shamrock
Investments.
4.5 Pledge and Security Agreement, dated as of September 29, 1994, by Charles P. Reilly, Michael E.
Gallagher, and Shamrock Investments in favor of the Company.
4.6 Stock Purchase Note, dated September 29, 1994, from Shamrock Investments to the Company.
4.7 Registration Rights Agreement, dated as of September 29, 1994 between the Company and Shamrock
Investments.
4.8 Convertible Note, dated September 29, 1994, from the Company to Charles P. Reilly.
4.9 Convertible Note, dated September 29, 1994, from the Company to Michael E. Gallagher.
4.10 Convertible Note, dated September 29, 1994, from the Company to Jonathan J. Spees.
4.11 Registration Rights Agreement, dated as of September 29, 1994, between the Company and Charles P.
Reilly, Michael E. Gallagher and Jonathan J. Spees.
4.12 Stock Option, dated as of October 3, 1994, between the Company and Charles P. Reilly.
4.13 Stock Option, dated as of October 3, 1994, between the Company and Michael E. Gallagher.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
4.14 Stock Option, dated as of October 3, 1994, between the Company and John P. Cole.
<C> <S>
4.15 Escrow Agreement, dated as of September 29, 1994, by and among PHP Family Healthcare Corporation,
J.P. Cole & Associates, Inc., John P. Cole, Charles P. Reilly, Michael E. Gallagher, the Company,
and William F. Bavinger, III.
4.16 Registration Rights Agreement, dated as of September 29, 1994, between the Company and John P. Cole,
Charles P. Reilly, and Michael E. Gallagher.
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
12.1 Statement re computation of ratios.
15.1 Letter of Coopers & Lybrand L.L.P. re unaudited interim financial information.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-4 hereof).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of IBJ
Schroder Bank & Trust Company.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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, the Registrant 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 public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of 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 Town of Reston, Commonwealth of Virginia, on this 20th day of
February, 1996.
PHP HEALTHCARE CORPORATION
(Registrant)
By: /s/ JACK M. MAZUR
-----------------------------------
Name: Jack M. Mazur
Title: President and Director
The officers and directors of PHP Healthcare Corporation whose signatures
appear below hereby constitute and appoint Charles H. Robbins, Jack M. Mazur,
Anthony M. Picini and Ben Rosenbaum III, and each of them, their true and lawful
attorneys and agents, each with power to act alone, to sign, execute and cause
to be filed on behalf of the undersigned any amendment or amendments, including
post-effective amendments, to this Registration Statement of PHP Healthcare
Corporation on Form S-3. Each of the Undersigned does hereby ratify and confirm
all that said attorneys and agents shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed below by the following persons in the capacities
indicated on this 20th day of February, 1996.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
/s/ CHARLES H. ROBBINS
------------------------------------------- Chairman of the Board and February 20, 1996
Charles H. Robbins Chief Executive Officer
/s/ JACK M. MAZUR
------------------------------------------- President and Director February 20, 1996
Jack M. Mazur
/s/ ANTHONY M. PICINI Senior Vice President and Chief
------------------------------------------- Financial Officer (Chief February 20, 1996
Anthony M. Picini Accounting Officer)
/s/ MICHAEL D. STARR Senior Vice President,
------------------------------------------- Information Systems and February 20, 1996
Michael D. Starr Director
/s/ JULIEN J. LAVOIE Senior Vice President,
------------------------------------------- Information Systems and February 20, 1996
Julien J. Lavoie Director
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
/s/ GEORGE E. SCHAFER, M.D.
------------------------------------------- Senior Vice President, Medical February 20, 1996
George E. Schafer, M.D. Affairs and Director
/s/ PAUL T. CUZMANES
------------------------------------------- Director February 20, 1996
Paul T. Cuzmanes
/s/ JOSEPH G. MATHEWS
------------------------------------------- Director February 20, 1996
Joseph G. Mathews
/s/ CHARLES P. REILLY
------------------------------------------- Director February 20, 1996
Charles P. Reilly
/s/ DONALD J. RUFFING
------------------------------------------- Director February 20, 1996
Donald J. Ruffing
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
4.1 Indenture dated as of December 15, 1995 between the Company and IBJ Schroder Bank & Trust Company
(filed as Exhibit 4.1 to the Company's Current Report on Form 8-K/A dated January 11, 1996 (File No.
001-11780) and incorporated herein by reference).
4.2 Form of 6 1/2% Convertible Subordinated Debentures due 2002 (included in Indenture filed as Exhibit
4.1 to the Company's Current Report on Form 8-K/A dated January 11, 1996 (File No. 001-11780) and
incorporated herein by reference).
4.3 Registration Rights Agreement, dated as of December 13, 1995, between the Company and Smith Barney
Inc. and Dean Witter Reynolds Inc. (filed as Exhibit 4.2 to the Company's Current Report on Form
8-K/A dated January 11, 1996
(File No. 001-11780) and incorporated herein by reference).
4.4 Stock Purchase Agreement, dated as of September 29, 1994, by and between the Company and Shamrock
Investments (filed as Exhibit 4 to the Company's Current Report on Form 8-K dated October 3, 1994
(File No. 0-16235)).
4.5 Pledge and Security Agreement, dated as of September 29, 1994, by Charles P. Reilly, Michael E.
Gallagher, and Shamrock Investments in favor of the Company.
4.6 Stock Purchase Note, dated September 29, 1994, from Shamrock Investments to the Company.
4.7 Registration Rights Agreement, dated as of September 29, 1994 between the Company and Shamrock
Investments.
4.8 Convertible Note, dated September 29, 1994, from the Company to Charles P. Reilly.
4.9 Convertible Note, dated September 29, 1994, from the Company to Michael E. Gallagher.
4.10 Convertible Note, dated September 29, 1994, from the Company to Jonathan J. Spees.
4.11 Registration Rights Agreement, dated as of September 29, 1994, between the Company and Charles P.
Reilly, Michael E. Gallagher and Jonathan J. Spees.
4.12 Stock Option, dated as of October 3, 1994, between the Company and Charles P. Reilly.
4.13 Stock Option, dated as of October 3, 1994, between the Company and Michael E. Gallagher.
4.14 Stock Option, dated as of October 3, 1994, between the Company and John P. Cole.
4.15 Escrow Agreement, dated as of September 29, 1994, by and among PHP Family Healthcare Corporation,
J.P. Cole & Associates, Inc., John P. Cole, Charles P. Reilly, Michael E. Gallagher, the Company, and
William F. Bavinger, III.
4.16 Registration Rights Agreement, dated as of September 29, 1994, between the Company and John P. Cole,
Charles P. Reilly, and Michael E. Gallagher.
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson (to be filed).
12.1 Statement re computation of ratios.
15.1 Letter of Coopers & Lybrand L.L.P. re unaudited interim financial information.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-4 hereof).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of IBJ
Schroder Bank & Trust Company.
</TABLE>
<PAGE>
EXHIBIT 4.5
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is made and effective as of
September 29, 1994 by EACH PARTY LISTED on Schedule 1 hereto (each, a "Pledgor";
collectively, the "Pledgors") in favor of PHP HEALTHCARE CORPORATION, a Delaware
corporation ("PHP").
R E C I T A L S
- - - - - - - -
WHEREAS, SHAMROCK INVESTMENTS, a California general partnership
("Shamrock") has entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") and has made and delivered to PHP a promissory note (the "Stock
Purchase Note"), each dated as of the date hereof; and
WHEREAS, as further security for the payment and performance of the
obligations of Shamrock under the Stock Purchase Agreement and the Stock
Purchase Note, and in order to induce PHP to engage in the transactions
contemplated thereby, each Pledgor is executing and delivering this Agreement to
PHP; and
WHEREAS, each Pledgor has determined that it is his, her or its best
interest to execute this Pledge and Security Agreement inasmuch as each Pledgor
will derive substantial direct and indirect benefits from the execution and
performance of the Stock Purchase Agreement; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficient of which are hereby acknowledged, and in order to induce PHP to enter
into the Stock Purchase Agreement with Shamrock, each Pledgor agrees, for the
benefit of Shamrock, as follows:
ARTICLE I: PLEDGE
1.1. GRANT OF SECURITY INTEREST. Each Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to PHP and
hereby grants to PHP a continuing security interest in all of the following
property ("Collateral"):
(a) The issued and outstanding shares of capital stock of PHP owned
by such Pledgor and identified on Schedule 1 hereto; and
(b) All other Pledged Shares issued from time to time to such
Pledgor; and
(c) All other Pledged Property (including, without limitation, all
options
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and warrants for Pledged Shares, as identified on Schedule 1
hereto) owned by such Pledgor, whether nor or hereafter delivered
to PHP in connection with this Pledge and Security Agreement; and
(d) All Dividends, Distributions and other payments and rights with
respect to any Pledged Property received or receivable by such
Pledgor (subject, however, to Sections 1.4 and 3.4(a) hereof);
and
(e) All proceeds of any of the foregoing.
1.2. SECURITY FOR OBLIGATIONS. This Pledge and Security Agreement
secures the payment and performance in full of all obligations (monetary or
otherwise) of Shamrock under the Stock Purchase Agreement and Stock Purchase
Note, whether for principal, interest, costs, fees, expenses, or otherwise, and
all obligations (monetary or otherwise) of Shamrock and/or any Pledgor now or
hereafter existing under this Pledge and Security Agreement (all such
obligations of Shamrock and/or any Pledgor being referred to as the "Secured
Obligations").
1.3. DELIVERY OF PLEDGED PROPERTY. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares, will be
delivered to and held by or on behalf of PHP pursuant hereto, must be in
suitable form for transfer by delivery, and must be accompanied by all necessary
instruments of transfer or assignment, duly executed in blank.
1.4. DIVIDENDS ON PLEDGED SHARES. So long as no Default has occurred
and is then continuing or is caused by the payment of such Dividend, any
Dividend paid on any Pledged Share may be paid directly to the respective
Pledgor; after the occurrence and during the continuance of a Default, all
Dividends distributed to shareholders must be paid directly to PHP and applied
against the Stock Purchase Note except for the amount of the respective
Pledgor's resulting federal, state and local income tax liability.
1.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This Pledge
and Security Agreement creates a continuing security interest in the Collateral
and will remain in full force and effect until the payment and performance in
full of all Secured Obligations and the expiration of any period during which
any such payments may be subject to challenge or return as a preference or
otherwise. This Pledge and Security Agreement is binding upon each Pledgor, and
his, her or its successors, heirs, executors, personal representatives,
transferees and assigns, and, together with the rights and remedies of PHP
hereunder, inures to the benefit of PHP and its successors, transferees and
assigns. Without limiting the generality of the foregoing, PHP may assign or
otherwise transfer (in whole or in part) the Stock Purchase Note held by it to
any other Person or entity, and each other Person or entity will thereupon
become vested with all the rights and benefits in respect thereof granted to PHP
under the Stock Purchase Agreement, the Stock Purchase Note and this Pledge and
Security Agreement or otherwise, SUBJECT, HOWEVER, to any contrary provision in
such assignment or transfer. Upon the payment and performance in full of all
Secured Obligations and the expiration of any period during which any such
payments may be subject to
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challenge to return, the pledge and security interest granted herein will
terminate and all rights to the Collateral will revert to each Pledgor. Upon any
such termination, PHP, at each Pledgor's sole expense, will deliver to each
Pledgor, without any representation, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing the
Pledged Shares, together with all other Collateral held by PHP hereunder, and
will execute and deliver to each Pledgor such documents as such Pledgor may
reasonably request to evidence such termination and delivery.
1.6. SECURITY INTEREST ABSOLUTE. All rights of PHP and the security
interests granted to PHP hereunder, and all obligations of any Pledgor
hereunder, are absolute and unconditional, irrespective of:
(a) Any lack of validity or enforceability of the Stock Purchase
Note; or
(b) The failure of PHP or any holder of the Stock Purchase Note:
(i) To assert any claim or demand or to enforce any right or
remedy under the provisions of the Stock Purchase Note or
otherwise, or
(ii) To exercise any right or remedy against any other obligor
of, or collateral security, any obligations of Shamrock
owing to PHP; or
(c) Any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation; or
(d) Any reduction, limitation, impairment or termination of any
Secured Obligation for any reason, including any claim of waiver,
release, surrender, alteration or compromise (and each Pledgor
hereby waives any right to or claim of any defense or set off,
counterclaim, recoupment or termination whatsoever by reason of
any invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligation); or
(e) Any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, the Stock Purchase Note; or
(f) Any addition, exchange, release, surrender or nonperfection of
any collateral (including the Collateral), or any amendment to or
waiver or release of or addition to or consent to departure from
any guaranty, for any of the Secured Obligations; or
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(g) Any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any
Pledgor.
ARTICLE II: REPRESENTATIONS AND WARRANTIES
Each Pledgor, as of the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by any such Pledgor to
PHP of any Collateral, hereby jointly and severally represents and warrants to
PHP as set forth in this Article.
2.1. LEGAL CAPACITY. Each Pledgor has the full power and legal
capacity to execute and deliver the Pledge and Security Agreement and perform
its obligations hereunder.
2.2. OWNERSHIP: NO LIENS. Each Pledgor is the legal and beneficial
owner of, and has good and marketable title to (and has full right and authority
to pledge and assign) such Collateral, free and clear of all liens, security
interests, options, or other charges or encumbrances, except any lien or
security interest granted pursuant hereto in favor of PHP.
2.3. VALID SECURITY INTEREST. The delivery of the Collateral to PHP
by each Pledgor is effective to create a valid, perfected, first priority
security interest in the Collateral and all proceeds thereof securing the
payment of the Secured Obligations. No filing and no approval or consent of any
Person will be necessary to perfect or protect such security interest.
2.4 NON-CONTRAVENTION. The execution, delivery and performance by
each Pledgor of this Pledge and Security Agreement do not:
(a) Contravene any contractual restriction the violation of which
individually or in the aggregate would have a Material Adverse
Effect; or
(b) Contravene any law or governmental regulation or court decree or
order binding on or affecting any Pledgor; or
(c) Result in, or require the creation or imposition of, any lien on
any of such Pledgor's property, other than the lien created
pursuant to this Pledge and Security Agreement.
2.5 VALIDITY. This Pledge and Security Agreement constitutes the
legal, valid and binding obligation of such Pledgor and is enforceable against
him, her or it in accordance with the terms hereof.
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ARTICLE III. COVENANTS
Each Pledgor, jointly and severally, hereby covenants and agrees that,
so long as this Pledge and Security Agreement remains effective, each Pledgor
will comply with the covenants set forth in this Article.
3.1. PROTECT COLLATERAL; FURTHER ASSURANCE. No Pledgor will sell,
assign, transfer, pledge, or encumber in any other manner the Collateral (except
in favor of PHP hereunder), except that any of the Pledged Shares hereunder
owned by an individual Pledgor may be transferred upon such individual's death
to his or her heirs, executor or personal representative PROVIDED THAT (a) such
Collateral at all times remains subject to the pledge and security interest
created hereby and, (b) such transferee (at such transferee's expense and prior
to the effectiveness of any such transfer) becomes a Pledgor hereunder and
executes such agreements and documents as PHP may reasonably request to ensure
the continuation of PHP's first priority interest in such Collateral. Shamrock
shall promptly notify PHP in writing of the death of any Pledgor. Each Pledgor
will warrant and defend the right and title herein granted to PHP in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all persons whomsoever. Each Pledgor agrees
that at any time, and from time to time, at the expense of such Pledgor, such
Pledgor will promptly execute and deliver all further instruments, and will take
all further action, that may be reasonably necessary or desirable, or that PHP
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable PHP to exercise and
endorse its rights and remedies hereunder with respect to any Collateral.
3.2. STOCK POWERS. Each Pledgor agrees that all Pledged Shares (and
all other shares of stock constituting Collateral) delivered by such Pledgor
pursuant to this Pledge and Security Agreement, if requested by PHP, will be
endorsed in blank or accompanied by duly executed undated blank stock powers, or
other equivalent instruments of transfer acceptable to PHP. Each Pledgor, from
time to time upon the request of PHP, will promptly deliver to PHP such stock
powers, instruments, and similar documents (satisfactory in form and substance
to PHP) with respect to the Collateral as PHP may reasonably request and from
time to time upon the request of PHP after the occurrence of any Event of
Default, will promptly transfer any Pledged Shares or other shares of capital
stock constituting Collateral into the name of any nominee designated by PHP.
3.3. CONTINUOUS PLEDGE. Each Pledgor, at all times, will keep pledged
to PHP pursuant hereto all Pledged Shares and all other shares of capital stock
constituting Collateral, all Dividends (subject, however, to Section 1.4 hereof)
and Distributions with respect thereto, and all other Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to Pledgor in respect to any Collateral.
3.4. VOTING RIGHTS; DISTRIBUTIONS. Until an Event of Default has
occurred and is continuing, each Pledgor may exercise all of its voting rights
in respect of its Collateral. Each Pledgor agrees:
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(a) Promptly upon receipt and without any request by PHP, to deliver
to PHP (properly endorsed where required hereby or requested by
PHP) all Distributions, all other non-Dividend cash payments, and
all proceeds of the Collateral, all of which will be held by PHP
as additional Collateral, provided that each Pledgor may retain
the amount of any such Distribution, payment or proceeds
representing his resulting federal, state and local income tax
liability; and
(b) After any Event of Default has occurred and is continuing and PHP
has notified Pledgor of PHP's intention to exercise its voting
power under this Section 3.4(b):
(i) PHP may exercise (to the exclusion of each Pledgor) the
voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of stock
constituting Collateral, and each Pledgor hereby grants PHP
an irrevocable proxy, exercisable under such circumstances,
to vote the Pledged Shares and such other Collateral; and
(ii) Promptly to deliver to PHP such additional proxies and other
documents as may be necessary to allow PHP to exercise such
voting power;
All Dividends, Distributions, cash payments, and proceeds that at any time and
from time to time may be delivered to any Pledgor but which such Pledgor is then
obligated to deliver to PHP, until delivery to PHP, must be held by such Pledgor
separate and apart from his, her or its other property in trust for PHP. PHP
agrees that unless an Event of Default has occurred and is continuing, each
Pledgor will have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) of such Pledgor constituting
Collateral and, upon the written request of such Pledgor, PHP will promptly
deliver such proxies and other documents, if any, as reasonably requested by
such Pledgor that are necessary to allow such Pledgor to exercise voting power
with respect to any such shares of capital stock (including any of the Pledged
Shares) of such Pledgor constituting Collateral; PROVIDED, HOWEVER, that no vote
may be cast, or consent, waiver, or ratification given, or action taken by any
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of any of the Stock Purchase Agreement, the Stock Purchase Note or
this Pledge and Security Agreement.
ARTICLE IV: PHP
4.1. PHP APPOINTED AS ATTORNEY-IN-FACT. Each Pledgor hereby
irrevocably appoints PHP as such Pledgor's attorney-in-fact, with full authority
in the place and stead of such Pledgor and in the name of Pledgor or otherwise,
from time to time in PHP's reasonable discretion, to take any action and to
execute any instrument which PHP may deem
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necessary or advisable to accomplish the purposes of this Pledge and Security
Agreement, including, without limitation:
(a) To ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; and/or
(b) To perform any and all of the affirmative obligations and
covenants of such Pledgor hereunder.
Each Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 4.1 is irrevocable and coupled with an interest
but will terminate upon the termination of this Agreement pursuant to Section
1.5 hereof.
4.2. PHP MAY PERFORM. If any Pledgor fails to perform any agreement
contained herein, PHP may itself perform, or cause the performance of, such
agreement, and the expenses of PHP incurred in connection therewith will be
payable pursuant to Section 5.6 hereof.
4.3. PHP HAS NO DUTY. The rights and powers conferred on PHP
hereunder are solely to protect its interest in the Collateral and do not impose
any duty on PHP to exercise any such rights or powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, PHP has no duty as to any Collateral or any
responsibility for taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
4.4. REASONABLE CARE. PHP is required to exercise reasonable care in
the custody and preservation of any of the Collateral in its possession;
PROVIDED, HOWEVER, PHP will be deemed to have exercised such reasonable care in
the custody and preservation of any of the Collateral, if it takes such action
for that purpose as each Pledgor reasonably requests in writing at times other
than upon the occurrence and during the continuance of any Event of Default, but
failure of PHP to comply with any such request at any time will not in itself be
deemed a failure to exercise reasonable care.
ARTICLE V: DEFAULTS AND REMEDIES
5.1. EVENTS OF DEFAULT. The occurrence of any of the following events
will constitute an Event of Default ("Event of Default") hereunder:
(a) STOCK PURCHASE AGREEMENT AND STOCK PURCHASE NOTE. If any default
occurs under the Stock Purchase Agreement or the Stock Purchase
Note.
(b) REPRESENTATIONS AND WARRANTIES. If any representation, warranty
or statement made in this Agreement, or in any schedule or
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exhibit hereto, by any Person (other than PHP) obligated
hereunder when made was or subsequently becomes false, misleading
or incorrect in any material respect.
(c) COVENANTS. If any Person (other than PHP) obligated hereunder
defaults in the performance of any agreement or covenant
contained herein, or in any document or agreement now or
hereafter executed or delivered in connection herewith, AND such
default remains uncured for a period of thirty (30) Business Days
after the earlier of the date that PHP notifies such Person
thereof or the date that such Person otherwise acquires
knowledge.
(d) SECURITY INTEREST. If the security interest or lien in any of
the Collateral hereunder at any time does not constitute a legal,
valid and enforceable first priority security interest or lien in
favor of PHP.
(e) INSOLVENCY. If any Person obligated hereunder becomes insolvent,
bankrupt or generally fails to pay his, her or its debts as such
debts as such debts become due.
5.2. CERTAIN REMEDIES. If any Event of Default occurs and is continuing:
(a) PHP may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise
available to it, all rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral).
(b) In addition, without notice except as specified below, PHP may
sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of PHP's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms
as PHP may in good faith deem commercially reasonable. Each
Pledgor agrees that, to the extent notice of sale is required by
applicable law, at least thirty (30) calendar days' prior notice
to such Pledgor of the time and place of any public sale or the
time after which any private sale is to be made will constitute
reasonable notification. PHP is not and will not be obligated to
make any sale of Collateral regardless of notice of sale having
been given. PHP may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and
without further notice, such sale may be made at the time and
place to which it was so adjourned.
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(c) PHP, in addition, may:
(i) Transfer all or part of the Collateral into the name of PHP
or its nominee, with or without disclosing that such
Collateral is subject to the Lien and security interest
hereunder; and
(ii) Notify the parties obligated on any of the Collateral to
make payment to PHP of any amount due or to become due in
connection therewith; and
(iii) Endorse any checks, drafts, or other writings in any
Pledgor's name to allow collection of the Collateral; and
(iv) Take control of any proceeds of the Collateral;
(v) Execute (in the name, place and stead of any Pledgor)
endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
5.3. COMPLIANCE WITH RESTRICTIONS. Each Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default has occurred and is
continuing, PHP is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law (including
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any Official Body. Each Pledgor further agrees that
such compliance will not result in such sale being considered or deemed not to
have been made in a commercially reasonable manner, nor will PHP be liable or
accountable to any Pledgor for any discount allowed by the reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.
5.4. APPLICATION OF PROCEEDS. All cash proceeds received by PHP in
respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral, in the discretion of PHP, may be held by PHP as
additional collateral security for, or then or at any time thereafter may be
applied in whole or in part by PHP against, all or any part of the Secured
Obligations in such order as PHP may elect. Any surplus of such cash or cash
proceeds held by PHP and remaining after payment in full of all the Secured
Obligations will be paid over to the applicable Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
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5.5. INDEMNITY AND EXPENSES.
(a) Each Pledgor hereby agrees to indemnify and hold harmless PHP
from and against any and all claims, losses, and liabilities
arising out of or resulting from this Pledge and Security
Agreement (including enforcement of this Pledge and Security
Agreement against such Pledgor) directly or indirectly caused by
or resulting from the actions or inactions of such Pledgor,
except for liabilities resulting from PHP's own willful
misconduct or fraud.
(b) Upon demand, each Pledgor (on a pro rata basis, based upon the
percentage of outstanding shares owned or to which such Pledgor
has the right to own) will pay to PHP the amounts of any and all
reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
PHP may incur in connection with:
(i) The administration of this Pledge and Security Agreement,
and each of the other Loan Documents to which Pledgor is a
party; and/or
(ii) The custody, preservation, use, or operation of, or the sale
of, collection from, or other realization upon, any of the
Collateral; and/or
(iii) The exercise or enforcement of any of the rights of PHP
hereunder; and/or
(iv) The failure by such Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VI: DEFINITIONS
6.1. CERTAIN TERMS. The following terms when used in this Pledge and
Security Agreement, including its preamble and recitals, have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
(a) "COLLATERAL" is defined in Section 1.1 hereof.
(b) "DISTRIBUTION" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
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(c) "DIVIDEND" means cash dividends and cash distributions with
respect to any Pledged Shares or other Pledged Property made in the ordinary
course of business and not a liquidating dividend.
(d) "MATERIAL ADVERSE EFFECT" means relative to any occurrence of
whatever nature (including, without limitation, any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), a
material adverse change to, or, as the case may be, a materially adverse effect
on:
(1) The business, assets, revenues, financial condition, or
operations of any Pledgor or Shamrock; or
(2) The ability of Pledgor or Shamrock to perform any of its
payment obligations when due or to perform any other
material obligations under this Pledge and Security
Agreement, the Stock Purchase Agreement or the Stock
Purchase Note.
(e) "PERSON" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
(f) "PHP" means PHP Healthcare Corporation, a Delaware corporation,
and any successor thereof, or any assignee or transferee of PHP under the Stock
Purchase Agreement or the Stock Purchase Note.
(g) "PLEDGE AND SECURITY AGREEMENT" means this Stock Pledge and
Security Agreement, and all exhibits and schedules hereto, all as may be
amended, supplemented and otherwise modified from time to time.
(h) "PLEDGED PROPERTY" means all Pledged Shares and all other pledged
shares of capital stock, all other securities (including, without limitation,
all options and warrants for Pledged Shares), all assignments of any amounts due
or to become due, all other instruments which are now being delivered by any
Pledgor to PHP or may from time to time hereafter be delivered by a Pledgor to
PHP for the purpose of pledge under the Pledge and Security Agreement, and all
proceeds of any of the foregoing.
(i) "PLEDGED SHARES" means all shares of capital and/or voting stock
issued by PHP which are delivered by any Pledgor to PHP as Pledged Property
hereunder.
(j) "PLEDGOR" means each Person required hereunder to execute this
Pledge and Security Agreement, and any successor, heir, personal representative
or executor thereof.
(k) "SECURED OBLIGATIONS" is defined in Section 1.2 hereof.
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(l) "SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and as implemented by the Securities Exchange Commission.
(m) "SHAMROCK" means Shamrock Investments, a California general
partnership, or any successor therefor or any authorized assignee of Shamrock
under the Stock Purchase Agreement.
(n) "STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement,
and all exhibits and schedules hereto, all as may be amended, supplemented and
otherwise modified from time to time.
(o) "STOCK PURCHASE NOTE" means the promissory note, dated the date
hereof, executed by Shamrock pursuant to the Stock Purchase Agreement, as may be
amended, supplemented and otherwise modified from time to time.
(p) "U.C.C." means the Uniform Commercial Code as in effect in the
State of Virginia.
6.2. U.C.C. DEFINITION. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge and Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE VII: MISCELLANEOUS PROVISIONS
7.1. AMENDMENTS. No amendment to or waiver of any provision of this
Pledge and Security Agreement nor any consent to any departure by any Pledgor
herefrom will in any event be effective unless the same is in writing and signed
by PHP and any Pledgor directly obligated by such amendment, and then any such
waiver or consent will be effective only in the specific instance and for the
specific purpose for which it is given.
7.2. PROTECTION OF COLLATERAL. PHP from time to time, at its option,
may perform any act which any Pledgor agrees hereunder to perform and which such
Pledgor fails to perform after being requested in writing so to perform (it
being understood that no such request need be given after the occurrence and
during the continuance of an Event of Default), and PHP from time to time may
take any other action which PHP reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
7.3. ADDRESSES FOR NOTICES. All notices and other communications
provided to any party hereto shall be in writing and mailed, delivered or
transmitted to such party at its address or facsimile number set forth below its
signature hereto and as to any party, at such other address or facsimile number
as may be designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. Any notice, if mailed
and properly addressed with postage prepaid or, if properly addressed and sent
by prepaid courier service, will be deemed given when received; any notice, if
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transmitted by facsimile, will be deemed given when transmitted (upon receipt of
electronic confirmation of transmission).
7.4. HEADINGS. The various headings used in this Pledge and Security
Agreement are for convenience of reference only, and shall not affect the
meaning or interpretation of this Pledge and Security Agreement or any provision
hereof.
7.5. SEVERABILITY. Wherever possible, each provision of this Pledge
and Security Agreement is to be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge and Security
Agreement is prohibited by or invalid under such law, such provision is to be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge and Security Agreement.
7.6. GOVERNING LAW; ENTIRE AGREEMENT. This Pledge and Security
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Virginia, without giving effect of conflicts of laws
principles, except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
collateral are governed by the laws of a jurisdiction other than the State of
Virginia. This Pledge and Security Agreement, the Stock Purchase Agreement and
the Stock Purchase Note constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
7.7. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE AND
SECURITY AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF PHP OR ANY PLEDGOR SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF VIRGINIA OR IN THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY ALSO BE BROUGHT, AT PHP'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND OR WHERE
PLEDGOR IS OTHERWISE SUBJECT TO PERSONAL JURISDICTION. EACH PLEDGOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF VIRGINIA AND OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF VIRGINIA OR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO
THE SERVICES OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF VIRGINIA. EACH PLEDGOR HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
ANY PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT
TO ITSELF OR ITS PROPERTY, SUCH
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PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS SECURED
OBLIGATIONS UNDER THIS PLEDGE AND SECURITY AGREEMENT.
7.8. WAIVER OF JURY TRIAL. PHP AND EACH PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PLEDGE AND SECURITY AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF PHP OR
ANY PLEDGOR. EACH PLEDGOR ACKNOWLEDGES AND AGREES THAT HE, SHE OR IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY), THAT HE, SHE OR
IT HAS BEEN ADVISED BY LEGAL COUNSEL IN CONNECTION HEREWITH AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR PHP ENTERING INTO THE STOCK PURCHASE
AGREEMENT.
7.9. REINSTATEMENT. To the extent permitted by law, this Pledge and
Security Agreement shall continue to be effective or be reinstated if at any
time any amount received by PHP in respect of the Stock Purchase Agreement or
the Stock Purchase Note is rescinded or must otherwise be restored or returned
by PHP upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Shamrock of any Pledgor or upon the appointment of any
receiver, intervenor, conservator, trustee or similar official for Shamrock or
any Pledgor or any substantial part of Shamrock or any Pledgor's assets, or
otherwise, all as though such payments had not been made.
7.10. WAIVER OF LIABILITY. EACH PLEDGOR (A) AGREES THAT PHP SHALL
HAVE NO LIABILITY TO PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE)
FOR LOSSES SUFFERED BY ANY PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED
BY THIS PLEDGE AND SECURITY AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING
IN CONNECTION THEREWITH, EXCEPT CLAIMS RESULTING FROM PHP'S WILLFUL MISCONDUCT
OR FRAUD, AND (B) WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM AGAINST
PHP (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE), EXCEPT CLAIMS RESULTING
FROM PHP'S WILLFUL MISCONDUCT OR FRAUD. WHETHER OR NOT SUCH DAMAGES ARE RELATED
TO A CLAIM THAT IS SUBJECT TO THE WAIVER EFFECTED ABOVE AND WHETHER OR NOT SUCH
WAIVER IS EFFECTIVE, PHP SHALL HAVE NO LIABILITY WITH RESPECT TO, AND EACH
PLEDGOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES SUFFERED BY ANY PLEDGOR IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS
CONTEMPLATED OR THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AND SECURITY
AGREEMENT, THE STOCK PURCHASE AGREEMENT OR THE STOCK PURCHASE NOTE, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH.
7.11. WAIVER OF NOTICE; WAIVER OF BOND. EACH PLEDGOR WAIVES ALL
RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY PHP OF ITS
RIGHTS FROM AND AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT TO REPOSSESS THE
COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE
COLLATERAL. EACH PLEDGOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF
PHP IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION
OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL OR OTHER
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SECURITY FOR THE SECURED OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF PHP, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS PLEDGE AND
SECURITY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN ANY PLEDGOR AND
PHP.
7.12. WAIVER OF SUBROGATION. Each Pledgor hereby irrevocably
waives any claim or other rights which it may now have or hereafter acquire
against Shamrock or any other obligor that arise from the existence, payment,
performance or enforcement of Pledgor's obligations under this Pledge and
Security Agreement, the Stock Pledge and Security Agreement or the Stock
Purchase Note, including any right of subrogation, reimbursement, exoneration,
or indemnification, any right to participate in any claim or remedy of PHP
against Shamrock or any other obligor or any collateral which PHP now has or
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including the right to take or receive
from Shamrock or any other obligor, directly or indirectly, in cash or other
property or by set-off or in any manner, payment or security on account of such
claim or other rights. If any amount shall be paid to any Pledgor in violation
of the preceding sentence and the Secured Obligations shall not have been paid
in cash in full, such amount shall be deemed to have been paid to such Pledgor
for the benefit of, and held in trust for, PHP, and shall forthwith be paid to
PHP to be credited and applied upon the Secured Obligations, whether matured or
unmatured. Each Pledgor acknowledges that it will receive direct and indirect
benefits from the transactions contemplated by the Stock Purchase Agreement and
that the waiver set forth in this Section is knowingly made in contemplation of
such benefits.
7.13. COUNTERPARTS. This Pledge and Security Agreement may be
executed in any number of counterparts with the same effect as if all the
signatures on such counterparts appeared on one document; each such counterpart
will be deemed to be an original but all counterparts together will constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed and delivered as of the day and year
first above written.
WITNESS/ATTEST: SHAMROCK INVESTMENTS (PLEDGOR)
By: /s/ Michael E. Gallagher By: /s/ Charles P. Reilly
------------------------------ --------------------------
Name: Michael E. Gallagher Name: Charles P. Reilly
Title: General Partner Title: Managing General Partner
WITNESS: CHARLES P. REILLY (PLEDGOR)
By: /s/ Michael E. Gallagher /s/ Charles P. Reilly
------------------------------ ----------------------------------
Name: Michael E. Gallagher Address: 2049 Century Park East,
Suite 3330
Los Angeles, California 90067
WITNESS: MICHAEL E. GALLAGHER (PLEDGOR)
By: /s/ Charles P. Reilly /s/ Michael E. Gallagher
------------------------------ ----------------------------------
Name: Charles P. Reilly Address: 2049 Century Park East,
Suite 3330
Los Angeles, California 90067
WITNESS/ATTEST: PHP HEALTHCARE CORPORATION
By: /s/ Margaret E. Ferrell By: /s/ Jack M. Mazur
------------------------------ --------------------------------
Name: Margaret E. Ferrell Name: Jack M. Mazur
Title: Title: Senior Vice President
<PAGE>
SCHEDULE I
PLEDGED SHARES
1. Fifty-Seven Thousand One Hundred Forty-Three (57,143) Shares of
Common Stock, $.01 par value, of PHP Healthcare Corporation registered in the
name of Charles P. Reilly.
2. Forty-Two Thousand Eight Hundred Fifty-Seven (42,857) Shares of
Common Stock, $.01 par value, of PHP Healthcare Corporation registered in the
name of Michael E. Gallagher.
3. One Hundred Thousand (100,000) Shares of Common Stock, $.01 par
value, of PHP Healthcare Corporation registered in the name of Shamrock
Investments.
<PAGE>
EXHIBIT 4.6
STOCK PURCHASE NOTE
$900,000.00 September 29, 1994
FOR VALUE RECEIVED, the undersigned, SHAMROCK INVESTMENTS, a
California general partnership ("Maker"), hereby unconditionally promises to pay
to the order of PHP HEALTHCARE CORPORATION, a Delaware corporation, or its
successors or assigns ("Payee"), on or before September 29, 1999, ("Maturity
Date") the principal sum of NINE HUNDRED THOUSAND DOLLARS ($900,000.00), or such
other amount as at the time may be outstanding hereunder, TOGETHER WITH all
accrued but unpaid interest thereon computed at the rate per annum set forth
below and all unpaid expenses and fees connected herewith.
Prior to the Maturity Date, the outstanding principal amount hereunder
will bear interest, computed daily until paid, at a fixed rate per annum of
7.0%. Interest will be calculated, accrued and imposed on the basis of a 365-day
year for the actual number of days elapsed.
Prior to the Maturity Date, accrued interest hereunder (but not
principal) will be due and payable annually in arrears on the 30th day of April,
commencing on April 30, 1995. Payee is authorized to note or endorse the date
and amount of each payment and prepayment of principal and/or interest hereunder
on a schedule annexed to and constituting a part hereof. Such notations or
endorsements, if made, will constitute PRIMA FACIE evidence of the information
endorsed on such schedule, but the failure of Payee to make any such notation or
endorsement will not limit or otherwise affect the obligations of Maker
hereunder.
At any time, upon two (2) business days written notice to Payee, Maker
may prepay the outstanding principal balance hereunder in whole or in part
without premium or penalty, except as otherwise provided herein. Payments and
prepayments will be applied by Payee in the following order: (a) first to the
payment of any fees and charges due hereunder, (b) then to any obligations of
Maker for the payment of expenses due hereunder, (c) then to the payment of
interest due and owing hereunder, (d) then to the principal indebtedness due
hereunder, and (e) then to any other indebtedness of Maker to Payee.
All payments of principal, interest (including any default interest),
fees and any other amounts due hereunder, including any prepayments thereof,
must be made by Maker to Payee in immediately available funds on or before
twelve o'clock (12:00) noon on the due date therefor at the principal office of
Payee at 11440 Commerce Park Drive, Reston, Virginia 22091, Attention: Anthony
M. Picini, Vice President, Finance, or at such other place as the Payee or any
other holder of this Note may at any time or from time to time designate in
writing to Maker.
Whenever any payment to be made hereunder is due on a day that is not
a business day (I.E., any day other than a Saturday, Sunday or legal public
holiday), such payment may be made on the next succeeding business day, and such
extension of time will be included
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in the computation of interest hereunder. Any funds received by Payee after
12:00 noon on any day will be deemed to be received on the next succeeding
business day.
Upon the occurrence and during the existence of a default hereunder
(including, without limitation, failure or refusal by Maker to deliver payment
of the outstanding balance plus interest on the Maturity Date), Maker hereby
agrees (to the maximum extent not prohibited by applicable law) to pay to Payee
interest on any indebtedness outstanding hereunder at the rate of three percent
(3.0%) per annum in excess of the rate then otherwise applicable to such
indebtedness.
If, after a default hereunder, counsel is employed to collect the
indebtedness evidenced hereby or to protect the security hereof, Maker agrees to
pay Payee (to the maximum extent not prohibited by applicable law) reasonable
attorneys' fees and all other costs and expenses incurred in connection with
such collection.
Maker hereby waives diligence, presentment, protest, demand for
payment, notice of protest and non-payment, notice of dishonor, and any and all
other notices or demands in connection with the delivery, acceptance,
performance, default, acceleration or enforcement of this Note. No delay on the
part of Payee in exercising any power or right hereunder will operate as a
waiver thereof nor will any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof or the exercise of any
other power or right. This Note is binding on Maker and its successors and
assigns. If any term or provision of this Note is held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof will in no
way be affected thereby.
Nothing contained in this Note will require Maker to pay interest at a
rate prohibited by applicable law. If interest payable to Payee on any date
would be in a prohibited amount, such interest will be automatically reduced to
an amount that is not prohibited and interest for subsequent periods, to the
extent not prohibited, will be increased by the amount of such reduction until
payment of the full amount of each such reduction. Any prohibited amount
previously paid will be credited towards reduction of the outstanding principal
balance.
MAKER AND PAYEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF MAKER OR PAYEE. MAKER ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION, THAT IT HAS
BEEN ADVISED BY LEGAL COUNSEL IN CONNECTION HEREWITH, AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR PAYEE ENTERING INTO THE STOCK PURCHASE AGREEMENT
(THE "STOCK PURCHASE AGREEMENT") BY AND BETWEEN MAKER AND PAYEE, AND THE
PLEDGE AND SECURITY AGREEMENT (THE "PLEDGE AND SECURITY AGREEMENT") BY AND
AMONG MAKER, PAYEE AND CERTAIN OTHER PARTIES, EACH DATED AS OF THE DATE HEREOF.
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<PAGE>
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF MAKER OR PAYEE WILL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF VIRGINIA OR IN
THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT HEREOF AGAINST MAKER MAY BE BROUGHT,
AT PAYEE'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE PAYEE MAY OTHERWISE
OBTAIN PERSONAL JURISDICTION OVER MAKER. MAKER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF VIRGINIA AND OF THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA FOR THE
PURPOSE OF ANY SUCH LITIGATION ASSET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. MAKER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
VIRGINIA. MAKER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT MAKER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, MAKER HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS SECURED OBLIGATIONS UNDER THIS NOTE.
This Note is the "Shamrock Note" referred to in, and arises out of,
the Stock Purchase Agreement, and the timely repayment hereof in accordance with
the terms hereof is secured by the Pledge and Security Agreement. Upon and at
any time after the occurrence of any breach or default hereunder or under the
Stock Purchase Agreement or the Pledge and Security Agreement, at the election
of Payee, Payee may declare the entire unpaid balance of all indebtedness
hereunder (including, principal, interest and fees) to be immediately due and
payable. Payee is entitled to the rights and benefits of the Stock Purchase
Agreement and the Pledge and Security Agreement.
THE RIGHTS OF PAYEE TO RECEIVE PAYMENT PURSUANT TO THIS NOTE ARE
SUBJECT TO THE RIGHTS OF MAKER TO SET OFF AGAINST ANY AMOUNTS THEN DUE AND
PAYABLE HEREUNDER ANY OTHER AMOUNTS THEN DUE AND PAYABLE BY MAKER TO PAYEE (OR
TO CHARLES P. REILLY OR MICHAEL E. GALLAGHER, PARTNERS OF MAKER, TO THE EXTENT
THAT PAYEE SHALL HAVE PURCHASED SUCH DEBT FROM THEM), PROVIDED THAT PAYEE SHALL
HAVE FIRST GIVEN MAKER WRITTEN NOTICE OF ITS INTENT TO EXERCISE SUCH SET OFF
RIGHT.
Payee, its successors or assigns, may assign at any time all or a part
of its rights hereunder without the consent of Maker.
This Note shall be governed by and construed under the laws of the
State of Virginia without giving effect to conflicts of laws principles.
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IN WITNESS WHEREOF, Maker has caused this Note to be executed in its
name and on its behalf on the day and year first written above.
WITNESS/ATTEST: SHAMROCK INVESTMENTS, Maker
/s/ Michael E. Gallagher By: /s/ Charles P. Reilly
- -------------------------- --------------------------------
Name: Michael E. Gallagher Name: Charles P. Reilly
Title: General Partner Title: Managing General Partner
BEING ALL OF THE GENERAL PARTNERS OF SHAMROCK INVESTMENTS, A CALIFORNIA GENERAL
PARTNERSHIP ("MAKER"), EACH INDIVIDUAL BELOW HEREBY RATIFIES, CONFIRMS AND
APPROVES THE INDEBTEDNESS REPRESENTED HEREBY AND HEREBY REPRESENTS AND WARRANTS
TO PHP HEALTHCARE CORPORATION THAT ALL NECESSARY ACTIONS HAVE BEEN TAKEN AND
APPROVALS RECEIVED IN ORDER FOR THE INDEBTEDNESS REPRESENTED BY THIS NOTE TO BE
THE LEGAL, VALID AND ENFORCEABLE INDEBTEDNESS OF THE MAKER.
/s/ Charles P. Reilly
- -------------------------------------
Charles P. Reilly, General Partner
/s/ Michael E. Gallagher
- -------------------------------------
Michael E. Gallagher, General Partner
<PAGE>
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of September 29, 1994, between
PHP HEALTHCARE CORPORATION, a Delaware corporation (the "Company"), and SHAMROCK
INVESTMENTS, a California partnership ("Shamrock").
RECITALS
1. Shamrock has entered into a Stock Purchase Agreement dated the
date hereof (the "Stock Purchase Agreement") under which it has acquired 100,000
shares of the Common Stock of the Company.
2. The Company and Shamrock therefore deem it to be in their
respective best interests to set forth the rights of Shamrock and certain other
holders of such shares of Common Stock of the Company in connection with public
offerings and sales of such shares.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, and intending to be legally bound hereby,
the Company and Shamrock hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Common Stock" shall mean the common stock, $.01 par value
per share, of the Company and any other securities into which or for which
such common stock has been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets, or otherwise.
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(c) "Form S-3" means such form of registration statement under
the Securities Act on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC that permits the inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
(d) "Holder" means Shamrock, so long as it holds any Registrable
Securities, and any person owning Registrable Securities who is a permitted
assignee under Section 11 of this Agreement.
<PAGE>
(e) The terms "register," "registered," and "resignation" refer
to a registration effected by the preparation and filing of a Registration
Statement in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such Registration Statement by the SEC.
(f) "Registrable Securities" shall mean the shares of Common
Stock acquired by Shamrock pursuant to the Stock Purchase Agreement or
owned by any subsequent Holder or Holders, and, in each case, all shares of
Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, in exchange for, or in replacement of such
shares of Common Stock. The term"Registrable Securities" excludes, however,
any security (i) the sale of which has been effectively registered under
the Securities Act and which has been disposed of in accordance with a
Registration Statement, (ii) that has been sold by a Holder in a
transaction exempt from the registration statement and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof (including,
without limitation, transactions pursuant to Rules 144 and 144A) such that
the further disposition of such securities by the transferee or assignee is
not restricted under the Securities Act, (iii) that have been sold by a
Holder in a transaction in which such Holder's rights under this Agreement
are not, or cannot be, assigned, or (iv) for which the registration rights
provided under this Agreement have expired pursuant to Section 14 of this
Agreement.
(g) "Registration Expenses" shall mean (i) registration,
qualification and filing fees; (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of any Registrable
Securities being registered); (iii) printing expenses; (iv) fees and
disbursements of counsel for the Company and customary fees and expenses
for independent certified public accountants retained by the Company
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of comfort letters
customarily requested by underwriters); (v) fees and expenses of counsel
for the requesting Holders; (vi) fees and expenses of listing any
Registrable Securities on any securities exchange on which the Common Stock
is then listed; (vii) fees and disbursements of underwriters customarily
paid by issuers or sellers of securities; and (viii) any underwriting fees,
discounts or commissions attributable to the sale of any Registrable
Securities and any fees and expenses of underwriters' counsel; but
excluding all internal expenses of the Company, including without
limitation all salaries and expenses of officers and employees of the
Company performing legal or accounting duties.
(h) "Registration Statement" shall mean any registration
statement or similar document that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the prospectus or
preliminary prospectus included therein, all amendments and supplements to
such Registration Statement, including post-effective amendments, all
exhibits to such Registration Statement and all material incorporated by
reference in such Registration Statement.
2
<PAGE>
(i) "Rule 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto.
(j) "Rule 144A" shall mean Rule 144A promulgated under the
Securities Act or any successor rule thereto.
(k) "SEC" shall mean the Securities and Exchange Commission.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2. FORM S-3 REGISTRATION.
(a) After the date hereof, if the Company shall receive from the
Holder(s) of the Registrable Securities a written request that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to any or all such Registrable Securities owned by such Holder(s),
the Company shall use its reasonable best efforts to effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all of the Registrable
Securities specified in such request.
(b) The Company shall not be obligated to effect any
registration, qualification or compliance pursuant to this Section 2 if Form S-3
is not available to the Company for such offering by the requesting Holder(s).
(c) The Company shall not be obligated to effect more than one
registration pursuant to this Section 2 and shall not be obligated to effect
more than one registration in any twelve-month period pursuant to this Section 2
or Section 3.
3. INCIDENTAL REGISTRATION. After the date hereof, if (but without
any obligation to do so) the Company proposes to register (including a
registration effected by the Company for shareholders other than the Holders)
any shares of Common Stock under the Securities Act in connection with the
public offering of such shares solely for cash on any form of Registration
Statement in which the inclusion of Registrable Securities is appropriate (other
than a registration (i) relating solely to the sale of securities to
participants in a Company stock plan, (ii) pursuant to a Registration Statement
on Form S-4 or Form S-8 (or any successor forms) or any form that does not
include substantially the same information, other than information relating to
the selling shareholders or their plan of distribution, as would be required to
be included in a registration statement covering the sale of Registrable
Securities, (iii) in connection with any dividend reinvestment or similar plan,
or (iv) for the sole purpose of offering securities to another entity or its
security holders in connection with the acquisition of assets or securities of
such entity or any similar transaction), the Company shall promptly give each
Holder written notice of such registration in the manner provided in Section 16
at least 30 days before the anticipated filing date of any such Registration
Statement. Upon the written request of any Holder given in the manner provided
in Section 16 within 15 days after the mailing of such notice by the Company,
the Company shall, subject to the provisions of Section 7 hereof, cause to be
registered under the Securities Act
3
<PAGE>
all of the Registrable Securities that such Holder has so requested to be
registered. The Company shall not be required to proceed with, or maintain the
effectiveness of, any registration of its securities after giving notice herein
provided, and the right of any Holder to have Registrable Securities included in
such Registration Statement shall be conditioned upon participation in any
underwriting to the extent provided herein. The Company shall not be required to
include any Registrable Securities in such underwriting unless the Holders
thereof enter into an underwriting agreement in customary form and upon terms
and conditions agreed upon between the Company and the underwriter(s) (except as
to monetary obligations of the Holders not contemplated by Section 6 of this
Agreement), with the underwriter(s) selected by the Company. In the event that
the underwriter(s) shall advise the Company that marketing or other factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto. The underwriter(s) may exclude some
or all of the Registrable Securities from such underwriting and the number of
Registrable Securities, if any, that may be included in the underwriting shall
be allocated among all Holders thereof in proportion (as nearly as practicable)
to the number of Registrable Securities which each Holder requested be included
in such registration. Nothing in this Section 3 is intended to diminish the
number of securities to be included by the Company in such underwriting. The
Company and the underwriter(s) selected by the Company shall make all
determinations with respect to the timing, pricing and other matters related to
the offering.
4. REGISTRATION PROCEDURE. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably practicable:
(a) Prepare and file with the SEC a new Registration Statement
with respect to such Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective, and keep
such Registration Statement effective for up to 90 days or such shorter
period as shall be required to sell all of the Registrable Securities
covered by such Registration Statement (except as provided in Section 3);
provided, however, that if such Registration Statement is on Form S-3 and
relates to a distribution by the Holders on a delayed or continuous basis
other than by means of an underwriting, the Company shall keep such
Registration Statement effective for the maximum period permitted for such
Registration Statement; provided further that no Registration Statement
need remain in effect after all Registrable Securities covered thereby have
been sold.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement.
(c) Furnish to the Holders of Registrable Securities to be
registered, without charge, such number of copies of a prospectus,
including a preliminary prospectus, and any amendment or supplement thereto
as they may reasonably request
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and a reasonable number of copies of the then-effective Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference
and all exhibits (including those incorporated by reference).
(d) Promptly after the filing of any document that is to be
incorporated by reference into a Registration Statement or prospectus,
provide copies of such document to the Holders of Registrable Securities
covered thereby and any underwriter.
(e) Use its reasonable best efforts to register and qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided, however, that the Company shall not be
required to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions where it would not otherwise
be required to so qualify to do business or consent to service of process
or subject itself to taxation in any such jurisdiction.
(f) Cooperate with the Holders of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc.
(g) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriter(s) of such offering, with such terms
and conditions as the Company and the underwriter(s) may agree. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(h) Notify each Holder of Registrable Securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(i) Cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange or automated quotation
system on which shares of the Company's Stock is then listed. If any of
such shares are not so listed, the Company shall cause such shares to be
listed on the securities exchange or automated quotation system as may be
reasonably requested by the holders of a majority of the Registrable
Securities being registered.
(j) In the case of an underwritten public offering, furnish, at
the request of any Holder requesting registration pursuant to this
Agreement, on the date
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<PAGE>
that such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Agreement, (A) an
opinion of counsel representing the Company for the purposes of such
registration, and (B) a letter from independent certified public
accountants of the Company, in each case to be dated such date and to be in
form and substance as is customarily given by counsel or independent
certified public accountants, as the case may be, to underwriters in an
underwritten public offering, addressed to the underwriters.
(k) Permit a representative of any Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration, and any attorney or accountant retained by such Holder
or underwriter, to participate, at each person's own expense, in the
preparation of the Registration Statement, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such representative, underwriter, attorney or accountant
in connection with such registration; provided, however, that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement, in form and substance reasonably satisfactory to
the Company, prior to the release or disclosure of any such information.
Notwithstanding the foregoing, the Company may delay, suspend or withdraw any
registration or qualification of Registrable Securities required pursuant this
Agreement for a period not exceeding 120 days if the Company shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of any securities of the Company or any other contemplated
material corporate event. In addition, the Company shall not be required to
register Registrable Securities within 12 months after the effective date of a
Registration Statement referred to in Section 3 pursuant to which the Holders
were afforded the opportunity to register Registrable Securities.
5. HOLDERS' OBLIGATION TO FURNISH INFORMATION. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Agreement with respect to any Registrable Securities that the
Holder of such securities furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Holder's Registrable Securities.
Each Holder agrees that, upon receipt of any notice from the Company,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the then current prospectus until (i) such Holder is advised in
writing by the Company that a new Registration Statement covering the reoffer of
Registrable Securities has become effective under the Securities Act or (ii)
such Holder receives copies of a supplemented or amended prospectus contemplated
by Section 4 hereof, or until such Holder is advised in writing by the Company
that the use of the prospectus may be resumed. The Company shall use its
reasonable best efforts to limit the duration of any discontinuance of
disposition of Registrable Securities pursuant to this paragraph.
6. REGISTRATION EXPENSES. In the case of any demand registration on
Form S-3 pursuant to Section 2, the Company shall pay the fees and disbursements
of
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counsel for the Company and customary fees and expenses for independent
certified public accountants retained by the Company (including the expenses of
any comfort letters or costs associated with the delivery by independent
certified public accountants of comfort letters customarily requested by
underwriters), and the requesting Holders shall pay their own expenses and shall
bear on a pro rata basis with the other requesting Holders all other
Registration Expenses relating to the Registrable Securities, provided, that the
holder of any other shares of Common Stock included in any such registration, or
the Company with respect to shares to be sold by the Company pursuant to such
registration, shall bear its incremental Registration Expenses. In the case of
any incidental registration pursuant to Section 3, the requesting Holders shall
pay their own expenses and shall bear on a pro rata basis with other requesting
Holders all incremental Registration Expenses, including, without limitation,
incremental registration and qualification fees and expenses (including
underwriters' fees, discounts and commissions), and all incremental costs and
disbursements (including legal fees and expenses), that result from the
inclusion of the Registrable Securities in such registration.
7. EFFECTIVENESS OF REGISTRATION. A registration requested pursuant
to Section 2 or Section 3 will not be deemed to have been effected if (i) the
registration statement has not been kept effective for the period required under
Section 4(a) of this Agreement or (ii) the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the SEC or other governmental agency or court.
8. DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any registration of the
Company's securities as the result of any controversy that might arise with
respect to the interpretation or implementation of this Agreement.
9. INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable
Securities are included in a Registration Statement pursuant to this Agreement:
(a) The Company will indemnify and hold harmless each Holder,
its directors, officers and employees and each person, if any, who
"controls" such Holder (within the meaning of the Securities Act) against
all losses, claims, damages, or liabilities, joint or several, or actions
in respect thereof to which such Holder or other person entitled to
indemnification hereunder may become subject under the Securities Act, or
otherwise, insofar as such losses, claims, damages, liabilities or actions
in respect thereof arise out of, or are based upon, any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, any related preliminary prospectus, or any related
prospectus or any amendment or supplement thereto, or arise out of, or are
based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse such Holder or other person
entitled to indemnification hereunder for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be so liable to the extent that any such loss, claim,
damage, liability or action arises out
7
<PAGE>
of, or is based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact
in such Registration Statement, such preliminary prospectus, or such
prospectus, or any such amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to the Company by or
on behalf of a Holder or an underwriter specifically for use therein; and
provided further that the Company will not be liable, and this
indemnification agreement shall not apply, in any such case to the extent
that any such loss, claim, damage, liability or action is solely
attributable to the failure of such Holder (or underwriter or agent acting
on its behalf) to deliver a final prospectus (or amendment or supplement
thereto) that corrects a material misstatement or omission contained
in the preliminary prospectus (or final prospectus). The Company will also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each person who "controls" such persons (within
the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Holders, if so requested, except
with respect to information furnished in writing specifically for use in
any prospectus or Registration Statement by any selling Holders or any such
underwriters.
(b) With respect to written information furnished to the Company
by or on behalf of a Holder specifically for use in a Registration
Statement, any related preliminary prospectus, or any related prospectus or
any supplement or amendment thereto, such Holder will severally indemnify
and hold harmless the Company, and its directors, officers and employees
and each person, if any, who "controls" the Company (within the meaning of
the Securities Act) against any losses, claims, damages or liabilities,
joint or several, or actions in respect thereof, to which the Company or
such other person entitled to indemnification hereunder may become subject
under the Securities Act, or otherwise, insofar as such losses, claims,
damages, liabilities or actions in respect thereof arise out of, or are
based upon, any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, such preliminary
prospectus, or such prospectus, or any such amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; and such Holder
will reimburse the Company and such other persons for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, in each case
to the extent, but only to the extent, that the same arises out of, or is
based upon, an untrue statement or alleged untrue statement of a material
fact or an omission or alleged omission to state a material fact in such
Registration Statement, such preliminary prospectus, or such prospectus or
any such amendment or supplement thereto in reliance upon, and in
conformity with, such written information. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to the
information so furnished in writing by such persons specifically for
inclusion in any prospectus or Registration Statement. The Holder will also
indemnify underwriters, selling brokers, dealer managers and similar
8
<PAGE>
securities industry professionals participating in the distribution, their
officers and directors and each person who "controls" such persons (within
the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Company, if so requested.
(c) Promptly after receipt by an indemnified party of notice of any
claim or the commencement of any action, the indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party,
notify the indemnifying party in writing of the claim or the commencement
of that action; provided, however, that the failure to notify the
indemnifying party will not relieve it from any liability that it may have
to the indemnified party except to the extent it was actually damaged or
suffered any loss or incurred any additional expense as a result thereof.
If any such claim or action is brought against an indemnified party, and it
notifies the indemnifying party thereof, the indemnifying party will be
entitled to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, (i) the
indemnifying party will not be liable to the indemnified party for any
legal or other expense subsequently incurred by the indemnified party in
connection with the defense thereof, (ii) the indemnifying party will not
be liable for the costs and expenses of any settlement of such claim or
action unless such settlement was effected with the written consent of
the indemnifying party or the indemnified party waived any rights to
indemnification hereunder in writing, in which case the indemnified party
may effect a settlement without such consent, and (iii) the indemnified
party will be obligated to cooperate with the indemnifying party in the
investigation of such claim or action; provided, however, that the Holders
and their respective controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by
such Holders against the Company may employ their own counsel if they have
been advised by counsel in writing that, in the reasonable judgment of such
counsel, it is advisable for such Holders and their controlling persons to
be represented by separate counsel due to the presence of conflicts of
interest, and in that event the fees and expenses of such separate counsel
will also be paid by the Company; provided that the Company shall not be
liable for the fees and expenses of more than one separate counsel at any
time for all such indemnified parties. An indemnifying party shall not,
without the prior written consent of the indemnified parties, settle,
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes a release of
such indemnified party reasonably acceptable to such indemnified party from
all liability arising out of such claim, action, suit or proceeding or
unless the indemnifying party shall confirm in a written agreement
reasonably acceptable to such indemnified party, that notwithstanding any
federal, state or common law, such settlement, compromise or consent shall
not adversely affect the right of any indemnified party to indemnification
or contribution as provided in this Agreement.
9
<PAGE>
(d) If for any reason the indemnification provided for in
Sections 10(a) or (b) is unavailable to an indemnified party or is
insufficient to hold it harmless as contemplated therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage, or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party and the indemnified party, but also the
relative fault of the indemnifying party and the indemnified party, as well
as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The obligations under this Section 10 shall survive the
completion of any offering of Registrable Securities in a Registration
Statement pursuant to this Agreement, and otherwise.
10. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144; and
(b) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, upon request (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 for the
most recent 90 days, the Securities Act and the Exchange Act, or as to its
qualification as a registrant whose securities may be resold pursuant to
Form S-3, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
11. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned by Shamrock to Charles P. Reilly and Michael E. Gallagher; provided,
however, that (i) the Company is, promptly upon such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned,
(ii) the transfer of such securities may be effected in accordance with all
applicable securities laws, (iii) immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act, and (iv) the transferee executes and agrees
to be bound by this Agreement, an executed counterpart of which shall be
furnished to the Company. In no event may the rights of Holders hereunder be
transferred or assigned to any other person.
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<PAGE>
12. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended or the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of a majority of Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section shall be binding upon each
Holder of any Registrable Securities, each future Holder of such securities
and the Company.
13. "MARKET STAND-OFF" AGREEMENT. Any Holder, if requested by the
Company or an underwriter of an underwritten public offering, agrees not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise transfer or dispose of any Common Stock held by such Holder (other
than Registrable Securities included in the registration) without the prior
written consent of the Company or such underwriter(s), as the case may be,
during a period of up to seven days prior to and 180 days following the
effective date of any underwritten registration of the Company's securities
effected pursuant to Section 2 or 3 hereof. Such agreement shall be in
writing in form satisfactory to the Company and such underwriter, and may be
included in the underwriting agreement. The Company may impose stop-transfer
instructions with respect to the securities subject to the foregoing
restriction until the end of the required stand-off period.
14. TERMINATION OF REGISTRATION RIGHTS. A Holder's registration
rights under this Agreement relating to such Registrable Securities shall
terminate on the date such Holder is able to dispose of all its shares of
Registrable Securities in any 90-day period pursuant to Rule 144. All
registration rights (except for rights previously exercised in connection
with an underwritten public offering pursuant to Section 3) of a Holder under
this Agreement shall terminate on the date on which all of such Holder's
shares of Registrable Securities can be sold pursuant to Rule 144(k).
15. INFORMATION CONFIDENTIAL. No Holder may use any confidential
information received by it pursuant to this Agreement in violation of the
Exchange Act or reproduce, disclose, or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information and its attorneys), except to the extent
reasonably related to the exercise of rights under this Agreement, unless such
information has been made available to the public generally (other than by
such recipient in violation of this Section 15) or such recipient is required
to disclose such information by a governmental body or regulatory agency or by
law in connection with a transaction that is not otherwise prohibited hereby.
16. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, or air-courier guaranteeing overnight delivery:
(a) If to a Holder of Registrable Securities: Shamrock
Investments, 2049 Century Park East, Suite 3330, Los Angeles, California
90067, Attention: Charles P. Reilly, Managing Partner (facsimile: (310)
551-3037), and thereafter at such other address as may be designated from
time to time by notice given in the manner provided in this Section 16.
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(b) If to the Company: PHP Healthcare Corporation, 11440
Commerce Park Drive, Reston, Virginia 22091, Attention: General Counsel
(facsimile: (703) 758-7259), and thereafter at such other address as may be
designated from time to time by notice given in the manner provided in this
Section 16.
(c) All such notices and other communications shall be deemed
to have been delivered and received (i) in the case of personal delivery,
telex, telecopier or telegram, on the date of such delivery, (ii) in the
case of air courier, on the business day after the date when sent and (iii)
in the Case of mailing, on the third business day following such mailing.
(d) From time to time as the Company may request, each Holder
shall provide to the Company such evidence or documentation reasonably
satisfactory to the Company, in its sole discretion, certified by an
appropriate officer of such Holder, regarding the number of shares of
Common Stock beneficially owned by such Holder and its status as an
"affiliate" under the Securities Act.
17. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 11
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one of the same agreement.
19. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
20. GOVERNING LAW. This Agreement shall be governed by and
constructed in accordance with the internal laws of the State of Delaware
without giving effect to conflicts of laws principles.
21. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
22. ENTIRE AGREEMENT. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first written above.
PHP HEALTHCARE CORPORATION
By: /s/ Jack M. Mazur
--------------------------------------
Name: Jack M. Mazur
Title: Senior Executive Vice President
SHAMROCK INVESTMENTS
By: /s/ Charles P. Reilly
--------------------------------------
Name: Charles P. Reilly
Title: Managing General Partner
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<PAGE>
EXHIBIT 4.8
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993 OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED OR SOLD UNLESS
REGISTERED THEREUNDER OR EXEMPTIONS FROM SUCH REGISTRATION ARE AVAILABLE.
CONVERTIBLE NOTE
$269,833.34 September 29, 1994
FOR VALUE RECEIVED, the undersigned, PHP HEALTHCARE CORPORATION, a Delaware
corporation ("Maker"), hereby unconditionally promises to pay CHARLES P. REILLY
("Payee"), on or before September 29, 1999 ("Maturity Date") the principal sum
of TWO HUNDRED SIXTY NINE THOUSAND EIGHT HUNDRED THIRTY THREE DOLLARS AND THIRTY
FOUR CENTS ($269,833.34), or such other amount as at the time may be outstanding
hereunder TOGETHER WITH all accrued but unpaid interest thereon computed at the
rate per annum set forth below and all unpaid expenses and fees connected
herewith.
Prior to the Maturity Date, the outstanding principal amount hereunder will
bear interest, computed daily until paid, at a fixed rate per annum of 7.0%.
Interest will be calculated, accrued and imposed on the basis of a 365-day year
for the actual number of days elapsed.
Prior to the Maturity Date, accrued interest hereunder (but not principal)
will be due and payable annually in arrears on the 30th day of April, commencing
on April 30, 1995. Payee is authorized to note or endorse the date and amount of
each payment and prepayment of principal and/or interest hereunder on a schedule
annexed to and constituting a part hereof. Such notations or endorsements, if
made, will constitute PRIMA FACIE evidence of the information endorsed on such
schedule, but the failure of Payee to make any such notation or endorsement will
not limit or otherwise affect the obligations of Maker hereunder.
Payee shall have the option at any time subsequent to one (1) year after
the date hereof or to the occurrence of a Change in Control of Maker as
defined in Section 14.4(b) of the Amended And Restated PHP Healthcare
Corporation 1986 Stock Option Plan, whichever shall first occur, and prior to
the Maturity Date to convert the principal amount outstanding hereunder into
fully paid and nonassessable shares of Maker's common stock, $.01 par value
("Common Stock"), at a conversion rate (the "Conversion Rate") of $9.00 of
principal for one share of Common Stock, subject to adjustment as set forth
below. Payee shall give written notice that it elects to convert to Maker at
its principal office (or such other office as Maker may designate by notice in
writing) at any time during Maker's usual business hours. All shares of Common
Stock to be delivered by Maker upon receipt of such notice shall be shares
held by Maker as treasury stock and not newly issued shares. No fractional
shares shall be issued upon conversion, and no payment or adjustment shall be
made on account of any cash dividends on the Common Stock on or prior to the
date of conversion. If any fractional share of Common Stock would otherwise be
delivered upon conversion, Maker shall pay to Payee an amount in cash equal to
the current market price of such fractional share.
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If Maker shall, on or after the date hereof, issue any shares of Common
Stock by way of stock dividend, stock split or other reclassification, the
Conversion Rate shall be adjusted by multiplying the conversion rate in effect
immediately prior to each such issuance by the quotient obtained by dividing
the total number of shares of Common Stock outstanding immediately after the
issuance of such Common Stock by the total number of shares of Common Stock
outstanding immediately prior to such issuance. In the event of a reverse
split or recombination, the Conversion Rate will be similarly adjusted to
preserve equitably the intended conversion relationship.
If there shall occur any reclassification or change of the outstanding
Common Stock or any reorganization of Maker (or any other entity the stock or
securities of which are at the time receivable upon conversion) on or after the
date hereof, or if Maker (or any such other entity) shall merge with or into
another entity or convey all or substantially all of its assets to another
entity, then and in each such event, Payee, upon conversion at any time after
the consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon conversion prior to such consummation,
the stock or other securities or property to which Payee would have been
entitled upon such consummation if Payee had converted immediately prior
thereto, all subject to further adjustment after such consummation as provided
herein.
Payments will be applied by Payee in the following order: (a) first to the
payment of any fees and charges due hereunder, (b) then to any obligation of
Maker for the payment of expenses due hereunder, (c) then to the payment of
interest due and owing hereunder, (d) then to the principal indebtedness due
hereunder, and (e) then to any other indebtedness of Maker to Payee.
All payments of principal, interest (including any default interest),
fees and any other amounts due hereunder must be made by Maker or Payee in
immediately available funds on or before twelve o'clock (12:00) noon on the
due date therefor at the principal office of Payee at 2049 Century Park East,
Suite 3330, Los Angeles, California 90067, or at such other place as Payee may
at any time or from time to time designate in writing to Maker.
Whenever any payment to be made hereunder is due on a day that is not a
business day (I.E., any day other than a Saturday, Sunday or legal public
holiday), such payment may be made on the next succeeding business day, and
such extension of time will be included in the computation of interest
hereunder. Any funds received by Payee after 12:00 noon on any day will be
deemed to be received on the next succeeding day.
Upon the occurrence and during the existence of a default hereunder
(including, without limitation, failure or refusal by Maker to deliver payment
of the outstanding balance plus interest on the Maturity Date), Maker hereby
agrees (to the maximum extent not prohibited by applicable law) to pay to Payee
interest on any indebtedness outstanding hereunder at the rate of three percent
(3.0%) per annum in excess of the rate then otherwise applicable to such
indebtedness.
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<PAGE>
If, after a default hereunder, counsel is employed to collect the
indebtedness evidenced hereby or to protect the security hereof, Maker agrees to
pay Payee (to the maximum extent not prohibited by applicable law) reasonable
attorneys' fees and all other costs and expenses incurred in connection with
such collection.
Maker hereby waives diligence, presentment, protest, demand for payment,
notice of protest and non-payment, notice of dishonor, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default, acceleration or enforcement of this Note. No delay on the part of
Payee in exercising any power or right hereunder will operate as a waiver
thereof nor will any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof or the exercise of any
other power or right. This Note is binding on Maker and its successors and
assigns. If any term or provision of this Note is held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof will in
no way be affected thereby.
Nothing contained in this Note will require Maker to pay interest at a
rate prohibited by applicable law. If interest payable to Payee on any date
would be in a prohibited amount, such interest will be automatically reduced
to an amount that is not prohibited and interest for subsequent periods, to
the extent not prohibited, will be increased by the amount of such reduction
until payment of the full amount of each such reduction. Any prohibited amount
previously paid will be credited towards reduction of the outstanding
principal balance.
MAKER AND PAYEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF MAKER OR PAYEE. MAKER AND PAYEE EACH ACKNOWLEDGE AND AGREE THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION, THAT IT HAS
BEEN ADVISED BY LEGAL COUNSEL IN CONNECTION HEREWITH, AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR IT ENTERING INTO THE PLAN AND AGREEMENT OF MERGER (THE
"MERGER AGREEMENT"), DATED AS OF SEPTEMBER 29, 1994, BY AND AMONG PARAGON
AMBULATORY SURGERY, INC., MAKER, CHARLES P. REILLY, MICHAEL E. GALLAGHER AND
JONATHAN J. SPEES.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF MAKER OR PAYEE WILL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF VIRGINIA OR IN THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA. MAKER AND PAYEE EACH
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF VIRGINIA AND OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF VIRGINIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. MAKER AND PAYEE EACH FURTHER IRREVOCABLY
CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF VIRGINIA.
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<PAGE>
MAKER AND PAYEE EACH HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT MAKER OR PAYEE HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS SECURED OBLIGATIONS
UNDER THIS NOTE.
This Note is the "Convertible PHP Note" referred to in, and arises out of,
the Merger Agreement. Upon and at anytime after the occurrence of any breach or
default hereunder, at the election of Payee, Payee may declare the entire unpaid
balance of all indebtedness hereunder (including, principal, interest and fees)
to be immediately due and payable.
Payee may not assign at any time all or a part of its rights hereunder
without the consent of Maker except to other parties to the Merger Agreement.
This Note shall be governed by and construed under the laws of the State of
Virginia, without giving effect to conflicts of laws principles.
IN WITNESS WHEREOF, Maker has caused this Note to be executed in
its name and as of the day and year first written above.
WITNESS/ATTEST: PHP HEALTHCARE CORPORATION,
Maker
/s/ Ben Rosenbaum, III By: /s/ Jack M. Mazur
- ---------------------- -----------------
Ben Rosenbaum, III, Secretary Name: Jack M. Mazur
Title: Sr. Exec. V. Pres.
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<PAGE>
EXHIBIT 4.9
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993 OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED OR SOLD UNLESS
REGISTERED THEREUNDER OR EXEMPTIONS FROM SUCH REGISTRATION ARE AVAILABLE.
CONVERTIBLE NOTE
$202,388.88 September 29, 1994
FOR VALUE RECEIVED, the undersigned, PHP HEALTHCARE CORPORATION, a Delaware
corporation ("Maker"), hereby unconditionally promises to pay MICHAEL E.
GALLAGHER ("Payee"), on or before September 29, 1999 ("Maturity Date") the
principal sum of TWO HUNDRED TWO THOUSAND THREE HUNDRED EIGHTY EIGHT DOLLARS AND
EIGHTY EIGHT CENTS ($202,388.88), or such other amount as at the time may be
outstanding hereunder, TOGETHER WITH all accrued but unpaid interest thereon
computed at the rate per annum set forth below and all unpaid expenses and fees
connected herewith.
Prior to the Maturity Date, the outstanding principal amount hereunder will
bear interest, computed daily until paid, at a fixed rate per annum of 7.0%.
Interest will be calculated, accrued and imposed on the basis of a 365-day year
for the actual number of days elapsed.
Prior to the Maturity Date, accrued interest hereunder (but not principal)
will be due and payable annually in arrears on the 30th day of April, commencing
on April 30, 1995. Payee is authorized to note or endorse the date and amount of
each payment and prepayment of principal and/or interest hereunder on a schedule
annexed to and constituting a part hereof. Such notations or endorsements, if
made, will constitute PRIMA FACIE evidence of the information endorsed on such
schedule, but the failure of Payee to make any such notation or endorsement will
not permit or otherwise affect the obligations of Maker hereunder.
Payee shall have the option at any time subsequent to one (1) year after
the date hereof or to the occurrence of a Change in Control of Maker as
defined in Section 14.4(b) of the Amended And Restated PHP Healthcare
Corporation 1986 Stock Option Plan, whichever shall first occur, and prior to
the Maturity Date to convert the principal amount outstanding hereunder into
fully paid and nonassessable shares of Maker's common stock, $.01 par value
("Common Stock"), at a conversion rate (the "Conversion Rate") of $9.00 of
principal for one share of Common Stock, subject to adjustment as set forth
below. Payee shall give written notice that it elects to convert to Maker at
its principal office (or such other office as Maker may designate by notice in
writing) at any time during Maker's usual business hours. All shares of Common
Stock to be delivered by Maker upon receipt of such notice shall be shares
held by Maker as treasury stock and not newly issued shares. No fractional
shares shall be issued upon conversion, and no payment or adjustment shall be
made on account of any cash dividends on the Common Stock on or prior to the
date of conversion. If any fractional share of Common Stock would otherwise be
delivered upon conversion, Maker shall pay to Payee an amount in cash equal to
the current market price of such fractional share.
-1 of 4-
<PAGE>
If Maker shall, on or after the date hereof, issue any shares of Common
Stock by way of stock dividend, stock split or other reclassification, the
Conversion Rate shall be adjusted by multiplying the conversion rate in effect
immediately prior to each such issuance by the quotient obtained by dividing
the total number of shares of Common Stock outstanding immediately after the
issuance of such Common Stock by the total number of shares of Common Stock
outstanding immediately prior to such issuance. In the event of a reverse
split or recombination, the Conversion Rate will be similarly adjusted to
preserve equitably the intended conversion relationship.
If there shall occur any reclassification or change of the outstanding
Common Stock or any reorganization of Maker (or any other entity the stock or
securities of which are at the time receivable upon conversion) on or after the
date hereof, or if Maker (or any such other entity) shall merge with or into
another entity or convey all or substantially all of its assets to another
entity, then and in each such event, Payee, upon conversion at any time after
the consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon conversion prior to such consummation,
the stock or other securities or property to which Payee would have been
entitled upon such consummation if Payee had converted immediately prior
thereto, all subject to further adjustment after such consummation as provided
herein.
Payments will be applied by Payee in the following order: (a) first to the
payment of any fees and charges due hereunder, (b) then to any obligations of
Maker for the payment of expenses due hereunder, (c) then to the payment of
interest due and owing hereunder, (d) then to the principal indebtedness due
hereunder, and (e) then to any other indebtedness of Maker to Payee.
All payments of principal, interest (including any default interest),
fees and any other amounts due hereunder must be made by Maker to Payee in
immediately available funds on or before twelve o'clock (12:00) noon on the
due date therefor at the principal office of Payee at 2049 Century Park East,
Suite 3330, Los Angeles, California 90067, or at such other place as Payee may
at any time or from time to time designate in writing to Maker.
Whenever any payment to be made hereunder is due on a day that is not a
business day (I.E., any day other than a Saturday, Sunday or legal public
holiday, such payment may be made on the next succeeding business day, and
such extension of time will be included in the computation of interest
hereunder. Any funds received by Payee after 12:00 noon on any day will be
deemed to be received on the next succeeding business day.
Upon the occurrence and during the existence of a default hereunder
(including, without limitation, failure or refusal by Maker to deliver payment
of the outstanding balance plus interest on the Maturity Date), Maker hereby
agrees (to the maximum extent not prohibited by applicable law) to pay to Payee
interest on any indebtedness outstanding hereunder at the rate of three percent
(3.0%) per annum in excess of the rate then otherwise applicable to such
indebtedness.
-2 of 4-
<PAGE>
If, after a default hereunder, counsel is employed to collect the
indebtedness evidenced hereby or to protect the security hereof, Maker agrees to
pay Payee (to the maximum extent not prohibited by applicable law) reasonable
attorneys' fees and all other costs and expenses incurred in connection with
such collection.
Maker hereby waives diligence, presentment, protest, demand for payment,
notice of protest and non-payment, notice of dishonor, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default, acceleration or enforcement of this Note. No delay on the part of
Payee in exercising any power or right. hereunder will operate as a waiver
thereof nor will any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof or the exercise of any
other power or right. This Note is binding on Maker and its successors and
assigns. If any term or provision of this Note is held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof will in
no way be affected thereby.
Nothing contained in this Note will require Maker to pay interest at a
rate prohibited by applicable law. If interest payable to Payee on any date
would be in a prohibited amount, such interest will be automatically reduced
to an amount that is not prohibited and interest for subsequent periods, to
the extent not prohibited, will be increased by the amount of such reduction
until payment of the full amount of each such reduction. Any prohibited amount
previously paid will be credited towards reduction of the outstanding
principal balance.
MAKER AND PAYEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF MAKER OR PAYEE. MAKER AND PAYEE EACH ACKNOWLEDGE AND AGREE THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION, THAT IT HAS
BEEN ADVISED BY LEGAL COUNSEL IN CONNECTION HEREWITH, AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR IT ENTERING INTO THE PLAN AND AGREEMENT OF MERGER (THE
"MERGER AGREEMENT"), DATED AS OF SEPTEMBER 29, 1994, BY AND AMONG PARAGON
AMBULATORY SURGERY, INC., MAKER, CHARLES P. REILLY, MICHAEL E. GALLAGHER AND
JONATHAN J. SPEES.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF MAKER OR PAYEE WILL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF VIRGINIA OR IN THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA. MAKER AND PAYEE EACH
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF VIRGINIA AND OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF VIRGINIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. MAKER AND PAYEE EACH FURTHER IRREVOCABLY
CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF VIRGINIA.
-3 of 4-
<PAGE>
MAKER AND PAYEE EACH HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT MAKER OR PAYEE HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT TO ITS SECURED OBLIGATIONS
UNDER THIS NOTE.
This Note is the "Convertible PHP Note" referred to in, and arises out of,
the Merger Agreement. Upon and at anytime after the occurrence of any breach or
default hereunder, at the election of Payee, Payee may declare the entire unpaid
balance of all indebtedness hereunder (including, principal, interest and fees)
to be immediately due and payable.
Payee may not assign at any time all or a part of its rights hereunder
without the consent of Maker except to other parties to the Merger Agreement.
This Note shall be governed by and construed under the laws of the State of
Virginia, without giving effect to conflicts of laws principles.
IN WITNESS WHEREOF, Maker has caused this Note to be executed in
its name and on its behalf as of the day and year first written above.
WITNESS/ATTEST: PHP HEALTHCARE CORPORATION,
Maker
/s/ Ben Rosenbaum, III By: /s/ Jack M. Mazur
- ---------------------- ----------------------
Ben Rosenbaum, III, Secretary Name: Jack M. Mazur
Title: Sr. Exec. V. Pres.
-4 of 4-
<PAGE>
EXHIBIT 4.10
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993 OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED OR SOLD UNLESS
REGISTERED THEREUNDER OR EXEMPTIONS FROM SUCH REGISTRATION ARE AVAILABLE.
CONVERTIBLE NOTE
$27,777.78 September 29, 1994
FOR VALUE RECEIVED, the undersigned, PHP HEALTHCARE CORPORATION, a
Delaware corporation ("Maker"), hereby unconditionally promises to pay
JONATHAN J. SPEES ("Payee"), on or before September 29, 1999 ("Maturity
Date") the principal sum of TWENTY SEVEN THOUSAND SEVEN HUNDRED SEVENTY SEVEN
DOLLARS AND SEVENTY EIGHT CENTS ($27,777.78), or such other amount as at the
time may be outstanding hereunder, TOGETHER WITH all accrued but unpaid
interest thereon computed at the rate per annum set forth below and all
unpaid expenses and fees connected herewith.
Prior to the Maturity Date, the outstanding principal amount hereunder
will bear interest, computed daily until paid, at a fixed rate per annum of
7.0%. Interest will be calculated, accrued and imposed on the basis of a
365-day year for the actual number of days elapsed.
Prior to the Maturity Date, accrued interest hereunder (but not
principal) will be due and payable annually in arrears on the 30th day of
April, commencing on April 30, 1995. Payee is authorized to note or endorse
the date and amount of each payment and prepayment of principal and/or
interest hereunder on a schedule annexed to and constituting a part hereof.
Such notations or endorsements, if made, will constitute PRIMA FACIE evidence
of the information endorsed on such schedule, but the failure of Payee to
make any such notation or endorsement will not limit or otherwise affect the
obligations of Maker hereunder.
Payee shall have the option at any time subsequent to one (1) year after
the date hereof or to the occurrence of a Change in Control of Maker as
defined in Section 14.4(b) of the Amended And Restated PHP Healthcare
Corporation 1986 Stock Option Plan, whichever shall first occur, and prior to
the Maturity Date to convert the principal amount outstanding hereunder into
fully paid and nonassessable shares of Maker's common stock, $.01 par value
("Common Stock"), at a conversion rate (the "Conversion Rate") of $9.00 of
principal for one share of Common Stock, subject to adjustment as set forth
below. Payee shall give written notice that it elects to convert to Maker at
its principal office (or such other office as Maker may designate by notice
in writing) at any time during Maker's usual business hours. All shares of
Common Stock to be delivered by Maker upon receipt of such notice shall be
shares held by Maker as treasury stock and not newly issued shares. No
fractional shares shall be issued upon conversion, and no payment or
adjustment shall be made on account of any cash dividends on the Common Stock
on or prior to the date of conversion. If any fractional share of Common
-1 of 4-
<PAGE>
Stock would otherwise be delivered upon conversion, Maker shall pay to Payee
an amount in cash equal to the current market price of such fractional share.
If Maker shall, on or after the date hereof, issue any shares of Common
Stock by way of stock dividend, stock split or other reclassification, the
Conversion Rate shall be adjusted by multiplying the conversion rate in
effect immediately prior to each such issuance by the quotient obtained by
dividing the number of shares of Common Stock outstanding immediately after
the issuance of such Common Stock by the total number of shares of Common
Stock outstanding immediately prior to such issuance. In the event of a
reverse split or recombination, the Conversion Rate will be similarly
adjusted to preserve equitability the intended conversion relationship.
If there shall occur any reclassification or change of the outstanding
Common Stock or any reorganization of Maker (or any other entity the stock or
securities of which are at the time receivable upon conversion) on or after
the date hereof, or if Maker (or any such other entity) shall merge with or
into another entity or convey all or substantially all of its assets to
another entity, then and in each such event, Payee, upon conversion at any
time after the consummation of such reclassification, change, reorganization,
merger or conveyance, shall be entitled to receive, in lieu of the stock or
other securities and property receivable upon conversion prior to such
consummation, the stock or other securities or property to which Payee would
have been entitled upon such consummation if Payee had converted immediately
prior thereto, all subject to further adjustment after such consummation as
provided herein.
Payments will be applied by Payee in the following order: (a) first to
the payment of any fees and charges due hereunder, (b) then to any obligation
of Maker for the payment of expenses due hereunder, (c) then to the payment
of interest due and owing hereunder, (d) then to the principal indebtedness
due hereunder, and (e) then to any other indebtedness of Maker to Payee.
All payments of principal, interest (including any default interest),
fees and any other amounts due hereunder must be made by Maker or Payee in
immediately available funds on or before twelve o'clock (12:00) noon on the
due date therefor at the principal office of Payee at 2049 Century Park East,
Suite 3300, Los Angeles, California 90067, or at such other place as Payee
may at time or from time to time designate in writing to Maker.
Whenever any payment to be made hereunder is due on a day that is not a
business day (I.E. any day other than a Saturday, Sunday or legal public
holiday), such payment may be made on the next succeeding business day, and
such extension of time will be included in the computation of interest
hereunder. Any funds received by Payee after 12:00 noon on any day deemed to
be received on the next succeeding day.
Upon the occurrence and during the existence of a default hereunder
(including, without limitation, failure or refusal by Maker to deliver
payment of the outstanding balance plus interest on the Maturity Date), Maker
hereby agrees (to the maximum extent not prohibited by applicable law) to pay
to Payee interest on any indebtedness outstanding hereunder at the rate of
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<PAGE>
three percent (3.0%) per annum in excess of the rate then otherwise
applicable to such indebtedness.
If, after a default hereunder, counsel is employed to collect the
indebtedness evidenced hereby or to protect the security hereof, Maker agrees
to pay Payee (to the maximum extent not prohibited by applicable law)
reasonable attorneys' fees and all other costs and expenses incurred in
connection with such collection.
Maker hereby waives diligence, presentment, protest, demand for payment,
notice of protest and non-payment, notice of dishonor, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default, acceleration or enforcement of this Note. No delay on the part of
Payee in exercising any power or right hereunder will operate as a waiver
thereof nor will any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof or the exercise of any
other power or right. This Note is binding on Maker and its successors and
assigns. If any term or provision of this Note is held invalid, illegal and
enforceable, the validity of all other terms and provisions hereof will in no
way be affected thereby.
Nothing contained in this Note will require Maker to pay interest at a
rate prohibited by applicable law. If interest payable to Payee on any date
would be in a prohibited amount, such interest will be automatically reduced
to an amount that is not prohibited and interest for subsequent periods, to
the extent not prohibited, will be increased by the amount of such reduction
until payment of the full amount of each such reduction. Any prohibited amount
previously paid will be credited towards reduction of the outstanding balance.
MAKER AND PAYEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF MAKER OR PAYEE. MAKER AND PAYEE EACH ACKNOWLEDGE AND AGREE THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION, THAT IT
HAS BEEN ADVISED BY LEGAL COUNSEL IN CONNECTION HEREWITH, AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR IT ENTERING INTO THE PLAN AND
AGREEMENT OF MERGER (THE "MERGER AGREEMENT"), DATED AS OF SEPTEMBER 29, 1994,
BY AND AMONG PARAGON AMBULATORY SURGERY, INC., MAKER, CHARLES P. REILLY,
MICHAEL E. GALLAGHER AND JONATHAN J. SPEES.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF MAKER OR PAYEE WILL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF VIRGINIA OR IN THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA. MAKER AND
PAYEE EACH HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF VIRGINIA AND OF THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND
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<PAGE>
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. MAKER
AND PAYEE EACH FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF VIRGINIA. MAKER AND PAYEE EACH HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
MAKER OR PAYEE HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT TO ITS SECURED OBLIGATIONS UNDER THIS NOTE.
This Note is the "Convertible PHP Note" referred to in, and arises out
of, the Merger Agreement. Upon and at anytime after the occurrence of any
breach or default hereunder, at the election of Payee, Payee may declare the
entire unpaid balance of all indebtedness hereunder (including, principal,
interest and fees) to be immediately due and payable.
Payee may not assign at any time all or part of its rights hereunder
without the consent of Maker except to other parties to the Merger Agreement.
This Note shall be governed by and construed under the laws of the State
of Virginia, without giving effect to conflicts of laws principles.
IN WITNESS WHEREOF, Maker has caused this Note to be executed in its
name and on its behalf as of the day and year first written above.
WITNESS/ATTEST: PHP HEALTHCARE CORPORATION,
Maker
/s/ Ben Rosenbaum, III By: /s/ Jack M. Mazur
- ---------------------- ------------------
Ben Rosenbaum, III, Secretary Name: Jack M. Mazur
Title: Sr. Exec. V. Pres.
-4 of 4-
<PAGE>
EXHIBIT 4.11
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of September 29, 1994, between PHP
HEALTHCARE CORPORATION, a Delaware corporation (the "Company"), and Charles P.
Reilly, Michael E. Gallagher and Jonathan J. Spees (each a "Shamrock Investor"
and, collectively the "Shamrock Investors").
RECITALS
1. The Company, the Shamrock Investors and others have entered into a
Plan and Agreement of Merger (the "Merger Agreement") dated as of the date
hereof providing for the merger of Paragon Ambulatory Surgery, Inc. into the
Company and for the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, and intending to be legally bound hereby, the
Company and the Shamrock Investors hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Common Stock" shall mean the common stock, $.01 par value
per share, of the Company and any other securities into which or for which
such common stock has been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets, or otherwise.
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(c) "Holder" means a Shamrock Investor, so long as he holds any
Registrable Securities, and any person owning Registrable Securities who is
a permitted assignee under Section 10 of this Agreement.
(d) The term "register," "registered," and "registration" refer
to a registration effected by the preparation and filing of a Registration
Statement in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such Registration Statement by the SEC.
(e) "Registrable Securities" shall mean the shares of Common
Stock acquired by the Shamrock Investors pursuant to the Merger Agreement
or owned by any subsequent Holder or Holders, and, in each case, all shares
of Common Stock issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, in exchange for, or in replacement of
such shares of Common Stock. The term "Registrable Securities" excludes,
however, any security (i) the sale of which has been effectively
registered under the Securities Act and which has been disposed of in
<PAGE>
accordance with a Registration Statement, (ii) that has been sold by a
Holder in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof
(including, without limitation, transactions pursuant to Rules 144 and
144A) such that the further disposition of such securities by the
transferee or assignee is not restricted under the Securities Act, (iii)
that have been sold by a Holder in a transaction in which such Holder's
rights under this Agreement are not, or cannot be, assigned, or (iv) for
which the registration rights provided under this Agreement have expired
pursuant to Section 13 of this Agreement.
(f) "Registration Expenses" shall mean (i) registration,
qualification and filing fees; (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of any Registrable
Securities being registered); (iii) printing expenses; (iv) fees and
disbursements of counsel for the Company and customary fees and expenses
for independent certified public accountants retained by the Company
(including the expenses of any comfort letters or costs associated with
the delivery by independent certified public accountants of comfort letters
customarily requested by underwriters); (v) fees and expenses of counsel
for the requesting Holders; (vi) fees and expenses of listing any
Registrable Securities on any securities exchange on which the Common Stock
is then listed; (vii) fees and disbursements of underwriters customarily
paid by issuers or sellers of securities; and (viii) any underwriting fees,
discounts or commissions attributable to the sale of any Registrable
Securities and any fees and expenses of underwriters' counsel; but
excluding all internal expenses of the Company, including without
limitation all salaries and expenses of officers and employees of the
Company performing legal or accounting duties.
(g) "Registration Statement" shall mean any registration
statement or similar document that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the prospectus or
preliminary prospectus included therein, all amendments and supplements to
such Registration Statement, including post-effective amendments, all
exhibits to such Registration Statement and all material incorporated by
reference in such Registration Statement.
(h) "Rule 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto.
(i) "Rule 144A" shall mean Rule 144A promulgated under the
Securities Act or any successor rule thereto.
(j) "SEC" shall mean the Securities and Exchange Commission.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2. INCIDENTAL REGISTRATION. After the date hereof, if (but without
any obligation to do so) the Company proposes to register (including a
registration effected by
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the Company for shareholders other than the Holders) any shares of Common
Stock under the Securities Act in connection with the public offering of such
shares solely for cash on any form of Registration Statement in which the
inclusion of Registrable Securities is appropriate (other than a registration
(i) relating solely to the sale of securities to participants in a Company stock
plan, (ii) pursuant to a Registration Statement on Form S-4 or Form S-8 (or any
successor forms) or any form that does not include substantially the same
information, other than information relating to the selling shareholders or
their plan of distribution, as would be required to be included in a
registration statement covering the sale of Registrable Securities, (iii) in
connection with any dividend reinvestment or similar plan, or (iv) for the sole
purpose of offering securities to another entity or its securityholders in
connection with the acquisition of assets or securities of such entity or any
similar transaction), the Company shall promptly give each Holder written notice
of such registration in the manner provided in Section 15 at least 30 days
before the anticipated filing date of any such Registration Statement. Upon the
written request of any Holder given in the manner provided in Section 15 within
15 days after the mailing of such notice by the Company, the Company shall,
subject to the provisions of Section 6 hereof, cause to be registered under the
Securities Act all of the Registrable securities that such Holder has so
requested to be registered. The Company shall not be required to proceed with,
or maintain the effectiveness of, any registration of its securities after
giving the notice herein provided, and the right of any Holder to have
Registrable Securities included in such Registration Statement shall be
conditioned upon participation in any underwriting to the extent provided
herein. The Company shall not be required to include any Registrable Securities
in such underwriting unless the Holders thereof enter into an underwriting
agreement in customary form and upon terms and conditions agreed upon between
the Company and the underwriter(s) (except as to monetary obligations of the
Holders not contemplated by Section 5 of this Agreement), with the
underwriter(s) selected by the Company. In the event that the underwriter(s)
shall advise the Company that marketing or other factors require a limitation of
the number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities that would otherwise be underwritten pursuant
hereto. The underwriter(s) may exclude some or all of the Registrable Securities
from such underwriting and the number of Registrable Securities, if any, that
may be included in the underwriting shall be allocated among all Holders thereof
in proportion (as nearly as practicable) to the number of Registrable Securities
which each Holder requested be included in such registration. Nothing in this
Section 2 is intended to diminish the number of securities to be included by the
Company in such underwriting. The Company and the underwriter(s) selected by the
Company shall make all determinations with respect to the timing, pricing and
other matters related to the offering.
3. REGISTRATION PROCEDURE. Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably practicable:
(a) Prepare and file with the SEC a new Registration Statement
with respect to such Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective, and keep
such Registration Statement effective for up to 90 days or such shorter
period as shall be required to sell all of the Registrable Securities
covered by such Registration Statement (except as provided in
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Section 2); provided, however, that if such Registration Statement is on
Form S-3 and relates to a distribution by the Holders on a delayed or
continuous basis other than by means of an underwriting, the Company shall
keep such Registration Statement effective for the maximum period permitted
for such Registration Statement; provided further that no Registration
Statement need remain in effect after all Registrable Securities covered
thereby have been sold.
(b) Prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection with
such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to the Holders of Registrable Securities to be
registered, without charge, such number of copies of a prospectus,
including a preliminary prospectus, and any amendment or supplement thereto
as they may reasonably request and a reasonable number of copies of the
then-effective Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference).
(d) Promptly after the filing of any document that is to be
incorporated by reference into a Registration Statement or prospectus,
provide copies of such document to the Holders of Registrable Securities
covered thereby and any underwriter.
(e) Use its reasonable best efforts to register and qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided, however, that the Company shall not be
required to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions where it would not otherwise
be required to so qualify to do business or consent to service of process
or subject itself to taxation in any such jurisdiction.
(f) Cooperate with the Holders of Registrable Securities and each
underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
(g) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriter(s) of such offering, with such terms
and conditions as the Company and the underwriter(s) may agree. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
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(h) Notify each Holder of Registrable Securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(i) Cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange or automated quotation
system on which shares of the Company's Common Stock is then listed. If any
of such shares are not so listed, the company shall cause such shares to be
listed on the securities exchange or automated quotation system as may be
reasonably requested by the Holders of a majority of the Registrable
Securities being registered.
(j) In the case of an underwritten public offering, furnish, at
the request of any Holder requesting registration pursuant to this
Agreement, on the date that such Registrable Securities are delivered to
the underwriters for sale in connection with a registration pursuant to
this Agreement, (A) an opinion of counsel representing the Company for the
purposes of such registration, and (B) a letter from independent certified
public accountants of the Company, in each case to be dated such date and
to be in form and substance as is customarily given by counsel or
independent certified public accountants, as the case may be, to
underwriters in an underwritten public offering, addressed to the
underwriters.
(k) Permit a representative of any Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration, and any attorney or accountant retained by such Holder
or underwriter, to participate, at each person's own expense, in the
preparation of the Registration Statement, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such representative, underwriter, attorney or accountant
in connection with such registration; provided, however, that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement, in form and substance reasonably satisfactory to
the Company, prior to the release or disclosure of any such information.
Notwithstanding the foregoing, the Company may delay, suspend or withdraw any
registration or qualification of Registrable Securities required pursuant this
Agreement for a period not exceeding 120 days if the Company shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of any securities of the Company or any other contemplated
material corporate event. In addition, the Company shall not be required to
register Registrable Securities within 12 months after the effective date of a
Registration Statement referred to in Section 2 pursuant to which the Holders
were afforded the opportunity to register Registrable Securities.
4. HOLDERS' OBLIGATION TO FURNISH INFORMATION. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Agreement
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with respect to any Registrable Securities that the Holder of such securities
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
Each Holder agrees that, upon receipt of any notice from the Company,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the then current prospectus until (i) such Holder is advised in
writing by the Company that a new Registration Statement covering the reoffer of
Registrable Securities has become effective under the Securities Act or (ii)
such Holder receives copies of a supplemented or amended prospectus contemplated
by Section 3 hereof, or until such Holder is advised in writing by the Company
that the use of the prospectus may be resumed. The Company shall use its
reasonable best efforts to limit the duration of any discontinuance of
disposition of Registrable Securities pursuant to this paragraph.
5. REGISTRATION EXPENSES. The requesting Holders shall pay their own
expenses and shall bear on a pro rata basis with other requesting Holders all
incremental Registration Expenses, including, without limitation, incremental
registration and qualification fees and expenses (including underwriters' fees,
discounts and commissions), and all incremental costs and disbursements
(including legal fees and expenses), that result from the inclusion of the
Registrable Securities in such registration.
6. EFFECTIVENESS OF REGISTRATION. A registration requested pursuant
to Section 2 will not be deemed to have been effected if (i) the registration
statement has not been kept effective for the period required under Section 3(a)
of this Agreement or (ii) the offering of Registrable Securities pursuant to
such registration is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court.
7. DELAY OF REGISTRATION. No holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any registration of the
Company's securities as the result of any controversy that might arise with
respect to the interpretation or implementation of this Agreement.
8. INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable
Securities are included in a Registration Statement pursuant to this Agreement:
(a) The Company will indemnify and hold harmless each Holder, its
directors, officers and employees and each person, if any, who "controls"
such Holder (within the meaning of the Securities Act) against all losses,
claims, damages, or liabilities, joint or several, or actions in respect
thereof to which such Holder or other person entitled to indemnification
hereunder may become subject under the Securities Act, or otherwise,
insofar as such losses, claims, damages, liabilities or actions in respect
thereof arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in such Registration
Statement, any related preliminary prospectus, or any related prospectus or
any amendment or supplement thereto, or arise out of, or are based upon,
the omission or alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
such Holder or other person entitled to indemnification hereunder for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be so liable to the
extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact
in such Registration Statement, such preliminary prospectus, or such
prospectus, or any such amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to the Company by or
on behalf of a Holder or an underwriter specifically for use therein;
provided further that the Company will not be liable, and this
indemnification agreement shall not apply, in any such case to the extent
that any such loss, claim, damage, liability or action is solely
attributable to the failure of such Holder (or underwriter or agent acting
on its behalf) to deliver a final prospectus (or amendment or supplement
thereto) that corrects a material misstatement or omission contained in the
preliminary prospectus (or final prospectus). The Company will also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each person who "controls" such persons (within
the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Holders, if so requested, except
with respect to information furnished in writing specifically for use in
any prospectus or Registration Statement by any selling Holders or any such
underwriters.
(b) With respect to written information furnished to the Company
by or on behalf of a Holder specifically for use in a Registration
Statement, any related preliminary prospectus, or any related prospectus or
any supplement or amendment thereto, such Holder will severally indemnify
and hold harmless the Company, and its directors, officers and employees
and each person, if any, who "controls" the Company (within the meaning of
the Securities Act) against any losses, claims, damages or liabilities,
joint or several, or actions in respect thereof, to which the Company or
such other person entitled to indemnification hereunder may become subject
under the Securities Act, or otherwise, insofar as such losses, claims,
damages, liabilities or actions in respect thereof arise out of, or are
based upon, any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, such preliminary
prospectus, or such prospectus, or any such amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and such Holder
will reimburse the Company and such other persons for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, in each case
to the extent, but only to the extent, that the same arises out of, or is
based upon, an untrue statement or alleged untrue statement of a material
fact or an omission or alleged omission to state a material fact in such
Registration Statement, such preliminary prospectus, or such prospectus or
any such amendment or supplement thereto in reliance upon, and in
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conformity with, such written information. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to the
information so furnished in writing by such persons specifically for
inclusion in any prospectus or Registration Statement. The Holder will also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each person who "controls" such persons (within
the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Company, if so requested.
(c) Promptly after receipt by an indemnified party of notice of
any claim or the commencement of any action, the indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party,
notify the indemnifying party in writing of the claim or the commencement
of that action; provided, however, that the failure to notify the
indemnifying party will not relieve it from any liability that it may have
to the indemnified party except to the extent it was actually damaged or
suffered any loss or incurred any additional expense as a result thereof.
If any such claim or action is brought against an indemnified party, and it
notifies the indemnifying party thereof, the indemnifying party will be
entitled to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, (i) the
indemnifying party will not be liable to the indemnified party for any
legal or other expense subsequently incurred by the indemnified party in
connection with the defense thereof, (ii) the indemnifying party will not
be liable for the costs and expenses of any settlement of such claim or
action unless such settlement was effected with the written consent of the
indemnifying party or the indemnified party waived any rights to
indemnification hereunder in writing, in which case the indemnified party
may effect a settlement without such consent, and (iii) the indemnified
party will be obligated to cooperate with the indemnifying party in the
investigation of such claim or action; provided, however, that the Holders
and their respective controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by
such Holders against the Company may employ their own counsel if they have
been advised by counsel in writing that, in the reasonable judgment of such
counsel, it is advisable for such Holders and their controlling persons to
be represented by separate counsel due to the presence of conflicts of
interest, and in that event the fees and expenses of such separate counsel
will also be paid by the Company; provided that the Company shall not be
liable for the fees and expenses of more than one separate counsel at any
time for all such indemnified parties. An indemnifying party shall not,
without the prior written consent of the indemnified parties, settle,
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes a release of
such indemnified party reasonably acceptable to such indemnified party from
all liability arising out of such
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claim, action, suit or proceeding or unless the indemnifying party shall
confirm in a written agreement reasonably acceptable to such indemnified
party, that notwithstanding any federal, state or common law, such
settlement, compromise or consent shall not adversely affect the right of
any indemnified party to indemnification or contribution as provided in
this Agreement.
(d) If for any reason the indemnification provided for in
Sections 10(a) or (b) is unavailable to an indemnified party or is
insufficient to hold it harmless as contemplated therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party and the indemnified party, but also the
relative fault of the indemnifying party and the indemnified party, as well
as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The obligations under this Section 8 shall survive the
completion of any offering of Registrable Securities in a Registration
Statement pursuant to this Agreement, and otherwise.
9. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144; and
(b) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, upon request (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 for the
most recent 90 days, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such
securities without registration.
10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned by a Shamrock Investor to another Shamrock Investor; provided, however,
that (i) the Company is, promptly upon such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned, (ii) the
transfer of such securities may be effected in accordance with all applicable
securities laws, (iii) immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act, and (iv) the
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transferee executes and agrees to be bound by this Agreement, an executed
counterpart of which shall be furnished to the Company. In no event may the
rights of Holders hereunder be transferred or assigned to any other person.
11. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended or the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this Section shall be binding upon each Holder of
any Registrable Securities, each future Holder of such securities and the
Company.
12. "MARKET STAND-OFF" AGREEMENT. Any Holder, if requested by the
Company or an underwriter of an underwritten public offering, agrees not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise transfer or dispose of any Common Stock held by such Holder (other
than Registrable Securities included in the registration) without the prior
written consent of the Company or such underwriter(s), as the case may be,
during a period of up to seven days prior to and 180 days following the
effective date of any underwritten registration of the Company's securities
effected pursuant to Section 2 hereof. Such agreement shall be in writing in
form satisfactory to the Company and such underwriter, and may be included in
the underwriting agreement. The Company may impose stop-transfer instructions
with respect to the securities subject to the foregoing restriction until the
end of the required stand-off period.
13. TERMINATION OF REGISTRATION RIGHTS. A Holder's registration
rights under this Agreement relating to such Registrable Securities shall
terminate on the date such Holder is able to dispose of all its shares of
Registrable Securities in any 90-day period pursuant to Rule 144. All
registration rights (except for rights previously exercised in connection with
an underwritten public offering pursuant to Section 2) of a Holder under this
Agreement shall terminate on the date on which all of such Holder's shares of
Registrable Securities can be sold pursuant to Rule 144(k).
14. INFORMATION CONFIDENTIAL. No Holder may use any confidential
information received by it pursuant to this Agreement in violation of the
Exchange Act or reproduce, disclose, disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information and its attorneys), except to the extent reasonably related to
the exercise of rights under this Agreement, unless such information has been
made available to the public generally (other than by such recipient in
violation of this Section 14) or such recipient is required to disclose such
information by a governmental body or regulatory agency or by law in connection
with a transaction that is not otherwise prohibited hereby.
15. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, or air-courier guaranteeing overnight delivery:
(a) If to a Holder of Registrable Securities: Shamrock
Investments, 2049 Century Park East, Suite 3330, Los Angeles, California
90067, Attention:
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Charles P. Reilly, Managing Partner (facsimile: (310) 551-3037), and
thereafter at such other address as may be designated from time to time by
notice given in the manner provided in this Section 15.
(b) If to the Company: PHP Healthcare Corporation, 11440
Commerce Park Drive, Reston, Virginia 22091, Attention: General Counsel
(facsimile: (703) 758-7259), and thereafter at such other address as may be
designated from time to time by notice given in the manner provided in this
Section 16.
(c) All such notices and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery,
telex, telecopier or telegram, on the date of such delivery, (ii) in the
case of air courier, on the business day after the date when sent and (iii)
in the case of mailing, on the third business day following such mailing.
(d) From time to time as the Company may request, each Holder
shall provide to the Company such evidence or documentation reasonably
satisfactory to the Company, in its sole discretion, certified by an
appropriate officer of such Holder, regarding the number of shares of
Common Stock beneficially owned by such Holder and its status as an
"affiliate" under the Securities Act.
16. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 10
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
18. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19. GOVERNING LAW. This Agreement shall be governed by and
constructed in accordance with the internal laws of the State of Delaware
without giving effect to conflicts of laws principles.
20. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
21. ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first written above.
PHP HEALTHCARE CORPORATION
By: /s/ Jack M. Mazur
---------------------------
Name: Jack M. Mazur
Title: Sr. Exec. Vice President
/s/ Charles P. Reilly
-------------------------------
Charles P. Reilly
/s/ Michael E. Gallagher
-------------------------------
Michael E. Gallagher
/s/ Jonathan J. Spees
-------------------------------
Jonathan J. Spees
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EXHIBIT 4.12
STOCK OPTION
THIS AGREEMENT, made as of the 3rd day of October, 1994 (the "Grant Date"),
between PHP Healthcare Corporation, a Delaware corporation (the "Company"), and
Charles P. Reilly (the "Optionee") in accordance with Section 157 of the
Delaware General Corporation Law.
The parties hereto agree as follows:
1. DEFINITION.
The term "Shares" shall mean the shares of common stock, par
value $.01 per share, of the Company.
2. GRANT OF OPTION.
2.1 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of Twelve
Thousand Two Hundred Twenty Seven (12,227) whole Shares subject to, and in
accordance with, the terms and conditions set forth in this Agreement. The
Shares to be delivered upon exercise of the Option shall be Shares held by the
Company as treasury stock and not newly issued Shares.
2.2 The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422A of the Internal Revenue Code of 1990
(the "Code") and is not granted pursuant to the Company's Amended and Restated
1986 Stock Option Plan (the "Option Plan").
3. PURCHASE PRICE.
3.1 The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be $9.00 per Share (the "Purchase
Price").
3.2 Payment of the Purchase Price shall be made (i) in cash, (ii)
in the discretion of the Company's Board of Directors, by tender of Shares owned
by the Optionee and registered in the Optionee's name with a fair market value
equal to the cash exercise price of the Option being exercised (in whole or in
part), or (iii) in the discretion of the Company's Board of Directors, by any
combination if (i) and (ii) hereof.
4. TERM OF OPTION.
Subject to earlier termination of the Option in accordance with
Section 5 hereof, the Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the Grant Date (the
"Exercise Term").
<PAGE>
5. EXERCISABILITY OF OPTION
5.1 The Option is granted pursuant to the Plan and Agreement of
Merger dated as of September 23, 1994, by and among PHP Family Healthcare
Corporation, a Delaware corporation ("Family"), the Company, the Optionee and
certain other parties (the "Merger Agreement"). The Option shall only be
exercisable with respect to Four Thousand Six Hundred Forty Six (4,646) whole
Shares, and shall be terminated and of no force or effect with respect to the
rest of the Shares covered by the Option, unless on or before December 31, 1996,
(i) Family has accrued the JPC Minimum Target Revenues under Qualifying
Contracts, as finally determined in good faith by Family in accordance with
generally accepted accounting principles consistently applied, or (ii) a Change
in Control of PHP shall have occurred. For this purpose, "JPC Minimum Target
Revenues" shall mean (i) total revenues of at least Fifty Million Dollars
($50,000,000) during the two year period ending December 31, 1996, and (ii)
revenues of at least Fifteen Million Dollars ($15,000,000) during each calendar
year of such period; "Qualifying Contracts" shall mean contracts entered into by
Family in its sole discretion on or after September 1, 1993, under which it
provides managed care products and services to private sector health insurers,
large employers, coalitions of employers, managed care plans or hospital
systems, and which have been performed or remain in force on December 31, 1996;
and "Change in Control" shall have the meaning set forth in Section 14.4(b) of
the Option Plan.
5.2 Except as otherwise provided in Section 5.1 hereof or in
this Agreement, the Option shall entitle the Optionee to purchase, in whole at
any time or in part from time to time, one-half (1/2) of the total number of
Shares covered by the Option after the expiration of one (1) year following the
Grant Date and the remaining one-half (1/2) of the total number of Shares
covered by the Option after the expiration of two (2) years following the Grant
Date, and each such right of purchase shall be cumulative and shall continue,
unless sooner exercised in whole or in part or terminated as herein provided,
during the remaining period of the Exercise Term.
6. MANNER OF EXERCISE.
6.1 Subject to the terms and conditions of this Agreement, the
Option may be exercised by delivery of written notice to the Secretary of the
Company at the Company's principal executive office. Such notice shall state
that the Optionee is electing to exercise the Option and the number of Shares in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option on behalf of the Optionee. If the Company
requests, such person or persons shall (i) deliver this Agreement to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and (ii) provide satisfactory proof as to the authority of such person or
persons to exercise the Option on behalf of the Optionee.
2
<PAGE>
6.2 The notice of exercise described in Section 6.1 shall be
accompanied by the Purchase Price for the number of Shares in respect of which
the Option is being exercised.
6.3 Upon receipt of notice of exercise and the Purchase Price for
the Shares in respect of which the Option is being exercised, the Company shall
take appropriate action to effect the transfer to the Optionee of the number of
Shares as to which such exercise was effective.
6.4 The Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any Shares subject to the
Option until (i) the Option shall have been exercised pursuant to the terms of
this Agreement and the Optionee shall have paid the full Purchase Price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
has complied, in its discretion, with any listing, registration or qualification
requirement of any securities exchange or the National Association of Securities
Dealers, Inc., as the case may be, or under any state or federal law, (iii) the
Optionee's name shall have been entered as a stockholder or record on the books
of the Company, and (iv) the Company shall have issued and delivered the Shares
in certificate form to the Optionee, whereupon the Optionee shall have full
voting and other ownership rights with respect to such shares.
7. NO RIGHT TO EMPLOYMENT.
Nothing in this Agreement shall be interpreted or construed to
confer upon the Optionee any right to employment or retention by the Company in
any capacity.
8. ADJUSTMENTS.
In the event that any option under the Option Plan is adjusted
pursuant to Section 14 thereof, the Option shall be adjusted in accordance with
such provision at the same time.
9. AMENDMENT.
This Agreement may be amended or terminated and any terms or
condition hereof may be waived in accordance with a written instrument executed
on behalf of each party hereto.
10. NOTICE.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by cable, telegram, telex or facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
3
<PAGE>
If to Optionee:
Charles P. Reilly
Shamrock Investments
2049 Century Park East, Suite 3330
Los Angeles, California 90067
If to the Company:
PHP Healthcare Corporation
11440 Commerce Park Drive
Reston, Virginia 22091
Attention: General Counsel
11. VALIDITY.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. HEADINGS.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. COUNTERPARTS.
This Agreement may be executed by the parties hereto in two or
more counterparts, each of which shall be deemed to be an original instrument,
but all of which together shall be deemed to be one and the same instrument.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of the laws thereof.
15. PARTIES IN INTEREST.
This Agreement is binding upon and is solely for the benefit
of the parties hereto and their respective successors (but not their assigns).
The Option shall not be transferable by the Optionee other than by will or the
laws of descent and distribution.
4
<PAGE>
16. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation, construction or
application of this Agreement shall be determined by the Board of Directors of
the Company. Any such determination shall be final, binding and conclusive on
the Optionee and Company for all purposes.
PHP HEALTHCARE CORPORATION
By: /s/ Jack M. Mazur
----------------------------
Name: Jack M. Mazur
Title: Sr. Exec. Vice Pres.
OPTIONEE
/s/ Charles H. Reilly
--------------------------------
Charles H. Reilly
5
<PAGE>
EXHIBIT 4.13
STOCK OPTION
THIS AGREEMENT, made as of the 3rd day of October, 1994 (the "Grant Date"),
between PHP Healthcare Corporation, a Delaware corporation (the "Company"), and
Michael E. Gallagher (the "Optionee") in accordance with Section 157 of the
Delaware General Corporation Law.
The parties hereto agree as follows:
1. DEFINITION.
The term "Shares" shall mean the shares of common stock, par value
$.01 per share, of the Company.
2. GRANT OF OPTION.
2.1 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of Nine
Thousand Two Hundred Two (9,202) whole Shares subject to, and in accordance
with, the terms and conditions set forth in this Agreement. The Shares to be
delivered upon exercise of the Option shall be Shares held by the Company as
treasury stock and not newly issued Shares.
2.2 The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422A of the Internal Revenue Code of 1990
(the "Code") and is not granted pursuant to the Company's Amended and Restated
1986 Stock Option Plan (the "Option Plan").
3. PURCHASE PRICE.
3.1 The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be $9.00 per Share (the "Purchase
Price").
3.2 Payment of the Purchase Price shall be made (i) in cash, (ii)
in the discretion of the Company's Board of Directors, by tender of Shares owned
by the Optionee and registered in the Optionee's name with a fair market value
equal to the cash exercise price of the Option being exercised (in whole or in
part), or (iii) in the discretion of the Company's Board of Directors, by any
combination if (i) and (ii) hereof.
4. TERM OF OPTION.
Subject to earlier termination of the Option in accordance with
Section 5 hereof, the Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the Grant Date (the
"Exercise Term").
<PAGE>
5. EXERCISABILITY OF OPTION
5.1 The Option is granted pursuant to the Plan and Agreement of
Merger dated as of September 23, 1994, by and among PHP Family Healthcare
Corporation, a Delaware corporation ("Family"), the Company, the Optionee and
certain other parties (the "Merger Agreement"). The Option shall only be
exercisable with respect to Four Thousand Six Hundred Forty Six (4,646) whole
Shares, and shall be terminated and of no force or effect with respect to the
rest of the Shares covered by the Option, unless on or before December 31, 1996,
(i) Family has accrued the JPC Minimum Target Revenues under Qualifying
Contracts, as finally determined in good faith by Family in accordance with
generally accepted accounting principles consistently applied, or (ii) a Change
in Control of PHP shall have occurred. For this purpose, "JPC Minimum Target
Revenues" shall mean (i) total revenues of at least Fifty Million Dollars
($50,000,000) during the two year period ending December 31, 1996, and (ii)
revenues of at least Fifteen Million Dollars ($15,000,000) during each calendar
year of such period; "Qualifying Contracts" shall mean contracts entered into by
Family in its sole discretion on or after September 1, 1993, under which it
provides managed care products and services to private sector health insurers,
large employers, coalitions of employers, managed care plans or hospital
systems, and which have been performed or remain in force on December 31, 1996;
and "Change in Control" shall have the meaning set forth in Section 14.4(b) of
the Option Plan.
5.2 Except as otherwise provided in Section 5.1 hereof or in this
Agreement, the Option shall entitle the Optionee to purchase, in whole at any
time or in part from time to time, one-half (1/2) of the total number of Shares
covered by the Option after the expiration of one (1) year following the Grant
Date and the remaining one-half (1/2) of the total number of Shares covered by
the Option after the expiration of two (2) years following the Grant Date, and
each such right of purchase shall be cumulative and shall continue, unless
sooner exercised in whole or in part or terminated as herein provided, during
the remaining period of the Exercise Term.
6. MANNER OF EXERCISE.
6.1 Subject to the terms and conditions of this Agreement, the
Option may be exercised by delivery of written notice to the Secretary of the
Company at the Company's principal executive office. Such notice shall state
that the Optionee is electing to exercise the Option and the number of Shares in
respect to which the Option is being exercised and shall be signed by the person
or persons exercising the Option on behalf of the Optionee. If the Company
requests, such person or persons shall (i) deliver this Agreement to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and (ii) provide satisfactory proof as to the authority of such person or
persons to exercise the Option on behalf of the Optionee.
2
<PAGE>
6.2 The notice of exercise described in Section 6.1 shall be
accompanied by the Purchase price for the number of Shares in respect of which
the Option is being exercised.
6.3 Upon receipt of notice of exercise and the Purchase Price for
the Shares in respect of which the Option is being exercised, the Company shall
take appropriate action to effect the transfer to the Optionee of the number of
Shares as to which such exercise was effective.
6.4 The Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any Shares subject to the
Option until (i) the Option shall have been exercised pursuant to the terms of
this Agreement and the Optionee shall have paid the full Purchase Price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
has complied, in its discretion, with any listing, registration or qualification
requirement of any securities exchange or the National Association of Securities
Dealers, Inc., as the case may be, or under any state or federal law, (iii) the
Optionee's name shall have been entered as a stockholder or record on the books
of the Company, and (iv) the Company shall have issued and delivered the Shares
in certificate form to the Optionee, whereupon the Optionee shall have full
voting and other ownership rights with respect to such shares.
7. NO RIGHT TO EMPLOYMENT.
Nothing in this Agreement shall be interpreted or construed to
confer upon the Optionee any right to employment or retention by the Company in
any capacity.
8. ADJUSTMENTS.
In the event that any option under the Option Plan is adjusted
pursuant to Section 14 thereof, the Option shall be adjusted in accordance with
such provision at the same time.
9. AMENDMENT.
This Agreement may be amended or terminated and any terms or
condition hereof may be waived in accordance with a written instrument executed
on behalf of each party hereto.
10. NOTICE.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by cable, telegram, telex or facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
3
<PAGE>
If to Optionee:
Michael E. Gallagher
Shamrock Investments
2049 Century Park East, Suite 3330
Los Angeles, California 90067
If to the Company:
PHP Healthcare Corporation
11440 Commerce Park Drive
Reston, Virginia 22091
Attention: General Counsel
11. VALIDITY.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. HEADINGS.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. COUNTERPARTS.
This Agreement may be executed by the parties hereto in two or
more counterparts, each of which shall be deemed to be an original instrument,
but all of which together shall be deemed to be one and the same instrument.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to the principles
of conflicts of the laws thereof.
15. PARTIES IN INTEREST.
This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors (but not their assigns). The
Option shall not be transferable by the Optionee other than by will or the laws
of descent and distribution.
4
<PAGE>
16. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result
of, or in any way relate to, the interpretation, construction or application of
this Agreement shall be determined by the Board of Directors of the Company. Any
such determination shall be final, binding and conclusive on the Optionee and
Company for all purposes.
PHP HEALTHCARE CORPORATION
By: /s/ Jack M. Mazur
----------------------------
Name: Jack M. Mazur
Title: Sr. Exec. Vice Pres.
OPTIONEE
/s/ Michael E. Gallagher
----------------------------
Michael E. Gallagher
5
<PAGE>
EXHIBIT 4.14
STOCK OPTION
THIS AGREEMENT, made as of the 3rd day of October, 1994 (the "Grant Date"),
between PHP Healthcare Corporation, a Delaware corporation (the "Company"), and
John P. Cole (the "Optionee") in accordance with Section 157 of the Delaware
General Corporation Law.
The parties hereto agree as follows:
1. DEFINITION.
The term "Shares" shall mean the shares of common stock, par
value $.01 per share, of the Company.
2. GRANT OF OPTION.
2.1 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an aggregate of Fifty
Thousand (50,000) whole Shares subject to, and in accordance with, the terms
and conditions set forth in this Agreement. The Shares to be delivered upon
exercise of the Option shall be Shares held by the Company as treasury stock and
not newly issued Shares.
2.2 The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422A of the Internal Revenue Code of 1990
(the "Code") and is not granted pursuant to the Company's Amended and Restated
1986 Stock Option Plan (the "Option Plan").
3. PURCHASE PRICE.
3.1 The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be $9.00 per Share (the "Purchase
Price").
3.2 Payment of the Purchase Price shall be made (i) in cash,
(ii) in the discretion of the Company's Board of Directors, by tender of Shares
owned by the Optionee and registered in the Optionee's name with a fair market
value equal to the cash exercise price of the Option being exercised (in whole
or in part), or (iii) in the discretion of the Company's Board of Directors, by
any combination if (i) and (ii) hereof.
4. TERM OF OPTION.
Subject to earlier termination of the Option in accordance with
Section 5 hereof, the Option shall be exercisable to the extent and in the
manner provided herein for a period of ten (10) years from the Grant Date (the
"Exercise Term").
<PAGE>
5. EXERCISABILITY OF OPTION
5.1 The Option is granted pursuant to the Plan and Agreement of
Merger dated as of September 23, 1994, by and among PHP Family Healthcare
Corporation, a Delaware corporation ("Family"), the Company, the Optionee and
certain other parties (the "Merger Agreement"). The Option shall only be
exercisable with respect to 19,000 whole Shares, and shall be terminated and
of no force or effect with respect to the rest of the Shares covered by the
Option, unless on or before December 31, 1996, (i) Family has accrued the JPC
Minimum Target Revenues under Qualifying Contracts, as finally determined in
good faith by Family in accordance with generally accepted accounting
principles consistently applied, or (ii) a Change in Control of PHP shall have
occurred. For this purpose, "JPC Minimum Target Revenues" shall mean (i) total
revenues of at least Fifty Million Dollars ($50,000,000) during the two year
period ending December 31, 1996, and (ii) revenues of at least Fifteen Million
Dollars ($15,000,000) during each calendar year of such period; "Qualifying
Contracts" shall mean contracts entered into by Family in its sole discretion
on or after September 1, 1993, under which it provides managed care products
and services to private sector health insurers, large employers, coalitions of
employers, managed care plans or hospital systems, and which have been
performed or remain in force on December 31, 1996; and "Change in Control"
shall have the meaning set forth in Section 14.4(b) of the Option Plan.
5.2 Except as otherwise provided in Section 5.1 hereof or in this
Agreement, the Option shall entitle the Optionee to purchase, in whole at any
time or in part from time to time, one-half (1/2) of the total number of Shares
covered by the Option after the expiration of one (1) year following the Grant
Date and the remaining one-half (1/2) of the total number of Shares covered by
the Option after the expiration of two (2) years following the Grant Date, and
each such right of purchase shall be cumulative and shall continue, unless
sooner exercised in whole or in part or terminated as herein provided, during
the remaining period of the Exercise Term.
6. MANNER OF EXERCISE.
6.1 Subject to the terms and conditions of this Agreement, the
Option may be exercised by delivery of written notice to the Secretary of the
Company at the Company's principal executive office. Such notice shall state
that the Optionee is electing to exercise the Option and the number of Shares in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option on behalf of the Optionee. If the Company
requests, such person or persons shall (i) deliver this Agreement to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and (ii) provide satisfactory proof as to the authority of such person or
persons to exercise the Option on behalf of the Optionee.
2
<PAGE>
6.2 The notice of exercise described in Section 6.1 shall be
accompanied by the Purchase Price for the number of Shares in respect of which
the Option is being exercised.
6.3 Upon receipt of notice of exercise and the Purchase Price for
the Shares in respect of which the Option is being exercised, the Company shall
take appropriate action to effect the transfer to the Optionee of the number of
Shares as to which such exercise was effective.
6.4 The Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any Shares subject to the
Option until (i) the Option shall have been exercised pursuant to the terms of
this Agreement and the Optionee shall have paid the full Purchase Price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
has complied, in its discretion, with any listing, registration or qualification
requirement of any securities exchange or the National Association of Securities
Dealers, Inc., as the case may be, or under any state or federal law, (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, and (iv) the Company shall have issued and delivered the Shares
in certificate form to the Optionee, whereupon the Optionee shall have full
voting and other ownership rights with respect to such shares.
7. NO RIGHT TO EMPLOYMENT.
Nothing in this Agreement shall be interpreted or construed to
confer upon the Optionee any right to employment or retention by the Company in
any capacity.
8. ADJUSTMENTS.
In the event that any option under the Option Plan is adjusted
pursuant to Section 14 thereof, the Option shall be adjusted in accordance with
such provision at the same time.
9. AMENDMENT.
This Agreement may be amended or terminated and any terms or
condition hereof may be waived in accordance with a written instrument executed
on behalf of each party hereto.
10. NOTICE.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by cable, telegram, telex or facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
3
<PAGE>
If to Optionee:
John P. Cole
9512 Eagle Ridge Drive
Bethesda, MD 20817
If to the Company:
PHP Healthcare Corporation
11440 Commerce Park Drive
Reston, Virginia 22091
Attention: General Counsel
11. VALIDITY.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. HEADINGS.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. COUNTERPARTS.
This Agreement may be executed by the parties hereto in two or
more counterparts, each of which shall be deemed to be an original instrument,
but all of which together shall be deemed to be one and the same instrument.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of the laws thereof.
15. PARTIES IN INTEREST.
This Agreement is binding upon and is solely for the benefit
of the parties hereto and their respective successors (but not their assigns).
The Option shall not be transferable by the Optionee other than by will or the
laws of descent and distribution.
4
<PAGE>
16. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation, construction or
application of this Agreement shall be determined by the Board of Directors of
the Company. Any such determination shall be final, binding and conclusive on
the Optionee and Company for all purposes.
PHP HEALTHCARE CORPORATION
By: /s/ Jack M. Mazur
------------------------------
Name: Jack M. Mazur
Title: Sr. Exec. Vice Pres.
OPTIONEE
/s/ John P. Cole
--------------------------------
John P. Cole
5
<PAGE>
EXHIBIT 4.15
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") made and entered into as of September
29, 1994, by and among PHP Family Healthcare Corporation, a Delaware corporation
("Family"), J.P. Cole & Associates, Inc., a Virginia corporation ("JPC"), John
P. Cole, Charles P. Reilly and Michael E. Gallagher (collectively, the
"Shareholders"), PHP Healthcare Corporation, a Delaware corporation ("PHP"), and
William F. Bavinger, III (the "Escrow Agent").
RECITALS
A. Family, JPC, the Shareholders and PHP (the "Escrow Parties") have
entered into a Plan and Agreement of Merger, dated as of September 29, 1994 (the
"Merger Agreement"), pursuant to which the outstanding shares of common stock of
JPC will be converted into, among other things, shares of common stock, $.01 par
value, of PHP ("PHP Common Stock").
B. The Merger Agreement provides that Forty Four Thousand Two Hundred
Eighty Six (44,286) shares of PHP Common Stock (the "Escrow Securities") shall
be deposited and held in escrow in accordance with the terms set forth herein.
C. The Escrow Agent desires to perform the escrow services described
herein, and the Escrow Parties desire to engage the Escrow Agent to perform such
services;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein and in the Merger Agreement, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
TERMS
1. APPOINTMENT OF ESCROW AGENT. The Escrow Agent is hereby appointed to
act as Escrow Agent hereunder and agrees to accept and to hold the Escrow
Securities in accordance with the terms hereof.
2. ESTABLISHMENT OF ESCROW. Pursuant to Article IV of the Merger
Agreement, certificates representing the Escrow Securities registered in the
names of the Shareholders have been deposited with the Escrow Agent, and the
Escrow Agent hereby acknowledges receipt of the Escrow Securities.
3. DECLARATION OF ESCROW. The Escrow Agent hereby declares and agrees
that it will hold and distribute the Escrow Securities, in accordance with and
subject to the provisions of
<PAGE>
this Agreement. The Escrow Agent further agrees that it will receive, hold and
distribute as additional Escrow Securities, in accordance with and subject to
the terms of this Agreement, all dividends, distributions, securities, rights,
instruments and proceeds in respect of the Escrow Securities which PHP or the
Shareholders may subsequently deliver to the Escrow Agent.
4. ESCROW PERIOD. The term of this escrow (the "Term") shall commence
immediately upon receipt by the Escrow Agent of the Escrow Securities and shall
expire as provided in Section 7(c) hereof.
5. DISTRIBUTION OF ESCROW SECURITIES.
(a) THE PERFORMANCE CONDITION. The Escrow Securities shall be
retained in escrow on the terms set forth herein until Family determines as
provided in Article IV of the Merger Agreement whether on or before December 31,
1996, (i) it has accrued the JPC Minimum Target Revenues under Qualifying
Contracts (the "Performance Condition"), or (ii) Change in Control of PHP has
occurred. Family shall make such determination and give notice thereof to the
Escrow Agent and the Escrow Parties as soon as reasonably practicable.
(b) RELEASE OF ESCROW SECURITIES TO SHAREHOLDERS. If Family shall give
notice that the Performance Condition has been satisfied or that a Change in
Control of PHP has occurred, the Escrow Securities shall be released to the
Shareholders promptly.
(c) RELEASE OF ESCROW SECURITIES TO PHP. If Family shall give notice
that the Performance Condition has not been satisfied and the Shareholders shall
not, within 20 days after receipt of such notice, give notice that they claim
that the Performance Condition has been satisfied, the Escrow Securities shall
be released to PHP promptly. If the Shareholders give timely notice that they
claim that the Performance Condition has been satisfied, the dispute shall be
resolved in accordance with Section 6 hereof.
6. SETTLEMENT OF DISPUTES. Any dispute among the Escrow Parties that may
arise under this Agreement with respect to: (a) the delivery, ownership or right
to possession of the Escrow Securities; (b) the facts upon which the Escrow
Agent's determinations are based; (c) the duties of the Escrow Agent hereunder;
(d) whether the Performance Condition set forth in Section 5(a) hereof has been
satisfied; and (e) any other questions arising under this Agreement, shall be
determined by (i) mutual agreement of the Escrow Parties (evidenced by
appropriate instructions in writing to the Escrow Agent signed by or on behalf
of all of such parties) within 30 days after such dispute arises, or (ii) if the
Escrow Parties are unable to reach an agreement, and are unable to agree upon
arbitration or some other form of alternative dispute resolution, litigation in
a court of competent jurisdiction. The Escrow Agent shall be under no duty to
institute or defend any proceeding relating to any such dispute and none of the
costs and expenses of any such proceedings shall be borne by the
2
<PAGE>
Escrow Agent. Pending the resolution of any dispute as provided in this Section
6, the Escrow Agent is authorized and directed to retain the Escrow Securities
in its possession.
7. PROVISIONS CONCERNING THE ESCROW AGENT.
(a) AMENDMENTS AND MODIFICATIONS. The Escrow Agent shall not in any
way be bound or affected by any amendment, modification or cancellation of this
Agreement which increases or alters the obligations of the Escrow Agent under or
pursuant to this Agreement, unless the same shall have been agreed to in writing
by the Escrow Agent.
(b) COMPENSATION. Upon receipt by Buyer and Seller of the Escrow
Agent's written notice itemizing its fees and out-of-pocket expenses incurred in
performing its duties hereunder, the Escrow Agent shall be entitled to payment
(from other than the Escrow Securities) of such fees and reimbursements for such
expenses from PHP, such amounts to be paid within thirty (30) days after such
written notice is given. The Escrow Agent's fee shall be as agreed upon by the
parties, plus all reasonable out-of-pocket expenses payable when billed.
(c) TERMINATION OF THIS ESCROW AGREEMENT. This Agreement shall
terminate upon the release of the Escrow Securities by the Escrow Agent pursuant
to this Agreement.
(d) DUTIES OF ESCROW AGENT. This Agreement sets forth the duties and
obligations of the Escrow Agent with respect to any and all matters pertinent to
its acting as such hereunder. The Escrow Agent shall not have duties or
responsibilities other than those specifically set forth herein and shall act
only in accordance with the provisions hereof. Without limiting the generality
of the foregoing, the Escrow Agent shall not have any duty or responsibility (i)
to enforce or cause to be enforced any of the terms and conditions contained in
the Merger Agreement or (ii) to verify the accuracy or sufficiency of any notice
or other document received by it in connection with this Agreement. The Escrow
Agent shall be entitled to reply upon any instructions or directions to it in
writing under this Agreement signed or presented by the proper party or parties
and shall be entitled to treat as genuine any instruction or document delivered
to the Escrow Agent hereunder and reasonably believed by the Escrow Agent to be
genuine and to have been presented by the proper party or parties, without being
required to determine the authenticity or correctness of any fact stated
therein, or the authority or authorization of the person or persons making
and/or delivering the same to do so.
(e) LIABILITY OF ESCROW AGENT. Neither the Escrow Agent nor any of its
officers, directors, shareholders, partners, employees or agents shall be liable
to the Escrow Parties or any other person or entity for or in respect of any
loss, claim, damage, liability or expense resulting from or arising out of any
act or failure to act by it in connection with this Agreement, other than for
any loss, claim, damage, liability or expense which shall be finally adjudicated
to be the result of gross negligence or willful bad faith on the part of the
Escrow Agent or any such officers, directors, partners, employees or agents.
More
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specifically, (i) the Escrow Agent shall not be liable for any error of judgment
made by it in good faith and (ii) the Escrow Agent may consult with counsel of
its own choice whenever the Escrow Agent shall deem it convenient or
appropriate, and shall have full and complete authorization and protection for
any action taken or suffered by it hereunder in good faith in accordance with
the advice of counsel.
(f) RESIGNATION OF ESCROW AGENT. At any time that the Escrow Agent so
chooses, the Escrow Agent may resign from its duties hereunder by giving not
less than 30 days' written notice to the Escrow Parties. Prior to the expiration
of such 30-day period, the Escrow Parties shall designate, by mutual consent, a
successor escrow agent; PROVIDED that notwithstanding any resignation date set
forth in the Escrow Agent's notice, such resignation shall not take effect until
receipt by the Escrow Agent of an instrument duly executed by a successor escrow
agent evidencing its appointment as Escrow Agent hereunder and acceptance of
this Agreement. If no successor escrow agent is appointed within such 30-day
period, the Escrow Agent may deposit the Escrow Securities with a court of
competent jurisdiction as provided in paragraph (g) below and thereupon the
Escrow Agent shall be discharged of all duties and obligations hereunder.
(g) DEPOSIT OF ESCROW SECURITIES WITH COURT. Notwithstanding anything
herein to the contrary, in the event of any disagreement between any of the
parties to this Agreement, or between them and any other person, resulting in
adverse claims or demands being made against the Escrow Securities, or in the
event the Escrow Agent in good faith is in doubt as to what action it should
take hereunder, the Escrow Agent may be discharged of its duties and obligations
hereunder upon its deposit, at any time after written notice to the Escrow
Parties, of the Escrow Securities with a court of competent jurisdiction.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement has been entered into pursuant to
the Merger Agreement and as such embodies the entire agreement and understanding
among the parties hereto relating to the subject matter hereof and may not be
charged orally, but only by an instrument in writing signed by all the parties
hereto.
(b) NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered and received personally or sent by facsimile
transmission or overnight delivery service, and addressed as set forth below:
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(i) If to PHP, Family or JPC:
PHP Healthcare Corporation
11440 Commerce Park Drive
Reston, Virginia 22091
Attention: General Counsel
(ii) If to Shareholders:
John P. Cole Charles P. Reilly
PHP Healthcare Corporation Shamrock Investments
11440 Commerce Park Drive 2049 Century Park East, Suite 3330
Reston, Virginia 22091 Los Angeles, California 90067
(iii) If to the Escrow Agent:
William F. Bavinger, III
700 Thirteenth Street, N.W.
Washington, D.C. 20005
or at such other address or to such other wire instructions as any party may
designate by means of notice given in accordance with this Section 8(b). Any
facsimile transmission not received by the Escrow Agent before 5:00 p.m. eastern
standard time shall be deemed received on the next business day.
(c) HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience only and shall not modify, define, limit or expand
the express provisions of this Agreement.
(d) GOVERNING LAW; SEVERABILITY. This Agreement shall be construed
and interpreted according to the laws of the State of Delaware without regard to
conflicts of law principles.
(e) BINDING NATURE. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, provided that the Escrow
Agent may not assign its obligations hereunder without the consent of all of the
other parties hereto.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original, but all of which
together constitute one and the same agreement, and it shall not be necessary,
in proving the due execution and delivery of this Agreement, to produce or
account for more than one such counterpart.
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(g) DEFINITIONS. Unless expressly provided otherwise herein, all
initially capitalized terms used herein and defined in the Acquisition Agreement
shall have the same meanings ascribed to them in the Acquisition Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the day and year first written.
Attest: J.P. COLE & ASSOCIATES, INC.
/s/ Charles P. Reilly By: /s/ John P. Cole
- --------------------- ----------------
Charles P. Reilly, Secretary John P. Cole, President
Attest: PHP FAMILY HEALTHCARE CORPORATION
/s/ Ben Rosenbaum, III By: /s/ Charles H. Robbins
- ---------------------- ----------------------
Ben Rosenbaum, III, Secretary Name: Charles H. Robbins
Title: President
Attest: PHP HEALTHCARE CORPORATION
/s/ Ben Rosenbaum, III By: /s/ Jack M. Mazur
- ---------------------- -----------------
Ben Rosenbaum, III, Secretary Name: Jack M. Mazur
Title: Sr. Exec. Vice Pres.
/s/ John P. Cole
----------------
John P. Cole
/s/ Charles P. Reilly
---------------------
Charles P. Reilly
/s/ Michael E. Gallagher
------------------------
Michael E. Gallagher
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/s/ William F. Bavinger, III
-----------------------------
William F. Bavinger, III
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EXHIBIT 4.16
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of September 29, 1994, between PHP
HEALTHCARE CORPORATION, a Delaware corporation (the "Company"), and John P.
Cole, Charles P. Reilly and Michael E. Gallagher (each a "Shareholder" and,
collectively the "Shareholders").
RECITALS
1. The Company, the shareholders and others have entered into a
Plan and Agreement of Merger (the "Merger Agreement") dated as of the date
hereof providing for the merger of J.P. Cole & Associates, Inc. into PHP
Family Healthcare Corporation and for the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, and intending to be legally bound hereby,
the Company and the Shareholders hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Common Stock" shall mean the common stock, $.01 par value
per share, of the Company and any other securities into which or for which
such common stock has been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets, or otherwise.
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(c) "Holder" means a shareholder, so long as he holds any
Registrable Securities, and any person owning Registrable Securities who is
a permitted assignee under Section 10 of this Agreement.
(d) The term "register," "registered," and "registration" refer
to a registration effected by the preparation and filing of a Registration
Statement in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such Registration Statement by the SEC.
(e) "Registrable Securities" shall mean the shares of Common
Stock acquired by the shareholders pursuant to the Merger Agreement
or owned by any subsequent Holder or Holders, and, in each case, all shares
of Common Stock issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, in exchange for, or in replacement of
such shares of Common Stock. The term "Registrable Securities" excludes,
however, any security (i) the sale of which has been effectively
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registered under the Securities Act and which has been disposed of in
accordance with a Registration Statement, (ii) that has been sold by a
Holder in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof
(including, without limitation, transactions pursuant to Rules 144 and
144A) such that the further disposition of such securities by the
transferee or assignee is not restricted under the Securities Act, (iii)
that have been sold by a Holder in a transaction in which such Holder's
rights under this Agreement are not, or cannot be, assigned, or (iv) for
which the registration rights provided under this Agreement have expired
pursuant to Section 13 of this Agreement.
(f) "Registration Expenses" shall mean (i) registration,
qualification and filing fees; (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of any Registrable
Securities being registered); (iii) printing expenses; (iv) fees and
disbursements of counsel for the Company and customary fees and expenses
for independent certified public accountants retained by the Company
(including the expenses of any comfort letters or costs associated with
the delivery by independent certified public accountants of comfort letters
customarily requested by underwriters): (v) fees and expenses of counsel
for the requesting Holders; (vi) fees and expenses of listing any
Registrable Securities on any securities exchange on which the Common Stock
is then listed; (vii) fees and disbursements of underwriters customarily
paid by issuers or sellers of securities; and (viii) any underwriting fees,
discounts or commissions attributable to the sale of any Registrable
Securities and any fees and expenses of underwriters' counsel; but
excluding all internal expenses of the Company, including without
limitation all salaries and expenses of officers and employees of the
Company performing legal or accounting duties.
(g) "Registration Statement" shall mean any registration
statement or similar document that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the prospectus or
preliminary prospectus included therein, all amendments and supplements to
such Registration Statement, including post-effective amendments, all
exhibits to such Registration Statement and all material incorporated by
reference in such Registration Statement.
(h) "Rule 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto.
(i) "Rule 144A" shall mean Rule 144A promulgated under the
Securities Act or any successor rule thereto.
(j) "SEC" shall mean the Securities and Exchange Commission.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2. INCIDENTAL REGISTRATION. After the date hereof, if (but without
any obligation to do so) the Company proposes to register (including a
registration effected by
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the Company for shareholders other than the Holders) or any shares of Common
Stock under the Securities Act in connection with the public offering of such
shares solely for cash on any form of Registration Statement in which the
inclusion of Registrable Securities is appropriate (other than a registration
(i) relating solely to the sale of securities to participants in a Company stock
plan, (ii) pursuant to a Registration Statement on Form S-4 or Form S-8 (or any
successor forms) or any form that does not include substantially the same
information, other than information relating to the selling shareholders or
their plan of distribution, as would be required to be included in a
registration statement covering the sale of Registrable Securities, (iii) in
connection with any dividend reinvestment or similar plan, or (iv) for the sole
purpose of offering securities to another entity or its securityholders in
connection with the acquisition of assets or securities of such entity or any
similar transaction), the Company shall promptly give each Holder written notice
of such registration in the manner provided in Section 15 at least 30 days
before the anticipated filing date of any such Registration Statement. Upon the
written request of any Holder given in the manner provided in Section 15 within
15 days after the mailing of such notice by the Company, the Company shall,
subject to the provisions of Section 6 hereof, cause to be registered under the
Securities Act all of the Registrable securities that such Holder has so
requested to be registered. The Company shall not be required to proceed with,
or maintain the effectiveness of, any registration of its securities after
giving the notice herein provided, and the right of any Holder to have
Registrable Securities included in such Registration Statement shall be
conditioned upon participation in any underwriting to the extent provided
herein. The Company shall not be required to include any Registrable Securities
in such underwriting unless the Holders thereof enter into an underwriting
agreement in customary form and upon terms and conditions agreed upon between
the Company and the underwriter(s) (except as to monetary obligations of the
Holders not contemplated by Section 5 of this Agreement), with the
underwriter(s) selected by the Company. In the event that the underwriter(s)
shall advise the Company that marketing or other factors require a limitation of
the number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities that would otherwise be underwritten pursuant
hereto. The underwriter(s) may exclude some or all of the Registrable Securities
from such underwriting and the number of Registrable Securities, if any, that
may be included in the underwriting shall be allocated among all Holders thereof
in proportion (as nearly as practicable) to the number of Registrable Securities
which each Holder requested be included in such registration. Nothing in this
Section 2 is intended to diminish the number of securities to be included by the
Company in such underwriting. The Company and the underwriter(s) selected by the
Company shall make all determinations with respect to the timing, pricing and
other matters related to the offering.
3. REGISTRATION PROCEDURE. Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably practicable:
(a) Prepare and file with the SEC a new Registration Statement
with respect to such Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective, and keep
such Registration Statement effective for up to 90 days or such shorter
period as shall be required to sell all of the Registrable Securities
covered by such Registration Statement (except as provided in
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Section 2); provided, however, that if such Registration Statement is on
Form S-3 and relates to a distribution by the Holders on a delayed or
continuous basis other than by means of an underwriting, the Company shall
keep such Registration Statement effective for the maximum period permitted
for such Registration Statement; provided further that no Registration
Statement need remain in effect after all Registrable Securities covered
thereby have been sold.
(b) Prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection with
such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to the Holders of Registrable Securities to be
registered, without charge, such number of copies of a prospectus,
including a preliminary prospectus, and any amendment or supplement thereto
as they may reasonably request and a reasonable number of copies of the
then-effective Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference).
(d) Promptly after the filing of any document that is to be
incorporated by reference into a Registration Statement or prospectus,
provide copies of such document to the Holders of Registrable Securities
covered thereby and any underwriter.
(e) Use its reasonable best efforts to register and qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided, however, that the Company shall not be
required to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions where it would not otherwise
be required to so qualify to do business or consent to service of process
or subject itself to taxation in any such jurisdiction.
(f) Cooperate with the Holders of Registrable Securities and each
underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
(g) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriter(s) of such offering, with such terms
and conditions as the Company and the underwriter(s) may agree. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
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(h) Notify each Holder of Registrable Securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(i) Cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange or automated quotation
system on which shares of the Company's Common Stock is then listed. If any
of such shares are not so listed, the company shall cause such shares to be
listed on the securities exchange or automated quotation system as may be
reasonably requested by the Holders of a majority of the Registrable
Securities being registered.
(j) In the case of an underwritten public offering, furnish, at
the request of any Holder requesting registration pursuant to this
Agreement, on the date that such Registrable Securities are delivered to
the underwriters for sale in connection with a registration pursuant to
this Agreement, (A) an opinion of counsel representing the Company for the
purposes of such registration, and (B) a letter from independent certified
public accountants of the Company, in each case to be dated such date and
to be in form and substance as is customarily given by counsel or
independent certified public accountants, as the case may be, to
underwriters in an underwritten public offering, addressed to the
underwriters.
(k) Permit a representative of any Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration, and any attorney or accountant retained by such Holder
or underwriter, to participate, at each person's own expense, in the
preparation of the Registration Statement, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such representative, underwriter, attorney or accountant
in connection with such registration; provided, however, that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement, in form and substance reasonably satisfactory to
the Company, prior to the release or disclosure of any such information.
Notwithstanding the foregoing, the Company may delay, suspend or withdraw any
registration or qualification of Registrable Securities required pursuant this
Agreement for a period not exceeding 120 days if the Company shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of any securities of the Company or any other contemplated
material corporate event. In addition, the Company shall not be required to
register Registrable Securities within 12 months after the effective date of a
Registration Statement referred to in Section 2 pursuant to which the Holders
were afforded the opportunity to register Registrable Securities.
4. HOLDERS' OBLIGATION TO FURNISH INFORMATION. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Agreement
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with respect to any Registrable Securities that the Holder of such securities
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
Each Holder agrees that, upon receipt of any notice from the Company,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the then current prospectus until (i) such Holder is advised in
writing by the Company that a new Registration Statement covering the reoffer of
Registrable Securities has become effective under the Securities Act or (ii)
such Holder receives copies of a supplemented or amended prospectus contemplated
by Section 3 hereof, or until such Holder is advised in writing by the Company
that the use of the prospectus may be resumed. The Company shall use its
reasonable best efforts to limit the duration of any discontinuance of
disposition of Registrable Securities pursuant to this paragraph.
5. REGISTRATION EXPENSES. The requesting Holders shall pay their own
expenses and shall bear on a pro rata basis with other requesting Holders all
incremental Registration Expenses, including, without limitation, incremental
registration and qualification fees and expenses (including underwriters' fees,
discounts and commissions), and all incremental costs and disbursements
(including legal fees and expenses), that result from the inclusion of the
Registrable Securities in such registration.
6. EFFECTIVENESS OF REGISTRATION. A registration requested pursuant
to Section 2 will not be deemed to have been effected if (i) the registration
statement has not been kept effective for the period required under Section 3(a)
of this Agreement or (ii) the offering of Registrable Securities pursuant to
such registration is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court.
7. DELAY OF REGISTRATION. No holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any registration of the
Company's securities as the result of any controversy that might arise with
respect to the interpretation or implementation of this Agreement.
8. INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable
Securities are included in a Registration Statement pursuant to this Agreement:
(a) The Company will indemnify and hold harmless each Holder, its
directors, officers and employees and each person, if any, who "controls"
such Holder (within the meaning of the Securities Act) against all losses,
claims, damages, or liabilities, joint or several, or actions in respect
thereof to which such Holder or other person entitled to indemnification
hereunder may become subject under the Securities Act, or otherwise,
insofar as such losses, claims, damages, liabilities or actions in respect
thereof arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in such Registration
Statement, any related preliminary prospectus, or any related prospectus or
any amendment or supplement thereto, or arise out of, or are based upon,
the omission or alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
such Holder or other person entitled to indemnification hereunder for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be so liable to the
extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact
in such Registration Statement, such preliminary prospectus, or such
prospectus, or any such amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to the Company by or
on behalf of a Holder or an underwriter specifically for use therein;
provided further that the Company will not be liable, and this
indemnification agreement shall not apply, in any such case to the extent
that any such loss, claim, damage, liability or action is solely
attributable to the failure of such Holder (or underwriter or agent acting
on its behalf) to deliver a final prospectus (or amendment or supplement
thereto) that corrects a material misstatement or omission contained in the
preliminary prospectus (or final prospectus). The Company will also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each person who "controls" such persons (within
the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Holders, if so requested, except
with respect to information furnished in writing specifically for use in
any prospectus or Registration Statement by any selling Holders or any such
underwriters.
(b) With respect to written information furnished to the Company
by or on behalf of a Holder specifically for use in a Registration
Statement, any related preliminary prospectus, or any related prospectus or
any supplement or amendment thereto, such Holder will severally indemnify
and hold harmless the company, and its directors, officers and employees
and each person, if any, who "controls" the Company (within the meaning of
the Securities Act) against any losses, claims, damages or liabilities,
joint or several, or actions in respect thereof, to which the Company or
such other person entitled to indemnification hereunder may become subject
under the Securities Act, or otherwise, insofar as such losses, claims,
damages, liabilities or actions in respect thereof arise out of, or are
based upon, any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, such preliminary
prospectus, or such prospectus, or any such amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and such Holder
will reimburse the Company and such other persons or any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, in each case
to the extent, but only to the extent, that the same arises out of, or is
based upon, an untrue statement or alleged untrue statement of a material
fact or an omission or alleged omission to state a material fact in such
Registration Statement, such preliminary prospectus, or such prospectus or
any such amendment or supplement thereto in reliance upon, and in
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conformity with, such written information. The Company shall be entitled to
receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to the
information so furnished in writing by such persons specifically for
inclusion in any prospectus or Registration Statement. The Holder will
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each person who "controls" such persons (within
the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Company, if so requested.
(c) Promptly after receipt by an indemnified party of notice of
any claim or the commencement of any action, the indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party,
notify the indemnifying party in writing of the claim or the commencement
of that action; provided, however, that the failure to notify the
indemnifying party will not relieve it from any liability that it may have
to the indemnified party except to the extent it was actually damaged or
suffered any loss or incurred any additional expense as a result thereof.
If any such claim or action is brought against an indemnified party, and it
notifies the indemnifying party thereof, the indemnifying party will be
entitled to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, (i) the
indemnifying party will not be liable to the indemnified party for any
legal or other expense subsequently incurred by the indemnified party in
connection with the defense thereof, (ii) the indemnifying party will not
be liable for the costs and expenses of any settlement of such claim or
action unless such settlement was effected with the written consent of the
indemnifying party or the indemnified party waived any rights to
indemnification hereunder in writing, in which case the indemnified party
may effect a settlement without such consent, and (iii) the indemnified
party will be obligated to cooperate with the indemnifying party in the
investigation of such claim or action; provided, however, that the Holders
and their respective controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by
such Holders against the Company may employ their own counsel if they have
been advised by counsel in writing that, in the reasonable judgment of such
counsel, it is advisable for such Holders and their controlling persons to
be represented by separate counsel due to the presence of conflicts of
interest, and in that event the fees and expenses of such separate counsel
will also be paid by the Company; provided that the Company shall not be
liable for the fees and expenses of more than one separate counsel at any
time for all such indemnified parties. An indemnifying party shall not,
without the prior written consent of the indemnified parties, settle,
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent ncludes a release of
such indemnified party reasonably acceptable to such indemnified party from
all liability arising out of such
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claim, action, suit or proceeding or unless the indemnifying party shall
confirm in a written agreement reasonably acceptable to such indemnified
party, that notwithstanding any federal, state or common law, such
settlement, compromise or consent shall not adversely affect the right of
any indemnified party to indemnification or contribution as provided in
this Agreement.
(d) If for any reason the indemnification provided for in
Sections 10(a) or (b) is unavailable to an indemnified party or is
insufficient to hold it harmless as contemplated therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party and the indemnified party, but also the
relative fault of the indemnifying party and the indemnified party, as well
as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The obligations under this Section 8 shall survive the
completion of any offering of Registrable Securities in a Registration
Statement pursuant to this Agreement, and otherwise.
9. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144; and
(b) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, upon request (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 for the
most recent 90 days, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such
securities without registration.
10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned by a Shareholder to another Shareholder; provided, however,
that (i) the Company is, promptly upon such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned, (ii) the
transfer of such securities may be effected in accordance with all applicable
securities laws, (iii) immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act, and (iv) the
9
<PAGE>
transferee executes and agrees to be bound by this Agreement, an executed
counterpart of which shall be furnished to the Company. In no event may the
rights of Holders hereunder be transferred or assigned to any other person.
11. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended or the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this Section shall be binding upon each Holder of
any Registrable Securities, each future Holder of such securities and the
Company.
12. "MARKET STAND-OFF" AGREEMENT. Any Holder, if requested by the
Company or an underwriter of an underwritten public offering, agrees not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise transfer or dispose of any Common Stock held by such Holder (other
than Registrable Securities included in the registration) without the prior
written consent of the Company or such underwriter(s), as the case may be,
during a period of up to seven days prior to and 180 days following the
effective date of any underwritten registration of the Company's securities
effected pursuant to Section 2 hereof. Such agreement shall be in writing in
form satisfactory to the Company and such underwriter, and may be included in
the underwriting agreement. The Company may impose stop-transfer instructions
with respect to the securities subject to the foregoing restriction until the
end of the required stand-off period.
13. TERMINATION OF REGISTRATION RIGHTS. A Holder's registration
rights under this Agreement relating to such Registrable Securities shall
terminate on the date such Holder is able to dispose of all its shares of
Registrable Securities in any 90-day period pursuant to Rule 144. All
registration rights (except for rights previously exercised in connection with
an underwritten public offering pursuant to Section 2) of a Holder under this
Agreement shall terminate on the date on which all of such Holder's shares of
Registrable Securities can be sold pursuant to Rule 144(k).
14. INFORMATION CONFIDENTIAL. No Holder may use any confidential
information received by it pursuant to this Agreement in violation of the
Exchange Act or reproduce, disclose, disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information and its attorneys), except to the extent reasonably related to
the exercise of rights under this Agreement, unless such information has been
made available to the public generally (other than by such recipient in
violation of this Section 14) or such recipient is required to disclose such
information by a governmental body or regulatory agency or by law in connection
with a transaction that is not otherwise prohibited hereby.
15. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, or air-courier guaranteeing overnight delivery:
(a) If to a holder of Registrable Securities: Shamrock
Investments, 2049 Century Park East, Suite 3330, Los Angeles, California
90067, Attention:
10
<PAGE>
Charles P. Reilly, Managing Partner (facsimile: (310) 551-3037), and
thereafter at such other address as may be designated from time to time by
notice given in the manner provided in this Section 15.
(b) If to the Company: PHP Healthcare Corporation, 11440
Commerce Park Drive, Reston, Virginia 22091, Attention: General Counsel
(facsimile: (703) 758-7259), and thereafter at such other address as may be
designated from time to time by notice given in the manner provided in this
Section 16.
(c) All such notices and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery,
telex, telecopier or telegram, on the date of such delivery, (ii) in the
case of air courier, on the business day after the date when sent and (iii)
in the case of mailing, on the third business day following such mailing.
(d) From time to time as the Company may request, each Holder
shall provide to the Company such evidence or documentation reasonably
satisfactory to the Company, in its sole discretion, certified by an
appropriate officer of such Holder, regarding the number of shares of
Common Stock beneficially owned by such Holder and its status as an
"affiliate" under the Securities Act.
16. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 10
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one of the same agreement.
18. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19. GOVERNING LAW. This Agreement shall be governed by and
constructed in accordance with the internal laws of the State of Delaware
without giving effect to conflicts of laws principles.
20. SEVERABILITY. In the event that any one or more of the previous
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
21. ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first written above.
PHP HEALTHCARE CORPORATION
By: /s/ Jack M. Mazur
--------------------------------
Name: Jack M. Mazur
Title: Sr. Exec. Vice President
/s/ John P. Cole
--------------------------------------
John P. Cole
/s/ Charles P. Reilly
--------------------------------------
Charles P. Reilly
/s/ Michael E. Gallagher
--------------------------------------
Michael E. Gallagher
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12.1
PHP HEALTHCARE CORPORATION
COMPUTATION OF RATION OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO DATA)
Six Months Ended
Year ended April 30 October 31
-------------------------------------------- -------------------------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations
before income taxes $ 6,150 $ 7,074 $ (5,562) $ (12,469) $ 1,487 $ 395 $ 3,696
Add:
Interest charges and
bank charges 1,061 283 1,071 3,288 2,209 1,384 1,098
Interest portion of
rentals 767 867 1,083 1,033 1,433 507 552
------- ------- ------- ------- ------- ------- -------
Income available for fixed
charges $ 7,978 $ 8,224 $ (3,408) $ (8,148) $ 5,129 $ 2,286 $ 5,346
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Fixed charges
Interest and bank
charges 1,061 283 1,071 3,288 2,209 1,384 1,098
Interest portion of
rentals 767 867 1,083 1,033 1,433 507 552
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 1,828 $ 1,150 $ 2,154 $ 4,321 $ 3,642 $ 1,891 $ 1,650
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Ratio of earnings (loss)
to fixed charges 4.36 7.15 (1.58) (1.89) 1.41 1.21 3.24
------- ------- ------- ------- ------- ------- -------
</TABLE>
<PAGE>
EXHIBIT 15.1
[COOPERS & LYBRAND LETTERHEAD]
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: PHP Healthcare Corporation
Registration on Form S-3
We are aware that our report dated November 29, 1995 on our review of interim
financial information of PHP Healthcare Corporation and consolidated
subsidiaries as of October 31, 1995 and for the three-month and six-month
periods then ended and included in the Company's quarterly report on Form 10-Q
for the quarter then ended is incorporated by reference in this prospectus and
registration statement. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the prospectus and
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
February 16, 1996
<PAGE>
EXHIBIT 23.1
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this prospectus and registration
statement on Form S-3 regarding $69,000,000 of 6 1/2% Convertible Subordinated
Debentures due 2002 and 3,499,937 shares of Common Stock, par value $.01 per
share, of our report dated July 6, 1995, on our audit of the consolidated
financial statements and financial statement schedule of PHP Healthcare
Corporation and Subsidiaries as of April 30, 1995 and for the year then ended
appearing in the Company's 1995 Form 10-K and, of our report dated July 6,
1995, except for the first paragraph of Note 8 as to which the date is November
20, 1995, on our audit of the consolidated financial statements of PHP
Healthcare Corporation and Subsidiaries as of April 30, 1995 and for the year
ended appearing in the Company's 8-K/A dated January 11, 1996. The report
appearing in the Company's 8-K/A dated January 11, 1996 includes an explanatory
paragraph regarding the adjustments described in the first paragraph on Note 8
to those consolidated financial statements that were applied to retroactively
restate the 1995, 1994 and 1993 consolidated financial statements and footnotes
thereto for the effects of a two-for-one stock split effected as a stock
dividend in November, 1995. We also consent to the reference to our firm under
the caption "Independent Public Accountants."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
February 16, 1996
<PAGE>
Exhibit 23.2
THE BOARD OF DIRECTORS
PHP HEALTHCARE CORPORATION
We consent to the use of our report included in the Annual Report on Form 10-K
for the fiscal year ended April 30, 1995 of PHP Healthcare Corporation
incorporated herein by reference and to the references to our firm under the
heading of "Independent Public Accountants" in the prospectus. Our report
refers to a change in the method of accounting for income taxes.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
Washington, D.C.
February 16, 1996
<PAGE>
EXHIBIT 25.1
---------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBLITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
PHP Healthcare Corporation
(Exact name of obligor as specified in its charter)
Delaware 54-1023168
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
11440 Commerce Park Drive
Reston, VA 22091
(Address of principal executive offices) (Zip code)
---------
61/2% Convertible Subordinated Debentures due 12/15/2002
(Title of indenture securities)
----------------------
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, Two Rector Street,
New York, New York
Federal Deposit Insurance Corporation, Washington, D.C.
Federal Reserve Bank of New York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
None
<PAGE>
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
<PAGE>
NOTE
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2. the answer to said item
are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 20th
day of February, 1996.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Thomas J. Bogert
--------------------------------
Thomas J. Bogert
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issue by PHP Healthcare
Corporation of its 6 1/2% Convertible Subordinated Debentures due 2002, we
hereby consent that reports of examinations by Federal, State, Territorial, or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Thomas J. Bogert
---------------------
Thomas J. Bogert
Assistant Vice President
Dated: February 20, 1996
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
---------------
ASSETS
<S> <C> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 27,302
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 274,438
Securities: Held to Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 169,283
Available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 30,605
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 49,732
Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . . . . . . . . . . . . . . . . .$ 1,837,874
LESS: Allowance for loan and lease losses. . . . . . . . . . . . . . . . . . . . . . . . .$ 52,477
LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . . . . . . . . . . . . $ -0-
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . . . . . . . . .$1,785,397
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$114
Premises and fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$7,958
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$397
Investments in unconsolidated subsidiaries and associated companies. . . . . . . . . . . . . . . . . . . . .$-0-
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . .$938
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$-0-
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$68,195
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,414,359
<PAGE>
LIABILITIES
DEPOSITS:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$474,693
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 143,148
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 331,545
In foreign offices, Edge and Agreement subsidiaries, and IBFs. . . . . . . . . . . . . . . . . . . . . . . . .$853,713
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 10,321
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 843,392
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$75,000
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $-0-
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$50,000
Trading Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$101
Other borrowed money:
a) With original maturity of one year or less. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$668,892
b) With original maturity of more than one year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$5,000
Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . . . . . . . .$-0-
Bank's liability on acceptances executed and outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . $938
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$-0-
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$83,666
TOTAL LIABILITES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,212,003
Limited life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$-0-
EQUITY CAPITAL
Perpetual preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$-0-
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$29,650
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$216,935
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$(44,320)
Plus: Net unrealized gains (losses) on marketable equity securities . . . . . . . . . . . . . . . . . . . . .$(91)
Cumulative foreign currency translation adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$-0-
TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$202,356
TOTAL LIABILITIES AND EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,414,359
</TABLE>