SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
PHP HEALTHCARE CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
PHP HEALTHCARE CORPORATION
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(1)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11: (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE>
PHP HEALTHCARE CORPORATION
11440 COMMERCE PARK DRIVE
RESTON, VIRGINIA 20191
OCTOBER 30, 1996
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
To the Shareholders of
PHP HEALTHCARE CORPORATION
The 1996 Annual Meeting of Shareholders of PHP Healthcare Corporation (the
"Company") will be held on Monday, November 25, 1996, at 10:00 a.m. local time,
at the Company's corporate offices at 11440 Commerce Park Drive, Reston,
Virginia, for the following purposes:
1. To elect three directors, each to be elected for a three-year term
expiring in 1999;
2. To approve the PHP Healthcare Corporation 1996 Incentive Plan;
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Holders of Common Stock of the Company whose names appear of record on the
books of the Company at the close of business on October 18, 1996, are entitled
to notice of and to vote at the meeting or at any adjournment thereof. A list of
such shareholders will be available for inspection by shareholders at the
Company's principal office for a period of ten days prior to the meeting date.
By Order of the Board of Directors
Ben Rosenbaum III
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE. A POSTAGE-PAID,
RETURN-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
PHP HEALTHCARE CORPORATION
11440 COMMERCE PARK DRIVE
RESTON, VIRGINIA 20191
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 25, 1996
------------------------
GENERAL INFORMATION
This Proxy Statement is being furnished to shareholders of PHP Healthcare
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company (the "Board") of proxies
for use at the Annual Meeting of Shareholders to be held on November 25, 1996,
at the Company's offices at 11440 Commerce Park Drive, Reston, Virginia, for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders,
and at all adjournments thereof (the "Annual Meeting"). This Proxy Statement is
first being mailed to the Company's stockholders on or about October 30, 1996.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, holders of record of the Company's outstanding
shares of common stock, par value $0.01 per share (the "Common Stock"), will be
asked to consider and vote upon the following matters:
(i) To elect three directors, each for a three-year term expiring in
1999;
(ii) To approve the Company's 1996 Incentive Plan (the "1996 Plan");
and
(iii) To transact such other business as may properly come before the
Annual Meeting.
The Board unanimously recommends that stockholders vote FOR the election of the
Board's nominees for election as directors of the Company. The Board has adopted
the 1996 Plan and unanimously recommends its approval by stockholders. As of the
date of this Proxy Statement, the Board knows of no other business to come
before the Annual Meeting.
RECORD DATE; QUORUM; VOTE REQUIRED
The Board of Directors has fixed the close of business on October 18, 1996,
as the record date for determination of the stockholders entitled to notice of,
and to vote at, the Annual Meeting (the "Record Date"). As of the Record Date,
there were 10,996,512 shares of Common Stock outstanding. The presence, either
in person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Common Stock as of the Record Date is necessary to
constitute a quorum at the Annual Meeting. Each share of Common Stock
outstanding on the Record Date entitles the record holder thereof to one vote on
each matter that may properly come before the Annual Meeting. The affirmative
vote of a plurality of the shares of Common Stock represented in person or by
properly executed proxy is required to approve the election of each of the
Company's nominees for election as a director. The affirmative vote of a
majority of the shares represented at the Annual Meeting, in person or by proxy,
and entitled to vote at the Annual Meeting, will be necessary to approve the
1996 Plan.
1
<PAGE>
PROXIES
All shares of Common Stock that are represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such proxies will
be voted for approval of the election of the Board's three nominees as directors
of the Company and for approval of the 1996 Plan. Although the Company has no
reason to believe that any of the nominees will be unwilling or unable to serve
as directors, if any of the nominees are not available for election, properly
executed proxies will be voted for the election of such substitute nominees as
may be designated by the Board of Directors.
The presence at the Annual Meeting, in person or by proxy, of the holders
of record of a majority of the shares issued and outstanding on the Record Date,
and entitled to vote, shall be necessary and sufficient to constitute a quorum
for the transaction of business. Any stockholder present (including broker
non-votes) at the Annual Meeting, but who abstains from voting, shall be counted
for purposes of determining whether a quorum exists. With respect to the
approval of the 1996 Plan, an abstention (or broker non-vote) has the same
effect as a vote against the proposal. Since only a plurality is required for
the election of directors, abstentions or broker non-votes will have no effect
on the election of directors (except for purposes of determining whether a
quorum is present at the Annual Meeting).
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Company, at or before the Annual Meeting, a written notice of
revocation bearing a date later than the proxy, (ii) duly executing a subsequent
proxy relating to the same shares of Common Stock and delivering it to the
Company at or before the Annual Meeting, or (iii) attending the Annual Meeting
and voting in person (although attendance at the Annual Meeting will not in and
of itself constitute a revocation of a proxy).
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of Common Stock and will reimburse them for their reasonable expenses in
so doing. Certain directors, officers and other employees of the Company, not
specially employed for this purpose, may solicit proxies, without additional
remuneration therefor, by personal interview, mail, telephone, facsimile or
other electronic means.
The Company's Annual Report to Shareholders containing the Company's
financial statements for the fiscal year ended April 30, 1996, is being mailed
with this Proxy Statement. The Annual Report does not constitute a part of the
proxy soliciting material.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of October 18, 1996,
with respect to the beneficial ownership of Common Stock by (i) each person
known to the Company to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each executive officer named in the Summary Compensation Table,
and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME AND ADDRESS OF SHARES OF CLASS
- --------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Charles H. Robbins......................................................... 2,010,076(1) 17.44%
11440 Commerce Park Drive
Reston, VA 20191
Shamrock Investments (2)................................................... 1,095,536(3) 9.54%
Charles P. Reilly
Michael E. Gallagher
2049 Century Park East, Suite 3330
Los Angeles, CA 90067
Bosko Djordjevic and Elizabeth Keck Djordjevic, Trustee.................... 800,000(4) 7.28%
505 S. Beverly Drive, Suite 215
Beverly Hills, CA 90212
Jack M. Mazur.............................................................. 487,293(5) 4.25%
11440 Commerce Park Drive
Reston, VA 20191
John P. Cole............................................................... 338,000(6) 3.05%
11440 Commerce Park Drive
Reston, VA 20191
Michael D. Starr........................................................... 329,136(7) 2.94%
11440 Commerce Park Drive
Reston, VA 20191
Robert L. Bowles, Jr....................................................... 137,011(8) 1.24%
820 First Street, N.E., Suite LL100
Washington, D.C. 20002-4205
George E. Schafer, M.D..................................................... 48,302 (9)
4 Imperial Oaks
San Antonio, TX 78248
William J. Lubin........................................................... 41,333(10) (9)
11440 Commerce Park Drive
Reston, VA 20191
Joseph G. Mathews.......................................................... 8,531 (9)
3510 Highway O
Wright City, MO 63390
Donald J. Ruffing.......................................................... 7,445 (9)
11104 Woodlawn Boulevard
Upper Marlboro, MD 20772
Paul T. Cuzmanes........................................................... 3,837 (9)
250 West Pratt Street
Baltimore, MD 21201
All directors and executive officers as a group (12 persons)............... 4,011,606 31.61%
</TABLE>
3
<PAGE>
- ------------------
(1) Includes 526,667 shares which Mr. Robbins presently could acquire upon the
exercise of options granted by the Company. Also includes 300,000 shares,
or 2.73% of the class, owned by Mr. Robbins' spouse, Ellen E. Robbins,
individually and as trustee for the benefit of their children.
(2) The persons listed constitute a group within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and jointly filed a Schedule 13D with the Securities and Exchange
Commission on October 11, 1994 reflecting the aggregate beneficial
ownership of 609,067 shares of Common Stock, options to purchase an
additional 375,358 shares of Common Stock, and promissory notes of the
Company which are convertible into 111,111 shares of Common Stock.
(3) Includes 200,000 shares owned by Shamrock Investments, 236,847 shares owned
by Mr. Reilly, 172,220 shares owned by Mr. Gallagher, 22,500 shares which
Shamrock Investments could acquire upon the exercise of options granted by
the Company, 231,596 shares which Mr. Reilly could acquire upon the
exercise of options granted by the Company, 121,262 shares which Mr.
Gallagher could acquire upon the exercise of options granted by the
Company, 59,963 shares which Mr. Reilly could acquire upon conversion of a
promissory note of the Company, 6,173 shares which Mr. Reilly could acquire
upon conversion of a promissory note of the Company issued to Shamrock
Investments, and 44,975 shares which Mr. Gallagher could acquire upon
conversion of a promissory note of the Company.
(4) According to the Amendment No. 1 to Schedule 13D of Bosko Djordjevic and
Elizabeth Keck-Djordjevic, as trustee, filed on September 15, 1995.
(5) Includes 480,000 shares which Mr. Mazur could acquire upon the exercise of
options granted by the Company. Does not include either 512,014 shares, or
4.66% of the class, owned by VACHR, Inc., a corporation owned by Mr.
Mazur's spouse, Lynn Mazur, or 30,000 shares owned by J&J Investment
Partnership, a partnership wholly owned by members of Mr. Mazur's family.
Mr. Mazur disclaims beneficial ownership of the shares owned by Lynn Mazur
(through VACHR, Inc.) and J&J Investment Partnership.
(6) Includes 68,000 shares which Mr. Cole presently could acquire upon the
exercise of options granted by the Company.
(7) Includes 193,333 shares which Mr. Starr presently could acquire upon the
exercise of options granted by the Company.
(8) Includes 33,333 shares which Dr. Bowles presently could acquire upon the
exercise of options granted by the Company.
(9) Represents less than 1% of the shares of the Company's outstanding stock.
(10) Represents the shares which Mr. Lubin presently could acquire upon exercise
of options granted by the Company.
4
<PAGE>
PROPOSAL I: ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
The Board of Directors is classified into three classes whose terms are
staggered to expire in different years. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
annual meeting of shareholders for a full three-year term. The terms of three of
the present directors are expiring at the Annual Meeting. Directors elected at
the Annual Meeting will hold office for a three-year term expiring in 1999 or
until their successors are elected and qualified. The other six directors will
continue in office for the remainder of their terms as indicated below.
Proxies may not be voted for more than three nominees. The Board knows of
no reason why any nominee will be unavailable or unable to serve. If any nominee
should for any reason become unavailable for election, the proxy holders will
vote for such other nominee as may be proposed by the Board.
Certain information about the three nominees and other directors continuing
in office is set forth below, including any position(s) they hold with the
Company.
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING IN 1999
<TABLE>
<CAPTION>
POSITIONS OR OFFICES SERVED AS DIRECTOR
NAME WITH THE COMPANY CONTINUOUSLY SINCE AGE
- ---------------------------------------------- ----------------------------- ------------------- -----------
<S> <C> <C> <C>
Robert L. Bowles, Jr.......................... President, D.C. Chartered 1996 56
Health Plan, Inc.
Donald J. Ruffing............................. None 1991 75
Joseph G. Mathews............................. None 1993 62
</TABLE>
Robert L. Bowles, Jr. joined the Company in connection with the Company's
acquisition of D.C. Chartered Health Plan, Inc. Dr. Bowles is the founder of
D.C. Chartered and has more than 30 years' experience in administration and
management of health care services and operations for corporations and the
military.
Donald J. Ruffing joined the Company as a Director in 1991. Colonel Ruffing
retired as the Chief of the Air Force Medical Service Corps, Office of the
Surgeon General, where he was responsible for developing plans, policies and
procedures for the management of the Air Force Medical Service Corps. In 1990,
Colonel Ruffing served as a team member of the Peer and Application Reviews,
Refugee Mental Health Programs for the National Institute of Mental Health.
Joseph G. Mathews joined the Company as a Director in July, 1993. Mr.
Mathews owns and operates Joseph G. Mathews & Associates, an insurance brokerage
firm. Mr. Mathews' professional designations include Chartered Financial
Consultant and Master of Science Financial Services. In addition to serving on
the Company's Board, Mr. Mathews is a member of the boards of directors of Lake
of the Ozarks General Hospital, Mark Twain Bank, Sanford Brown College and
Learfield Communication. Mr. Mathews also serves on the Lindenwood College
Board.
DIRECTORS CONTINUING IN OFFICE IN THE CLASS OF 1997
<TABLE>
<CAPTION>
POSITIONS OR OFFICES SERVED AS DIRECTOR
NAME WITH THE COMPANY CONTINUOUSLY SINCE AGE
- ---------------------------------------------- ----------------------------- ------------------- -----------
<S> <C> <C> <C>
George E. Schafer, M.D........................ Senior Vice President for 1981 74
Medical Affairs
Paul T. Cuzmanes.............................. None 1989 51
Charles P. Reilly............................. None 1991 54
</TABLE>
George E. Schafer, M.D., joined the Company as a Director in 1981. Dr.
Schafer serves as Senior Vice President for Medical Affairs and previously
served as Vice President/Medical Director.
5
<PAGE>
Dr. Schafer retired from the Air Force with the rank of Lieutenant General,
having served as Surgeon General of the United States Air Force.
Paul T. Cuzmanes joined the Company as a Director in 1989. Mr. Cuzmanes is
a partner with the law firm of Wilson, Elser, Moskowitz, Edelman & Dicker. Mr.
Cuzmanes specializes in health care law, commercial law and the representation
of municipalities. He is a fellow in the American Society of Pharmaceutical Law.
Charles P. Reilly joined the Company as a Director in 1991. Mr. Reilly is
the managing general partner of Shamrock Investments, a financial advisory and
investment firm that specializes in the health care industry. Mr. Reilly serves
as Chairman of the Board of Directors of Dynamic Health, Inc., an acute care
hospital company, and as a director of G & L Realty Corporation, a NYSE health
care real estate investment trust (REIT). Mr. Reilly has served as a director,
trustee and governing council member of the Federation of American Healthcare
Systems and The National Committee for Quality Health Care and the American
Hospital Association. From August 1994 to August 1995, Mr. Reilly was an officer
of the Company, serving as a member of the Executive Council.
DIRECTORS CONTINUING IN OFFICE IN THE CLASS OF 1998
<TABLE>
<CAPTION>
POSITIONS OR OFFICES SERVED AS DIRECTOR
NAME WITH THE COMPANY CONTINUOUSLY SINCE AGE
- ------------------------------------ -------------------------------------- ------------------- -----------
<S> <C> <C> <C>
Charles H. Robbins.................. Chairman of the Board and Chief 1976 66
Executive Officer
Jack M. Mazur....................... President 1976 54
Michael D. Starr.................... Senior Executive Vice President, 1985 52
Treasurer, and Chief Executive
Officer, Government Managed Care
Services Division
</TABLE>
Charles H. Robbins founded the Company in 1976 and has been Chairman of the
Board since its inception. He also served as President of the Company from its
inception through October 1995.
Jack M. Mazur has been a Director of the Company since 1976 and has served
as President since October 1995. Prior to his election as President, Mr. Mazur
was Chief Executive Officer of the Company's Commercial Managed Care Services
Division. From August 1989 to October 1995, he served as Senior Executive Vice
President of the Company, and from June 1986 to October 1993 as Secretary of the
Company.
Michael D. Starr has been a Director since 1985. Mr. Starr was Executive
Vice President from 1986 to September 1995 and has served as Senior Executive
Vice President since October 1995. He has served as Chief Executive Officer,
Government Managed Care Services Division, since April 1995.
VOTE REQUIRED
The three nominees for election as directors at the 1996 Annual Meeting who
receive the greatest number of votes cast for the election of directors at that
meeting shall be elected directors, assuming there is a quorum present. The
aggregate number of votes entitled to be cast by all shareholders present in
person or represented by proxy at the meeting, whether those shareholders vote
"for," "against," or abstain from voting, will be counted for purposes of
determining the number of shares present for purposes of establishing a quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
ELECTION AS DIRECTORS.
6
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings during the year ended April 30,
1996, and took action by written consent in lieu of a meeting four times during
such year. Each of the incumbent directors attended at least 75% of the meetings
of the Board of Directors, and of the meetings of committees on which they
serve, held while they were on the Board of Directors and such committees in the
year ended April 30, 1996.
The standing committees of the Board of Directors include the Audit
Committee, the Compensation Committee, and the Stock Option Committee. The Board
of Directors has not appointed a nominating committee.
Messrs. Cuzmanes, Ruffing, and Mathews were members of the Audit Committee
for the fiscal year ended April 30, 1996. The functions of the Audit Committee
are to review the adequacy of systems and procedures for preparing the financial
statements of the Company as well as the suitability of internal financial
controls, and to review and approve the scope and performance of the independent
auditors' work. The Audit Committee met once during the fiscal year ended April
30, 1996.
Messrs. Cuzmanes, Ruffing, and Mathews were members of the Stock Option
Committee. The functions of the Stock Option Committee are to determine the
amount and allocation of options to be granted under the Company's 1986 Stock
Option Plan, and to determine who are eligible Participants under the Plan. The
Stock Option Committee met twice during the fiscal year ended April 30, 1996,
and took action by written consent in lieu of a meeting five times during such
year.
Messrs. Cuzmanes, Reilly and Mathews were members of the Compensation
Committee for the fiscal year ended April 30, 1996. The function of the
Compensation Committee is to recommend salary levels for the executive officers
of the Company. The Compensation Committee met once during the fiscal year ended
April 30, 1996.
Shareholders wishing to suggest potential nominees for election to the
Board of Directors should write to the Secretary of the Company specifying the
name of the proposed nominee together with a statement of such person's
qualifications and relevant biographical data. Each submission must be
accompanied by the written consent of the proposed nominee. All such
recommendations will be brought to the attention of the Board of Directors. The
procedures to be followed to nominate a candidate for election as a director are
described under the caption "Shareholder Proposals."
7
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's executive officers. Each of the officers listed has been appointed by,
and serves at the discretion of the Board.
<TABLE>
<CAPTION>
CONTINUOUSLY SERVED
POSITIONS OR OFFICES AS EXECUTIVE
NAME WITH THE COMPANY OFFICER SINCE AGE
- --------------------------------------- -------------------------------------------- --------------------- -----------
<S> <C> <C> <C>
Charles H. Robbins..................... Chairman of the Board and Chief Executive 1976 66
Officer
Jack M. Mazur.......................... President 1976 54
Michael D. Starr....................... Senior Executive Vice President, Treasurer, 1981 52
and Chief Executive Officer, Government
Managed Care Services Division
Anthony M. Picini...................... Senior Vice President and Chief Financial 1990 41
Officer
William J. Lubin....................... Executive Vice President and Chief Executive 1993 44
Officer, Commercial Managed Care Services
Division
John P. Cole........................... Executive Vice President 1994 55
</TABLE>
Anthony M. Picini joined the Company in December 1989 as Chief Financial
Officer and became Vice President in 1990 and Senior Vice President in 1993.
Prior to joining the Company, Mr. Picini was a Senior Manager with the
accounting firm of KPMG Peat Marwick LLP, managing auditing and accounting
services provided to public and private commercial companies.
William J. Lubin joined PHP in August 1994 as Senior Vice President for
Managed Care. In late 1994 he assumed the position of Chief Operating Officer,
Commercial Managed Care Services Division. In October 1995, he became Chief
Executive Officer, Commercial Managed Care Services Division. In April 1996, he
became Executive Vice President. Prior to joining PHP, Mr. Lubin held management
positions with Aetna Health Plans, Travelers Insurance Companies, Lincoln
National, and Blue Cross and Blue Shield of Connecticut.
John P. Cole is Executive Vice President of the Company with responsibility
for marketing the Company's managed health care products and services.
Previously, he was President and Chief Executive Officer of JP Cole & Associates
which exclusively marketed PHP products. JP Cole & Associates was merged into
the Company in October 1994. Mr. Cole is a 30-year veteran of the employee
benefits field having held senior executive positions with Prudential, AMI, Blue
Cross of California, and Lincoln National Corporation. Prior to starting JP Cole
& Associates in 1993, Mr. Cole was Senior Vice President at Aetna Health Plans
where he had responsibility for both sales and delivery of health care in
markets across the United States.
For a summary of the business experience of each of the other executive
officers of the Company, see "Nominees for Election as Directors" and "Directors
Continuing in Office," above.
There are no family relationships among any of the directors and executive
officers.
8
<PAGE>
SUMMARY COMPENSATION
The following table sets forth certain information for each of the last
three fiscal years with respect to the compensation awarded to, earned by, or
paid to the Chief Executive Officer of the Company and the next four most highly
compensated executive officers for the fiscal year ended April 30, 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- ---------------
(A) (B) (C) (D) (E) (F) (G)
OTHER ANNUAL ALL OTHER
COMPENSATION OPTIONS/SARs COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARD(S) ($)
- ------------------------------------- --------- ----------- ----------- ----------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Robbins, 1996 $ 625,000 -0- (1) -0- $ 11,413(2)
Chairman and Chief 1995 500,000 83,333 790,000 11,827
Executive Officer 1994 500,000 -0- -0- 50,428
Jack M. Mazur, 1996 550,000 -0- (1) -0- 9,636(3)
President 1995 400,000 66,667 720,000 9,688
1994 400,000 -0- -0- 7,673
Michael D. Starr, 1996 330,000 -0- (1) -0- 9,362(4)
Senior Executive Vice 1995 275,000 -0- 290,000 9,688
President 1994 275,000 -0- -0- 3,969
John P. Cole, 1996 330,000 -0- (1) -0- 1,636(7)
Executive Vice 1995 176,346(5) -0- 30,000(6) 1,488
President 1994 -0- -0- -0- -0-
William J. Lubin, 1996 207,692 -0- (1) 15,000 706(8)
Executive Vice 1995 154,800 -0- 100,000 620
President 1994 -0- -0- -0- -0-
</TABLE>
- ------------------
(1) Each of the named executive officers receives certain perquisites, including
the use of Company automobiles; such perquisites, however, do not exceed the
lesser of $50,000 or 10% of such officer's salary and bonus.
(2) Includes $3,013 term life insurance premiums, $8,000 director's fees, and
$400 in 401(k) Plan matching fees. Mr. Robbins has elected to be paid his
director's fees in stock pursuant to the Directors' Retainer Plan.
(3) Includes $1,236 term life insurance premiums, $8,000 director's fees, and
$400 in 401(k) Plan matching fees. Mr. Mazur has elected to be paid his
director's fees in stock pursuant to the Directors' Retainer Plan.
(4) Includes $962 term life insurance premiums, $8,000 director's fees, and $400
in 401(k) Plan matching fees. Mr. Starr has elected to be paid his
director's fees in stock pursuant to the Director's Retainer Plan.
(5) Salary shown is that from Mr. Cole's date of employment, September 29, 1994,
through the end of the fiscal year.
(6) Does not include options for 38,000 shares received by Mr. Cole upon the
merger of JP Cole & Associates into the Company in October 1994.
(7) Includes $1,236 term life insurance premiums and $400 in 401(k) Plan
matching fees.
(8) Includes $306 term life insurance premiums and $400 in 401(k) Plan matching
fees.
9
<PAGE>
OPTION GRANTS
The following table sets forth certain information regarding options
granted during fiscal 1996 by the Company to the individuals named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
--------------- POTENTIAL REALIZABLE VALUE AT
NO. OF % OF TOTAL ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO MARKET APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------------------
NAME GRANTED IN 1996 PRICE GRANT DATE DATE 0% 5% 10%
- ----------------------- ------------- --------------- ----------- ----------- ----------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles H. Robbins..... -- -- -- -- -- -- -- --
Jack M. Mazur.......... -- -- -- -- -- -- -- --
Michael D. Starr....... -- -- -- -- -- -- -- --
John P. Cole........... -- -- -- -- -- -- -- --
William J. Lubin....... 15,000 5.7% $27.25 $27.25 1/25/2006 -0- $259,500 $657,450
</TABLE>
OPTION EXERCISES
The following table sets forth certain information relating to stock
options exercised by and the number and value of unexercised options previously
granted to, the individuals named in the Summary Compensation Table during
fiscal 1996.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARs OPTIONS/SARs
AT 4/30/96 AT 4/30/96
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------- ------------------- --------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Charles H. Robbins................ -0- -0- 263,333/526,667 $6,990,125/$13,980,250
Jack M. Mazur..................... -0- -0- 240,000/480,000 $6,378,333/$12,756,667
Michael D. Starr.................. -0- -0- 96,667/193,333 $ 2,548,375/$5,096,750
John P. Cole...................... -0- -0- 49,000/19,000 $ 1,274,000/$494,000
William J. Lubin.................. -0- -0- 33,333/81,667 $ 849,563/$1,747,875
</TABLE>
401(K) PLAN
The Company established the PHP Healthcare Corporation 401(k) Plan (the
"401(k) Plan") effective January 1, 1991, pursuant to which employees may defer
compensation for income tax purposes under Section 401(k) of the Internal
Revenue Code of 1986 (the "Code"). Participant contributions will be invested at
all times in any or all of six funds at the direction of the participant.
Participant contributions will be matched up to $400 annually by the Company.
The Company contributed $400 to the 401(k) Plan during fiscal year 1996 on
behalf of each of the named executive officers.
DIRECTOR COMPENSATION
Through fiscal 1996, each member of the Board of Directors of the Company
received $2,000 per quarter for services as a director, plus $650 for each
special meeting of the Board. Effective on May 1, 1996, employee directors no
longer receive additional compensation for serving on the Board and each
non-employee director receives $4,500 per quarter for his services as a
director, plus $650 for each special meeting of the Board. In addition, each
outside director serving on a particular committee is paid $1,200 for attending
up to three committee meetings annually and $500 for each additional committee
meeting. Each director is reimbursed for travel expenses relating to attending
meetings of the Board of Directors and its committees.
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The Company has adopted a Directors' Retainer Plan. For any fiscal quarter,
each director of the Company may elect to have the full amount of his retainer
paid in the form of Common Stock. The number of shares issued is calculated
based on the then current market value of the stock.
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements with each of Charles H.
Robbins, Jack M. Mazur and Michael D. Starr. Under these agreements, Mr. Robbins
is employed as Chief Executive Officer, Mr. Mazur is employed as President and
Mr. Starr is employed as Senior Executive Vice President. The agreements renew
automatically on May 1 of each year unless terminated by either the executive or
the Company on ninety (90) days advance notice, or otherwise in accordance with
the agreements, except that no notice may be given by the Company sooner than
three years after a Change in Control (as defined in the agreements). The
agreements are currently in effect through April 30, 1997. In the event of
termination because of the executive's death or disability, the Company will pay
the executive or his estate a lump sum severance payment equal to one year's
salary and a pro rata bonus for the year in which the termination occurs. In the
event the Company terminates the agreement other than for cause, death or
disability or the executive terminates the agreement because of certain adverse
changes following a Change in Control of the Company, then (a) the Company must
pay the executive a lump sum amount equal to three times the sum of the
executive's base salary and bonus; (b) the executive is entitled, for a period
of three years, to continuation of coverage at the Company's expense of the
executive's disability, medical and dental benefits; and (c) all restrictions on
any outstanding awards granted to the executive will lapse and be immediately
vested, all stock options will become fully exercisable and the executive will
have the right to require the company to purchase for cash any shares of
unrestricted stock and stock purchased upon the exercise of any options.
The Company also has entered into an employment agreement with John P.
Cole. Under this agreement, Mr. Cole is employed as Executive Vice President of
the Company with an annual salary of $330,000. Options to purchase 30,000 shares
of the Company's common stock at $4.50 per share were granted to Mr. Cole
pursuant to this agreement. The options are exercisable ratably over one year in
increments of three months starting at the grant date of September 29, 1994.
Under the agreement, if Mr. Cole's employment is involuntarily terminated
"without cause," he will be entitled to receive continued compensation
throughout the remaining term of the agreement or any extension thereof. The
agreement provides that if the Company is sold, merged or reorganized whereby
there is a change in control of more than 25% of the Company's outstanding
shares, a new Board of Directors is elected and existing management is replaced,
and if Mr. Cole's responsibilities and compensation are reduced, Mr. Cole's
employment will be deemed to have been involuntarily terminated "without cause."
The agreement is currently in effect through December 31, 1997.
The Company has entered into an agreement with William J. Lubin under
which, if Mr. Lubin's employment is involuntarily terminated, he will be
entitled to receive continued compensation as a consultant for 18 months or
until he earlier secures full time employment. Under the agreement, if the
Company is sold or acquired by way of merger, stock swap or cash transaction
whereby there is a change in control of at least 20% of the voting power of the
Company's outstanding shares, and if Mr. Lubin's responsibilities and
compensation are reduced, then Mr. Lubin's employment will be deemed to have
been involuntarily terminated.
JOINT COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Compensation Committee and the Stock Option Committee are comprised of
non-employee members of the Board of Directors. The Compensation Committee is
responsible for setting and administering executive officer compensation
policies and programs. The Stock Option Committee is responsible for determining
the recipients and number of options, the timing of grants and the option
exercise prices, all in accordance with the terms of the Company's Stock Option
Plan. The Stock Option Committee considers the recommendations of management and
of the Compensation Committee.
The Company's executive compensation program is designed (i) to align
executive compensation closely with the Company's performance and shareholder
returns through equity-based incentives, (ii) to attract and retain the key
executives critical to the success of the Company and (iii) to motivate and
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<PAGE>
reward such individuals based on corporate and individual performance. In
developing compensation plans and setting compensation levels, the Compensation
Committee takes into consideration compensation programs offered by other
companies with which the Company competes for executives.
The components of the Company's executive compensation program for fiscal
year 1996 were (i) annual compensation consisting of base salaries,
(ii) long-term incentives, and (iii) other benefits. Executive compensation is
determined and administered by the Compensation Committee on the basis of total
compensation rather than as separate free-standing components.
Base Salary
The Compensation Committee reviews each executive officer's base salary on
an annual basis. When reviewing the base salary, the Compensation Committee
takes into account the overall performance of the Company and the executive, the
competitive market for base salaries, the executive's responsibilities, and
increases in the cost of living. In determining base salary compensation for
fiscal year 1996, the Compensation Committee considered financial and
operational results of the fiscal year and the contribution of the executive
officers to achieve those results, and the compensation packages for executives
of comparable position and responsibility in the industry.
To provide additional incentive to achieve outstanding performance, the
Compensation Committee also makes cash bonuses to eligible executives based on
corporate and individual performance. The Compensation Committee believes that
cash bonus awards enhance the link between pay and performance and motivate
participants by clearly communicating to them the potential rewards for
corporate performance.
For fiscal year 1996, the Compensation Committee determined that, in light
of the earlier grant of stock options and the significant appreciation in the
Company's stock price, it was not necessary or appropriate to award cash bonuses
to reward executives for performance. However, the Compensation Committee has
approved a 6% increase in the annual salary of the executives for fiscal 1997.
Long-Term Incentives
The Compensation Committee believes that the financial interests of
executive officers should be aligned closely with those of shareholders through
stock ownership. Under the Amended and Restated PHP Healthcare Corporation 1986
Stock Option Plan (the "1986 Plan") adopted by the Board of Directors and
approved by the shareholders, the Stock Option Committee approves the grant of
stock options to its key employees and officers after evaluating the
contribution of the executives to the Company's long-term performance and the
importance of their responsibilities within the Company. Stock options granted
under the 1986 Plan generally have a term of ten years, vest over three to four
years and have an exercise price equal to the fair market value of the Common
Stock on the grant date. Each year, the Stock Option Committee reviews the
desirability of granting stock options under the 1986 Plan. In fiscal year 1996,
the Company granted 265,000 stock options to executive officers and other
eligible employees to acquire shares of Common Stock at exercise prices per
share ranging from $9.25 to $27.25.
To link executive compensation more effectively to the Company's long-term
performance, the Compensation and Stock Option Committees recommended for Board
consideration and approval the PHP Healthcare Corporation 1996 Incentive Plan
(the "1996 Plan") (see "Proposal II -- Approval of the PHP Healthcare
Corporation 1996 Incentive Plan"). The adoption and approval of the 1996 Plan
will not have any effect on the 1986 Plan. Outstanding options granted under the
1986 Plan will remain in effect under the terms of their respective grants;
consideration of further grants is expected to continue.
The 1996 Plan provides for performance awards which are units denominated
in shares or cash (and payable in shares or cash, or any combination thereof) or
which are granted in the form of shares subject to vesting. In addition, it
permits the granting of stock options, restricted stock, dividend equivalent
rights and stock appreciation rights. The two Committees believe that the 1996
Plan presents a more flexible incentive compensation approach for the Company
and will make the Company's executive compensation program more responsive to
shareholder interests.
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<PAGE>
Deductibility of Executive Compensation
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any of the four
most highly compensated other executive officers employed by the corporation on
the last day of the taxable year. Exceptions are made for, among other things,
qualified "performance-based compensation." Qualified performance-based
compensation means compensation paid solely on account of the attainment of
objective performance goals, provided that (i) performance goals are established
by a compensation committee consisting solely of two or more outside directors,
(ii) the material terms of the performance-based compensation are disclosed to
and approved by stockholders in a separate stockholder vote prior to payment and
(iii) prior to payment, the compensation committee certifies that the
performance goals were attained and other material terms were satisfied.
The 1986 Plan, as amended, is designed to conform with Section 162(m) of
the Code. Except with respect to certain stock options the exercise price of
which is less than the fair market value of the underlying shares on the date of
grant, compensation attributable to options granted under the 1986 Plan will
meet (or will be treated under applicable IRS regulations as meeting) the
requirements for qualified 'performance-based compensation.' With respect to
stock options granted under the 1986 Plan with an exercise price less than the
fair market value of the underlying shares on the date of grant, there can be no
assurance that the compensation attributable to such options will not be subject
to the deduction limitations of Section 162(m) of the Code.
Chief Executive Officer Compensation
During fiscal 1996, the Company's most highly compensated executive officer
was Charles H. Robbins, Chairman and Chief Executive Officer. Mr. Robbins
participates in the Company's regular executive compensation programs. The
Compensation Committee's approach to determining Mr. Robbins' compensation is to
take into account the Company's financial and operational performance (including
its financial and operational goals for the fiscal year), the Company's other
corporate objectives (such as transitioning to a commercial market-based managed
health care company), comparable public company compensation programs, and his
length of service. During this fiscal year, the Compensation Committee
re-evaluated Mr. Robbins' compensation with the concurrence of the Board of
Directors.
Mr. Robbins' salary was increased for the first time in three years from
$500,000 to $625,000 for the 1996 fiscal year beginning May 1, 1995. The 25%
increase reflected the Compensation Committee's view that the Company
successfully made a difficult transition from being principally a government
contractor/public sector entity to an enterprise with a significant stake in the
private sector. The Compensation Committee also concluded that the Company's
financial and operational results, the related improvement in shareholder equity
values, and the compensation programs of pertinent public companies justified
this compensatory action at this time after several years of not increasing Mr.
Robbins' compensation.
Mr. Robbins did not receive any grants of options for fiscal year 1996
under the 1986 Plan.
Other Benefits
The Compensation Committee retained the other elements of the current
executive compensation package (health and life insurance, use of Company
automobiles and, for the senior executive officers, split dollar life insurance)
for fiscal year 1996.
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
CHARLES P. REILLY PAUL T. CUZMANES
JOSEPH G. MATHEWS DONALD J. RUFFING
PAUL T. CUZMANES JOSEPH G. MATHEWS
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<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The line graph below compares yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock against the cumulative
total return on the Standard and Poor's 500 Stock Index and the Standard and
Poor's Health Care Composite Index for the period of five years commencing on
April 30, 1991.
In the Printed version there appears a line chart in which plot points
of the following table are drawn.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
----------------------------------------------------------------------------
4/91 4/92 4/93 4/94 4/95 4/96
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
PHP Healthcare Corp PPH 100 74 31 44 81 257
S & P 500 1500 100 114 125 131 154 201
S & P Health Care Cmpst IHCC 100 113 96 92 129 181
</TABLE>
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
In September 1995, the Company retained Shamrock Investments ("Shamrock")
as a financial advisor. Charles P. Reilly, a director of the Company, is the
managing general partner of Shamrock and Michael E. Gallagher is a general
partner of Shamrock. In fiscal 1996, the Company paid Shamrock $200,000 for
financial advisory services.
The Company has adopted a Senior Executive Loan Program (the "Program"),
pursuant to which loans to senior executive officers may be made up to three and
one-half times the officer's annual salary. Each loan must be repaid within one
year and bears interest at two percent above the Company's short-term borrowing
rate. All loans are collateralized by the shares of the Company's Common Stock
owned by the senior executive officer. The due dates on amounts outstanding were
extended in 1996 for twelve months. Beginning in fiscal year 1993, there were
loans made under the Program to each of Charles H. Robbins and Jack M. Mazur.
The largest amount outstanding during fiscal 1996 to Mr. Robbins was $1,465,000
and to Mr. Mazur was $1,798,000. The interest rate on these loans as of
September 30, 1996 was 8.5%.
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<PAGE>
In accordance with the Board of Directors' approval, the Company makes
premium payments relating to certain insurance policies on behalf of certain
officers of the Company. These advances are owed to the Company and are
collateralized by assignment of the underlying cash surrender value and related
death benefit. During 1996, the officers signed promissory notes bearing
interest at 7% and due in April 2002 for the amounts advanced. The amount
outstanding as of April 30, 1996, to Mr. Robbins was $724,000, to Mr. Mazur was
$173,000, and to Mr. Starr was $165,000.
Paul Cuzmanes is a partner with the law firm of Wilson, Elser, Moskowitz,
Edelman & Dicker, which firm the Company retained in fiscal 1996. During the
year ended April 30, 1996, total billings approximated $300,000.
For further information with respect to related party transactions, see
Note 10 of Notes to Consolidated Financial Statements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
('SEC') and the New York Stock Exchange. Executive officers, directors and
greater than ten percent shareholders are required by the SEC regulation to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based on the Company's review of the copies of such forms it has received
and based on written representations from certain reporting persons that they
were not required to file Forms 5 for the fiscal year, except as noted below,
the Company believes that all its executive officers, directors and greater than
ten percent shareholders complied with all filing requirements applicable to
them with respect to transactions during fiscal 1996. Certain of the Company's
executive officers and directors failed to report on a timely basis certain
option grants and stock issuances under the Company's Stock Option Plan and
Directors' Retainer Plan, as follows: Charles H. Robbins (one late report with
respect to two transactions), Jack M. Mazur (one late report with respect to two
transactions), Michael D. Starr (one late report with respect to two
transactions), Julien J. Lavoie (one late report with respect to three
transactions), George E. Schafer, M.D. (one late report with respect to two
transactions), Joseph G. Mathews (one late report with respect to one
transaction), Donald Ruffing (one late report with respect to one transaction),
Anthony M. Picini (one late report with respect to three transactions). These
transactions were reported on Forms 5 filed in June 1996. Additionally, Paul T.
Cuzmanes sold certain shares in August 1995, but did not report the dispositions
until the filing of Form 5 in June 1996.
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<PAGE>
PROPOSAL II: APPROVAL OF PHP HEALTHCARE CORPORATION
1996 INCENTIVE PLAN
GENERAL
On October 24, 1996, the Board unanimously adopted the PHP Healthcare
Corporation 1996 Incentive Plan (the "1996 Plan"), subject to stockholder
approval. The Board believes that, in order to attract, retain and reward
valuable personnel, it is important for the Company to adopt a more flexible,
long-term incentive plan, which is both competitive with, and responsive to,
rapidly changing health care industry standards. In recent years, innovative and
sophisticated types of incentive awards have been created and utilized by other
companies to enhance the effectiveness of their compensation programs. The 1996
Plan will provide the Company with the ability to devise stock-based, cash-based
or performance-based incentive programs which are responsive to the demands of
the marketplace without unduly diluting stockholder interests.
The principal provisions of the 1996 Plan are summarized below. This
summary, however, does not purport to be complete and is qualified in its
entirety by reference to the provisions of the 1996 Plan, a copy of which is
attached hereto as Annex A. Terms not defined herein shall have the meanings set
forth in the 1996 Plan.
PURPOSE
The purpose of the 1996 Plan is to strengthen the Company by providing an
incentive to its employees, officers, consultants and directors through the
granting or awarding of incentive and nonqualified stock options, stock
appreciation and dividend equivalent rights, restricted stock, performance
units, and performance shares to employees, officers, employee directors,
consultants and advisors and the granting of options to non-employee directors
of the Company (collectively or individually, "Awards"), thereby encouraging
them to devote their abilities and energies to the success of the Company.
ADMINISTRATION
The 1996 Plan is to be administered by a committee consisting of at least
two directors of the Company (the "Committee"), and it may be administered by
the entire Board. If the Committee consists of less than the entire Board, each
member will be a 'non-employee director' within the meaning of Rule 16b-3
promulgated under the 1934 Act. To the extent necessary for any Award to qualify
as performance-based compensation under Section 162(m) of the Code, each member
of the Committee will be an 'outside director' within the meaning of Section
162(m) of the Code.
Each Award under the 1996 Plan will be evidenced by an agreement that sets
forth the terms of the grant. Under the 1996 Plan, the Committee has the
authority to, among other things: (i) select the employees to whom Awards will
be granted, (ii) determine the type, size and the terms and conditions of Awards
and (iii) establish the terms for treatment of Awards upon a termination of
employment.
SHARES AVAILABLE FOR ISSUANCE
Under the 1996 Plan, 500,000 shares of authorized and unissued Common Stock
will be available for the grant of Awards to Eligible Individuals, provided that
the maximum number of shares with respect to which Awards may be granted to any
individual over the term of the plan is 150,000 during any calendar year. In the
event of any Change in Capitalization (as defined in the 1996 Plan), however,
the Committee may adjust the maximum number and class of shares with respect to
which Awards may be granted, the number and class of shares which are subject to
outstanding Awards and the purchase price thereof. Of the total number of shares
allotted under the Plan, not more than one-third of the number of allotted
shares may be used for restricted stock grants and the maximum dollar amount
that an individual may receive during the term of the Plan in respect of
cash-denominated performance units may not exceed 100% of his aggregate base
salary.
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<PAGE>
STOCK OPTIONS
The Committee will determine whether any option is a non-qualified or
incentive stock option at the time of grant. The per share exercise price of an
option granted under the 1996 Plan will be determined by the Committee at the
time of grant and set forth in the option agreement, provided that the purchase
price per share under each incentive stock option must not be less than 100% of
the fair market value of the Common Stock of the Company subject to the option
at the date of grant (110% in the case of an incentive stock option granted to a
"Ten Percent Stockholder" (as defined in the 1996 Plan)). Each option will be
exercisable at such dates and in such installments as determined by the
Committee. Unless otherwise provided in the applicable option agreement, all
outstanding options will become fully exercisable upon a "Change in Control" (as
defined in the 1996 Plan). In addition, the Committee reserves the authority to
accelerate the exercisability of any option. Each option terminates at the time
determined by the Committee provided that the term of each option may not exceed
ten years (five years in the case of any incentive stock options granted to a
Ten Percent Stockholder).
Unless otherwise determined by the Committee, options are not transferable
except by will or the laws of descent and distribution or pursuant to a domestic
relations order. Options may be exercised during the optionee's lifetime only by
the grantee or his guardian or legal representative. In the discretion of the
Committee, the purchase price for shares may be paid (i) in cash, (ii) by
transferring shares of Common Stock to the Company, or (iii) by a combination of
the foregoing. In addition, options may be exercised through a registered
broker-dealer pursuant to such cashless exercise procedures which are, from time
to time, deemed acceptable by the Committee.
If the fair market value of Common Stock exceeds the exercise price of an
option on the date of exercise, an optionee may request that the Committee
authorize payment to the optionee of the difference between the fair market
value of part or all of the shares subject to the option and the exercise price
of the option. The Committee in its sole discretion may grant or deny such a
request. To the extent granted, the Committee will direct the Company to make
the payment to the optionee in cash, shares of Common Stock or in any
combination thereof. An option will be deemed to be exercised and canceled to
the extent that the Committee grants the request.
Unless otherwise provided in an optionee's employment agreement or option
agreement, if an optionee's employment is terminated by the Company for any
reason other than for "Cause" (as defined in the 1996 Plan) or voluntarily by
the optionee prior to serving five years as an employee of the Company, options
which were exercisable as of the date of the termination will remain exercisable
until the earlier of (i) ninety days after the date of termination or (ii) the
expiration of the stated term of the option. Upon termination of an optionee's
employment by the Company for 'Cause' or voluntarily by the optionee prior to
five years of service with the Company, unless determined otherwise by the
Committee, any unexercised options held by such optionee will terminate and
expire concurrently with the optionee's termination of employment. Upon
termination of an optionee's employment caused by his or her "Disability" (as
defined in the 1996 Plan), any unexercised options held by such optionee will
expire one year after the date of termination subject to the expiration date of
the option. Upon termination of an optionee's employment caused by his or her
death, options which were exercisable as of the date of death will remain
exerciseable until the earlier of (i) one year after the date of the optionee's
death or (ii) the expiration of the stated term of the option.
DIRECTOR OPTIONS
The 1996 Plan also provides for the non-discretionary grant of options to
each of its non-employee directors ("Director Options") (i) with respect to
5,000 shares of Common Stock of the Company to each non-employee director who
becomes a member of the Board after October 1, 1996, upon election or
appointment and (ii) with respect to 5,000 shares of Common Stock of the Company
annually on the first business day on or after October 24 of each calendar year
that the 1996 Plan is in effect to all non-employee directors who are members of
the Board at that time; provided, however, that a director shall not be entitled
to receive an annual grant during the year in which such director is appointed
or elected. Director Options are granted at a purchase price equal to the fair
market value of Common Stock of the Company subject to such Director Options on
the date of grant. Director Options vest with respect to 100% of the shares
subject to such Director Options on the third anniversary of the
17
<PAGE>
date of grant; provided that the director remains in service at that time.
Director Options generally have ten-year terms, unless earlier terminated in
accordance with the provisions of the 1996 Plan.
STOCK APPRECIATION RIGHTS ("SARs")
The 1996 Plan permits the granting of SARs either in connection with the
grant of an option (other than a Director Option) or as a freestanding right. A
SAR permits a grantee to receive upon exercise of the SAR, cash and/or shares,
at the discretion of the Committee, in an amount equal in value to the excess,
if any, of the then per share fair market value over the per share fair market
value on the date the SAR was granted (or option exercise price in the case of a
SAR granted in connection with an option). When a SAR is granted, however, the
Committee may establish a limit on the maximum amount a grantee may receive on
exercise. The Committee will decide at the time the SAR is granted the date or
dates at which it will become vested and exercisable; however, in the event of a
Change in Control of the Company, all SARs become immediately and fully
exercisable.
DIVIDEND EQUIVALENT RIGHTS ("DERs")
DERs may be granted in tandem with any Award under the 1996 Plan and may be
payable currently or deferred until the lapsing of the restrictions on the DERs
or until the vesting, exercise, payment, settlement or other lapse of
restrictions on the related Award. DERs may be settled in cash or shares of
Common Stock or a combination thereof, in a single payment or multiple
installments.
RESTRICTED STOCK
The Committee will determine the terms of each restricted stock Award at
the time of grant, including the price, if any, to be paid by the grantee for
the restricted stock, the restrictions placed on the shares, and the time or
times when the restrictions will lapse. In addition, at the time of grant, the
Committee, in their discretion, may decide: (i) whether any deferred dividends
will be held for the account of the grantee or deferred until the restrictions
thereon lapse, (ii) whether any deferred dividends will be reinvested in
additional shares of Common Stock or held in cash, (iii) whether interest will
be accrued on any dividends not reinvested in additional shares of restricted
stock and (iv) whether any stock dividends paid will be subject to the
restrictions applicable to the restricted stock Award. Unless otherwise provided
at the time of grant, the restrictions on the restricted stock will lapse upon a
Change in Control.
PERFORMANCE UNITS AND PERFORMANCE SHARES
Performance units and performance shares will be awarded as the Committee
may determine, and the vesting of performance units and performance shares will
be based upon the Company's attainment within an established period of specified
performance objectives to be determined by the Committee among the following:
earnings per share, share price, pre-tax profits, net earnings, return on equity
or assets, revenues, EBITDA, market share or market penetration or any
combination of the foregoing. The agreements evidencing the Award of performance
shares or performance units will set forth the terms and conditions thereof
including those applicable in the event of the grantee's termination of
employment. Performance units may be denominated in dollars or in shares of
Common Stock, and payments in respect of performance units will be made in cash,
shares, shares of restricted stock or any combination of the foregoing, as
determined by the Committee. In the event of a Change in Control, unless
otherwise determined by the Committee, all performance units will vest and all
restrictions on performance shares will lapse.
AMENDMENTS AND TERMINATION
The 1996 Plan will terminate on the day preceding the tenth anniversary of
the date of its adoption by the Board of Directors. The Board of Directors may
at any time and from time to time amend or terminate the 1996 Plan; provided,
however, that, to the extent necessary under applicable law, no such change will
be effective without the requisite approval of the Company's stockholders. In
addition, no such change may alter or adversely impair any rights or obligations
under any Awards previously granted, except with the written consent of the
grantee.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is generally a summary of the principal United
States federal income tax consequences under current federal income tax laws
relating to grants or awards to employees under the 1996 Plan. This summary is
not intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences.
Stock Options
An optionee will not recognize any taxable income upon the grant of a
non-qualified option and the Company will not be entitled to a tax deduction
with respect to such grant. Generally, upon exercise of a non-qualified option,
the excess of the fair market value of Common Stock on the date of exercise over
the exercise price will be taxable as ordinary income to the optionee. If the
Company complies with applicable withholding requirements, the Company will be
entitled to a tax deduction in the same amount and at the same time as the
optionee recognizes ordinary income, subject to any deduction limitation under
Section 162(m) of the Code (which is discussed below). The subsequent
disposition of shares acquired upon the exercise of a nonqualified option will
ordinarily result in capital gain or loss.
Subject to the discussion below, an optionee will not recognize taxable
income at the time of grant or exercise of an "incentive stock option" and the
Company will not be entitled to a tax deduction with respect to such grant or
exercise. However, the exercise of an "incentive stock option" may result in an
alternative minimum tax liability for the optionee.
Generally, if an optionee has held shares acquired upon the exercise of an
"incentive stock option" for at least one year after the date of exercise and
for at least two years after the date of grant of the "incentive stock option,"
upon disposition of the shares by the optionee, the difference, if any, between
the sales price of the shares and the exercise price will be treated as
long-term capital gain or loss to the optionee. Generally, upon a sale or other
disposition of shares acquired upon the exercise of an "incentive stock option"
within one year after the date of exercise or within two years after the date of
grant of the "incentive stock option" (a "disqualifying disposition"), any
excess of the fair market value of the shares at the time of exercise of the
option over the exercise price of such option will constitute ordinary income to
the optionee. Any excess of the amount realized by the holder on the
disqualifying disposition over the fair market value of the shares on the date
of exercise will generally be capital gain. Subject to any deduction limitation
under Section 162(m) of the Code, the Company will be entitled to a deduction
equal to amount of such ordinary income recognized by the holder.
If an option is exercised through the use of shares previously owned by the
holder, such exercise generally will not be considered a taxable disposition of
the previously owned shares and thus no gain or loss will be recognized with
respect to such shares upon such exercise. However, if the option is an
"incentive stock option" and the previously owned shares were acquired on the
exercise of an "incentive stock option" and the holding period requirement for
those shares is not satisfied at the time they are used to exercise the Option,
such use will constitute a disqualifying disposition of the previously owned
shares resulting in the recognition of ordinary income in the amount described
above.
Special rules may apply in the case of an optionee who is subject to
Section 16 of the 1934 Act.
Stock Appreciation Rights
The amount of any cash (or the fair market value of any shares) received
upon the exercise of a stock appreciation right under the 1996 Plan will be
includible in the grantee's ordinary income and, subject to satisfying
applicable withholding requirements and any Company deduction limitation under
Section 162(m) of the Code.
Restricted Stock
A grantee generally will not recognize taxable income upon the grant of
restricted stock, and the recognition of any income will be postponed until such
shares are no longer subject to the restrictions or the risk of forfeiture. When
either the restrictions or the risk of forfeiture lapses, the grantee will
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recognize ordinary income equal to the fair market value of the restricted stock
at the time that such restrictions lapse and, subject to satisfying applicable
withholding requirements and deduction limitation under Section 162(m) of the
Code, the Company will be entitled to a deduction. A grantee may elect to be
taxed at the time of the grant of restricted stock and, if this election is
made, the grantee will recognize ordinary income equal to the excess of the fair
market value of the restricted stock at the time of grant determined without
regard to any of the restrictions thereon over the amount paid, if any, by the
grantee for such shares.
Performance Shares and Performance Units
Generally, a grantee will not recognize any taxable income and the Company
will not be entitled to a deduction upon the award of performance shares or
performance units. At the time the grantee receives the distribution in respect
to the performance shares or the performance units, the fair market value of
shares or the amount of any cash received in payment for such Awards generally
is taxable to the grantee as ordinary income and, subject to the Company
deduction limitation under Section 162(m) of the Code.
Dividend Equivalents
A grantee realizes ordinary income upon the receipt of dividend equivalents
in an amount equal to any cash received.
Section 162(m)
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of
$1 million in any taxable year to the chief executive officer or any of the
four other most highly compensated executive officers who are employed by the
corporation on the last day of the taxable year, but does allow a deduction for
"performance-based compensation" the material terms of which are disclosed to
and approved by stockholders. The Company has structured and intends to
implement the 1996 Plan (except with respect to stock options with an exercise
price less than the fair market value of the underlying shares on the date of
grant) so that compensation resulting therefrom would be qualified
"performance-based compensation." To allow the Company to qualify such
compensation, the Company is seeking stockholder approval of the 1996 Plan and
the material terms of the performance goals applicable to performance units
under the 1996 Plan.
The 1996 Plan is designed to conform with Section 162(m) of the Code. With
respect to stock options awarded under the 1996 Plan with an exercise price less
than the fair market value of the underlying shares on the date of grant, there
can be no assurance that the compensation attributable to such options will not
be subject to the deduction limitations of Section 162(m) of the Code.
Section 280G of the Code
Under certain circumstances, the accelerated vesting or exercise of options
or stock appreciation rights, or the accelerated lapse of restrictions with
respect to other Awards, in connection with a Change of Control (as defined in
the 1996 Plan) of the Company might be deemed an "excess parachute payment" for
purposes of the golden parachute tax provisions of Section 280G of the Code. To
the extent it is so considered, the grantee may be subject to a 20% excise tax
and the Company may be denied a tax deduction.
NEW PLAN BENEFITS
As described above, the selection of the Eligible Individuals who will
receive Awards under the 1996 Plan, upon approval of the Plan by stockholders,
and the size and type of awards is generally to be determined by the Committee
in its discretion. Other than Director Options, no Awards have been made or
granted under the 1996 Plan, nor are any such Awards now determinable. Thus, it
is not possible to predict the benefits or amounts that will be received by or
allocated to particular individuals or groups of employees in 1996. The table
below sets forth certain information about Director Options granted to
non-employee directors on October 24, 1996, subject to stockholder approval.
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NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
DIRECTOR
NAME OPTIONS
- ---- --------
<S> <C>
Paul T. Cuzmanes...................................................................... 5,000
Joseph G. Mathews..................................................................... 5,000
Charles P. Reilly..................................................................... 5,000
Donald J. Ruffing..................................................................... 5,000
All officers and directors as a group................................................. 20,000
</TABLE>
EFFECT ON 1986 STOCK OPTION PLAN
The adoption and approval of the 1996 Plan will not affect the Amended and
Restated PHP Healthcare Corporation 1986 Stock Option Plan (the "1986 Plan").
Outstanding options granted under the 1986 Plan will remain in effect under the
terms of their respective grants. As of October 18, 1996, there were 3,291,766
shares of Common Stock reserved for issuance upon the exercise of outstanding
options granted under the 1986 Plan and 43,853 shares of Common Stock available
for future grants.
VOTE REQUIRED
Approval of the 1996 Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock represented at the Annual Meeting, in
person or by proxy, and entitled to vote.
FOR THE REASONS STATED HEREIN, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE 1996 PLAN.
SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal considered for inclusion in the
Company's proxy solicitation materials in connection with the Annual Meeting of
Shareholders to be held in September 1997, the proposal must comply with the
Securities and Exchange Commission's proxy rules, be stated in writing, and be
submitted on or before May 22, 1997, to the Company at its principal executive
offices at 11440 Commerce Park Drive, Reston, Virginia 20191, Attention: Ben
Rosenbaum III, Secretary. All such proposals should be sent by certified mail,
return receipt requested.
Excluding shareholder proposals filed in accordance with the proxy rules, a
shareholder is required to comply with the Company's Bylaws with respect to any
proposal to be presented for action at an annual meeting of shareholders. The
Company's Bylaws require each proposal to be (i) written, (ii) delivered to, or
mailed and received at, the principal executive offices of the Company not less
than 60 days nor more than 90 days prior to the date of the annual meeting, and
(iii) accompanied by (A) a brief description of the proposal and the reasons
therefor, (B) the name and address of the shareholder making the proposal and
any other shareholders known by such shareholder to support such proposal,
(C) the class and number of shares of Company capital stock beneficially owned
by all such shareholders, and (D) any financial interest of such shareholder in
the proposal. If notice or public disclosure of the date of the annual meeting
occurs less than 70 days prior to the date of the annual meeting, shareholders
must deliver to the Company, or mail and have received at the Company, the
proposal and required attendant information not later than the close of business
on the tenth day following the earlier of (i) the day on which such notice of
the date of the annual meeting was mailed or (ii) the day on which such public
disclosure was made. Nothing in the Bylaws requires the Company to include in
its proxy statement and proxy for any annual meeting of shareholders any
shareholder proposal which the Company is permitted to exclude pursuant to the
rules of the Securities and Exchange Commission at the time such proposal is
received.
If a shareholder wishes to nominate a candidate for election as director at
the Annual Meeting of Shareholders to be held in 1997, the shareholder must
comply with the Company's Bylaws with respect to director nominations. Written
notice of the shareholder's intent to make such nomination must be given to the
Secretary of the Company at the principal executive offices of the Company, not
later than 60 days prior to the date of the 1997 Annual Meeting. The written
notice shall set forth (A) the name and address of the shareholder and each
person whom the shareholder proposes to
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nominate as a director; (B) a representation that the shareholder is a holder of
record of stock of the Company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (C) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (D) such other information regarding each nominee
proposed by such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission as then in effect; and (E) the consent of each nominee to serve as a
director of the Company if so elected. The presiding officer of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
The preceding two paragraphs are intended to summarize the applicable
Bylaws of the Company. These summaries are qualified in their entirety by
reference to those Bylaws.
SELECTION OF AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. to serve as
the Company's independent auditors for the current year. Coopers & Lybrand
L.L.P. has acted as the Company's independent auditors since March 17, 1995. A
representative of Coopers & Lybrand L.L.P. will be present at the Annual Meeting
of Shareholders and will have the opportunity to make a statement and respond to
any questions that might arise.
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 years 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 KPMG Peat Marwick LLP found unsatisfied, 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.
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MISCELLANEOUS
The Company will bear the cost of solicitation of proxies, including
expenses in connection with the preparation and mailing of this Proxy Statement.
The Company will reimburse banks, brokers and nominees their reasonable expenses
for sending proxy material to the beneficial owners of the Common Stock. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone or telegram by officers or regular employees of the Company.
The person giving a proxy has the power to revoke it at any time before it
is exercised. All shares represented by proxies received in time to be counted
at the Annual Meeting will be voted.
Management knows of no business to be brought before the Annual Meeting of
Shareholders other than as set out above. If other matters properly come before
the meeting, it is the intention of the persons named in the solicited proxy to
vote such proxy thereon in accordance with their judgment.
Even though you plan to attend the meeting in person, please sign, date and
return the enclosed proxy promptly. If you attend the meeting, the proxy will be
voided at your request and you can vote in person. A postage-paid
return-addressed envelope is enclosed for your convenience. Your cooperation in
giving this your immediate attention will be appreciated.
By Order of the Board of Directors
Ben Rosenbaum III, Secretary
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ANNEX A
PHP HEALTHCARE CORPORATION
1996 INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to strengthen PHP Healthcare
Corporation, a Delaware corporation (the "Company"), by providing an incentive
to its employees, officers, consultants and directors and thereby encouraging
them to devote their abilities and industry to the success of the Company's
business enterprise. It is intended that this purpose be achieved by extending
to employees, officers, consultants and directors of the Company and its
Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance
Awards and Restricted Stock (as each term is herein defined).
2. Definitions. For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per Share paid to holders of
the Shares in any transaction (or series of transactions) constituting or
resulting in a Change in Control or (ii) the highest Fair Market Value of a
Share during the sixty (60) day period ending on the date of a Change in
Control.
2.2 "Affiliate" means any entity, directly or indirectly, controlled
by, controlling or under common control with the Company or any corporation
or other entity acquiring, directly or indirectly, all or substantially all
the assets and business of the Company, whether by operation of law or
otherwise.
2.3 "Agreement" means the written agreement between the Company and an
Optionee or Grantee evidencing the grant of an Option or Award and setting
forth the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, a Stock Appreciation
Right, a Performance Award, a Dividend Equivalent Right or any or all of
them.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" shall mean:
(a) for purposes of Section 6.4, (i) a willful act which
constitutes gross misconduct or fraud and which is materially injurious
to the Company or (ii) conviction of, or plea of "guilty" or "no
contest" to, a felony; and
(b) in all other cases, either (1) the definition set forth in the
employment agreement between the Optionee or Grantee, or in absence
thereof, (2)(i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of
duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit or (iv) willful
violation of any law, rule or regulation in connection with the
performance of duties (other than traffic violations or similar
offenses).
2.7 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind
of shares or other securities of the Company or another corporation, by
reason of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares, repurchase
of shares, change in corporate structure or otherwise.
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2.8 A "Change in Control" shall mean the occurrence during the term of
the Plan of any of the following events:
(1) An acquisition (other than directly from the Company or
pursuant to options granted under this Plan or otherwise by the Company)
of any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) immediately after which such Person has 'Beneficial Ownership'
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that
Beneficial Ownership of not more than thirty-five percent (35%) of the
combined voting power of the Company's outstanding Voting Securities by
Charles H. Robbins and/or Jack M. Mazur shall not constitute a Change in
Control; provided, further, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as defined below) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee benefit plan
(or a trust forming a part thereof) maintained by (i) the Company or
(ii) any corporation or other Person of which a majority of its voting
power or its equity securities or equity interest is owned directly or
indirectly by the Company (a "Company Subsidiary"), (B) the Company or
any Company Subsidiary, or (C) any Person in connection with a
"Non-Control Transaction" (as defined below);
(2) The individuals who, as of October 1, 1996, are members of the
Board of Directors (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board of Directors; provided,
however, that if the election, or nomination for election by the
Company's stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for
purposes of the Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless
(i) the stockholders of the Company immediately before
such merger, consolidation or reorganization own, directly or
indirectly, immediately following such merger, consolidation or
reorganization, at least seventy-five percent (75%) of the
combined voting power of the outstanding voting securities of
the corporation resulting from merger or consolidation or
reorganization (the "Surviving Corporation") in substantially
the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization.
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation.
(iii) no Person (other than the Company or any Company
Subsidiary, any employee benefit plan (or any trust forming a
part thereof) maintained by the Company, the Surviving
Corporation or any Company's Subsidiary, or any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty percent (20%)
or more of the then outstanding
A-2
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Voting Securities) has Beneficial Ownership of twenty percent
(20%) or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities, and
(iv) a transaction described in clauses (i) through (iii)
shall herein be referred to as a "Non-Control Transaction";
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Company Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
solely because any person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares beneficially owned by the Subject Person; provided, however, that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owners of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities beneficially owned by the Subject Person,
then a Change in Control shall occur.
2.9 "Code" means the Internal Revenue Code of 1986, as amended.
2.10 "Committee" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to
perform the functions set forth herein.
2.11 "Company" means PHP Healthcare Corporation.
2.12 "Director" means a director of the Company.
2.13 "Director Option" means an Option granted pursuant to Section 6.
2.14 "Disability" means:
(a) in the case of an Optionee or Grantee whose employment with the
Company or a Subsidiary is subject to the terms of an employment
agreement between such Optionee or Grantee and the Company or
Subsidiary, which employment agreement includes a definition of
"Disability," the term "Disability" as used in this Plan or any
Agreement shall have the meaning set forth in such employment agreement
during the period that such employment agreement remains in effect; and
(b) in all other cases, the term "Disability" as used in this Plan
or any Agreement shall mean a physical or mental infirmity which impairs
the Optionee's or Grantee's ability to perform substantially his or her
duties for a period of one hundred eighty (180) consecutive days.
2.15 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.
2.16 "Dividend Equivalent Right" means a right to receive all or some
portion of the cash dividends that are or would be payable with respect to
Shares.
2.17 "Eligible Director" means a director of the Company who is not an
employee of the Company or any subsidiary thereof.
2.18 "Eligible Individual" means any director (other than an Eligible
Director), officer or employee of the Company or a Subsidiary, or any
consultant or advisor who is receiving cash compensation from the Company
or a Subsidiary, designated by the Committee as eligible to receive Options
or Awards subject to the conditions set forth herein.
2.19 "Employee Option" means an Option granted pursuant to Section 5.
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2.20 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.21 "Fair Market Value" on any date means the closing price of the
Shares on such date on the principal national securities exchange on which
such Shares are listed or admitted to trading, or, if such Shares are not
so listed or admitted to trading, the closing price on such date as quoted
on the National Association of Securities Dealers Automated Quotation
System or such other market in which such prices are regularly quoted, or,
if there have been no published bid or asked quotations with respect to
Shares on such date, the Fair Market Value shall be the value established
by the Board in good faith and, in the case of an Incentive Stock Option,
in accordance with Section 422 of the Code.
2.22 "Grantee" means a person to whom an Award has been granted under
the Plan.
2.23 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as
an Incentive Stock Option.
2.24 "Nonemployee Director" means a director of the Company who is a
'nonemployee director' within the meaning of Rule 16b-3 promulgated under
the Exchange Act.
2.25 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.26 "Option" means a Nonqualified Stock Option, an Incentive Stock
Option, a Director Option, or any or all of them.
2.27 "Optionee" means a person to whom an Option has been granted
under the Plan.
2.28 "Outside Director" means a director of the Company who is an
'outside director' within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.29 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the
Company.
2.30 "Performance Awards" means Performance Units, Performance Shares
or either or both of them.
2.31 "Performance Cycle" means the time period specified by the
Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.32 "Performance Objectives" has the meaning set forth in Section 11.
2.33 "Performance Shares" means Shares issued or transferred to an
Eligible Individual under Section 11.
2.34 "Performance Units" means Performance Units granted to an
Eligible Individual under Section 11.
2.35 "Plan" means the PHP Healthcare Corporation 1996 Incentive Plan,
as amended and restated from time to time.
2.36 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a 'pooling of
interests' under generally accepted accounting principles.
2.37 "Restricted Stock" means Shares issued or transferred to an
Eligible Individual pursuant to Section 10.
2.38 "Shares" means the common stock, par value $.01 per share, of the
Company.
2.39 "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 8
hereof.
2.40 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect
to the Company.
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2.41 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a)
of the Code applies.
2.42 "Ten-Percent Stockholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, or of a Parent or a Subsidiary.
2.43 "Termination of Employment" means the later of (i) a severance
of the employer-employee relationship with the Company or (ii) the
resignation, removal or termination of an officer of the Company.
3. Administration.
3.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of
the Plan. The Committee shall keep minutes of its meetings. A quorum shall
consist of not fewer than two members of the Committee and a majority of a
quorum may authorize any action. Any decision or determination reduced to
writing and signed by a majority of all of the members of the Committee
shall be as fully effective as if made by a majority vote at a meeting duly
called and held. The Committee shall consist of at least two (2) directors
of the Company and may consist of the entire Board; provided, however, that
(A) if the Committee consists of less than the entire Board, each member
shall be a Nonemployee Director and (B) to the extent necessary for any
Option or Award intended to qualify as performance-based compensation under
Section 162(m) of the Code to so qualify, each member of the Committee,
whether or not it consists of the entire Board, shall be an Outside
Director. No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with
respect to this Plan or any transaction hereunder, except for liability
arising from his or her own willful misfeasance, gross negligence or
reckless disregard of his or her duties. The Company hereby agrees to
indemnify each member of the Committee for all costs and expenses and, to
the extent permitted by applicable law, any liability incurred in
connection with defending against, responding to, negotiating for the
settlement of or otherwise dealing with any claim, cause of action or
dispute of any kind arising in connection with any actions in administering
this Plan or in authorizing or denying authorization to any transaction
hereunder.
3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Employee Options
shall be granted under the Plan and the number of such Employee Options
to be granted and to prescribe the terms and conditions (which need not
be identical) of each such Employee Option, including the purchase price
per Share subject to each Employee Option, and make any amendment or
modification to any Option Agreement consistent with the terms of the
Plan;
(b) select those Eligible Individuals to whom Awards shall be
granted under the Plan and to determine the number of Stock Appreciation
Rights, Performance Awards, Shares of Restricted Stock and/or Dividend
Equivalent Rights to be granted pursuant to each Award, the terms and
conditions of each Award, including the restrictions or Performance
Objectives relating to Shares, the maximum value of each Performance
Share and make any amendment or modification to any Award Agreement
consistent with the terms of the Plan;
(c) to construe and interpret the Plan and the Options and Awards
granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not
limited to, correcting any defect or supplying any omission, or
reconciling any inconsistency in the Plan or in any Agreement, in the
manner and to the extent it shall deem necessary or advisable so that
the Plan complies with applicable law including Rule 16b-3 under the
Exchange Act and the Code to the extent applicable, and otherwise to
make the Plan fully effective. All decisions and determinations by the
Committee in the exercise of
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this power shall be final, binding and conclusive upon the Company, its
Subsidiaries, the Optionees and Grantees, and all other persons having
any interest therein;
(d) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee or Grantee on an individual basis
without constituting a termination of employment or service for purposes
of the Plan;
(e) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(f) generally, to exercise such powers and to perform such acts as
are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be made the subject of
Options and Awards granted under the Plan is 500,000; provided, however,
that in the aggregate, not more than one-third of the number of allotted
Shares may be made the subject of Restricted Stock Awards under Section 10
of the Plan; and provided, further, that during the term of the Plan (i) no
Eligible Individual may be granted Options and Awards (other than Awards
described in clause (ii) below) in the aggregate in respect of more than
150,000 Shares per calendar year, (ii) the maximum dollar amount that any
Eligible Individual may receive during the term of the Plan in respect of
Performance Units denominated in dollars may not exceed 100% of the
aggregate base salary of such Eligible Individual and (iii) the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock
Options granted under the Plan become exercisable for the first time by an
Optionee during any calendar year shall not exceed $100,000. Upon a Change
in Capitalization, the maximum number of Shares referred to in the
preceding sentence shall be adjusted in number and kind pursuant to Section
13. The Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's
treasury, or partly out of each, such number of Shares as shall be
determined by the Board.
4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards
shall be reduced as follows:
(a) In connection with the granting of an Option or an Award (other
than the granting of a Performance Unit denominated in dollars), the
number of Shares shall be reduced by the number of Shares in respect of
which the Option or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an
amount equal to the quotient of (i) the dollar amount in which the
Performance Unit is denominated, divided by (ii) the Fair Market Value
of a Share on the date the Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion thereof
expires, is canceled or is otherwise terminated for any reason without
having been exercised or payment having been made in respect of the entire
Option or Award, the Shares allocable to the expired, canceled or otherwise
terminated portion of the Option or Award may again be the subject of
Options or Awards granted hereunder.
5. Option Grants for Eligible Individuals.
5.1 Authority of Committee. Subject to the provisions of the Plan,
the Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, and the terms and conditions
of the grant to such Eligible Individuals shall be set forth in an
Agreement.
5.2 Purchase Price. The purchase price (which may be greater than,
less than or equal to the Fair Market Value on the date of grant) or the
manner in which the purchase price is to be determined for Shares under
each Employee Option shall be determined by the Committee and set forth in
the Agreement; provided, however, that the purchase price per Share under
each Incentive Stock Option shall not be less than 100% of the Fair Market
Value of a Share on the date the
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Employee Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Employee Options granted hereunder shall be for
such term as the Committee shall determine, provided that an Incentive
Stock Option shall not be exercisable after the expiration of ten (10)
years from the date it is granted (five (5) years in the case of an
Incentive Stock Option granted to a Ten-Percent Stockholder) and a
Nonqualified Stock Option shall not be exercisable after the expiration of
ten (10) years from the date it is granted. The Committee may, subsequent
to the granting of any Employee Option, extend the term thereof, but in no
event shall the term as so extended exceed the maximum term provided for in
the preceding sentence.
5.4 Vesting. Subject to Section 7.4, each Employee Option shall
become exercisable in such installments (which need not be equal) and at
such times as may be designated by the Committee and set forth in the
Agreement. To the extent not exercised, installments shall accumulate and
be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the Employee Option expires. The
Committee may accelerate the exercisability of any Employee Option or
portion thereof at any time.
5.5 Modification. No modification of an Employee Option shall
adversely alter or impair any rights or obligations under the Employee
Option without the Optionee's consent.
6. Option Grants for Nonemployee Directors.
6.1 Grant. Director Options shall be granted (i) to Eligible
Directors who become members of the Board after October 1, 1996 upon
election or appointment and (ii) to all Eligible Directors who are members
of the Board as follows:
(a) Initial Grant. Each Eligible Director who becomes a Director
after October 1, 1996 shall, upon becoming a Director, be granted a
Director Option in respect of 5,000 Shares.
(b) Annual Grant. Each Eligible Director shall be granted a
Director Option in respect of 5,000 Shares annually on the first
business day on or after October 24 of each calendar year that the Plan
is in effect provided that the Eligible Director is a Director on such
date; provided, however, that a Director shall not be entitled to
receive an annual grant pursuant to this Section 6.1(b) for the calendar
year in which such Director is first elected or appointed to the Board.
All Director Options shall be evidenced by an Agreement containing such other
terms and conditions not inconsistent with the provisions of this Plan as
determined by the Board; provided, however, that such terms shall not vary the
price, amount or timing of Director Options provided under this Section 6,
including provisions dealing with vesting, forfeiture and termination of such
Director Options.
6.2 Purchase Price. The purchase price for Shares under each Director
Option shall be equal to 100% of the Fair Market Value of such Shares on
the date the Director Option is granted.
6.3 Vesting. Subject to Sections 6.4 and 7.4, each Director Option
shall become fully vested and exercisable with respect to 100% of the
Shares subject thereto on the third anniversary of the date of grant;
provided, however, that the Optionee continues to serve as a Director as of
such date. If an Optionee ceases to serve as a Director for any reason, the
Optionee shall have no rights with respect to any Director Option which has
not then vested pursuant to the preceding sentence and the Optionee shall
automatically forfeit any Director Option which remains unvested.
6.4 Duration. Each Director Option shall terminate on the date which
is the tenth anniversary of the date of grant, unless terminated earlier as
follows:
(a) If an Optionee's service as a Director terminates for any
reason other than Disability, death or Cause, the Optionee may for a
period of three (3) months after such termination exercise his or her
Option to the extent, and only to the extent, that such Option or
portion
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thereof was vested and exercisable as of the date the Optionee's service
as a Director terminated, after which time the Option shall
automatically terminate in full.
(b) If an Optionee's service as a Director terminates by reason of
the Optionee's resignation or removal from the Board due to Disability,
the Optionee may, for a period of one (1) year after such termination,
exercise his or her Option to the extent, and only to the extent, that
such Option or portion thereof was vested and exercisable, as of the
date the Optionee's service as Director terminated, after which time the
Option shall automatically terminate in full.
(c) If an Optionee's service as a Director terminates for Cause,
the Option granted to the Optionee hereunder shall immediately terminate
in full and no rights thereunder may be exercised.
(d) If an Optionee dies while a Director or within three (3) months
after termination of service as a Director as described in clause (a) of
this Section 6.4 or within twelve (12) months after termination of
service as a Director as described in clause (b) of this Section 6.4,
the Option granted to the Optionee may be exercised at any time within
twelve (12) months after the Optionee's death by the person or persons
to whom such rights under the Option shall pass by will, or by the laws
of descent or distribution, after which time the Option shall terminate
in full; provided, however, that an Option may be exercised to the
extent, and only to the extent, that the Option or portion thereof was
exercisable on the date of death or earlier termination of the
Optionee's services as a Director.
7. Terms and Conditions Applicable to All Options.
7.1 Non-Transferability. Unless set forth in the Agreement evidencing
the Option at the time of grant or at any time thereafter, an Option
granted hereunder shall not be transferable by the Optionee to whom granted
except by will or the laws of descent and distribution or pursuant to a
domestic relations order (within the meaning of Rule 16a-12 promulgated
under the Exchange Act), and an Option may be exercised during the lifetime
of such Optionee only by the Optionee or his or her guardian or legal
representative. The terms of such Option shall be final, binding and
conclusive upon the legal representatives, heirs and successors of the
Optionee.
7.2 Method of Exercise.
(a) The exercise of an Option shall be made only by a written
notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise
in accordance with the Agreement pursuant to which the Option was
granted. The purchase price for any Shares purchased pursuant to the
exercise of an Option shall be paid, as determined by the Committee in
its discretion, in either of the following forms (or any combination
thereof): (i) cash or (ii) the transfer of Shares to the Company upon
such terms and conditions as determined by the Committee. In addition,
both Employee Options and Director Options may be exercised through a
registered broker-dealer pursuant to such cashless exercise procedures
(other than Share withholding) which are, from time to time, deemed
acceptable by the Committee. Any Shares transferred to the Company (or
withheld upon exercise) as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option. The Optionee shall deliver the Agreement
evidencing the Option to the Secretary of the Company who shall endorse
thereon a notation of such exercise and return such Agreement to the
Optionee. No fractional Shares (or cash in lieu thereof) shall be issued
upon exercise of an Option and the number of Shares that may be
purchased upon exercise shall be rounded to the nearest number of whole
Shares.
(b) If the Fair Market Value of the Shares with respect to which
the Option is being exercised exceeds the exercise price of such Option,
an Optionee may, instead of exercising an Option as provided in Section
7.2(a), request that the Committee authorize payment to the Optionee of
the difference between the Fair Market Value of part or all of the
Shares which
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are the subject of the Option and the exercise price of the Option, such
difference to be determined as of the date the Committee receives the
request from the Optionee. The Committee in its sole discretion may
grant or deny such a request from an Optionee with respect to part or
all of the Shares as to which the Option is then exercisable and, to the
extent granted, shall direct the Company to make the payment to the
Optionee either in cash or in Shares or in any combination thereof,
provided, however, that any Share shall be distributed based upon its
Fair Market Value as of the date the Committee received the request from
the Optionee. An Option shall be deemed to have been exercised and shall
be canceled to the extent that the Committee grants a request pursuant
to this Section 7.2(b).
7.3 Rights of Optionees. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until
(i) the Option shall have been exercised pursuant to the terms thereof,
(ii) the Company shall have issued and delivered Shares to the Optionee,
and (iii) the Optionee's name shall have been entered as a stockholder of
record on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such Shares,
subject to such terms and conditions as may be set forth in the applicable
Agreement.
7.4 Effect of Change in Control. In the event of a Change in Control,
all Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable. In addition, to the extent set forth in
an Agreement evidencing the grant of an Employee Option, an Optionee will
be permitted to surrender to the Company for cancellation within sixty (60)
days after such Change in Control any Employee Option or portion of an
Employee Option to the extent not yet exercised and the Optionee will be
entitled to receive a cash payment in an amount equal to the excess, if
any, of (x) (A) in the case of a Nonqualified Stock Option, the greater of
(1) the Fair Market Value, on the date preceding the date of surrender, of
the Shares subject to the Employee Option or portion thereof surrendered or
(2) the Adjusted Fair Market Value of the Shares subject to the Employee
Option or portion thereof surrendered or (B) in the case of an Incentive
Stock Option, the Fair Market Value, on the date preceding the date of
surrender, of the Shares subject to the Employee Option or portion thereof
surrendered, over (y) the aggregate purchase price for such Shares under
the Employee Option or portion thereof surrendered. In the event an
Optionee's employment with, or service as a Director of, the Company is
terminated by the Company following a Change in Control, each Option held
by the Optionee that was exercisable as of the date of termination of the
Optionee's employment or service shall remain exercisable for a period
ending not before the earlier of (A) the first anniversary of the
termination of the Optionee's employment or service or (B) the expiration
of the stated term of the Option.
8. Stock Appreciation Rights. The Committee may in its discretion, either
alone or in connection with the grant of an Employee Option, grant Stock
Appreciation Rights in accordance with the Plan, the terms and conditions of
which shall be set forth in an Agreement. If granted in connection with an
Option, a Stock Appreciation Right shall cover the same Shares covered by the
Option (or such lesser number of Shares as the Committee may determine) and
shall, except as provided in this Section 8, be subject to the same terms and
conditions as the related Option.
8.1 Time of Grant. A Stock Appreciation Right may be granted (i) at
any time if unrelated to an Option, or (ii) if related to an Option, either
at the time of grant, or at any time thereafter during the term of the
Option.
8.2 Stock Appreciation Right Related to an Option.
(a) Exercise. Subject to Section 8.7, a Stock Appreciation Right
granted in connection with an Option shall be exercisable at such time
or times and only to the extent that the related Options are
exercisable, and will not be transferable except to the extent the
related Option may be transferable. A Stock Appreciation Right granted
in connection with an Incentive Stock Option shall be exercisable only
if the Fair Market Value of a Share on the date of exercise exceeds the
purchase price specified in the related Incentive Stock Option
Agreement.
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(b) Amount Payable. Upon the exercise of a Stock Appreciation
Right related to an Option, the Grantee shall be entitled to receive an
amount determined by multiplying (A) the excess of the Fair Market Value
of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the per Share purchase price under the related
Option, by (B) the number of Shares as to which such Stock Appreciation
Right is being exercised. Notwithstanding the foregoing, the Committee
may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement evidencing
the Stock Appreciation Right at the time it is granted.
(c) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of
the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in connection with
a Stock Appreciation Right, the Stock Appreciation Right shall be
canceled to the extent of the number of Shares as to which the Option is
exercised or surrendered.
8.3 Stock Appreciation Right Unrelated to an Option. The Committee
may grant to Eligible Individuals Stock Appreciation Rights unrelated to
Options. Stock Appreciation Rights unrelated to Options shall contain such
terms and conditions as to exercisability (subject to Section 8.7), vesting
and duration as the Committee shall determine, but in no event shall they
have a term of greater than ten (10) years. Upon exercise of a Stock
Appreciation Right unrelated to an Option, the Grantee shall be entitled to
receive an amount determined by multiplying (A) the excess of the Fair
Market Value of a Share on the date preceding the date of exercise of such
Stock Appreciation Right over the Fair Market Value of a Share on the date
the Stock Appreciation Right was granted, by (B) the number of Shares as to
which the Stock Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with
respect to any Stock Appreciation Right by including such a limit in the
Agreement evidencing the Stock Appreciation Right at the time it is
granted.
8.4 Method of Exercise. Stock Appreciation Rights shall be exercised
by a Grantee only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office,
specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Committee, the
Grantee shall deliver the Agreement evidencing the Stock Appreciation Right
being exercised and the Agreement evidencing any related Option to the
Secretary of the Company who shall endorse thereon a notation of such
exercise and return such Agreement to the Grantee.
8.5 Form of Payment. Payment of the amount determined under Sections
8.2(b) or 8.3 may be made in the discretion of the Committee solely in
whole Shares in a number determined at their Fair Market Value on the date
preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares. If the Committee decides
to make full payment in Shares and the amount payable results in a
fractional Share, payment for the fractional Share will be made in cash.
8.6 Modification. No modification of an Award shall adversely alter
or impair any rights or obligations under the Agreement without the
Grantee's consent.
8.7 Effect of Change in Control. In the event of a Change in Control,
all Stock Appreciation Rights shall become immediately and fully
exercisable. In addition, to the extent set forth in an Agreement
evidencing the grant of a Stock Appreciation Right, a Grantee will be
entitled to receive a payment from the Company in cash or stock, in either
case, with a value equal to the excess, if any, of (A) the greater of (x)
the Fair Market Value, on the date preceding the date of exercise, of the
underlying Shares subject to the Stock Appreciation Right or portion
thereof exercised and (y) the Adjusted Fair Market Value, on the date
preceding the date of exercise, of the Shares over (B) the aggregate Fair
Market Value, on the date the Stock Appreciation Right was granted, of the
Shares subject to the Stock Appreciation Right or portion thereof
exercised. In the event a Grantee's employment with the Company is
terminated by the Company following a Change in Control each Stock
Appreciation Right held by the Grantee that
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was exercisable as of the date of termination of the Grantee's employment
shall remain exercisable for a period ending not before the earlier of the
first anniversary of (A) the termination of the Grantee's employment or
(B) the expiration of the stated term of the Stock Appreciation Right.
9. Dividend Equivalent Rights. Dividend Equivalent Rights may be granted
to Eligible Individuals in tandem with an Option or Award. The terms and
conditions applicable to each Dividend Equivalent Right shall be specified in
the Agreement under which the Dividend Equivalent Right is granted. Amounts
payable in respect of Dividend Equivalent Rights may be payable currently or
deferred until the lapsing of restrictions on such Dividend Equivalent Rights or
until the vesting, exercise, payment, settlement or other lapse of restrictions
on the Option or Award to which the Dividend Equivalent Rights relate. In the
event that the amount payable in respect of Dividend Equivalent Rights are to be
deferred, the Committee shall determine whether such amounts are to be held in
cash or reinvested in Shares or deemed (notionally) to be reinvested in Shares.
If amounts payable in respect of Dividend Equivalent Rights are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Dividend Equivalent
Rights may be settled in cash or Shares or a combination thereof, in a single
installment or multiple installments.
10. Restricted Stock.
10.1 Grant. The Committee may grant Awards to Eligible Individuals of
Restricted Stock, which shall be evidenced by an Agreement between the
Company and the Grantee. Each Agreement shall contain such restrictions,
terms and conditions as the Committee may, in its discretion, determine and
(without limiting the generality of the foregoing) such Agreements may
require that an appropriate legend be placed on Share certificates. Awards
of Restricted Stock shall be subject to the terms and provisions set forth
below in this Section 10.
10.2 Rights of Grantee. Shares of Restricted Stock granted pursuant
to an Award hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the Grantee
has executed an Agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the Agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period prescribed
by the Committee at the time the Award is granted, the Award shall be null
and void. At the discretion of the Committee, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the stock
powers with an escrow agent (which may be the Company) designated by the
Committee. Unless the Committee determines otherwise and as set forth in
the Agreement, upon delivery of the Shares to the escrow agent, the Grantee
shall have all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
10.3 Non-transferability. Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set
forth in Section 10.4, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated,
nor shall they be delivered to the Grantee.
10.4 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted Stock
awarded hereunder shall lapse at such time or times and on such terms
and conditions as the Committee may determine. The Agreement evidencing
the Award shall set forth any such restrictions.
(b) Effect of Change in Control. Unless the Committee shall
determine otherwise at the time of the grant of an Award of Restricted
Stock, the restrictions upon Shares of
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Restricted Stock shall lapse upon a Change in Control. The Agreement
evidencing the Award shall set forth any such provisions.
10.5 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Restricted Stock or accept
the surrender of outstanding Shares of Restricted Stock (to the extent the
restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
10.6 Treatment of Dividends. At the time an Award of Shares of
Restricted Stock is granted, the Committee may, in its discretion,
determine that the payment to the Grantee of dividends, or a specified
portion thereof, declared or paid on such Shares by the Company shall be
(i) deferred until the lapsing of the restrictions imposed upon such Shares
and (ii) held by the Company for the account of the Grantee until such
time. In the event that dividends are to be deferred, the Committee shall
determine whether such dividends are to be reinvested in shares of Stock
(which shall be held as additional Shares of Restricted Stock) or held in
cash. If deferred dividends are to be held in cash, there may be credited
at the end of each year (or portion thereof) interest on the amount of the
account at the beginning of the year at a rate per annum as the Committee,
in its discretion, may determine. Payment of deferred dividends in respect
of Shares of Restricted Stock (whether held in cash or as additional Shares
of Restricted Stock), together with interest accrued thereon, if any, shall
be made upon the lapsing of restrictions imposed on the Shares in respect
of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Shares of
Restricted Stock shall be forfeited upon the forfeiture of such Shares.
10.7 Delivery of Shares. Upon the lapse of the restrictions on Shares
of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all
restrictions hereunder.
11. Performance Awards.
11.1 (a) Performance Objectives. Performance Objectives for
Performance Awards may be expressed in terms of (i) earnings per Share,
(ii) Share price, (iii) pre-tax profits, (iv) net earnings, (v) return on
equity or assets, (vi) revenues, (vii) EBITDA, (viii) market share or
market penetration or (ix) any combination of the foregoing, and may be
determined before or after accounting changes, special charges, foreign
currency effects, acquisitions, divestitures or other extraordinary events.
Performance Objectives may be in respect of the performance of the Company
and its Subsidiaries (which may be on a consolidated basis), a Subsidiary
or a Division. Performance Objectives may be absolute or relative and may
be expressed in terms of a progression within a specified range. The
Performance Objectives with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (i) the date on
which a quarter of the Performance Cycle has elapsed or (ii) the date which
is ninety (90) days after the commencement of the Performance Cycle, and in
any event while the performance relating to the Performance Objectives
remain, substantially uncertain.
(b) Determination of Performance. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any
Performance Award made to a Grantee who is subject to Section 162(m) of
the Code, the Committee shall certify in writing that the applicable
Performance Objectives have been satisfied.
11.2 Performance Units. The Committee, in its discretion, may grant
Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company
and the Grantee. Performance Units shall be denominated in Shares or a
specified dollar amount and, contingent upon the attainment of specified
Performance Objectives within the Performance Cycle, represent the right to
receive payment as provided in Section 11.2(b) of the specified dollar
amount or a percentage (which may be more than 100%) thereof depending on
the level of Performance Objective attainment; provided, however,that, the
Committee may at the time a Performance Unit is granted specify a maximum
amount payable in
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respect of a vested Performance Unit. Each Agreement shall specify the
number of Performance Units to which it relates, the Performance Objectives
which must be satisfied in order for the Performance Units to vest and the
Performance Cycle within which such Performance Objectives must be
satisfied.
(a) Vesting and Forfeiture. Subject to Sections 11.1(b) and 11.4,
a Grantee shall become vested with respect to the Performance Units to
the extent that the Performance Objectives set forth in the Agreement
are satisfied for the Performance Cycle.
(b) Payment of Awards. Payment to Grantees in respect of vested
Performance Units shall be made as soon as practicable after the last
day of the Performance Cycle to which such Award relates unless the
Agreement evidencing the Award provides for the deferral of payment, in
which event the terms and conditions of the deferral shall be set forth
in the Agreement. Subject to Section 11.4, such payments may be made
entirely in Shares valued at their Fair Market Value as of the last day
of the applicable Performance Cycle or such other date specified by the
Committee, entirely in cash, or in such combination of Shares and cash
as the Committee in its discretion shall determine at any time prior to
such payment; provided, however, that if the Committee in its discretion
determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which such
payment will be in Shares of Restricted Stock and the terms of such
Restricted Stock at the time the Award is granted.
11.3 Performance Shares. The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company
and the Grantee. Each Agreement may require that an appropriate legend be
placed on Share certificates. Awards of Performance Shares shall be subject
to the following terms and provisions:
(a) Rights of Grantee. The Committee shall provide at the time an
Award of Performance Shares is made the time or times at which the
actual Shares represented by such Award shall be issued in the name of
the Grantee; provided, however, that no Performance Shares shall be
issued until the Grantee has executed an Agreement evidencing the Award,
the appropriate blank stock powers and, in the discretion of the
Committee, an escrow agreement and any other documents which the
Committee may require as a condition to the issuance of such Performance
Shares. If a Grantee shall fail to execute the Agreement evidencing an
Award of Performance Shares, the appropriate blank stock powers and, in
the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award
shall be null and void. At the discretion of the Committee, Shares
issued in connection with an Award of Performance Shares shall be
deposited together with the stock powers with an escrow agent (which may
be the Company) designated by the Committee. Except as restricted by the
terms of the Agreement, upon delivery of the Shares to the escrow agent,
the Grantee shall have, in the discretion of the Committee, all of the
rights of a stockholder with respect to such Shares, including the right
to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
(b) Non-transferability. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner
set forth in Sections 11.3(c) or 11.4, such Performance Shares shall not
be sold, transferred or otherwise disposed of and shall not be pledged
or otherwise hypothecated, nor shall they be delivered to the Grantee.
The Committee may also impose such other restrictions and conditions on
the Performance Shares, if any, as it deems appropriate.
(c) Lapse of Restrictions. Subject to Sections 11.1(b) and 11.4,
restrictions upon Performance Shares awarded hereunder shall lapse and
such Performance Shares shall become vested at such time or times and on
such terms, conditions and satisfaction of
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Performance Objectives as the Committee may, in its discretion,
determine at the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of Performance
Shares is granted, the Committee may, in its discretion, determine that
the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on actual Shares represented by such Award which have
been issued by the Company to the Grantee shall be (i) deferred until
the lapsing of the restrictions imposed upon such Performance Shares and
(ii) held by the Company for the account of the Grantee until such time.
In the event that dividends are to be deferred, the Committee shall
determine whether such dividends are to be reinvested in shares of Stock
(which shall be held as additional Performance Shares) or held in cash.
If deferred dividends are to be held in cash, there may be credited at
the end of each year (or portion thereof) interest on the amount of the
account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Performance Shares (whether held in cash or in
additional Performance Shares), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the
Performance Shares in respect of which the deferred dividends were paid,
and any dividends deferred (together with any interest accrued thereon)
in respect of any Performance Shares shall be forfeited upon the
forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the restrictions on
Performance Shares awarded the Committee shall cause a stock certificate
to be delivered to the Grantee, free of all restrictions hereunder.
11.4 Effect of Change in Control. In the event of a Change in
Control:
(a) With respect to Performance Units, unless otherwise determined
by the Committee, the Grantee shall (i) become vested in all Performance
Units and (ii) be entitled to receive in respect of all Performance
Units which become vested as a result of a Change in Control a cash
payment within ten (10) days after such Change in Control in an amount
as determined by the Committee at the time of the Award of such
Performance Unit and as set forth in the Agreement.
(b) With respect to Performance Shares, unless otherwise determined
by the Committee, restrictions shall lapse immediately on all
Performance Shares.
(c) The Agreements evidencing Performance Shares and Performance
Units shall provide for the treatment of such Awards (or portions
thereof) which do not become vested as the result of a Change in
Control, including, but not limited to, provisions for the adjustment of
applicable Performance Objectives.
11.5 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Performance Awards or accept the
surrender of outstanding Performance Awards and grant new Performance
Awards in substitution for them. Notwithstanding the foregoing, no
modification of a Performance Award shall adversely alter or impair any
rights or obligations under the Agreement without the Grantee's consent.
12. Effect of a Termination of Employment. An employment agreement, if
applicable, between an Optionee or Grantee and the Company shall govern with
respect to the terms and conditions applicable to such Option or Award upon a
termination or change in the status of the employment of the Optionee or
Grantee. However, in absence of an employment agreement, the following shall
apply:
(a) The Agreement evidencing the grant of each Option and each Award
shall set forth the terms and conditions applicable to such Option or Award
upon a termination or change in the status of the employment of the
Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division),
which, except for Director Options, shall be as the Committee may, in its
discretion, determine at the time the Option or Award is granted or
thereafter.
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(b) Unless otherwise determined by the Committee at the time of grant
(and set forth in the Option Agreement) or at a later date, except in the
case of death and Disability as provided in paragraphs 12(c) and 12(d)
below, if an Optionee of an Employee Option granted under the Plan has a
Termination of Employment with the Company or a Subsidiary, any unexercised
Employee Option held by such Optionee shall expire ninety (90) days after
the Optionee has a Termination of Employment for any reason other than a
termination for Cause or a Voluntary Termination (as defined below), and
such Employee Option may only be exercised by the Optionee or his
Beneficiary to the extent that the Employee Option or a portion thereof was
exercisable on the date of Termination of Employment; provided, however, no
Employee Option may be exercised after the expiration date specified for
the particular Employee Option in the Employee Option grant. If the
Optionee's Termination of Employment arises as a result of a termination
for Cause or a Voluntary Termination, then, unless the Committee determines
otherwise at the time of the Termination of Employment, any unexercised
Options held by such Optionee shall terminate and expire concurrently with
the Optionee's Termination of Employment. A "Voluntary Termination" shall
mean the voluntary Termination of Employment by an Optionee prior to five
years of total Service (as defined below) as an employee with the Company
and its Subsidiaries. "Service" shall mean total of years for which the
Optionee, prior to or after first becoming an Optionee, has 1,000 hours of
service as an employee or otherwise with, or has served as a director or
officer of, the Company or a Subsidiary.
(c) Unless otherwise determined by the Committee at the time of grant
(and set forth in the Option Agreement) or at a later date, if an Optionee
dies while still employed by the Company, the shares which the Optionee was
entitled to exercise on the date of the Optionee's death under an Option or
Options granted under the Plan may be exercised at any time after the
Optionee's death by the Optionee's beneficiary; provided, however, that no
Option may be exercised after the earlier of: (i) one (1) year after the
Optionee's death or (ii) the expiration date specified for the particular
Option in the Option Agreement.
(d) Unless otherwise determined by the Committee at the time of grant
(and set forth in the Option Agreement) or at a later date, if an Optionee
becomes disabled within the meaning of Section 2.14 hereof, any unexercised
Employee Option held by such disabled Optionee shall expire one (1) year
after the Optionee has a Termination of Employment because of such
Disability and such Option may only be exercised by the Optionee or his
Beneficiary to the extent that the Employee Option or a portion thereof was
exercisable on the date of Termination of Employment because of such
Disability; provided, however, no Employee Option may be exercised after
the expiration date specified for the particular Employee Option in the
Employee Option grant.
13. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted to any Eligible
Individual during the term of the Plan, (iii) the number and class of
Shares or other stock or securities which are subject to outstanding
Options or Awards granted under the Plan and the purchase price therefor,
if applicable, (iv) the number and class of Shares or other securities in
respect of which Director Options are to be granted under Section 6 and (v)
the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments
in the purchase price) shall be made in such manner as not to constitute a
modification as defined by Section 424(h)(3) of the Code and only to the
extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Grantee of an Award
shall be entitled to, or an Optionee shall be entitled to exercise an
Option with respect to, new, additional or different shares of stock or
securities, such new, additional or different shares shall thereupon be
subject to
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all of the conditions, restrictions and performance criteria which were
applicable to the Shares subject to the Award or Option, as the case may
be, prior to such Change in Capitalization.
14. Effect of Certain Transactions. Subject to Sections 7.4, 8.7, 10.4(b)
and 11.4 or as otherwise provided in an Agreement, in the event of (i) the
liquidation or dissolution of the Company or (ii) a merger or consolidation of
the Company (a "Transaction"), the Plan and the Options and Awards issued
hereunder shall continue in effect in accordance with their respective terms,
except that following a Transaction each Optionee and Grantee shall be entitled
to receive in respect of each Share subject to any outstanding Options or
Awards, as the case may be, upon exercise of any Option or payment or transfer
in respect of any Award, the same number and kind of stock, securities, cash,
property or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share; provided, however, that such
stock, securities, cash, property, or other consideration shall remain subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Options and Awards prior to such Transaction.
15. Interpretation. Following the required registration of any equity
security of the Company pursuant to Section 12 of the Exchange Act:
(a) The Plan is intended to comply with Rule 16b-3 promulgated under
the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith.
Any provisions inconsistent with such Rule shall be inoperative and shall
not affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant Agreement, each
Option, Stock Appreciation Right and Performance Award granted under the
Plan is intended to be performance-based compensation within the meaning of
Section 162(m)(4)(C) of the Code. The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Options or Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation
attributable to such Options or Awards to fail to qualify as
performance-based compensation.
16. Pooling Transactions. Notwithstanding anything contained in the Plan
or any Agreement to the contrary, in the event of a Change in Control which is
also intended to constitute a Pooling Transaction, the Committee shall take such
actions, if any, as are specifically recommended by an independent accounting
firm retained by the Company to the extent reasonably necessary in order to
assure that the Pooling Transaction will qualify as such, including but not
limited to (i) deferring the vesting, exercise, payment, settlement or lapsing
of restrictions with respect to any Option or Award, (ii) providing that the
payment or settlement in respect of any Option or Award be made in the form of
cash, Shares or securities of a successor or acquirer of the Company, or a
combination of the foregoing, and (iii) providing for the extension of the term
of any Option or Award to the extent necessary to accommodate the foregoing, but
not beyond the maximum term permitted for any Option or Award.
17. Effective Date, Termination and Amendment of the Plan. The effective
date of this Plan shall be the date the Plan is adopted by the Board, subject
only to the approval by the affirmative vote of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting of stockholders duly held in accordance with the applicable laws of the
State of Delaware within twelve (12) months of the adoption of the Plan by the
Board.
The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option or Award may be granted
thereafter. The Board may sooner terminate the Plan and the Board may at any
time and from time to time amend, modify or suspend the Plan; provided, however,
that: (a) no such amendment, modification, suspension or termination shall
impair or adversely alter any Options or Awards theretofore granted under the
Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and (b) to the extent necessary under applicable law, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law.
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18. Non-Exclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
19. Limitation of Liability. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(i) give any person any right to be granted an Option or Award other
than at the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to terminate the
employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
20. Regulations and Other Approvals; Governing Law.
20.1 Except as to matters of federal law, the Plan and the rights of
all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to
conflicts of laws principles thereof.
20.2 The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the
Committee.
20.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock
Options the tax benefits under the applicable provisions of the Code and
regulations promulgated thereunder.
20.4 Each Option and Award is subject to the requirement that, if at
any time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option
or Award or the issuance of Shares, no Options or Awards shall be granted
or payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or
obtained free of any conditions as acceptable to the Committee.
20.5 Notwithstanding anything contained in the Plan or any Agreement
to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required by the
Securities Act and Rule 144 or other regulations thereunder. The Committee
may require any individual receiving Shares pursuant to an Option or Award
granted under the Plan, as a condition precedent to receipt of such Shares,
to represent and warrant to the Company in writing that the Shares acquired
by such individual are acquired without a view to any distribution thereof
and will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable
under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
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21. Miscellaneous.
21.1 Multiple Agreements. The terms of each Option or Award may
differ from other Options or Awards granted under the Plan at the same
time, or at some other time. The Committee may also grant more than one
Option or Award to a given Eligible Individual during the term of the Plan,
either in addition to, or in substitution for, one or more Options or
Awards previously granted to that Eligible Individual.
21.2 Withholding of Taxes.
(a) At such times as an Optionee or Grantee recognizes taxable
income in connection with the receipt of Shares or cash hereunder (a
"Taxable Event"), the Optionee or Grantee shall pay to the Company an
amount equal to the federal, state and local income taxes and other
amounts as may be required by law to be withheld by the Company in
connection with the Taxable Event (the "Withholding Taxes") prior to the
issuance, or release from escrow, of such Shares or the payment of such
cash. The Company shall have the right to deduct from any payment of
cash to an Optionee or Grantee an amount equal to the Withholding Taxes
in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company,
the Optionee or Grantee may make a written election (the "Tax
Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Shares then issuable to him
or her having an aggregate Fair Market Value equal to the Withholding
Taxes.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of
any Share or Shares issued to such Optionee pursuant to the exercise of
an Incentive Stock Option within the two-year period commencing on the
day after the date of the grant or within the one-year period commencing
on the day after the date of transfer of such Share or Shares to the
Optionee pursuant to such exercise, the Optionee shall, within ten (10)
days of such disposition, notify the Company thereof, by delivery of
written notice to the Company at its principal executive office.
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/ /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING:
I. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote
listed below / / for all nominees listed below / /
*EXCEPTIONS / /
Nominee: For terms ending in 1999 -- Robert L. Bowles, Jr., Donald J. Ruffing
and Joseph G. Mathews
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.)
*Exceptions: __________________________________________________________
II. To approve the PHP Healthcare Corporation 1996 Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Change of Address and
or Comments Mark Here / /
Please sign exactly as name appears on the label affixed hereto. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign.
Dated: ___________________________ 1996
_______________________________________
Signature
_______________________________________
SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PHP HEALTHCARE CORPORATION
PROXY FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Charles H. Robbins, Jack M. Mazur and Michael D.
Starr, or any one of them (with full power to act alone), as proxies for the
undersigned with full power of substitution, to vote all the shares of Common
Stock of PHP Healthcare Corporation standing in the undersigned's name on its
books at the close of business on October 18, 1996 at the Annual Meeing of
Shareholders to be held at the Company's corporate offices at 11440 Commerce
Park Drive, Reston, Virginia on November 25, 1996, at 10:00 a.m., local time,
and at any adjournment thereof, with all the powers the undersigned would
possess if personally present, as indicated on the reverse side.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. The undersigned hereby acknowledges
receipt of Notice of said Annual Meeting dated October 30, 1996, and
accompanying Proxy Statement.
If no direction is made, this proxy will be voted FOR Proposals I and II.
(Continued and to be SIGNED on reverse side)
PHP HEALTHCARE CORPORATION
P.O. BOX 11051
NEW YORK, N.Y. 10203-0051
