<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
PHP HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C>
DELAWARE 54-1023168
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
</TABLE>
--------------------------
11440 COMMERCE PARK DRIVE
RESTON, VIRGINIA 20191
(703) 758-3600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BEN ROSENBAUM III
SECRETARY AND GENERAL COUNSEL
11440 COMMERCE PARK DRIVE, RESTON, VIRGINIA 20191
(703) 758-3600
(Name, address, including zip code, and telephone number, including area code,
of registrant's agent for service)
--------------------------
Please send copies of all communications to:
ANDREW P. VARNEY, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
1001 PENNSYLVANIA AVENUE, N.W., SUITE 800
WASHINGTON, D.C. 20004-2505
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
--------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE PER AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED SECURITY OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share, and associated
Preferred Stock Purchase Rights 735,000 $5.75 -
(3)................................ shares (1) $12.125 (2) $8,744,750.00 (2) $2,649.93 (2)
<FN>
(1) Represents (i) 100,000 shares issuable upon the exercise of options that
may be granted under the PHP Healthcare Corporation 1996 Physicians' Stock
Option Plan (the "Plan"), (ii) 45,000 shares issuable upon the exercise of
an outstanding Warrant, dated November 1, 1992 (the "Warrant"), issued by
the Company, in each case (i) and (ii) together with such indeterminate
number of additional shares as may become issuable upon the exercise of
such options or warrants by means of an adjustment in the exercise price,
(iii) 90,000 shares held by Medigroup of New Jersey, Inc. ("Medigroup") and
(iv) 500,000 shares held by Charles H. Robbins, Ellen E. Robbins, Ellen E.
Robbins, Trustee under Trust Indenture dated October 1, 1985, FBO Caroline
H. Robbins, Charles H. Robbins, Grantor, Ellen E. Robbins, Trustee under
Trust Indenture dated October 1, 1985, FBO Lee S. Robbins, Charles H.
Robbins, Grantor and Charles B. Robbins (collectively, the "Robbins
Family").
(2) The registration fee for the 45,000 shares issuable upon the exercise of
the Warrant is based on exercise prices of $5.75, $7.50 and $12.00 per
share, in each case with respect to 15,000 shares. Pursuant to Rule 457(c),
the registration fee for the remaining 690,000 shares is based upon a price
of $12.125 per share, the average of the high and low reported sales prices
of the Registrant's Common Stock, par value $.01 per share, as reported on
the NYSE on April 23, 1997.
(3) The Preferred Stock Purchase Rights, which are attached to the shares of
Common Stock of the registrant, will be issued for no additional
consideration; no additional registration fee is required.
</TABLE>
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PHP HEALTHCARE CORPORATION
------------------------
CROSS-REFERENCE SHEET
------------------------
PURSUANT TO ITEM 501(b) of Regulation S-K
<TABLE>
<CAPTION>
FORM S-3 ITEM NUMBER HEADING CAPTION OR LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Front Cover Page; Cross-Reference Sheet; Outside
Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Risk Factors, The Company
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Not Applicable
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Selling Stockholders
8. Plan of Distribution................................. Plan of Distribution
9. Description of Securities to be Registered........... Description of the Plan, Description of Capital Stock
10. Interests of Named Experts and Counsel............... Not Applicable
11. Material Changes..................................... Not Applicable
12. Incorporation of Certain Information by Reference.... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 30, 1997
PROSPECTUS
PHP HEALTHCARE CORPORATION
735,000 SHARES OF COMMON STOCK
------------------
Of the 735,000 shares of Common Stock offered hereby, 145,000 are being sold
by PHP Healthcare Corporation, a Delaware corporation ("PHP" or the "Company"),
and 590,000 shares are being sold by the Selling Stockholders named under
"Selling Stockholders." The 145,000 shares of Common Stock being sold by the
Company include (i) 100,000 shares (the "Option Shares") which may be issued
upon the exercise of stock options ("Options") granted from time to time under
the PHP Healthcare Corporation 1996 Physicians' Option Plan (the "Plan") and
(ii) 45,000 shares (the "Warrant Shares") which are issuable upon the exercise
of an outstanding Warrant, dated as of November 1, 1992 (the "Warrant") issued
by the Company. The 590,000 shares of Common Stock being sold by Selling
Stockholders include (i) 90,000 shares (the "Blue Cross Shares") held by
Medigroup of New Jersey, Inc., a New Jersey corporation ("Medigroup") and (ii)
500,000 shares (the "Robbins Family Shares") held by Charles H. Robbins, the
Company's former Chairman and Chief Executive Officer, and certain members of
his immediate family or trusts for their benefit.
OPTION SHARES. Option Shares will be issued by the Company from time to
time, at the exercise price for the related Option granted under the Plan as and
if Options are exercised. The exercise prices and other terms of such Options
will be determined in accordance with the terms of the Plan. The Plan provides
that the purchase price per share under each Option granted thereunder shall not
be less than the par value of a Share on the date the Option is granted. The
Company has not granted any Options pursuant to the Plan as of April 30, 1997.
See "Description of the Plan" and "Plan of Distribution--Option Shares."
WARRANT SHARES. The Warrant Shares will be issued by the Company from time
to time as and if the Warrant is exercised. The Warrant was granted on November
1, 1992 (the "Grant Date") and is exercisable for a period of seven years after
the Grant Date. The Warrant entitles the holder to purchase 15,000 Warrant
Shares at an exercise price of $5.75 per share, 15,000 Warrant Shares at an
exercise price of $7.50 per share, and 15,000 Warrant Shares at an exercise
price of $12.00 per share, subject to adjustment in certain circumstances. See
"Plan of Distribution--Warrant Shares."
BLUE CROSS SHARES. The Blue Cross Shares were issued by the Company to
Medigroup in connection with the acquisition of 10 primary care health centers
by the Company from Blue Cross and Blue Shield of New Jersey, Inc., a New Jersey
health service corporation ("BCBSNJ"), on February 28, 1997 (the "Acquisition").
The Blue Cross Shares are being registered by the Company pursuant to Section
6.10 of the Health Center Purchase Agreement dated as of December 16, 1996 among
the Company, Pinnacle Health Enterprises, L.L.C., Pinnacle Medical Group, P.A.,
BCBSNJ, Medigroup and Physician Group Practice Associates, P.A. (the "Purchase
Agreement"). The transactions contemplated by the Purchase Agreement were
consummated on February 28, 1997. The Blue Cross Shares may be offered by
Medigroup from time to time by open market transactions, negotiated
transactions, or a combination of such methods of sale, at fixed prices, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. See "Plan of Distribution--Blue Cross
Shares."
ROBBINS FAMILY SHARES. The Robbins Family Shares consist of (i) 200,000
shares held by Charles H. Robbins, (ii) 100,000 shares held by Ellen E. Robbins,
Trustee under Trust Indenture dated October 1, 1985, FBO Caroline H. Robbins,
Charles H. Robbins, Grantor, (iii) 100,000 shares held by Ellen E. Robbins,
Trustee, under Trust Indenture dated October 1, 1985, FBO Lee S. Robbins,
Charles H. Robbins, Grantor and (iv) 100,000 shares held by Charles B. Robbins.
The Robbins Family Shares may be offered by the Robbins Family from time to time
by open market transactions, negotiated transactions, or a combination of such
methods, at fixed prices, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices. See "Plan of
Distribution-- Robbins Family Shares."
The Option Shares, the Warrant Shares, the Blue Cross Shares and the Robbins
Family Shares are collectively referred to herein as the "Shares."
The Common Stock is traded on the New York Stock Exchange under the symbol
PPH. On April 29, 1997, the closing price of the Common Stock as reported by the
New York Stock Exchange was $13.375 per share.
The Company will use the net proceeds from the sales of the Option Shares
and Warrant Shares for general corporate purposes. The Company will not receive
any of the proceeds from the sale of shares by the Sellling Stockholders,
except, with respect to the Blue Cross Shares, to the extent the proceeds
therefrom exceed $2,400,000 (or a pro rata portion thereof, if less than all of
the Blue Cross Shares are sold). For a description of certain income tax
consequences to holders of the Options and the Option Shares issued upon the
exercise thereof, see "Certain United States Federal Income Tax Consequences."
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
THE DATE OF THIS PROSPECTUS IS APRIL 30, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W, Washington D.C. 20549 and
at the Commission's Regional Offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington D.C. 20549, at prescribed rates. Such materials can also be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (such registration statement, together with all amendments and exhibits
thereto, being hereinafter referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), for the
registration under the Securities Act of the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement for further information with respect to the Company and the securities
offered hereby. Statements contained herein concerning the provisions of
documents filed as exhibits to the Registration Statement are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission. Copies of the Registration Statement and the exhibits may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and made a part hereof: the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1996 and the Company's Amendment to that Form 10-K for the
fiscal year ended April 30, 1996 on Form 10-K/A; the Company's Quarterly Reports
on Form 10-Q for the quarters ended July 31, 1996, October 31, 1996 and January
31, 1997, including amendments numbers 1, 2, 3, 4 and 5 thereto; the Company's
Current Report on Form 8-K filed July 11, 1996; and the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A, Amendment 1, filed on August 11, 1992, including any amendments or reports
filed for the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents which have been incorporated by reference in this
Prospectus, other than exhibits to such documents unless such
2
<PAGE>
exhibits are specifically incorporated by reference into the documents so
incorporated. Requests for such copies should be directed to: Anthony M. Picini,
Executive Vice President, PHP Healthcare Corporation, 11440 Commerce Park Drive,
Reston, Virginia 20191, telephone (703) 758-3600.
RISK FACTORS
In addition to the other information contained in this Prospectus and in the
documents incorporated herein by reference, prospective purchasers of the Shares
should carefully consider the factors set forth below before purchasing the
Shares.
GOVERNMENT REGULATION
REGULATORY ENVIRONMENT.
Virtually all aspects of the health care industry are subject to extensive
federal and state regulation. Various federal and state laws, which are
interpreted and enforced by courts and regulatory authorities with broad
discretion, regulate the relationships between the Company and its affiliated
physicians, hospitals and ancillary health care providers. These laws include
(i) the anti-fraud and abuse provisions of the Medicaid and Medicare statutes,
which prohibit certain business practices and relationships that may affect the
provision and cost of health care services reimbursable under the Medicaid and
Medicare programs, including the solicitation, payment, receipt or offering of
any direct or indirect remuneration for the referral of patients or for the
provision of goods or services; (ii) the anti-kickback provisions of the Social
Security Act, which restrict physician referrals to certain providers, including
hospitals, with which the physician has a financial arrangement; (iii) the laws
of some states, which prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from engaging in the practice
of medicine; (iv) the laws of most states, which regulate the business of
insurance and the operation of HMOs; (v) federal antitrust laws, which prohibit
anti-competitive conduct, including price fixing, concerted refusals to deal and
division of market; and (vi) federal and state civil and criminal statutes which
prohibit health care providers from fraudulently or wrongfully overcharging
governmental or other third party payors for health care services. Violations of
these laws could result in substantial civil or criminal penalties, exclusion
from the Medicaid and Medicare programs, and suspension or debarment from
obtaining government contracts. Although the Company seeks to structure its
operations and arrange its business relationships so as to comply with all
applicable legal requirements (including the laws and regulations mentioned
above), there can be no assurance that, upon review of the Company's business,
courts or regulatory authorities might not adopt or assert a contrary position,
that the Company's present or future operations might not be successfully
challenged as violating, or determined to have violated, such legal
requirements, or that new laws and regulations, or the interpretation of
existing laws and regulations, might not require the Company to restructure some
or all of its operations or adversely effect the Company's business
relationships. Any such result could have a material adverse effect on the
Company.
While the Company's Medicaid HMO is not presently subject to licensure
requirements in the District of Columbia, a bill which would require the
licensure of HMOs in the District of Columbia and subject the Company to
additional regulatory requirements was approved by the District of Columbia
Council on November 7, 1996 and signed by the Mayor on December 24, 1996. The
bill is currently pending for congressional review prior to approximately April
11, 1997. If the final legislation includes the licensure provision contained in
the current bill, the Company will have to apply for a license. While the
Company expects that its Medicaid HMO in the District of Columbia will be
granted a license to operate as an HMO in the District of Columbia, there can be
no assurance that such license will be granted. The Company's inability to
obtain a license to operate as an HMO in the District for any reason would have
a material adverse effect on the Company.
FEDERAL AND STATE INVESTIGATIONS. As part of the pervasive regulation of
the health care industry by federal and state governments, these governments
have begun intensive investigations and audits of health care providers to
determine whether the providers are overcharging for medical services and
3
<PAGE>
procedures for Medicare and Medicaid patients. In cases in which the
overcharging is deemed intentional and meets other criteria, the federal or
state government may seek criminal, civil, or administrative sanctions against
health care providers. This could result in exclusion from the Medicare and
Medicaid programs and could result in suspension or debarment from government
contracts. Any such exclusion, suspension or debarment of the Company could have
a material adverse effect upon the Company's business.
UNCERTAINTY RELATING TO HEALTH CARE REFORM. Political, economic and
regulatory influences are subjecting the health care industry in the United
States to fundamental change. Although Congress has failed to pass comprehensive
health care reform legislation thus far, there are currently numerous
initiatives on the federal and state levels for comprehensive reforms affecting
the payment for and availability of health care services, including a number of
proposals that would significantly limit reimbursement under Medicare and
Medicaid. It is not clear at this time what proposals, if any, will be adopted
or, if adopted, what effect such proposals would have on the Company's business.
There can be no assurance that currently proposed or future health care
legislation or other changes in the administration or interpretation of
governmental health care programs will not have an adverse effect on the
Company.
DEPENDENCE ON CERTAIN CONTRACTS
For the year ended April 30, 1996, and for the nine months ended January 31,
1997, 37% and 30%, respectively, of the Company's revenues, and an even greater
percentage of the Company's gross profits, were derived from two contracts.
These contracts are with the District of Columbia Department of Human Services
("DCDHS") (concerning the Company's Medicaid HMO in the District of Columbia)
and with Medigroup, Inc., a wholly owned subsidiary of BCBSNJ (concerning the
development and management of ten integrated health care delivery networks in
New Jersey), and accounted for 28% and 9%, respectively, of the Company's
revenues in fiscal 1996. For the nine months ended January 31, 1997, revenues
derived from these contracts represented 21% and 9%, respectively, of the
Company's revenue. As described below, in conjunction with the Company's
purchase of the ten primary care facilities from BCBSNJ, the Company's
relationship with BCBSNS was substantially restructured. The loss of either the
DCDHS contract or the new BCBSNJ contract would have a material adverse effect
on the Company's business, financial condition and results of operations.
On February 28, 1997, the Company and a real estate investment trust
subsidiary in which the Company owns a minority interest (the "REIT") acquired
ten primary care facilities located throughout New Jersey formerly operated by
BCBSNJ. The ten health centers were originally designed, built and managed by
the Company under a management agreement with BCBSNJ. Under the management
agreement, the Company recruited physicians and other center staff, developed an
integrated referral network of medical and surgical specialists, and designed
the utilization, case management and quality assurance systems for the health
centers.
The total consideration paid by the Company and the REIT to BCBSNJ,
approximately $35 million, was determined through arms' length negotiations
between the Company and BCBSNJ. Of the $35 million received by BCBSNJ, $22
million was paid by the REIT and the balance was paid by the Company, including
$10.6 million in cash plus 90,000 shares of the Company's common stock. In
addition, in connection with the transaction, the Company made a $0.9 million
capital contribution to the REIT and advanced the REIT an additional $18
million, including $16 million in short-term secured loans and $2 million in
long-term secured loans, until permanent financing is obtained. The Company's
portion of the cash consideration paid to BCBSNJ and the amounts contributed or
advanced to the REIT were obtained from a combination of cash on hand, equipment
lease financing and borrowings on its bank line of credit.
The Company intends to use the health centers as the cornerstone of a
provider sponsored integrated health care delivery network to be operated on a
non-exclusive basis for BCBSNJ, and other third party payors, including HMOs.
The integrated health care delivery network will operate
4
<PAGE>
under the name Pinnacle Health Enterprises and resemble other provider service
networks managed by the Company in Connecticut and Georgia, which align the
Company with local hospital and physical partners.
In addition, the physicians previously employed at the health centers are
now employed by a professional medical group affiliated with the Company.
Concurrent with the purchase agreement the Company and BCBSNJ entered into a
network services agreement pursuant to which the Company provides certain health
care services to enrolled BCBSNJ beneficiaries through global capitation based
on market rates. Under the network services agreement, BCBSNJ has guaranteed
certain global capitation payments to the Company over a three year period.
In connection with the acquisition, PHP's management agreement with BCBSNJ
was terminated and BCBSNJ paid PHP for all outstanding receivables, including
retroactive net capitation payments (less operating expenses) for the period
prior to February 28, 1997 and after July 1, 1996, as if the transaction had
been completed on that date.
The Company's accounts receivable as of January 31, 1997 include gross
amounts due from the DCDHS and the United States Department of Health and Human
Services totalling $17.6 million related to the cost settlement for the
three-year contract period ended September 30, 1994, and related to the cost
settlement for the contract period beginning October 1, 1994. In the quarter
ending January 31, 1997, the Company established a reserve of $9.8 million
against its medicaid receivable from DCDHS, principally relating to services
provided during the period 1992 through 1994. The Company cannot predict when or
whether any of the unreserved amounts will be paid. The failure of the Company
to collect such amounts would have a material adverse effect on the Company's
business, financial condition and results of operations.
CAPITATED NATURE OF REVENUE
The Company provides a portion of its services on a capitated basis, and the
Company intends to negotiate additional capitated agreements with managed care
organizations or assume such contracts in connection with its affiliation with
primary care practices. Such contracts, typically referred to as "risk sharing"
contracts, are arrangements between the Company and another managed care
organization under which the Company agrees to provide certain health care
services, as required by members of such managed care organization, in exchange
for a fixed fee per member per month. Under these contracts, the Company bears
the risk that the cost of the services it is required to provide will exceed the
fixed fees it is entitled to receive. In order for such risk sharing contracts
to be profitable for the Company, the Company must effectively manage the
utilization rate of primary care services, specialty physician services, and
hospital services delivered to members of the managed care organization. There
can be no assurance that the Company will receive fees under such shared-risk
arrangements which will permit it to recover the costs of the health care
services it will be required to provide.
DEPENDENCE ON PRIMARY CARE PHYSICIANS
Primary care physicians are a key operating component of the Company's
integrated health care delivery networks. The Company competes for exclusive
primary care physician affiliations with a variety of networks including group
practices, IPAs, HMOs, practice management companies and hospitals. Most primary
care physicians have traditionally practiced independently or in small single
specialty groups. The competitive and operational disadvantages to the physician
of this type of practice structure have compelled many of these physicians to
evaluate alternatives. The process of negotiating these affiliations is often
competitive, complex and time consuming. There can be no assurance that the
Company will continue to be able to identify and secure affiliations with a
sufficient number of primary care physicians to operate its integrated health
care delivery networks effectively.
5
<PAGE>
LIMITATIONS ON REIMBURSEMENT
A major portion of the Company's revenues is derived from third party
payors, such as governmental programs, private insurance plans and managed care
organizations. In particular, for the year ended April 30, 1996 and the nine
months ended January 31, 1997, approximately 29% and 28%, respectively, of the
Company's revenues were derived from the Medicaid program, a cooperative state-
federal program for medical assistance to the needy. Reflecting a trend in the
health care industry, third party payors increasingly are negotiating with
health care providers such as the Company concerning the prices charged for
medical services, with the goal of lowering reimbursement and utilization rates.
There can be no assurance that any future reduction in reimbursement rates would
be offset through enhanced operating efficiencies, or that any such enhancement
of operating efficiencies would occur. Third party payors may also deny
reimbursement if they determine that a treatment was not performed in accordance
with the cost-effective treatment methods established by such payors, was
experimental, or for other reasons. In addition, funding for governmental
programs, such as Medicaid, is under increased scrutiny.
Congress continues to make cutbacks in the Medicare and Medicaid programs
following its failure to enact a budget reconciliation bill providing for
reductions in the rate of spending increases in the Medicare and Medicaid
programs. These cutbacks, budgetary constraints at both the federal and state
levels, and increasing public and private sector pressures to contain health
care costs are likely to continue to lead to significant reductions in
government and other third party reimbursements for medical charges which could
adversely affect the Company.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems are critical to its ability to
manage care efficiently and to be competitive in the market. The Company relies
on these systems to support practice operations and to facilitate the management
and monitoring of clinical performance. Clinical guidelines, practice protocols,
case management and utilization review systems are all essential to the
Company's ability to secure, and operate profitably under, capitated and
shared-risk contracts. There can be no assurance that the Company will be able
to refine and enhance these systems to keep them current and competitive.
DEPENDENCE ON GOVERNMENT CONTRACTS
Contracts with various federal, state and local government agencies
(excluding agreements concerning the Company's Medicaid HMO in the District of
Columbia) accounted for approximately 47% and 45% of the Company's revenues for
the year ended April 30, 1996, and the nine months ended January 31, 1997,
respectively. These contracts are obtained primarily through the competitive
bidding process as governed by applicable federal and state statutes and
regulations, and generally may be modified or terminated for the convenience of
the government agency at any time during the term of the contract. Contracts are
generally awarded for a base period of less than one year and corresponding with
the government agency's fiscal year, have two-to-four one-year renewals at the
option of the government agency, and are subject to appropriation of funds
annually by the appropriate legislative body. There is, therefore, no assurance
that the Company will be able to retain its contracts or, if retained, that all
of such contracts will be fully funded.
Under the competitive bidding process, unsuccessful bidders may protest the
award of a contract to another bidder in accordance with a government appeals
process if they believe the award was improper. Such protests could result in
the rebidding, delay or loss of contracts. In addition, contracts with
government agencies are generally complex in nature and subject contractors to
extensive regulation under federal, state and local law. For example, government
contractors are subject to audits which can result in adjustments to contract
costs and fees.
The Company believes that it has complied in all material respects with
applicable government regulations. In certain circumstances in which a
contractor has not complied with the terms of a contract or with regulations or
statutes, the contractor may be debarred or suspended from obtaining future
contracts for a specified period of time. Moreover, pursuant to recent statutes
and regulations, a suspension or debarment from obtaining future federal
contracts will also result in a reciprocal
6
<PAGE>
suspension or debarment from participation in non-procurement federal programs,
such as Medicare, Medicaid, and other federally-funded grant programs. Any such
suspension or debarment of the Company could have a material adverse effect upon
the Company's business.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the skill and efforts of its senior
management. The loss of key management personnel or the inability to attract,
retain and motivate sufficient numbers of qualified management personnel could
adversely affect the Company's business.
COMPETITION
The managed care industry is highly competitive and is subject to continuing
changes in how services are provided and how providers are selected and paid.
Increased enrollment in prepaid health care plans due to health care reform or
for other reasons, increased participation by physicians in group practices and
other factors may attract new entrants into the managed care industry and result
in increased competition for the Company. Certain of the Company's competitors
are significantly larger and better capitalized, provide a wider variety of
services, may have greater experience in providing health care management
services and may have longer established relationships with payors.
EXPOSURE TO PROFESSIONAL LIABILITY
Due to the nature of the Company's business, there are asserted from time to
time medical malpractice lawsuits and other claims against the Company, some of
which are currently pending, which subjects the Company to the attendant risk of
substantial damage awards. The most significant source of potential liability in
this regard is the negligence of physicians employed or contracted by the
Company. To the extent such physicians are employees of the Company or were
regarded as agents of the Company in the practice of medicine, the Company
would, in most instances, be held liable for their negligence. In addition, the
Company could be found in certain instances to have been negligent in performing
its management services under contractual arrangements, even if no agency
relationship with the physician were found to exist. In some cases, the
Company's contracts with hospitals and third party payors require the Company to
indemnify such other parties for losses resulting from the negligence of
physicians who were employed or managed by or affiliated with the Company.
The Company maintains professional and general liability insurance on a
claims made basis in amounts deemed appropriate by management, based on
historical claims and the nature and risks of its business. There can be no
assurances, however, that an existing or future claim or claims will not exceed
the limits of available insurance coverage, that any insurer will remain solvent
and able to meet its obligations to provide coverage for any such claim or
claims or that such coverage will continue to be available or available with
sufficient limits and at a reasonable cost to adequately and economically insure
the Company's operations in the future. A judgment against the Company in excess
of such coverage could have a material adverse effect on the Company.
HISTORICAL LOSSES
The Company reported net losses of $3,756,000 and $9,334,000 for the fiscal
years ended April 30, 1993 and 1994, respectively, and a net loss of $5,142,000
for the nine months ended January 31, 1997. There can be no assurance that it
will operate profitably in the future, or have earnings or cash flow sufficient
to comply with the financial covenants to which it is subject or to cover its
fixed charges. As a consequence of the losses reported in fiscal 1993 and 1994,
and the fiscal period ended January 31, 1997, the Company failed to comply with
certain financial covenants under its credit agreement. The Company obtained
waivers for such noncompliance and the Company's bank modified the applicable
financial covenants. In the future, any failure by the Company to comply with
the financial covenants contained in its credit agreement (or in any replacement
credit facility) could result in a default under such facility which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
SUBSTANTIAL INDEBTEDNESS
The Company's indebtedness is substantial in relation to its stockholders'
equity. At January 31, 1997, the Company's total long-term debt, net of current
portion, accounted for 72% of its total capitalization.
7
<PAGE>
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock has experienced a high degree of
volatility. There can be no assurance that such volatility will not continue or
become more pronounced. In addition, recently the stock market has experienced,
and is likely to experience in the future, significant price and volume
fluctuations which could adversely affect the market price of the Common Stock
without regard to the operating performance of the Company. The Company believes
that factors such as quarterly fluctuations in the financial results of the
Company or its competitors and general conditions in the industry, the overall
economy and the financial markets could cause the price of the Common Stock to
fluctuate substantially.
CONTROL BY MANAGEMENT AND CERTAIN STOCKHOLDERS
Certain of the Company's executive officers and directors and related
entities (the "Shareholders") currently hold an aggregate of approximately 22.6%
of the outstanding Common Stock (10.8% including shares issuable upon the
exercise of options or the conversion of convertible securities held by such
persons and exercisable or convertible within 60 days) and may exercise a
controlling influence over the outcome of matters submitted to the Company's
stockholders for approval. In addition, pursuant to the terms of an Employment
Agreement (the "Employment Agreement") entered into as of February 24, 1997
between the Company and Charles H. Robbins, the Company's former Chairman and
Chief Executive Officer, Mr. Robbins and his wife, Ellen Robbins, agreed to vote
Common Stock beneficially owned by them, at their option, either (i) in
accordance with the recommendation of the Board of Directors of the Company or
(ii) pro rata in the same manner and proportion that votes of the other
stockholders of the Company have been cast. The Robbins have agreed to vote in
such a manner until the earlier of (i) January 31, 1999 or (ii) a Change of
Control (as defined in the Employment Agreement). Including the Common Stock
beneficially owned by the Robbins, the Shareholders have voting control of an
aggregate 37.2% of the Outstanding Common Stock (14.5% including shares issuable
upon the exercise of options or the conversion of convertible securities held by
the Shareholders and the Robbins and exercisable or convertible within 60 days).
As a result, such executive officers, directors and related entities
collectively may have the power to delay, defer or prevent a change in control
of the Company.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Company's certificate of incorporation, by-laws
and Delaware law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. These provisions include a classified Board of Directors, the
ability of the Board of Directors to authorize the issuance, without further
stockholder approval, of preferred stock with rights and privileges which could
be senior to the Common Stock, elimination of the stockholders' ability to take
any action without a meeting, and establishment of certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at stockholders' meetings. In addition,
the Company has distributed preferred stock purchase rights which could cause
substantial dilution to a person or group that attempts to acquire a controlling
interest in the Company. The Company is also subject to Section 203 of the
Delaware General Corporation Laws which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that such stockholder became an "interested
stockholder." See "Description of Capital Stock."
RISKS ASSOCIATED WITH "FORWARD-LOOKING" STATEMENTS
This Prospectus contains and incorporates by reference certain statements
that are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Those statements include,
among other things, the discussions of the Company's business strategy and
expectations concerning the Company's market position, future operations,
margins, profitability, liquidity and capital resources. Investors in the Common
Stock offered hereby are cautioned that reliance on any forward-looking
statement involves risks and uncertainties, and that although the Company
believes that the assumptions on which the forward-looking statements contained
herein are based are reasonable, any of those assumptions could prove to be
inaccurate, and
8
<PAGE>
as a result, the forward-looking statements based on those assumptions also
could be incorrect. The uncertainties in this regard include, but are not
limited to, those identified in the risk factors discussed above. In light of
these and other uncertainties, the inclusion of a forward-looking statement
herein should not be regarded as a representation by the Company that the
Company's plans and objectives will be achieved.
THE COMPANY
PHP Healthcare Corporation ("PHP" or the "Company") develops, consolidates
and manages integrated health care delivery networks. Through its networks of
affiliated group and independent practice association ("IPA") physicians,
hospitals and ancillary health care providers, the Company markets and provides
primary and specialty health care services to third party payors, self-insured
employers and government agencies. As of January 31, 1997, PHP was operating 80
healthcare projects in 28 states and was affiliated with over 5,000 physicians
through network, employment and a variety of other arrangements, providing
health care resulting in over two million patient visits per year.
PHP was organized as a Delaware corporation in January 1986 and succeeded to
the business of a predecessor corporation by merger in March 1986. The Company's
corporate headquarters is located at 11440 Commerce Park Drive, Reston,
Virginia, 20191, and its telephone number at that address is (703) 758-3600.
Unless the context otherwise requires, all references herein to the "Company"
include PHP and its subsidiaries.
USE OF PROCEEDS
The net proceeds from the sale of the Option Shares and the Warrant Shares,
as and if received, will be used by the Company for general corporate purposes.
Pursuant to Section 6.10 of the Purchase Agreement, if the net proceeds from the
sale of the Blue Cross Shares is in excess of $2,400,000 (or a pro rata portion
thereof, if less than all of the Blue Cross Shares are sold), Medigroup must pay
the excess, if any, to the Company. Such proceeds, as and if received, will be
used by the Company for general corporate purposes.
The Company will not receive any proceeds from any sales of the Robbins
Family Shares.
DESCRIPTION OF THE PLAN
The following description of the Plan and its administration is qualified in
its entirety by reference to the full text of the Plan, a copy of which is an
exhibit to the Registration Statement.
PURPOSE OF THE PLAN
The purpose of the Plan is to strengthen the Company by providing an
incentive to certain directors, officers, employees, and certain consultants and
advisors of the Company and its Affiliates, Associates and Subsidiaries (each as
defined under Rule 12b-2 under the Exchange Act) and thereby encouraging them to
devote their abilities and industry to the success of the Company's business
enterprise.
SHARES AVAILABLE FOR ISSUANCE
The maximum number of Shares that may be issued under the Plan is 100,000.
Unexercised Options that expire, terminate or are canceled become again
available for Options under the Plan.
ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") whose
members are appointed by the Board of Directors of the Company. The Committee
shall consist of at least two officers or directors of the Company and may
consist of the entire Board. Subject to the terms and conditions of the Plan,
the Committee shall have the power from time to time to, among other things,
construe and interpret the Plan and the Options granted under the Plan to
correct defects, omissions and inconsistencies in the Plan, and to establish,
amend and revoke rules and regulations for the administration of the Plan. All
decisions and determinations by the Committee are final, binding and conclusive
upon the Company, its Subsidiaries, persons granted Options under the Plan
("Optionees"), and all other persons having any interest therein.
9
<PAGE>
The Committee acts as manager of, and not trustee of, the Plan. Members of
the Committee or the Board of Directors receive no compensation for their
services in connection with their administration of the Plan. As of the date of
this Prospectus, the members of the Board of Directors and the Committee are
listed in the Company's Annual Report on Form 10-K. Requests for additional
information should be directed to Anthony M. Picini, Executive Vice President
and Chief Financial Officer, PHP Healthcare Corporation, 11440 Commerce Park
Drive, Reston, VA, 20191.
ERISA; INTERNAL REVENUE CODE
The Plan is not subject to the Employee Retirement Income Security Act of
1974 ("ERISA") and is not qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Options granted under the Plan may only
be nonqualified stock options. See "Certain United States Federal Income Tax
Consequences" below for information concerning the tax treatment of Options and
the Shares issued upon the exercise thereof.
ELIGIBILITY
The Plan provides that Options may be granted to any director, officer,
employee, consultant or advisor of the Company, any Subsidiary, Affiliate or
Associate of the Company or to any person with whom the Company or any
Subsidiary, Affiliate or Associate has a management or services agreement
including, without limitation, (i) any duly licensed doctor of medicine who
provides health care services in any health care network, plan or product
sponsored or administered by the Company or any Subsidiary, Affiliate or
Associate, or (ii) any professional medical corporation, the employees of which
include a duly licensed doctor of medicine who provides health care services in
any health care network plan or product sponsored or administered by the Company
or any Subsidiary, Affiliate or Associate ("Eligible Person"). Notwithstanding
the foregoing, the term "Eligible Person" shall not include any officer or
director of the Company who is subject to reporting under Section 16(a) of the
Exchange Act.
Subject to the terms and conditions of the Plan, the Committee shall
determine the Eligible Persons to whom Options shall be granted under the Plan
and the number of such Options to be granted, and prescribe the terms and
conditions of each such Option, including the purchase price per Share subject
to each Option. The Plan does not provide for a maximum or minimum number of
shares of Common Stock that may be granted under Options to any Eligible Person.
TERMS AND CONDITIONS OF OPTIONS
Each grant of an Option under the Plan shall be evidenced by a Stock Option
Agreement ("Agreement") between the Optionee and the Company, and is subject to
the following additional terms and conditions:
PURCHASE PRICE. The purchase price per Share under each Option granted
under the Plan shall be determined by the Committee and shall not be less than
the par value of a Share on the date the Option is granted.
MAXIMUM DURATION. Options granted under the Plan shall be for such term as
the Committee shall determine, provided that an Option shall not be exercisable
after the expiration of ten (10) years from the date it is granted.
VESTING. Each Option shall become exercisable in such installments and at
such times as may be designated by the Committee and set forth in the Agreement
and may be exercised in whole or in part, at any time after becoming
exercisable, but not later than the date the Option expires. The Committee may
accelerate the exercisability of any Option or portion thereof at any time.
MODIFICATION. The Committee may amend or modify any Agreement in any manner
consistent with the terms of the Plan, provided that no modification of an
Option may adversely alter or impair any rights or obligations under the Option
without the Optionee's consent.
NON-TRANSFERABILITY. No Option granted under the Plan shall be transferable
by the Optionee to whom granted except by will or the laws of descent and
distribution, and an Option may be exercised
10
<PAGE>
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 beneficiaries, executors, administrators, heirs and
successors of the Optionee.
METHOD OF EXERCISE. 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 in full
in cash upon such exercise. Notwithstanding the foregoing, the Committee shall
have the discretion to determine at the time of grant of each Option or at any
later date (up to and including the date of exercise) that the form of payment
acceptable in respect of the exercise of such Option may consist of either of
the following (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. Any Shares transferred to the Company 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. In addition, 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. 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.
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.
EFFECT OF A TERMINATION OF SERVICE
The Agreement evidencing the grant of each Option shall set forth the terms
and conditions applicable to such Option upon a termination or change in the
Optionee's status as an Eligible Person, including a termination or change by
reason of the sale of the Company's interest in any Subsidiary, Affiliate,
Associate or Division, which shall be as the Committee may, in its discretion,
determine at the time the Option is granted or thereafter.
EFFECT OF CERTAIN TRANSACTIONS
Except 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 issued thereunder shall
continue in effect in accordance with their respective terms, except that
following a Transaction each Optionee shall be entitled to receive in respect of
each Share subject to any outstanding Options, upon exercise of any Options, 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 prior to such Transaction.
WITHHOLDING OF TAXES
At such times as an Optionee recognizes taxable income in connection with
the receipt of Shares or cash under the Plan (a "Taxable Event"), the Optionee
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 an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
11
<PAGE>
Withholding Taxes to the Company, the Optionee may make a written 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.
ADJUSTMENT OF SHARES UPON CHANGES IN CAPITALIZATION OR REORGANIZATION
In the event of any Change in Capitalization the Committee shall determine
the appropriate adjustments, if any, to the (i) maximum number and class of
Shares or other stock or securities with respect to which Options may be granted
under the Plan and (ii) the number and class of Shares or other stock or
securities which are subject to outstanding Options granted under the Plan and
the purchase price therefor, if applicable. A Change in Capitalization could
result from 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 similar event.
TERMINATION AND AMENDMENT OF THE PLAN
The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option may be granted thereafter. The
Board may sooner terminate the Plan and may at any time and from time to time
amend, modify or suspend the Plan; PROVIDED, HOWEVER, that: no such amendment,
modification, suspension or termination shall impair or adversely alter any
Options theretofore granted under the Plan, except with the consent of the
Optionee, nor shall any amendment, modification, suspension or termination
deprive any Optionee of any Shares which he or she may have acquired through or
as a result of the Plan.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, par value $.01 per share, and 500,000 shares of Preferred Stock,
par value $.01 per share. No shares of Preferred Stock are outstanding. Certain
Preferred Stock Purchase Rights were distributed pursuant to a dividend
distribution declared April 10, 1992, and 50,000 shares of Preferred Stock were
designated and reserved as Series A Junior Participating Preferred Stock for
issuance upon exercise of such rights. As of January 31, 1997, 11,014,444 shares
of Common Stock (including 88,572 shares held in escrow) were outstanding and
held by approximately 950 shareholders of record.
COMMON STOCK
Subject to the prior rights of any shares of Preferred Stock which may be
issued in the future, the holders of the Common Stock are entitled to receive
dividends as and when declared by the Board of Directors out of funds legally
available for dividends, and, in the event of liquidation, dissolution or
winding up of the Company, to share ratably in all assets remaining after
payment of liabilities. The holders of the Common Stock are entitled to one vote
for each share of Common Stock held of record on all matters submitted to a vote
of shareholders. Since holders of Common Stock do not have cumulative voting
rights, holders of more than 50% of the outstanding shares of Common Stock
present and voting at an annual meeting at which a quorum is present can elect
all the directors of the Company to be elected at such meeting. The holders of
Common Stock have no preemptive rights or conversion rights and are not subject
to further calls or assessments by the Company. There are no redemption or
sinking fund provisions applicable to the Common Stock.
The Transfer Agent for the Company's Common Stock is The Bank of New York.
PREFERRED STOCK
The Board of Directors is authorized to issue shares of Preferred Stock from
time to time in one or more classes or series and to fix by resolution or
resolutions (without further stockholder action) the voting rights, if any, and
the designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions thereof,
including, without limitation, the dividend rights, conversion rights, rights
and terms of redemption (including sinking fund
12
<PAGE>
provisions) and liquidation rights of each such class or series. In addition,
the Board of Directors is empowered to determine the number of shares
constituting each class and series of Preferred Stock and, subject to compliance
with applicable law, to increase or decrease the number of shares of each such
class or series. The Board of Directors may, without shareholder approval, issue
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of holders of Common Stock.
PREFERRED STOCK PURCHASE RIGHTS
The description of certain Preferred Stock Purchase Rights distributed
pursuant to a dividend distribution declared by the Company's Board of Directors
on April 10, 1992, and of the shares of Series A Junior Participating Preferred
Stock reserved for issuance upon exercise of such Rights, is incorporated by
reference to Item 1 of the Company's Form 8-A, dated April 10, 1992, filed with
the Securities and Exchange Commission on April 13, 1992.
The Preferred Stock Purchase Rights have certain anti-takeover effects. The
Rights will cause substantial dilution to a person or group that attempts to
acquire the Company without conditioning the offer on a substantial number of
the Rights being acquired. The Rights should not interfere with any merger or
other business combination approved by the Board of Directors since the Rights
may be redeemed by the Company.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND BY-LAWS
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that the Board of Directors consists of three classes of directors
serving for staggered three-year terms. As a result, one-third of the Company's
Board of Directors will be elected each year. The classified board provision
could prevent a party who acquires control of a majority of the outstanding
voting stock of the Company from obtaining control of the Board of Directors
until the second annual stockholders meeting following the date the acquirer
obtains the controlling interest. Subject to the rights of holders of Preferred
Stock of the Company, any vacancy on the Board of Directors may be filled only
by the remaining directors then in office.
The Company has 500,000 authorized and unissued shares of Preferred Stock.
The Certificate grants the Board of Directors broad power to establish the
designations, powers, preferences and rights of any series of Preferred Stock.
Such stock could be used by the Board of Directors for defensive purposes,
including its issuance or sale to third parties or use in recapitalization
transactions.
In order for a stockholder to nominate a candidate for director, under the
Company's By-laws, timely notice of the nomination must be given to the Company
in advance of the meeting. Such notice must be given in respect to an election
to be held at an annual meeting of stockholders not less than 90 days before the
anniversary of the immediately preceding annual meeting, and must be given in
respect to an election to be held at a special meeting of stockholders within 10
days after the notice of the meeting is given to stockholders. The stockholder
filing the notice of nomination must describe various matters regarding the
nominee, including such information as name, address, occupation and shares
held.
In order for a stockholder to bring other business before an annual
stockholder meeting, timely notice must be received by the Company not less than
60 days nor more than 90 days before the meeting (but if the Company gives less
than 70 days notice of the meeting, then such notice must be received within 10
days after the notice of the meeting is mailed or other public disclosure of the
meeting is made). Such notice must include a description of the proposed
business, the reasons therefore, and other specified matters.
Under the By-laws, special meetings of stockholders may be called only by
the Board of Directors or the President of the Company, and may not be called by
stockholders. In addition, the Certificate provides that any action required or
permitted to be taken by the stockholders of the Company at an annual or special
meeting of stockholders must be effected at a duly called meeting and may not be
taken or effected by a written consent of the stockholders in lieu thereof.
13
<PAGE>
The By-laws may be amended by the Board of Directors or by affirmative vote
of the holders of two-thirds of the stock issued and outstanding and entitled to
vote thereon. Certain provisions of the Certificate, including provisions
concerning the classified Board of Directors and the ability of stockholders to
take action only at an annual or special meeting of stockholders, may only be
amended by the affirmative vote of the holders of two-thirds of the stock issued
and outstanding and entitled to vote thereon. The foregoing summary is qualified
in its entirety by reference to the full text of the Company's Certificate and
By-laws.
These provisions are designed in part to make it more difficult and
time-consuming to obtain majority control of the Board of Directors of the
Company or otherwise to bring a matter before stockholders without the Board's
consent, and thus reduce the vulnerability of the Company to an unsolicited
takeover proposal. These provisions are designed to enable the Company to
develop its business in a manner which will foster its long-term growth, with
the threat of a takeover not deemed by the Board to be in the best interest of
the Company and its stockholders and the potential disruption entailed by such a
threat reduced to the extent practicable. On the other hand, these provisions
may have an adverse effect on the ability of stockholders to influence the
governance of the Company and the possibility of stockholders receiving a
premium above market price for their securities from a potential acquiror who is
unfriendly to management.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law which
restricts certain business combinations between the Company and an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) or its affiliates or associates for a period of three
years following the date on which the stockholder becomes an "interested
stockholder." The restrictions do not apply if (i) prior to an interested
stockholder becoming such, the Board of Directors approves either the business
combination or the transaction in which the stockholder becomes an interested
stockholder (ii) upon consummation of the transaction in which any person
becomes an interested stockholder, such interested stockholder owns at least 85%
of the voting stock of the Company outstanding at the time the transaction
commences (excluding shares owned by certain employee stock ownership plans and
persons who are both directors and officers of the Company) or (iii) on or
subsequent to the date an interested stockholder becomes such, the business
combination is both approved by the Board of Directors and authorized at an
annual or special meeting of the Company's stockholders, not by written consent,
by the affirmative vote of at least 66 2/3% of the outstanding voting stock not
owned by the interested stockholders.
SELLING STOCKHOLDERS
Medigroup beneficially owns 90,000 shares of Common Stock, all of which are
being registered for sale pursuant to this Prospectus. The Company has agreed to
use its best efforts to keep this Prospectus effective as to such shares until
June 30, 1997. In the event that the Blue Cross Shares have not been sold prior
to June 30, 1997, the Purchase Agreement provides that until July 10, 1997
Medigroup may require the Company to purchase, or the Company may require
Medigroup to sell, the Blue Cross Shares for $2,400,000 in cash (or any portion
of such Shares for a pro rata portion of the aggregate price). Medigroup has not
had a material relationship with the Company within the past three years other
than as a result of the ownership of the Blue Cross Shares. Because Medigroup
may offer all or some of the Shares which it holds pursuant to the offering
contemplated by this Prospectus, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Blue Cross
Shares, no estimate can be given as to the number of Blue Cross Shares that will
be held by Medigroup after completion of this offering.
Charles H. Robbins ceased to be an executive officer and director of the
Company effective as of January 31, 1997, but will continue as an employee of
the Company until January 31, 1998, unless terminated earlier pursuant to the
terms of the Employment Agreement. Mr. Robbins beneficially owns 1,710,076
shares of Common Stock, including 526,667 shares which Mr. Robbins can acquire
14
<PAGE>
upon the exercise of options granted by the Company pursuant to stock option
agreements. The 1,710,076 shares do not, however, include shares owned by Ellen
E. Robbins, individually and as trustee, described below, or 139,000 shares
beneficially owned by Charles H. Robbins' son, Charles B. Robbins. The 1,710,076
shares beneficially owned by Mr. Robbins represent approximately 14.8% of the
outstanding Common Stock of the Company. Pursuant to the terms of the Employment
Agreement, Mr. Robbins may require the Company to purchase 200,000 of his shares
prior to April 30, 1997 at a price equal to the average closing price of the
Common Stock for five days preceding the sale (the "Put Right"). Ellen E.
Robbins, individually and as trustee under trusts established by Charles H.
Robbins for the benefit of Caroline H. Robbins and Lee S. Robbins, beneficially
owns 300,000 shares of Common Stock, which represent approximately 2.7% of the
outstanding Common Stock of the Company.
In the aggregate, Charles H. Robbins and Ellen E. Robbins (individually and
as trustee) beneficially own 2,010,076 shares of Common Stock, which represent
approximately 17.4% of the outstanding Common Stock of the Company.
Pursuant to Section 3.01 of the Employment Agreement, Charles H. Robbins and
Ellen E. Robbins have agreed not to acquire beneficial ownership of additional
securities of the Company prior to the earlier of January 31, 1999 or (ii) a
change in control of the Company.
In addition, Charles H. Robbins and Ellen E. Robbins, have agreed not to
dispose of their shares of the Company prior to November 1, 1997, other than the
shares registered by this Prospectus, pursuant to the Put Right or after the
occurence of certain events as set forth in the Employment Agreement.
Charles B. Robbins beneficially owns 139,000 shares of Common Stock,
including 39,000 shares which he can acquire upon the exercise of options
granted by the Company pursuant to stock option agreements. The 139,000 shares
beneficially owned by Charles B. Robbins represents 1.3% of the outstanding
Common Stock of the Company. Until February 24, 1997, Charles B. Robbins was
employed by the Company as a Senior Vice President.
Because the Robbins Family may offer all or some of the Robbins Family
Shares pursuant to the offering contemplated by this Prospectus, and because Mr.
Robbins may exercise all or a portion of the Put Right prior to the completion
of this offering, no estimate can be given as to the number of Robbins Family
Shares that will be held after completion of this offering.
PLAN OF DISTRIBUTION
OPTION SHARES
The Option Shares may be issued from time to time upon the exercise of
Options granted under the Plan and the payment in full of the exercise price
with respect to such Options. The Option Shares will be sold directly to
Optionees exercising Options under the Plan and no person will receive any
commission or other compensation in connection with the sale of the Option
Shares. The Company will pay all expenses incident to the offer and sale of the
Option Shares.
WARRANT SHARES
The Warrant Shares may be issued from time to time prior to the expiration
of the Warrant upon exercise of the Warrant and payment in full of the exercise
price. The Warrant Shares will be sold directly to the holder of the Warrant and
no person will receive any commission or other compensation in connection with
the sale of the Warrant Shares. The Company will pay all expenses incident to
the offer and sale of the Warrant Shares.
BLUE CROSS SHARES
The Blue Cross Shares may be offered and sold from time to time by or for
the account of Medigroup. The Company has agreed to use its best efforts to keep
this Prospectus effective until June 30, 1997 as to the Blue Cross Shares after
which time this Prospectus may be amended to omit
15
<PAGE>
any portion of such shares that have not yet been sold. The decision to offer
and sell the Blue Cross Shares, and the timing and amount of any offers or sales
that are made, is and will be (subject to the limitation set forth below) within
the sole discretion of Medigroup. Any Blue Cross Shares may be offered for sale
by Medigroup on the New York Stock Exchange, or otherwise, through brokers'
transactions at prices then prevailing at the time of sale. Sales of the Blue
Cross Shares may involve: (a) block transactions in which the broker or dealer
so engaged will attempt to sell the Blue Cross Shares as an agent, but may
position and resell a portion of the block as principal to facilitate the
transactions; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions; or (d) transactions in which the broker solicits
purchasers. Pursuant to Section 6.10 of the Purchase Agreement, Medigroup cannot
sell more than 10,000 of the Blue Cross Shares in any one trading day without
having first received the consent of the Company. To the extent required, this
Prospectus may be amended and supplemented from time to time to describe a
specific plan of distribution. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Common Stock, to the extent permitted by law, in the course of hedging positions
they assume with Medigroup. Medigroup may also pledge Shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged shares pursuant to this
Prospectus (as supplemented or amended to reflect such transaction). Brokers or
dealers engaged to sell the Blue Cross Shares will receive compensation from
Medigroup in the form of commissions or discounts in amounts to be negotiated
immediately prior to the sale. Any gain realized by such brokers or dealers on
the sale of the Blue Cross Shares which they purchase as a principal may be
deemed to be compensation to the brokers or dealers in addition to any
commissions they will receive from Medigroup. Brokers or dealers engaged by
Medigroup may arrange for other brokers or dealers to participate. Such broker
or dealer and any other participating broker or dealer may be deemed to be
"underwriters" within the meaning of the Securities Act and any discounts or
commissions received by them or any profit on the resale of shares by them may
be deemed to be underwriting discounts and commissions thereunder.
The Company will bear all expenses in connection with the registration of
the Blue Cross Shares being offered and sold by Medigroup.
The Company has advised Medigroup that, unless granted an exemption by the
Commission from Regulation M under the Exchange Act, or unless otherwise
permitted under Regulation M, Medigroup cannot engage in any stabilization
activity in connection with the Company's securities and cannot bid for or
purchase any securities of the Company or attempt to induce any person to
purchase any of the Company's securities other than as permitted by the Exchange
Act. In addition, the Company will make copies of this Prospectus available to
Medigroup and Medigroup will furnish each broker or dealer engaged by Medigroup
and each other participating broker or dealer the number of copies of this
Prospectus required by such broker or dealer.
ROBBINS FAMILY SHARES
The Robbins Family Shares may be offered and sold from time to time by or
for the account of the Robbins Family. The decision to offer and sell the
Robbins Family Shares, and the timing and amount of any offers or sales that are
made, is and will be within the sole discretion of the Robbins Family. Any
Robbins Family Shares may be offered for sale by the Robbins Family on the New
York Stock Exchange, or otherwise, at prices and on terms then obtainable, at
fixed prices, at prices then prevailing at the time of sale, or in negotiated
transactions at negotiated prices, or otherwise. The Robbins Family Shares
offered hereby may be offered in any manner permitted by law, other than an
underwritten public offering, including through brokers, dealers or agents, and
directly to one or more purchasers. Sales of the Robbins Family Shares may
involve: (a) block transactions in which the broker or dealer so engaged will
attempt to sell the Robbins Family Shares as an agent, but may position and
resell a portion of the block as principal to facilitate the transactions; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions; or (d) transactions in which the broker solicits
16
<PAGE>
purchasers. To the extent required, this Prospectus may be amended and
supplemented from time to time to describe a specific plan of distribution. In
connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the Common Stock, to the extent
permitted by law, in the course of hedging the positions they assume with the
Robbins Family. The Robbins Family may also pledge Shares to a broker-dealer or
other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged Shares pursuant to this
Prospectus (as supplemented or amended to reflect such transaction). In
addition, any Shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus. Brokers or dealers
engaged to sell the Robbins Family Shares will receive compensation from the
Robbins Family in the form of commissions or discounts in amounts to be
negotiated immediately prior to the sale. Any gain realized by such brokers or
dealers on the sale of the Robbins Family Shares which they purchase as a
principal may be deemed to be compensation to the brokers or dealers in addition
to any commissions they will receive from the Robbins Family. Brokers or dealers
engaged by the Robbins Family may arrange for other brokers or dealers to
participate. Such broker or dealer and any other participating broker or dealer
may be deemed to be "underwriters" within the meaning of the Securities Act and
any discounts or commissions received by them or any profit on the resale of
shares by them may be deemed to be underwriting discounts and commissions
thereunder.
The Company will bear all expenses in connection with the registration of
the Robbins Family Shares being offered and sold by the Robbins Family.
The Company has advised the Robbins Family that, unless granted an exemption
by the Commission from Regulation M under the Exchange Act, or unless otherwise
permitted under Regulation M, the Robbins Family cannot engage in any
stabilization activity in connection with the Company's securities and cannot
bid for or purchase any securities of the Company or attempt to induce any
person to purchase any of the Company's securities other than as permitted by
the Exchange Act. In addition, the Company will make copies of this Prospectus
available to the Robbins Family and the Robbins Family will furnish each broker
or dealer engaged by the Robbins Family and each other participating broker or
dealer the number of copies of this Prospectus required by such broker or
dealer.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Options and the Option
Shares received upon the exercise thereof. This discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
Internal Revenue Service ("IRS") rulings, and judicial decisions now in effect,
all of which are subject to change (possibly with retroactive effect) or
different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be relevant to holders of the Options and the Option
Shares and does not deal with tax consequences arising under the laws of any
foreign, state or local jurisdiction. This discussion is for general information
only, and does not purport to address all of the tax consequences that may be
relevant to particular purchasers in light of their personal circumstances, or
to certain types of purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
hold the Option Shares in connection with a straddle) who may be subject to
special rules. This discussion assumes that each holder holds the Option Shares
as capital assets.
For the purpose of this discussion, the term "United States person" means a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or any state thereof, or an estate or trust,
the income of which is includible in income for United States federal income tax
purposes regardless of its source.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
17
<PAGE>
THEIR PARTICIPATION IN THIS OFFERING, OWNERSHIP AND DISPOSITION OF THE OPTIONS
AND THE OPTION SHARES RECEIVED UPON THE EXERCISE THEREOF, AND THE EFFECT THAT
THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
GRANT AND EXERCISE OF OPTIONS
An Optionee will not be deemed to have received any income subject to tax at
the time the Option is granted.
Upon exercise of an Option, the Optionee will recognize an amount of
ordinary income equal to the excess of the fair market value of Option Shares
purchased on the date of exercise over the exercise price. In general, the
Optionee's basis in the Option Shares acquired by exercising an Option is equal
to their fair market value at the time of the exercise. A subsequent disposition
of such Option Shares in a taxable transaction will produce capital gain (or
loss) for the Optionee equal to the difference between his or her basis and the
sale proceeds. Provided the Option Shares are held as a capital asset, the gain
or loss realized on such disposition will be taxed as long-term capital gain or
loss if the stock was held for more than one year from the date the Option
Shares were acquired pursuant to the exercise of the Option. If the stock was
held for one year or less, such gain or loss will be short-term capital gain or
loss.
The Company is required to withhold any federal, state or local taxes
required by law to be withheld on the amount of ordinary income recognized by
the Optionee. Under the terms of the Plan, as set forth in the Prospectus (see
"Description of the Plan -- Withholding Taxes"), the Optionee is required to pay
to the Company an amount equal to the Company's withholding obligation prior to
the issuance of the Shares.
USING STOCK TO EXERCISE OPTIONS
Special rules apply if an Optionee already owns shares of Common Stock and
surrenders those shares to pay all or part of the exercise price under an
Option. Such a transaction is treated as a tax-free exchange with respect to the
number of new Option Shares that is equal to the number of old shares being
surrendered. The Optionee's basis in the new shares received for the old shares
actually surrendered in exchange therefor is the same as his or her basis in the
old shares, and the capital gain holding period runs without interruption from
the date the old shares were acquired. The Optionee will recognize ordinary
income on any additional new Option Shares received in an amount equal to (1)
the fair market value of the additional new Option Shares at the time of receipt
less (2) any cash paid by the Optionee in connection with the exercise. The
Optionee's basis in the additional Shares is equal to any cash paid upon the
exercise of the Option plus any amount includible in gross income, and the
capital gain holding period commences on the date of exercise. The effect of
these rules is to defer the date when any gain in the old shares must be
recognized for tax purposes. Stated differently, these rules allow an Optionee
to finance the exercise of an Option by using shares that he or she already
owns, without paying current tax on any unrealized appreciation in the value of
those old shares.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will be passed
upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), Washington, D.C. 20004.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company as of and for the years
ended April 30, 1996 and 1995, incorporated by reference in this Prospectus and
in the Registration Statement from the Company's 1996 Form 10-K, have been
audited by Coopers & Lybrand L.L.P., independent certified public accountants,
as stated in its reports incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. Coopers & Lybrand
L.L.P.'s report included in the Company's Form 8-K/A filed on January 11, 1996
includes an explanatory paragraph regarding the
18
<PAGE>
adjustments described in the first paragraph of Note 8 to those consolidated
financial statements that were applied to retroactively restate the 1995, 1994
and 1993 consolidated financial statements and footnotes thereto included in
that Form 8-K/A for the effects of a two-for-one stock split effected as a stock
dividend in November 1995. With respect to the unaudited interim financial
information as of January 31, 1997 and 1996, and for the three-month and
nine-month periods then ended incorporated by reference in this Prospectus and
Registration Statement, Coopers & Lybrand L.L.P. has reported that it has
applied limited procedures in accordance with professional standards for a
review of such information. However, its separate report included in the
Company's quarterly report on Form 10-Q for the quarter ended January 31, 1997,
including amendments numbers 1, 2, 3 and 4 thereto, and incorporated by
reference herein, states that Coopers & Lybrand L.L.P did not audit and it does
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on its report on such information should be restricted in
light of the limited nature of the review procedures applied. Coopers & Lybrand
L.L.P is not subject to the liability provisions of Section 11 of the Securities
Act for its report on unaudited interim financial information because that
report is not a "report" or "part" of the Prospectus or Registration Statement
prepared or certified by Coopers & Lybrand L.L.P within the meaning of Sections
7 and 11 of the Securities Act.
The consolidated financial statements of the Company for the year ended
April 30, 1994, have been incorporated by reference in this Prospectus and in
the Registration Statement from the Company's 1996 Form 10-K in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants
incorporated by reference therein, and upon the authority of said firm as
experts in accounting and auditing. The consolidated financial statements of the
Company for the year ended April 30, 1994, included in the Company's Form 8-K/A
filed on January 11, 1996, but prior to the adjustments described in the first
paragraph of Note 8 to those consolidated financial statements that were applied
to retroactively restate the 1994 consolidated financial statements and
footnotes thereto for the effects of a two-for-one stock split effected as a
stock dividend in November 1995, have been incorporated by reference in this
Prospectus and in the Registration Statement, in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference therein, and upon the authority of said firm as experts in accounting
and auditing.
On January 9, 1995, the Company solicited Statements of Qualifications from
several independent accounting firms, including KPMG Peat Marwick LLP, the
Company's public accountants for the fiscal years ended April 30, 1994 and April
30, 1993, to provide audit services for its consolidated financial statements
for the year ended April 30, 1995. On January 11, 1995, KPMG Peat Marwick LLP
indicated that it had decided not to stand for re-appointment and, therefore,
would not submit a Statement of Qualifications. The decision to solicit
proposals to perform audit services was recommended by the Audit Committee and
approved by the Board of Directors.
The audit reports of KPMG Peat Marwick LLP on the Company's consolidated
financial statements as of and for the fiscal years ended April 30, 1994 and
1993 did not contain an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principle
except with respect to the Company's adoption of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, in fiscal year ended April 30, 1994. In addition,
during fiscal year 1993 and 1994 and any subsequent interim period during which
KPMG Peat Marwick LLP served as the Company's independent public accountants,
there were no disagreements with KPMG Peat Marwick LLP on any matter of
accounting principles, or practices, financial statement disclosure, or auditing
scope or procedures which, if not satisfied to KPMG Peat Marwick LLP's
satisfaction, would have caused it to make a reference to the subject matter of
the disagreement in connection with its reports. In connection with its audit of
the Company's consolidated financial statements for the fiscal year ended April
30, 1994, KPMG Peat Marwick LLP issued a letter relating to internal controls to
the Board of Directors that identified what KPMG Peat Marwick LLP considered to
be a reportable condition relating to timely financial reporting and the
Company's accounting decision-making process.
On March 17, 1995, the Company engaged Coopers & Lybrand L.L.P as the
Company's independent accounting firm to provide audit services for the
Company's consolidated financial statements.
19
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Risk Factors................................... 3
The Company.................................... 8
Use of Proceeds................................ 9
Description of the Plan........................ 9
Description of Capital Stock................... 12
Selling Stockholders........................... 14
Plan of Distribution........................... 15
Certain United States Federal Income Tax
Consequences.................................. 17
Legal Matters.................................. 18
Independent Public Accountants................. 18
</TABLE>
PHP HEALTHCARE CORPORATION
735,000 SHARES
OF COMMON STOCK
---------------------
PROSPECTUS
---------------------
APRIL 30, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the Common Stock being registered. All amounts are estimates except the
registration fee.
<TABLE>
<S> <C>
Commission Registration Fee.................................... $ 2,649.93
Printing and engraving expenses................................ 8,000.00
Legal fees and expenses........................................ 20,000.00
Accounting fees and expenses................................... 12,000.00
Miscellaneous.................................................. 3,000.00
----------
Total...................................................... $45,649.93
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceedings, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such persons' heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under Section 145.
II-1
<PAGE>
Article IX of the Company's By-laws provides that the Company shall
indemnify its directors and officers to the fullest extent authorized by the
DGCL.
Section 102(b)(7) of DGCL provides that a certificate of incorporation may
contain a provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director provided that such provision shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. Article X of the Company's
Certificate of Incorporation limits the liability of directors to the fullest
extent permitted by Section 102(b)(7).
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
4.1 1996 Physicians' Stock Option Plan of PHP Healthcare Corporation, as amended.
4.2 Stock Purchase Agreement by and between PHP Healthcare Corporation and David E. Berman and Mary Ellen
Michael-Fleming dated as of November 1, 1992.
4.3 Warrant to Purchase Shares of Common Stock of PHP Healthcare Corporation dated as of November 1, 1992.
4.4 Specimen form of the Company's Common Stock certificate (incorporated by reference from Exhibit 7.1 to
the Company's Form 8-A, Amendment 1, filed with the Securities and Exchange Commission on August 11,
1992).
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
15.1 Letter of Coopers & Lybrand L.L.P. re: unaudited interim financial information.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page hereof).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Reston, Commonwealth of Virginia, on this 30th day of
April, 1997.
PHP HEALTHCARE CORPORATION
(Registrant)
By: /S/ JACK M. MAZUR
-----------------------------------
Name: Jack M. Mazur
Title: President and Director
The officers and directors of PHP Healthcare Corporation whose signatures
appear below hereby constitute and appoint Jack M. Mazur, Anthony M. Picini and
Ben Rosenbaum III, and each of them, their true and lawful attorneys and agents,
each with power to act alone, to sign, execute and cause to be filed on behalf
of the undersigned any amendment or amendments, including post-effective
amendments, to this Registration Statement of PHP Healthcare Corporation on Form
S-3. Each of the Undersigned does hereby ratify and confirm all that said
attorneys and agents shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed below by the following persons in the capacities
indicated on this 30th day of April, 1997.
<TABLE>
<C> <S> <C>
/S/ CHARLES P. REILLY
- ------------------------------------------- Chairman of the Board April 30, 1997
Charles P. Reilly
/S/ JACK M. MAZUR
- ------------------------------------------- President and Director April 30, 1997
Jack M. Mazur
/S/ MICHAEL D. STARR
- ------------------------------------------- Senior Executive Vice President April 30, 1997
Michael D. Starr and Director
/S/ ANTHONY M. PICINI Executive Vice President and
- ------------------------------------------- Chief Financial Officer (Chief April 30, 1997
Anthony M. Picini Accounting Officer)
/S/ ROBERT L. BOWLES, JR.
- ------------------------------------------- President, D.C. Chartered April 30, 1997
Robert L. Bowles, Jr. Health Plan, and Director
/S/ GEORGE E. SCHAFER, M.D.
- ------------------------------------------- Senior Vice President, Medical April 30, 1997
George E. Schafer, M.D. Affairs and Director
/S/ PAUL T. CUZMANES
- ------------------------------------------- Director April 30, 1997
Paul T. Cuzmanes
/S/ JOSEPH G. MATHEWS
- ------------------------------------------- Director April 30, 1997
Joseph G. Mathews
/S/ DONALD J. RUFFING
- ------------------------------------------- Director April 30, 1997
Donald J. Ruffing
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
4.1 1996 Physicians' Stock Option Plan of PHP Healthcare Corporation, as amended.
4.2 Stock Purchase Agreement by and between PHP Healthcare Corporation and David E. Berman and Mary
Ellen Michael-Fleming dated as of November 1, 1992.
4.3 Warrant to Purchase Shares of Common Stock of PHP Healthcare Corporation dated as of November 1,
1992.
4.4 Specimen form of the Company's Common Stock certificate (incorporated by reference from Exhibit
7.1 to the Company's Form 8-A, Amendment 1, filed with the Securities and Exchange Commission
on August 11, 1992).
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
15.1 Letter of Coopers & Lybrand L.L.P. re: unaudited interim financial information.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page hereof).
</TABLE>
<PAGE>
EXHIBIT 4.1
PHP HEALTHCARE CORPORATION
1996 PHYSICIANS' STOCK OPTION PLAN
(AS ADOPTED APRIL 11, 1996
AND AMENDED OCTOBER 24, 1996)
<PAGE>
PHP HEALTHCARE CORPORATION
1996 PHYSICIANS' STOCK OPTION PLAN
1. PURPOSE.
The purpose of this Plan is to strengthen PHP Healthcare Corporation, a
Delaware corporation (the "Company"), by providing an incentive to Eligible
Persons (as defined herein) 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 Eligible Persons
incentive for high levels of performance and unusual efforts through the grant
of Options (as herein defined).
2. DEFINITIONS.
For purposes of the Plan:
2.1"Affiliate" means an affiliate of the Company within the meaning of Rule
12b-2 under the Exchange Act.
2.2"Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option and setting forth the terms
and conditions thereof.
2.3"Associate" means an associate of the Company within the meaning of Rule
12b-2 under the Exchange Act.
2.4"Board" means the Board of Directors of the Company.
2.5"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, 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.
2.6"Committee" means a committee, as described in Section 3.1, appointed by
the Board to administer the Plan and to perform the functions set forth
herein.
2.7"Company" means PHP Healthcare Corporation
2.8"Disability" means a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a
period of one hundred eighty (180) consecutive days.
2.9"Division" means any of the operating units or divisions of the Company
designated as a Division by the Committee.
2.10
"Eligible Person" means any director, officer, employee, consultant or
advisor of the Company, any Subsidiary, Affiliate or Associate, or any
person with whom the Company or any Subsidiary, Affiliate or Associate has a
management or services agreement (including, without limitation, (i) any duly
licensed doctor of medicine who provides health care services in any health care
network, plan or product sponsored or administered by the Company or any
Subsidiary, Affiliate or Associate, or (ii) any professional medical
corporation, the employees of which include a duly licensed doctor of medicine
who provides health care services in any health care network, plan or product
sponsored or administered by the Company or any Subsidiary, Affiliate or
Associate). Notwithstanding the foregoing, the term "Eligible Person" shall not
include any officer or director of the Company who is subject to reporting under
Section 16(a) of the Exchange Act.
2.11
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.12
"Fair Market Value" on any date means the average of the high and low
sales prices 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 arithmetic mean of
1
<PAGE>
the per Share closing bid price and per Share closing asked 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.
2.13
"Option" means an Option granted pursuant to Section 5.
2.14
"Optionee" means a person to whom an Option has been granted under the
Plan.
2.15
"person" means an individual, a corporation, a partnership, a limited
liability company, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision thereof.
2.16
"Plan" means the PHP Healthcare Corporation 1996 Physicians' Stock Option
Plan.
2.17
"Shares" means the Common Stock, par value $.01 per share, of the
Company.
2.18
"Subsidiary" means a "subsidiary" of the Company within the meaning of
Rule 12b-2 under the Exchange Act.
3. ADMINISTRATION.
3.1The 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) officers or directors of the
Company. 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.
3.2Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:
(a) determine those Eligible Persons to whom Options shall be granted
under the Plan and the number of such Options to be granted and to prescribe
the terms and conditions (which need not be identical) of each such Option,
including the purchase price per Share subject to each Option, and make any
amendment or modification to any Agreement consistent with the terms of the
Plan;
(b) to construe and interpret the Plan and the Options 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, and
otherwise to make the Plan fully effective. All decisions and determinations
by the Committee in the exercise of this power shall be final, binding and
conclusive upon the Company, its Subsidiaries, the Optionees, and all other
persons having any interest therein;
2
<PAGE>
(c) to determine the duration and purposes for leaves of absence which
may be granted to an Optionee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;
(d) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and
(e) 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.
4.1The maximum number of Shares that may be made the subject of Options
granted under the Plan is 100,000. Upon a Change in Capitalization the
maximum number of Shares shall be adjusted in number and kind pursuant to
Section 7. 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.
4.2Upon the granting of an Option, the number of Shares available under
Section 4.1 for the granting of further Options shall be reduced by the
number of Shares in respect of which the Option is granted or denominated.
4.3Whenever any outstanding Option or portion thereof expires, is canceled
or is otherwise terminated for any reason without having been exercised
in respect of the entire Option, the Shares allocable to the expired, canceled
or otherwise terminated portion of the Option may again be the subject of
Options granted hereunder.
5. OPTION GRANTS FOR ELIGIBLE PERSONS.
5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible Persons
who will receive Options, the terms and conditions of which shall be set forth
in an Agreement.
5.2 PURCHASE PRICE. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Option shall be determined by
the Committee and set forth in the Agreement; provided, however, that the
purchase price per Share under each Option shall not be less than the par value
of a Share on the date the Option is granted.
5.3 MAXIMUM DURATION. Options granted hereunder shall be for such term as
the Committee shall determine, provided that an 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 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. Each 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 Option expires.
The Committee may accelerate the exercisability of any Option or portion thereof
at any time.
5.5 MODIFICATION. No modification of an Option shall adversely alter or
impair any rights or obligations under the Option without the Optionee's
consent.
5.6 NON-TRANSFERABILITY. No Option granted hereunder shall be transferable
by the Optionee to whom granted except by will or the laws of descent and
distribution, 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
beneficiaries, executors, administrators, heirs and successors of the Optionee.
3
<PAGE>
5.7 METHOD OF EXERCISE. 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 in full
in cash upon such exercise. Notwithstanding the foregoing, the Committee shall
have discretion to determine at the time of grant of each Option or at any later
date (up to and including the date of exercise) that the form of payment
acceptable in respect of the exercise of such Option may consist of either of
the following (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. Any Shares transferred to the Company 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. In addition, 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. 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.
5.8 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.
6. EFFECT OF A TERMINATION OF SERVICE.
The Agreement evidencing the grant of each Option shall set forth the terms
and conditions applicable to such Option upon a termination or change in the
Optionee's status as an Eligible Person, (including a termination or change by
reason of the sale of the Company's interest in any Subsidiary, Affiliate,
Associate or Division), which shall be as the Committee may, in its discretion,
determine at the time the Option is granted or thereafter.
7. 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 the (i) maximum
number and class of Shares or other stock or securities with respect to which
Options may be granted under the Plan, and (ii) the number and class of Shares
or other stock or securities which are subject to outstanding Options granted
under the Plan and the purchase price therefor, if applicable.
(b) If, by reason of a Change in Capitalization, 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 all of the conditions, restrictions and performance
criteria which were applicable to the Shares subject to the Option, as the case
may be, prior to such Change in Capitalization.
8. EFFECT OF CERTAIN TRANSACTIONS.
Except 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 issued hereunder shall
continue in effect in accordance with their respective terms, except that
following a Transaction each Optionee shall be entitled to receive in respect of
each Share subject to any outstanding Options, upon exercise of any Options, the
same number and kind of stock, securities, cash, property, or other
consideration that each holder of a Share was entitled to receive in
4
<PAGE>
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 prior to such Transaction.
9. TERMINATION AND AMENDMENT OF THE PLAN.
The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option 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 no such
amendment, modification, suspension or termination shall impair or adversely
alter any Options theretofore granted under the Plan, except with the consent of
the Optionee, nor shall any amendment, modification, suspension or termination
deprive any Optionee of any Shares which he or she may have acquired through or
as a result of the Plan.
10. 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.
11. 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 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.
12. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
12.1
Except as to matters of federal law, this 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.
12.2
The obligation of the Company to sell or deliver Shares with respect to
Options 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.
12.3
The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority.
12.4
Each Option 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 the issuance of
Shares, no Options 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.
5
<PAGE>
12.5
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 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.
13. MISCELLANEOUS.
13.1 MULTIPLE AGREEMENTS. The terms of each Option may differ from other
Options granted under the Plan at the same time, or at some other time. The
Committee may also grant more than one Option to a given Eligible Person during
the term of the Plan, either in addition to, or in substitution for, one or more
Options previously granted to that Eligible Person.
13.2 WITHHOLDING OF TAXES. (a) At such times as an Optionee recognizes
taxable income in connection with the receipt of Shares or cash hereunder (a
"Taxable Event"), the Optionee 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 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 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.
13.3 EFFECTIVE DATE. The effective date of the Plan shall be as determined
by the Board.
6
<PAGE>
Exhibit 4.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
PHP HEALTHCARE CORPORATION,
Purchaser,and
DAVID E. BERMAN AND MARY ELLEN MICHAEL-FLEMING
SELLERS,
Dated As of November 1, 1992
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS 1
ARTICLE I
PURCHASE AND SALE 1
1.1 The Shares 1
1.2 Consideration 1
1.3 Place, Time and Effectiveness 2
1.4 Deliveries of Sellers at Closing 2
1.5 Deliveries of Purchaser at Closing 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS 2
2.1 Stock Ownership 2
2.2 Valid and Enforceable Agreement; Authorization 3
2.3 Subsidiaries 3
2.4 Property, Licenses and Permits 3
2.5 Capitalization and Related Matters 3
2.6 Financial Statements 4
2.7 Taxes 4
2.9 Accounts Receivable 5
2.10 Inventories 5
2.11 Books and Records 6
2.12 Absence of Certain Changes 6
2.13 No Undisclosed Liabilities 8
2.14 No Breach of Law or Governing Document 8
2.15 Litigation 8
2.16 Environmental Matters 9
2.17 Contracts 10
2.18 Intellectual Property 10
2.19 Officers, Directors, Employees and Consultants 11
2.20 Bank Accounts of EastWest 12
2.21 Transactions with Related Persons 12
2.22 Employment Relations 12
2.23 Employee Benefit Matters 13
2.24 Other Governmental Approvals and Filings 14
2.25 Complete Disclosure 14
2.26 Brokers, Finders 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER 14
3.1 Authorization 15
3.2 Brokers, Finders 15
ARTICLE IV
COVENANTS 15
4.1 Board of Directors 15
4.2 Non-Compete 15
4.3 Guaranty 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS 15
5.1 Representations and Warranties 15
5.2 Performance of Agreement 15
5.3 Governmental Approvals 16
5.4 No Adverse Proceeding 16
5.5 Certificates 16
5.6 Opinion 16
5.7 Due Diligence 16
5.8 Employment Agreements 16
5.9 Continuation of Key Employees 16
ARTICLE VI
CONDITIONS TO SELLERS' OBLIGATIONS 16
6.1 Representations and Warranties 17
6.2 Performance of Agreement 17
6.3 Governmental Approvals 17
6.4 No Adverse Proceeding 17
6.5 Certificate 17
ARTICLE VII
REMEDIES 17
7.1 Indemnification of Purchaser 17
7.2 Indemnification of Sellers 18
7.3 Survival 18
7.4 Notice of Claim 18
7.5 Right to Contest Claims of Third Parties 18
7.6 Arbitration 20
ARTICLE VIII
MISCELLANEOUS PROVISIONS 21
8.1 Notice 21
8.2 Entire Agreement 22
8.3 Assignment; Binding Agreement 22
8.4 Severability 23
8.5 Counterparts 23
8.6 Headings; Interpretation 23
8.7 Expenses and Transactions 23
8.8 Waiver; Consent 23
8.9 Governing Law 24
8.10 Exhibits and Schedules 24
</TABLE>
ii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is executed as of November
1, 1992, by and between PHP Healthcare Corporation, a Delaware corporation
("Purchaser"), and David E. Berman ("Berman") and Mary Ellen Michael-Fleming
("Michael-Fleming") (Berman and Michael-Fleming collectively referred to herein
as "Sellers").
RECITALS
A. Purchaser desires to purchase from Sellers, on the terms and subject to
the conditions hereinafter stated, all of the issued and outstanding shares of
all classes or series of the capital stock (the "Shares") of EastWest Research
Corporation, a Maryland corporation ("EastWest"); and
B. Sellers desire to sell the Shares to Purchaser.
NOW, THEREFORE, in consideration of the premises and the mutual promises,
warranties, covenants, and agreements made in this Agreement, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE SHARES. Upon the terms and subject to the conditions set forth in
this Agreement, at the Closing (as hereinafter defined), Sellers shall sell,
assign, transfer and deliver to Purchaser and Purchaser shall purchase, receive
and accept from Sellers in consideration of payment to Sellers of the Purchase
Price (as hereinafter defined), the Shares, free and clear of all liens,
security interests, encumbrances, pledges, charges, claims, voting trusts and
restrictions on transfer of any nature whatsoever, other than restrictions on
transfer of a general nature arising under federal and state securities laws.
1.2 CONSIDERATION. Purchaser shall pay Sellers the following consideration
(the "Purchase Price") for the Shares and the other rights of Purchaser
hereunder:
(a) Purchaser shall pay to Berman Four Hundred Thirty-Nine Thousand Dollars
($439,000), of which One Hundred Thirty-Nine Thousand Dollars ($139,000) shall
be payable on the Closing Date and the balance shall be payable in equal
installments on each of the first four (4) anniversaries of the of the date
hereof, together with interest on such installment at the rate of six percent
(6.0%) per annum, as evidenced by a Note in the form attached as Exhibit A. In
addition, Purchaser shall grant to Berman warrants to purchase a total of
Twenty-Two Thousand Five Hundred (22,500) shares of Purchasers' common stock,
$.01 par value, at the prices and on the terms and conditions set forth in
Exhibit B.
<PAGE>
(b) Purchaser shall pay to Michael-Fleming One Hundred Seventy-Two Thousand
Dollars ($172,000), of which Seventy-Two Thousand Dollars ($72,000) shall be
payable on the Closing Date and the balance shall be payable in equal
installments on each of the first four (4) anniversaries of the date hereof,
together with interest on such installment at the rate of six percent (6.0 %)
per annum, as evidenced by a Note in the form attached as Exhibit C. In
addition, Purchaser shall grant to Michael-Fleming warrants to purchase a total
of Seventy-Five Hundred (7,500) shares of Purchasers' common stock, $.01 par
value, at the prices and on the terms and conditions set forth in Exhibit D.
1.3 Place, Time and Effectiveness. The Closing (the "Closing") shall take
place on December 18, 1992 (the "Closing Date"), effective as of midnight
November 1, 1992, at the offices of Bryan Cave, Washington D.C., or at such
other date and place as the parties may agree in writing.
1.4 DELIVERIES OF SELLERS AT CLOSING. At the Closing, Sellers shall
deliver to Purchaser certificates evidencing the Shares, duly endorsed or
accompanied by appropriate, duly executed stock powers in form sufficient to
permit transfer of the Shares to Purchaser.
1.5 DELIVERIES OF PURCHASER AT CLOSING. At the Closing, Purchaser shall
deliver to Sellers certified checks made payable to Berman and Michael-Fleming
in the amount of One Hundred Thirty-Nine Thousand Dollars ($139,000) and
Seventy-Two Thousand Dollars ($72,000), respectively, Notes in form attached as
Exhibits A and C, and Warrants in the form attached as Exhibits B and D.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby make the following representations and warranties to the
Purchaser, jointly and severally, each of which is true and correct on the date
hereof and each of which shall survive the Closing Date and the sale
contemplated hereby:
2.1 STOCK OWNERSHIP. Sellers are the owner of record and the beneficial
owner of the Shares, which are represented by the certificates set forth on
Schedule 2.1. The Shares, which consist of 100 shares of common stock, are owned
by Sellers free and clear of all liens, security interests, encumbrances,
pledges, charges, claims, voting trusts and restrictions of any
2
<PAGE>
nature whatsoever. The Shares constitute all of the issued and outstanding
capital stock of EastWest, and are all validly issued, fully paid and
nonassessable.
2.2 VALID AND ENFORCEABLE AGREEMENT; AUTHORIZATION.
(a) Sellers have the ability and power to enter into this Agreement, which
constitutes a valid obligation of Sellers, enforceable against Sellers in
accordance with its terms.
(b) EastWest is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland. EastWest has the corporate
power and authority to own and use its properties and to transact the business
in which it is engaged.
2.3 SUBSIDIARIES. EastWest has no subsidiaries and has no direct or
indirect beneficial investment or other interest in or obligation with respect
to any other entity, corporation, partnership, joint venture or enterprise.
2.4 PROPERTY, LICENSES AND PERMITS. Except as set forth on Schedule 2.4,
EastWest owns all personal property necessary to transact the business in
which it is engaged, free and clear of all mortgages, options, liens, charges,
security interests, leases, covenants, conditions, agreements, claims,
restrictions and other encumbrances of every kind, and there exists no
restriction on the use or transfer of such property. EastWest holds all
licenses and permits necessary and required to transact the business in
which it is engaged.
2.5 CAPITALIZATION AND RELATED MATTERS. The authorized capital stock of
EastWest consists of 10,000 shares of common stock, par value $.10. There are no
authorized or issued shares of capital stock or other securities of EastWest
other than such common stock. There are no (a) outstanding stock or other
securities convertible or exchangeable for shares of EastWest's capital stock or
containing any profit participation features or (b) rights or options to
subscribe for or purchase shares of EastWest's capital stock or any stock or
securities convertible or exchangeable therefor. EastWest is not subject to any
obligation, contingent or otherwise, to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock.
2.6 FINANCIAL STATEMENTS. The Financial Statements (as hereinafter
defined) are true, complete and correct and fairly present the financial
position, results of operations and
3
<PAGE>
cash flows of EastWest at the dates and for the periods indicated. Except as
set forth on Schedule 2.6 attached hereto, the Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis. As used in this Agreement, "Financial Statements"
means the unaudited balance sheet of EastWest as of October 31, 1992,
together with any notes or schedules thereto. As of the date hereof and the
Closing Date, the stockholders' equity of EastWest, determined according to
generally accepted accounting principles, and its working capital, determined
in such manner, shall be substantially as set forth in the Financial
Statements.
2.7 TAXES.
(a) EastWest has filed or caused to be filed in a timely fashion with the
appropriate Federal, state, county, local and foreign governmental agencies or
instrumentalities all tax returns and reports required to be filed (including
estimated tax and informational returns) and none of such returns and reports
have been amended. All such returns and reports are true, correct and complete
in all material respects. All Taxes (as hereinafter defined) payable with
respect to the periods reflected on those returns have been fully paid. There
are no grounds for the assertion or assessment of any additional Taxes against
EastWest or its assets with respect to returns or reports filed by EastWest.
EastWest is not a member of an "affiliated group" within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the "Code").
(b) Without limiting the foregoing subsection (a) of this Section, the
Financial Statements include adequate provision for all Taxes which have been or
may in the future be assessed against EastWest with respect to the appropriate
period then ended and all periods prior thereto; and EastWest is not liable for
any other Taxes, including any accrued but unpaid Taxes not yet due and owing,
which accrued but unpaid Taxes are included in the Financial Statements to the
extent accrued through October 31, 1992.
(c) As used in this Agreement, "Taxes" shall mean all taxes, charges, fees,
levies, or other like assessments, including without limitation income, gross
receipts, ad valorem, premium, excise, real property, personal property,
windfall profit, sales, use, transfer, license, withholding, employment,
payroll, and franchise taxes imposed by the United States or any state, local or
foreign government, or any subdivision, agency, or other similar person of the
United States or any such government; and such term shall include any interest,
fines, penalties, assessments, or additions to tax resulting from, attributable
to, or incurred in connection with any such tax or
4
<PAGE>
any contest or dispute thereof.
2.9 ACCOUNTS RECEIVABLE. All the accounts receivable of EastWest, and an
aging schedule relating thereto, each as of October 31, 1992, are set forth in
the list attached hereto as Schedule 2.9. Said accounts receivable, and any
accounts receivable arising between said date and the Closing Date
(collectively, the "Accounts Receivable"), all are or will be valid and
subsisting and all arose or will have arisen in the ordinary and usual course of
the business of EastWest. The reserve for the uncollectible receivables
reflected in the Financial Statements is adequate. The Accounts Receivable are
not and will not be, as of the Closing Date, subject to any counterclaim,
set-off or defense, or to any lien, charge or encumbrance of any nature. The
Accounts Receivable are and will be current and collectible and will be paid in
full, net of reserves, on or before ninety (90) days after the Closing Date,
less any applicable discounts.
2.10 INVENTORIES. All inventories held by EastWest at any location are:
(i) assets currently merchantable in the ordinary and usual course of business
at values not less than book value as of the date hereof; and (ii) free and
clear of all pledges, liens, security interests, encumbrances and other
restrictions whatsoever.
2.11 BOOKS AND RECORDS. The books of account, stock record books, minute
books, bank accounts and other corporate records of EastWest are complete and
correct, have been maintained in accordance with good business practices and the
matters contained therein are accurately reflected in the Financial Statements
to the extent appropriate. Copies of the articles of incorporation and bylaws
and all amendments thereto of EastWest are attached hereto as Schedule 2.11 and
are correct and complete to the date hereof.
2.12 ABSENCE OF CERTAIN CHANGES. Since December 31, 1991, except as set
forth in the Financial Statements or Schedule 2.12 hereto, there have not been:
(a) Any material adverse change in the financial condition or the
operations, properties, assets, business or prospects of EastWest or any
occurrence, circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change;
(b) Any declaration, setting aside or payment of any dividend or any
distribution (in cash or in kind) to any shareholder of EastWest with respect to
such shareholder's shares of the capital stock of EastWest other than those made
in the
5
<PAGE>
ordinary course and on arms-length conditions; any direct or indirect
redemption, purchase or other acquisition by EastWest of any of its capital
stock or of any options, warrants, rights or agreements to purchase or acquire
such stock; or any issuance or other disposition of any note or other securities
of EastWest or any agreement to take any of the aforesaid actions;
(c) Any increase in compensation or other remuneration payable to or for the
benefit of or committed to be paid to or for the benefit of any shareholder,
director, officer, agent or employee of EastWest, or in any benefits granted
under any bonus, stock option, profit sharing, pension, retirement, deferred
compensation, insurance, or other direct or indirect benefit Agreement made to
or for the benefit of, or with, any such director, shareholder, officer, agent
or employee;
(d) Any transaction entered into or carried out by EastWest other than in
the ordinary and usual course of business;
(e) Any borrowing or agreement to borrow funds; any incurring of any other
indebtedness or liability, contingent or otherwise; or any endorsement,
assumption or guarantee of payment or performance of any loan or obligation of
any other individual, firm, corporation or other entity by EastWest;
(f) Any change made by EastWest in its methods of doing business or of
accounting;
(g) Any mortgage, pledge, lien, security interest, hypothecation, charge or
other encumbrance imposed or agreed to be imposed on or with respect to any
properties or assets, tangible or intangible, of EastWest;
(h) Any lien, mortgage, security interest, pledge, charge or other
encumbrance discharged or satisfied, or any obligation or liability (absolute or
contingent) paid, other than current liabilities shown on the Financial
Statements and the Closing Date Balance Sheet and current liabilities incurred
and obligations arising under contracts entered into after the date thereof in
the usual and ordinary course of business;
(i) Any sale, lease or disposition of, or any agreement to sell, lease or
dispose of, any properties or assets held for use, used or useful in the
business of EastWest, other than sales, leases or dispositions in the usual and
ordinary course of business for fair equivalent value to persons other than
directors, officers or shareholders of EastWest or sales or dispositions
expressly referred to in this Agreement;
6
<PAGE>
(j) Any modification, waiver, change, amendment, release, rescission, accord
and satisfaction or termination of, or with respect to, any material term,
condition or provision of any agreement, to which EastWest is party, other than
any satisfaction by performance in accordance with the terms thereof in the
usual and ordinary course of business;
(k) Any purchase by EastWest, or any agreements by EastWest to purchase,
capital assets;
(l) Any labor disputes or disturbances materially affecting in an adverse
fashion the operations, business, financial condition or prospects of EastWest,
including the filing of any petition or charge of unfair labor practices with
the National Labor Relations Board;
(m) Any loan or advance made by EastWest to any individual, firm,
corporation or entity except for advances not material in amount made in the
usual and ordinary course of business to employees who are not shareholders,
officers or directors of EastWest; or
(n) Any other event or condition of any character which adversely affects,
or may reasonably be expected to so affect, the operations, properties and
assets, business, financial condition or prospects of EastWest.
2.13 NO UNDISCLOSED LIABILITIES. EastWest does not have any liabilities or
obligations whatsoever, known or unknown, accrued, absolute, contingent or
otherwise, and there is no basis for any claim against EastWest for any
liability or obligation, except (a) to the extent set forth in the Financial
Statements, (b) to the extent specifically set forth on Schedule 2.13 attached
hereto or other Schedule to this Agreement, or (c) contractual obligations due
after the effective time of the Closing for purchases or sales of goods and
services in the ordinary course of the business of EastWest which (i) are not
required to be set forth in a Schedule hereto or (ii) were entered into after
the date hereof but before the Closing Date.
2.14 NO BREACH OF LAW OR GOVERNING DOCUMENT. EastWest is not in default
under or in violation of any applicable statute, law, ordinance, decree, order,
rule, or regulation of any governmental body, or the provisions of any franchise
or license, or in default under or in violation of any provision of its articles
of incorporation or its bylaws. Neither the execution of this Agreement nor the
Closing do or will constitute or result in any such default or violation.
2.15 LITIGATION. Except as set forth on Schedule 2.15,
7
<PAGE>
there is no suit, claim, action, litigation or proceeding, administrative or
judicial, or any governmental investigation pending or, to the knowledge of
Sellers or EastWest, threatened against EastWest or involving any of its
properties and assets, or, in connection with the business of EastWest, any
of its shareholders, directors, officers, agents or other personnel,
including without limiting the generality of the foregoing, any claim,
proceeding or litigation for the purpose of challenging, enjoining or
preventing the execution and delivery of this Agreement or any other
agreement to be delivered hereunder, the performance of the respective terms
and conditions hereof or thereof or the consummation of the respective
transactions contemplated hereby or thereby. EastWest is not subject to or in
default under any order, writ, injunction or decree of any court or
governmental authority.
2.16 ENVIRONMENTAL MATTERS.
(a) Except as disclosed on Schedule 2.16 attached hereto, all property
owned, leased or used by EastWest at the Closing Date or previously owned by,
used by or leased to EastWest ("Property"), and all existing and prior
conditions on and uses of such Property, comply and have at all times complied
with, and do not cause and have not caused liability to be incurred under any or
all federal, state, county and local statutes, laws, regulations, rules,
ordinances, codes, licenses and permits relating to the protection of health or
the environment, including by way of illustration and not by way of limitation:
the Clean Air Act; the Federal Water Pollution Control Act; the Resource
Conservation and Recovery Act; the Comprehensive Environmental Response,
Compensation and Liability Act; the Toxic Substance Control Act, and all other
applicable environmental laws and regulations including, without limiting the
generality of the foregoing, the common law, including the law of nuisance and
strict liability (collectively, "Environmental Laws"). Except as disclosed on
Schedule 2.16 attached hereto, EastWest is not in violation of and has not
violated, in connection with the ownership, use, maintenance or operation of the
Property or the conduct of its business, any Environmental Laws.
(b) Except as disclosed on Schedule 2.16, EastWest has obtained and is in
compliance with all necessary permits, registrations, approvals and licenses,
and has made all registrations and filings with and submissions to federal,
state, and local regulatory authorities required by or under any Environmental
Law. All such registrations, filings and submissions were in compliance with
applicable law when filed and no deficiencies have been asserted by any such
authority with respect to such registrations, filings or submissions.
8
<PAGE>
(c) Except as disclosed on Schedule 2.16, there have been no spill,
discharge, leak, emission, injection, disposal, escape, dumping or release of
any kind on, beneath or above the Property or into the environment surrounding
the Property of any pollutants, contaminants, hazardous substances, hazardous
chemicals, toxic substances, hazardous wastes, infectious wastes, radioactive
materials, petroleum including crude oil or any fraction thereof, asbestos
fibers or solid wastes (collectively referred to herein as "Hazardous
Materials"), including but not limited to those defined in any Environmental
Law.
(d) Except as disclosed on Schedule 2.16, (i) there have been no past, and
there is no current or anticipated, storage, disposal, generation, manufacture,
refinement, transportation, production or treatment of any Hazardous Materials
at, upon or from the Property; (ii) no asbestos fibers or materials or
polychlorinated biphenyls (PCBs) are or have been on the Property, and (iii)
there are and have been no underground storage tanks located on the Property.
2.17 CONTRACTS. Set forth on Schedule 2.17 attached hereto is a complete
list of each contract, agreement, indenture and evidence of indebtedness,
contingent or otherwise (the "Contracts"), to which EastWest is a party and
which either (a) involves an obligation in excess of One Thousand Dollars
($1,000) or (b) is not terminable upon 30 days' notice without liability. Except
as indicated on Schedule 2.17, neither EastWest nor, to the knowledge of Sellers
and EastWest, any other party to the Contracts is in default thereunder or in
violation thereof, and no event has occurred that, through the passage of time
or the giving of notice, or both, would constitute, and neither the execution of
this Agreement nor the Closing hereunder do or will constitute or result in,
such a default or violation or would cause the acceleration of any obligation of
any party thereto or the creation of a lien or encumbrance upon any property of
EastWest or the Shares.
2.18 INTELLECTUAL PROPERTY. Except as described on Schedule 2.18, (a) with
respect to all of the names, patents, inventions, processes, trade secrets,
marks, symbols, tradenames, trademarks, service marks, copyrights and logos
(collectively, the "Intellectual Property"), all computer software programs and
any other material computer "know how" currently existing or under development
(the "Software"), all licenses, sublicenses or agreements in respect of the
Intellectual Property or Software; and all filings, applications, registrations
or issuances of or relating to any of the foregoing with or by any Federal,
state,
9
<PAGE>
local or foreign regulatory, administrative or governmental office or
offices which are owned, used or licensed by or to EastWest in connection with
its business or to which EastWest is a party or which are used by EastWest in
its business:
(i) EastWest is the sole and exclusive owner of all rights, title and
interest in and to such Intellectual Property and Software, free and clear of
all liens, claims, charges, equities, rights of use, encumbrances and
restrictions whatsoever. EastWest is the exclusive owner of all rights, title
and interest in and to any prospect lists, customer lists, projections,
analyses, and internally developed market studies, research and research
materials pertaining to the business of EastWest, free and clear of all liens,
claims, encumbrances and restrictions whatsoever, and has the right to use any
other market studies, research and research materials used by EastWest but not
exclusively owned.
(ii) No Intellectual Property or Software is necessary in any respect of the
operation of the business of EastWest. The ownership, use or sale by EastWest of
any of the Intellectual Property or Software, does not contravene, conflict
with, violate or infringe upon any trademark, copyright or other proprietary
right of any third party or depend for noncontravention upon the acquiescence,
agreement or consent of any such third party.
(iii) None of the Intellectual Property or Software is subject to a valid
challenge, claim of infringement, claim of unfair competition or other claim or,
to the knowledge of Sellers or EastWest, is being infringed upon or violated by
any person, firm, corporation or other legal entity.
(iv) EastWest has not given any indemnification for patent, trademark or
copyright infringement as to any equipment, materials, products, services or
supplies which EastWest produces, owns, uses, licenses or sells; and no product,
process, method, service or operation, which does not constitute Intellectual
Property or Software, presently sold, engaged in or employed by EastWest
infringes upon any rights owned by any other person, firm, corporation or
other legal entity.
2.19 OFFICERS, DIRECTORS, EMPLOYEES AND CONSULTANTS. Set forth on
Schedule 2.19 hereto is a complete list of:
(a) all directors of EastWest;
(b) all officers (with office held) of EastWest;
(c) all employees of EastWest; and
10
<PAGE>
(d) all consultants to EastWest;
together, in each case, with the current rate of compensation payable to each.
2.20 BANK ACCOUNTS OF EASTWEST. Set forth on Schedule 2.20 hereto is a
list of (a) the locations and numbers of all bank accounts and safe deposit
boxes maintained by EastWest, together with the names of all persons who are
authorized signatories or have access thereto and (b) the names of all persons,
if any, holding powers of attorney from EastWest and a summary statement of the
terms thereof.
2.21 TRANSACTIONS WITH RELATED PERSONS. Except as disclosed on Schedule
2.21 hereto, EastWest has no obligations, contractual or otherwise, owed to or
owing from, directly or indirectly, Sellers, any affiliate of Sellers, or any
member of Sellers' families. Except as disclosed on Schedule 2.21, no director,
officer, affiliate or shareholder of EastWest has any material financial
interest, direct or indirect, in any supplier or customer of, or other business
which has any significant transactions or other material business relationship
with, EastWest. For purposes of this Section and this Agreement, an "affiliate"
of a person means any person which is controlling, controlled by or under common
control with, directly or indirectly, the person referred to.
2.22 EMPLOYMENT RELATIONS.
(a) EastWest is in compliance with all federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices, terms
and conditions of employment and wages and hours, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Occupational Safety
and Health Act of 1970, as amended, and the Fair Labor Standards Act, as
amended, and all rules and regulations promulgated thereunder; and EastWest has
not and is not engaged in any unfair labor practice;
(b) No unfair labor practice complaint against EastWest is pending or, to
the knowledge of Sellers or EastWest, threatened before the National Labor
Relations Board;
(c) There is no labor strike, dispute, slowdown or stoppage pending or, to
the knowledge of Sellers or EastWest, threatened against EastWest;
(d) No right of representation exists respecting EastWest's employees;
11
<PAGE>
(e) No employee grievance will have a material adverse effect upon EastWest
or the conduct of its business and no arbitration proceeding arising out of or
under any agreement relating to employment is pending and no claim therefor has
been asserted;
(f) No collective bargaining Agreement is currently being negotiated and no
organizing effort is currently being made with respect to EastWest's employees;
and
(g) EastWest has not experienced any other material labor difficulty since
its incorporation.
2.23 EMPLOYEE BENEFIT MATTERS.
(a) Except as set forth on Schedule 2.23 hereto, EastWest is not a party to
(i) any pension, profit sharing, deferred compensation, bonus, stock option,
stock purchase, retainer, consulting, health, welfare, retirement or incentive
plan or agreement whether legally binding or not, (ii) any plan or policy
providing for welfare or "fringe" benefits to its stockholders, directors,
employees, or agents including but not limited to, vacation, severance,
disability, sick leave, medical, hospitalization, life insurance and other
insurance plans, and related benefits, or (iii) any employment agreement, all of
which are referred to herein individually and collectively as "Plan(s)."
(b) Each Plan has been administered in compliance with, and neither Sellers
nor EastWest have any direct or indirect liability under, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(c) (i) EastWest has not made any contributions to, (ii) EastWest has
never been a member of a controlled group which contributed to and (iii)
EastWest has never been under common control with an employer which
contributed to any multi-employer plan (as defined in ERISA Section 3(37)
or ERISA Section 4001(a)(3)) nor to any pension plan subject to the minimum
funding standards of ERISA or Title IV of ERISA.
(d) EastWest is not a party to any Plan that is intended to qualify under
Section 401(a) or Section 501(a) of the Code.
(e) All of the Plans listed on Schedule 2.23 hereof, to the extent
applicable, are in compliance with the continuation of health benefit provisions
contained in the
12
<PAGE>
Consolidated Omnibus Budget Reconciliation Act of 1985, as subsequently
amended ("COBRA").
(f) All of the Plans listed on Schedule 2.23 hereof, to the extent
applicable, are in compliance with Section 1862(b)(4)(A)(i) of the Social
Security Act and EastWest does not have any liability for any excise tax imposed
by Code Section 5000.
(g) True, correct and complete copies of all documents creating or
evidencing any Plan listed on Schedule 2.23 have been delivered to Buyer. There
are no negotiations, demands or proposals which are pending or have been made
which concern matters now covered, or that would be covered, by the type of
agreements listed in Schedule 2.23.
2.24 OTHER GOVERNMENTAL APPROVALS AND FILINGS. Neither the Sellers nor
EastWest are required to obtain any consent, approval or authorization of, or to
make any declaration or filing with, any governmental authority for the valid
execution and delivery of this Agreement or any other agreement to be delivered
hereunder, the purchase and sale of the Shares, or the performance or
consummation of the respective transactions contemplated hereby or thereby.
2.25 COMPLETE DISCLOSURE. No representation or warranty by Sellers in this
Agreement or any Schedule referred to herein or in any agreement to be delivered
hereunder, and no written statement, certificate or other writing furnished to
Purchaser by or on behalf of Sellers pursuant hereto or thereto knowingly
contains or will contain as of the Closing Date a material untrue statement of
fact or any omission of a material fact necessary to make the respective
statements contained herein or therein not materially or substantially
misleading.
2.26 BROKERS, FINDERS. No finder, broker, agent or other intermediary has
acted on behalf of Sellers, or is entitled to a commission or a finder's fee
in connection with the negotiation or consummation of this Agreement or any
of the transactions contemplated hereby and is responsible for any and all
such commissions and fees owed to parties claiming through or on behalf of
Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties to
Sellers, each of which is true and correct on the date hereof and each of which
shall survive the Closing Date and the sale contemplated hereby:
13
<PAGE>
3.1 AUTHORIZATION. Purchaser is a corporation, duly organized, validly
existing and in good standing under the laws of Delaware. Purchaser has all
requisite power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby. This Agreement constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its respective terms.
3.2 BROKERS, FINDERS. Except as set forth on Schedule 3.2, no finder,
broker, agent or other intermediary has acted on behalf of Purchaser, or is
entitled to a commission or a finder's fee in connection with the negotiation
or consummation of this Agreement or any of the transactions contemplated
hereby and is responsible for any and all such commissions and fees owed to
parties claiming through or on behalf of Purchaser.
ARTICLE IV
COVENANTS
4.1 BOARD OF DIRECTORS. Purchaser shall vote all of the shares of capital
stock of EastWest owned by Purchaser to elect a board of directors of EastWest
consisting of five (5) persons, including each of the Sellers if they remain
employed by EastWest.
4.2 NON-COMPETE. In consideration of the sale of the Shares and the
consummation of the transactions contemplated hereby, each of the Sellers
covenants and agrees that:
(a) (i) He or she will not, directly or indirectly, as a principal,
employee, partner, agent or otherwise, (A) compete, assist in or provide
financial resources to any activity which competes with the business of
EastWest or Purchaser as it is currently conducted or as, to his or her
knowledge, it is currently contemplated to be conducted, except that if and
so long as he or she is no longer employed by EastWest or Purchaser, he or
she may engage, as principal or partner, in the business of consulting, but
only as and in the manner conducted by EastWest during the one (1) year
period prior to the Closing Date, or (B) solicit or divert or attempt to
solicit or divert the business of any persons or entities who are or were
vendors, joint venturers, contractors, clients, customers, consultants,
agents or representatives of EastWest or Purchaser during the one (1) year
period prior to the Closing Date or with whom EastWest or Purchaser has
discussed the possibility of becoming a vendor, joint venturer, contractor,
client, customer, consultant, agent or representative (unless
14
<PAGE>
such person or entity shall have previously advised EastWest or Purchaser in
writing that it has no interest in continuing such discussions) or plans to
engage in such discussions, to his or her knowledge, or otherwise interfere
with or attempt to interfere with the relationship between EastWest or
Purchaser and any such person or entity, for a period of five (5) consecutive
years from the date hereof anywhere EastWest or Purchaser currently conducts,
or, to his or her knowledge, plans to conduct its business; provided,
however, that the running of such time period shall be tolled during any
period of time during which he or she violates this paragraph;
(ii) He or she will not use or disclose to anyone except authorized
personnel of EastWest or Purchaser, whether or not for his or her benefit or
otherwise, any confidential matters concerning EastWest or its business or
Purchaser or its business, including, without limitation, secrets, lists of
vendors, joint venturers, contractors, clients, customers, consultants, agents,
representatives or employees, mailing lists, details of contracts, pricing
policies, operational methods, marketing plans or strategies, product
development and techniques or plans, research and development programs and
plans, business acquisition plans, recruitment plans, designs and design
projects and any other research or business information concerning EastWest or
Purchaser which EastWest or Purchaser currently deems to be confidential;
(iii) He or she will not, directly or indirectly, solicit, encourage to
leave, or hire any officer of EastWest or Purchaser or any person who at the
time of such solicitation or hire has an employment agreement with EastWest or
Purchaser or is involved in sales, marketing or planning activities on behalf of
EastWest or Purchaser (a "Key Person") or who had been a Key Person within the
previous twelve (12) months.
(b) He or she acknowledges that the foregoing restrictions have been
negotiated with the advice of counsel, are reasonable in light of the
previous and existing business relationships between EastWest and Purchaser
and the acquisition of the Shares, including a substantial acquisition of
goodwill, by the Purchaser, and agrees that in the event of any breach
thereof the harm to Purchaser will be irreparable and without adequate remedy
at law, and therefore that injunctive relief with respect thereto will be
appropriate, and that Purchaser shall have no obligation to pay any amounts
which may still be owing to him or her under this Agreement or any note
executed in connection therewith.
(c) If any court determines that any of the provisions of this Section 4.2,
or any part thereof, is invalid
15
<PAGE>
or unenforceable, the remainder of this Section 4.2 shall not be affected and
shall be given full effect, without regard to the invalid portions;
(d) If any court determines that any of the provisions of this Section 4.2,
or any part thereof, is unenforceable because of the scope of any of the
covenants contained therein, then the parties agree that such provision shall be
deemed reduced so that the covenants impose the maximum restraints permissible
under applicable law and, in its reduced form, such provision shall than be
enforceable and shall be enforced.
4.3 GUARANTY. Purchaser shall guaranty payment by EastWest to Sellers of
the base compensation amounts set forth in Section 3(a) of the Employment and
Non-Competition Agreements between EastWest and each of the Sellers.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
Each and every obligation of Purchaser to be performed under this Agreement
shall be subject to the complete and timely satisfaction at or prior to the
Closing of each of the following conditions (unless waived in writing by
Purchaser):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Sellers set forth in Article II of this Agreement shall have been true and
correct in all respects when made and shall be true and correct in all respects
as of the Closing as though such representations and warranties were made at and
as of such date and time.
5.2 PERFORMANCE OF AGREEMENT. All covenants, conditions and other
obligations under this Agreement to be performed or complied with by Sellers at
or prior to the Closing shall have been fully performed and complied with,
including without limitation the delivery of all Shares and all the other
deliveries to be made pursuant to Section 1.4 hereof.
5.3 GOVERNMENTAL APPROVALS. All governmental consents and approvals
necessary to permit the consummation of the transactions required to close on
the Closing Date shall have been received.
5.4 NO ADVERSE PROCEEDING. No action or proceedings shall have been
instituted and remain pending before a court or other government body or by any
public authority for the purpose
16
<PAGE>
of enjoining or preventing the consummation of this Agreement or any
agreement delivered hereunder or any of the respective transactions
contemplated hereby or thereby or otherwise claiming that this Agreement or
any agreement delivered hereunder or the consummation hereof or thereof is
illegal.
5.5 CERTIFICATES. Sellers and EastWest shall have delivered to Purchaser
at the Closing certificates dated the Closing Date, to the effect that the
conditions set forth in Sections 5.1, 5.2, 5.3 and 5.4 hereof have been
satisfied. Such certificate shall be deemed an additional representation and
warranty of Sellers hereunder.
5.6 OPINION. Sellers shall have delivered to Purchaser an opinion of
counsel, addressed to Purchaser and dated the Closing Date; in form satisfactory
to Purchaser, to the affect set forth in Exhibit E.
5.7 DUE DILIGENCE. Purchaser shall be satisfied in all material aspects
with the results of its due diligence review, including, among other areas,
environmental, tort, securities, corporate, product liability, and insurance
matters.
5.8 EMPLOYMENT AGREEMENTS. Berman and Michael-Fleming shall have executed
and delivered to Purchaser Employment Agreements in the form attached as
Exhibits F and G, respectively.
5.9 CONTINUATION OF KEY EMPLOYEES. Purchaser shall be satisfied that
employees it reasonably deems necessary to the continuing business of EastWest
will remain with EastWest after the Closing Date.
ARTICLE VI
CONDITIONS TO SELLERS' OBLIGATIONS
Each and every obligation of Sellers to be performed under this Agreement
shall be subject to the satisfaction at the Closing of the following conditions
(unless waived in writing by Sellers):
6.1 REPRESENTATIONS AND WARRANTIES. Purchaser's representations and
warranties set forth in Article III of this Agreement shall have been true and
correct in all respects when made, and shall be true and correct in all respects
at and as of the Closing as though such representations and warranties were made
at and as of such date and time.
6.2 PERFORMANCE OF AGREEMENT. Purchaser shall have
17
<PAGE>
fully performed and complied with the covenants, conditions and other
obligations under this Agreement to be performed or complied with by it at or
prior to the Closing, including without limitation the deliveries to be made
pursuant to Section 1.5 hereof.
6.3 GOVERNMENTAL APPROVALS. All governmental consents and approvals
necessary to permit the consummation of the transactions contemplated hereby
shall have been received.
6.4 NO ADVERSE PROCEEDING. No action or proceedings shall have been
instituted and remain pending before a court or other government body or by any
public authority for the purpose of enjoining or preventing the consummation of
this Agreement or any of the respective transactions contemplated hereby or
otherwise claiming that this Agreement or any other agreement delivered
hereunder or the consummation hereof or thereof is illegal.
6.5 CERTIFICATE. Purchaser shall have delivered to Sellers at the Closing
a certificate, dated the Closing Date, to the effect that the conditions set
forth in Sections 6.1, 6.2, 6.3, and 6.4 have been satisfied. Such certificate
shall be deemed an additional representation and warranty of Purchaser
hereunder.
ARTICLE VII
REMEDIES
7.1 INDEMNIFICATION OF PURCHASER. Sellers agree, jointly and severally, to
hold Purchaser, its shareholders, directors, officers, successors, and any party
acting on the foregoing's behalf, harmless and indemnify each of them from and
against any claim, loss, damage, liability, expense or cost of any kind or
amount whatsoever (including reasonable attorneys' fees) incurred or paid either
before or after the date hereof resulting from or arising out of any breach of
or default under the Sellers' representations, warranties, covenants and
agreements contained in this Agreement.
7.2 INDEMNIFICATION OF SELLERS. Purchaser agrees to hold Sellers harmless
and indemnify them from and against any claim, loss, damage, liability, expense
or cost of any kind or amount whatsoever (including reasonable attorneys' fees)
incurred or paid either before or after the date hereof resulting from or
arising out of any breach of or default under the Purchaser's representations,
warranties, covenants and agreements contained in this Agreement.
18
<PAGE>
7.3 SURVIVAL. The respective representations and warranties made by the
parties in this Agreement or in any certificate or other document delivered
pursuant hereto or in connection herewith shall survive the Closing Date for
a period of five (5) years, but thereafter shall expire unless a claim with
respect thereto shall have been made in writing against the indemnifying
party pursuant to Section 7.4 hereof; provided, that the foregoing limitation
shall not apply to representations and warranties under Sections 2.1, 2.4,
2.5, 2.7, 2.16, 2.18 and 2.23, which shall survive without limitation
hereunder.
7.4 NOTICE OF CLAIM. In the event that any party hereto asserts a claim
for indemnification hereunder, such party seeking indemnification (the
"Indemnified Party") shall give written notice to the other party or parties
(the "Indemnifying Party") specifying the facts constituting the basis for such
claim and the amount, if known, of the claim asserted. The failure of the
Indemnifying Party, within a period of ninety (90) days after the giving of such
notice by the Indemnified Party, to give written notice to the Indemnified Party
of the intention to contest such claim shall be deemed an agreement that the
claim is a valid claim and at such time as it is known, the amount thereof shall
be paid promptly by the Indemnifying Party.
7.5 RIGHT TO CONTEST CLAIMS OF THIRD PARTIES. If an Indemnified Party
asserts a claim for indemnification hereunder because of a claim made by any
claimant not a party to this Agreement, the Indemnified Party shall give the
other party or parties reasonably prompt notice thereof, but in no event more
than ten (10) business days after said assertion is actually known to the
Indemnified Party; provided, however, that the right of an Indemnified Party to
be indemnified hereunder in respect of claims made by a third party shall not be
adversely affected by a failure to give such notice unless, and then only to the
extent that, an Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, and using counsel reasonably satisfactory to the Indemnified Party, to
investigate, secure, contest or settle the claim alleged by such third party
(hereinafter called a "Third-Party Claim"), provided that the Indemnified Party
may participate voluntarily, at its own expense, in any such Third-Party Claim
through representatives and counsel of its own choice, and, provided further,
that the Indemnifying Party unconditionally acknowledges to the Indemnified
Party in writing his or its obligation to indemnify the Indemnified Party with
respect to all elements of such Third-Party Claim, and posts a bond in an
appropriate amount and that any action by the Indemnifying Party relating to the
Third-Party Claim shall be without prejudice to the Indemnified Party. The
Indemnified Party shall not settle or compromise any
19
<PAGE>
Third-Party Claim for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party (which shall not
be unreasonably withheld) unless suit shall have been instituted against it
and the Indemnifying Party shall not have taken control of the defense of
such Third-Party Claim after notification thereof as provided in this Section
7.5.
Except as provided otherwise in the immediately preceding sentence, the
Indemnifying Party shall bear all costs of such Third-Party Claim and shall
indemnify and hold the Indemnified Party harmless against and from all costs,
fees and expenses of such Third-Party Claim. Unless and until the Indemnifying
Party elects to defend the Third-Party Claim, the Indemnified Party shall have
the full right, at its option, to do so and to look to the Indemnifying Party
under the provisions of this Purchase Agreement for the amount of the costs, if
any, of defending the Contest. The failure of the Indemnifying Party to respond
in writing to the aforesaid notice of the Indemnified Party with respect to such
Third-Party Claim within twenty (20) days after receipt thereof shall be deemed
an election not to defend the same. If the Indemnifying Party does not assume
the defense of any such Third-Party Claim, including any litigation resulting
therefrom, (a) the Indemnified Party may defend against such claim or
litigation, in such manner as it may deem appropriate, including, but not
limited to, settling such claim or litigation, after giving notice of the same
to the Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the Indemnifying Party shall be entitled to participate in
(but not to control) the defense of such action, with its own counsel at its own
expense. If the Indemnifying Party thereafter seeks to question the manner in
which the Indemnified Party defended such Third-Party Claim or the amount or
nature of any such settlement, the Indemnifying Party shall have the burden to
prove by a preponderance of the evidence that the Indemnified Party did not
defend or settle such Third-Party Claim in a reasonably prudent manner.
The parties hereto shall make mutually available to each other all relevant
information in their possession relating to any such Third-Party Claim and shall
cooperate in the defense thereof.
20
<PAGE>
7.6 ARBITRATION.
(a) Resolution of any and all disputes between the parties to this Agreement
(each a "Party" and together the "Parties") arising from or in connection with
this Agreement whether based on contract, tort, common law, equity, statute,
regulation, order or otherwise ("Disputes"), shall be exclusively governed by
and settled in accordance with the provisions of this Section 7.6; provided,
that the foregoing shall not preclude equitable or other judicial relief to
enforce the provisions of this Section 7.6 or Section 4.2 or to preserve the
status quo pending resolution of Disputes hereunder.
(b) The Parties hereby agree to submit to arbitration all Disputes, which
arbitration shall be final and binding upon the Parties, their successors and
assigns.
(c) Either Party may initiate such arbitration by delivery of a demand
therefor (the "Arbitration Demand") to the other Party.
(d) The arbitration shall be conducted in Alexandria, Virginia, by a sole
arbitrator selected by agreement of the Parties not later than 10 days after
delivery of the Arbitration Demand or, failing such agreement, appointed
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, as amended from time to time (the "AAA Rules"). If an arbitrator
becomes unable to serve, his successor(s) shall be similarly selected or
appointed.
(e) The arbitration shall be conducted pursuant to the Federal Arbitration
Act and the Virginia Uniform Arbitration Act and such procedures as the Parties
may agree or, in the absence of or failing such agreement, pursuant to the AAA
Rules. Notwithstanding the foregoing, (i) each Party shall have the right to
audit the books and records of the other Party that are reasonably related to
the Dispute; (ii) each Party shall provide to the other, reasonably in advance
of any hearing, copies of all documents which a Party intends to present in such
hearing; (iii) all hearings shall be conducted on an expedited schedule; and
(iv) all proceedings shall be confidential, except that either Party may at its
expense make a stenographic record thereof.
(f) The arbitrator shall complete all hearings not later than 90 days after
his selection or appointment, and shall make a final award not later than 30
days thereafter. The arbitrator shall apportion all costs and expenses of the
arbitration, including the arbitrator's fees and expenses and fees and expenses
of experts ("Arbitration Costs") between the
21
<PAGE>
prevailing and non-prevailing Party as the arbitrator shall deem fair and
reasonable. In circumstances where a Dispute has been asserted or defended
against on grounds that the arbitrator deems manifestly unreasonable, the
arbitrator may assess all Arbitration Costs against the non-prevailing Party
and may include in the award the prevailing Party's attorney's fees and
expenses in connection with any and all proceedings under this Section 7.6.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 NOTICE. All notices, requests, demands and other communications
required or permitted under this Agreement shall be deemed to have been duly
given and made if in writing upon being served either by personal delivery or by
telecopier to the party for whom it is intended or two business days after being
deposited, postage prepaid, certified or registered mail, return receipt
requested (or such form of mail as may be substituted therefor by postal
authorities), in the United States mail, bearing the address shown in this
Section 8.1 for, or such other address as may be designated in writing hereafter
by such Party:
If to Purchaser:
PHP Healthcare Corporation
4900 Seminary Rd., 12th Floor
Alexandria, Virginia 22311
Attn.: Jack M. Mazur
Telecopies: (703) 998-5040
With a copy to:
Bryan Cave
700 13th St., N.W.
Washington, D.C. 20005
Attn.: William F. Bavinger
Telecopies: (202) 508-6200
If to Sellers:
David E. Berman
Mary Ellen Michael-Fleming
4405 EastWest Highway
Bethesda, Maryland 20814
Telecopies: (301) 656-2160
22
<PAGE>
8.2 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits hereto
embody the entire agreement and understanding of the parties hereto with respect
to the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings relative to said subject matter.
8.3 ASSIGNMENT; BINDING AGREEMENT. This Agreement and various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
Purchaser, its successors and permitted assigns and the Sellers, their
respective executors, administrators, heirs, legal representatives, successors
and permitted assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be transferred or assigned (by operation of law
or otherwise) by any of the parties hereto without the prior written consent of
the other party (which consent shall not be unreasonably withheld), except that
Purchaser shall have the right to transfer and assign its rights hereunder to
purchase the Shares and all other rights or benefits afforded to it by this
Agreement to any entity or entities which may become affiliated with Purchaser,
but no such transfer and assignment by Purchaser shall operate in any way to
modify, relieve or discharge any of the obligations of Purchaser contemplated by
this Agreement.
8.4 SEVERABILITY. If any provision of this Agreement shall be determined
to be contrary to law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
8.5 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
8.6 HEADINGS; INTERPRETATION. The article and section headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of the Agreement. Both parties have
participated substantially in the negotiation and drafting of this Agreement and
each party hereby disclaims any defense or assertion in any litigation or
arbitration that any ambiguity herein should be construed against the draftsman.
8.7 EXPENSES AND TRANSACTIONS. The Sellers (and not EastWest) shall pay
all costs and expenses incurred on behalf of themselves or EastWest in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, the fees and expenses of counsel and accountants.
23
<PAGE>
8.8 WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than in accordance with
its terms), in whole or in part, except by a writing executed by the parties
hereto. No waiver of any of the provisions or conditions of this Agreement or
any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have otherwise
agreed in writing, no waiver by that party of any term, condition or other
provision of this Agreement, or any breach thereof by any other party shall be
deemed to be a waiver of any other term, condition or provision or any breach
thereof, or any subsequent breach of the same term, condition or provision by
the other party, nor shall any forbearance by the first party or parties to seek
a remedy for any noncompliance or breach by the other party be deemed to be a
waiver by the first party of its, her or their rights and remedies with respect
to such noncompliance or breach.
8.9 GOVERNING LAW. This Agreement shall in all respects be construed in
accordance with and governed by the laws of the State of Virginia.
8.10 EXHIBITS AND SCHEDULES. Each reference in this Agreement to a
Schedule or Exhibit, unless otherwise indicated, shall mean a Schedule or
Exhibit attached to this Agreement, which shall be deemed to be incorporated
into this Agreement by such reference.
24
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to
be executed as of the date first above written.
PURCHASER:
PHP HEALTHCARE CORPORATION
By:
------------------------------------------
------------------------------------------
Sellers:
------------------------------------------
David E. Berman
------------------------------------------
MARY ELLEN MICHAEL-FLEMING
25
<PAGE>
Exhibit 4.3
THIS WARRANT IS NON-TRANSFERABLE. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE SECURITIES LAW, AND THIS
WARRANT AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN WHOLE OR IN PART IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THAT ACT AND APPLICABLE STATE SECURITIES LAW OR
AN EXEMPTION FROM SUCH REGISTRATION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
PHP HEALTHCARE CORPORATION
PHP Healthcare Corporation, a Delaware corporation (the "Company"),
certifies that, in accordance with a certain Stock Purchase Agreement of even
date herewith among the Company, David E. Berman (the "Registered Owner") and
Mary Ellen Michael-Fleming (David E. Berman and Mary Ellen Michael-Fleming
referred to collectively herein as the "Sellers"), the Registered Owner has been
granted on the date hereof (the "Grant Date") the right, subject to the terms of
this Warrant, to purchase from the Company a total of Twenty Two Thousand Five
Hundred (22,500) fully paid and nonassessable shares of its common stock, $.01
par value per share (the "Shares"), subject to adjustment as provided herein.
1. PURCHASE PRICE.
The Registered Owner shall be entitled to purchase Seven Thousand Five
Hundred (7,500) Shares hereunder at the price of Eleven Dollars and Fifty Cents
($11.50) per share; Seven Thousand Five Hundred (7,500) Shares at the price of
Fifteen Dollars ($15.00) per share; and Seven Thousand Five Hundred (7,500)
Shares at the price of Twenty Four Dollars ($24.00) per share. Payment of the
Purchase Price shall be made in cash.
2. TERM OF WARRANT.
Subject to earlier termination in accordance with Section 5, this Warrant
shall be exercisable to the extent and in the manner provided herein for a
period of seven (7) years from the Grant Date (the "Exercise Term").
3. EXERCISABILITY OF WARRANT.
This Warrant shall entitle the Registered Owner to purchase, in whole at any
time or in part from time to time, ten percent (10%) of the Shares after the
expiration of two (2) years from the Grant Date, an additional forty percent
(40%) of the Shares after the expiration of three (3) years from the Grant Date,
and the balance of the Shares after the expiration of four (4) years
<PAGE>
from the Grant Date. Such right of purchase shall accrue equally in respect
of Shares purchasable at each of the Purchase Prices set forth in Section 1,
and shall be cumulative and shall continue, unless sooner exercised in whole
or part or terminated as herein provided, during the remaining period of the
Exercise Term.
4. MANNER OF EXERCISE.
4.1 Subject to the terms and conditions herein, this Warrant may be
exercised by delivery of written notice to the Secretary of the Company at
the Company's principal executive office. Such notice shall state that the
Registered Owner is electing to exercise this Warrant and the number of
Shares and Purchase Price in respect of which the Warrant is being exercised
and shall be signed by the person or persons exercising the Warrant on behalf
of the Registered Owner. Such person or persons shall deliver this Warrant to
the Secretary of the Company who shall endorse thereon a notation of such
exercise, and shall provide satisfactory proof as to the authority of such
person or persons to exercise the Warrant on behalf of the Registered Owner.
4.2 The notice of exercise described in Section 4.1 shall be accompanied
by the Purchase Price for the number of Shares in respect of which this
Warrant is being exercised.
4.3 Upon receipt of notice of exercise and the Purchase Price for the
Shares in respect of which this Warrant is being exercised, the Company shall
take appropriate action to effect the transfer to the Registered Owner of the
number of Shares as to which such exercise was effective.
4.4 The Registered Owner shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any Shares subject to
this Warrant until (i) the Warrant shall have been exercised pursuant to the
terms hereof and the Registered Owner shall have paid the full Purchase Price
for the number of Shares in respect of which the Warrant was exercised, (ii)
the Company has complied, in its discretion, with any listing, registration
or qualification requirement of any securities exchange or of the National
Association of Securities Dealers, Inc., as the case may be, or under any
state or federal law, (iii) the Registered Owner's name shall have been
entered as a stockholder of record on the books of the Company, and (iv) the
Company shall have issued and delivered the Shares in certificate form to the
Registered Owner, whereupon the Registered Owner shall have full voting and
other ownership rights with respect to such Shares.
2
<PAGE>
5. TERMINATION.
5.1 This Warrant and all rights of the registered owner under this
Warrant shall terminate (i) upon the expiration of the Exercise Term, to the
extent not previously exercised; and (ii) if the employment of the Registered
Owner by EastWest Research Corporation ("EastWest") under the Employment and
Non-Competition Agreement of even date herewith between EastWest and the
Registered Owner (or any amendment thereto) (the "Employment Agreement") is
terminated pursuant to Section 4(a), (b), (c) or (d) thereof or the
Registered Owner terminates the Employment Agreement prior to the expiration
of its term.
5.2 This Warrant and all rights of the Registered Owner under this
Warrant shall terminate one (1) year after the Employment Agreement is
terminated pursuant to Section 4(e) or (f), but only to the extent it was
exercisable on the date the Employment Agreement was so terminated.
6. DILUTION.
6.1 If the Company shall (i) pay a dividend on its common stock in shares
of its common stock, (ii) subdivide its outstanding common stock, or (iii)
combine its outstanding common stock into a smaller number of shares, then
the Purchase Price of any Shares not yet purchased hereunder shall be
proportionately decreased in the case of such payment or subdivision, or
increased in the case of such combination; and upon such adjustment of the
Purchase Price, the Registered Owner shall thereafter be entitled to
purchase, at the new purchase price, the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares of common
stock issuable upon exercise of this Warrant immediately prior to such
adjustment by the Purchase Price in effect immediately prior to such
adjustment and dividing the product so obtained by the new purchase price.
6.2 Whenever any adjustment is required in the number of shares of common
stock for which this Warrant is exercisable, the Company shall (i) file with
its stock record books a statement describing in reasonable detail the
adjustment and the calculation used in determining that adjustment and (ii)
deliver a copy of that statement to the Registered Owner.
7. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing herein shall be interpreted or construed to confer upon the
Registered Owner any right to continued employment by EastWest or to interfere
in any way with the right of EastWest to
3
<PAGE>
terminate the Registered Owner's employment under the Employment Agreement at
any time.
8. TRANSFER RESTRICTIONS.
This Warrant is binding upon and is solely for the benefit of the parties
hereto. It shall not be transferable other than by will or the laws of descent
and distribution and is binding upon the Registered Owner's executors, heirs and
administrators. Neither this Warrant nor the shares issuable upon exercise of
this Warrant have been registered under the Securities Act of 1933 or under any
applicable state securities law, and this Warrant and such shares may not be
sold, transferred, pledged, hypothecated or otherwise disposed of in whole or in
part in the absence of an effective registration statement under that Act and
applicable state securities law or an exemption from such registration.
9. REGISTRATION RIGHTS.
9.1 In the event the Company files a registration statement under the
Securities Act of 1933 (the "Act") which relates to a public offering of its
securities (except in connection with an offering to employees) and which
offering is of a type and registered pursuant to a form of registration
statement that permits registration of the Shares, the Company agrees, upon
the written request of the Sellers, to have such registration statement and
the prospectus included therein include and relate to, and meet the
requirements of the Act with respect to, the public offering of the Shares
owned by the Sellers (the "Included Shares") so as to permit the public sale
thereof in compliance with the Act.
9.2 The Company shall give written notice to the Sellers of its intention
to file a registration statement under the Act relating to a public offering
of the aforesaid securities at least thirty (30) days prior to the filing of
such registration statement. The Sellers shall deliver their written request
to include their Shares within fifteen (15) days thereafter. Neither the
delivery of such notice by the Company nor of such request by the Sellers
shall in any way obligate the Company to file such registration statement and
notwithstanding the filing of such registration statement the Company may, at
any time prior to the effective date thereof, determine to withdraw such
registration statement without liability to the Sellers.
9.3 The Company shall supply to the Sellers two (2) executed copies of
each registration statement and that reasonable number of copies of the
preliminary, final and other prospectus in conformity with requirements of
the Act and the
4
<PAGE>
Rules and Regulations promulgated thereunder and such other documents as the
Sellers shall reasonably request.
9.4 The Company shall cooperate in taking such action as may be necessary
to register or qualify the Included Shares under such other securities acts
or blue sky laws of such jurisdictions as the Sellers shall reasonably
request and to do any and all other acts and things which may be necessary or
advisable to enable the Sellers to consummate such proposed sale or other
disposition of the Included Shares in any such jurisdiction; provided that in
no event shall the Company be obligated, in connection therewith, to qualify
to do business or to file a general consent to service of process in any
jurisdiction where it shall not then be qualified.
9.5 The Company shall keep effective for a period of not less than ninety
(90) days after the initial effectiveness thereof all such registrations
under the Act and cooperate in taking such action as may be necessary to keep
effective such other registrations and qualifications, and do any and all
other acts and things for such period--not to exceed six (6) months--as may
be necessary to permit the public sale or other disposition of the Included
Shares.
9.6 The Company shall pay the registration and filing fees, underwriting
commissions, transfer taxes, and underwriter's expense allowance attributable
to the Included Shares and the reasonable fees and expenses of the Sellers'
counsel.
9.7 In no event shall the Company be required to include Shares owned by
the Sellers in a registration statement pursuant to the requirements of this
Section 9 more than once. Such inclusion shall be conditioned upon a timely
receipt by the Company in writing of information as to the terms of such
public offering furnished by or on behalf of the Sellers, and such other
information as the Company may reasonably require from the Sellers, or any
underwriter for them, for inclusion in such registration statement.
10. AMENDMENT.
This Warrant may be amended or terminated, and any terms or condition hereof
may be waived, only by a written instrument executed on behalf of each party
hereto.
11. NOTICE.
All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by cable,
5
<PAGE>
telegram, telex or facsimile transmission or by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses:
If Registered Owner:
David E. Berman
4405 EastWest Highway
Bethesda, Maryland 20814
If to the Company:
PHP Healthcare Corporation
4900 Seminary Road
12th Floor
Alexandria, Virginia 22311
Attention: Secretary
12. VALIDITY.
The invalidity or unenforceability of any provision of this Warrant shall
not affect the validity or enforceability of any other provisions of this
Warrant, which shall remain in full force and effect.
13. HEADINGS.
The headings contained in this Warrant are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Warrant.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Virginia without giving effect to the principles of
conflicts of the laws thereof.
6
<PAGE>
15. REPRESENTATIONS.
By accepting this Warrant, the Registered Owner represents and confirms that
he has such knowledge and experience in financial and business matters that he
is capable of evaluating the merits and risks of acquiring this Warrant; that he
has received from the Company a copy of its most recent annual report on Form
10-K, its subsequent quarterly report on Form 10-Q and its most recent proxy
statement, and a brief description of the Company's common stock, and any
material changes in the Company's affairs that are not disclosed in the
foregoing; that he has had the opportunity to ask questions and receive answers
concerning the terms and conditions of this Warrant and to obtain any additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished; and that he is familiar with the limitations on resale referred to in
Section 13.
IN WITNESS WHEREOF, the Company has caused this instrument to be signed, and
its corporate seal to be affixed hereto, as of the 1st day of November, 1992.
PHP HEALTHCARE CORPORATION
By
-----------------------
[Title]
[SEAL]
7
<PAGE>
EXHIBIT 15.1
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: PHP Healthcare Corporation
Registration on Form S-3
We are aware that our report dated March 31, 1997 on our review of interim
financial information of PHP Healthcare Corporation and consolidated
subsidiaries as of January 31, 1997 and 1996, and for the three-month and
nine-month periods then ended and included in the Company's quarterly report on
Form 10-Q for the quarter then ended (as amended on Form 10-Q/A, Amendments No.
1, 2, 3, 4 and 5) is incorporated by reference in this prospectus and
registration statement. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the prospectus and
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
April 29, 1997
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 in connection with the sale of 735,000 shares of common stock of PHP
Healthcare Corporation (the "Company"), including (i) 100,000 shares issuable
upon the exercise of stock options, (ii) 45,000 shares issuable upon the
exercise of an outstanding warrant, dated as of November 1, 1992, issued by the
Company, (iii) 90,000 shares held by Medigroup of New Jersey, Inc., (iv) 200,000
shares held by Charles H. Robbins, (v) 100,000 shares held by Ellen E. Robbins,
Trustee under Trust Indenture dated October 1, 1985 ("Trustee"), FBO Caroline H.
Robbins, Charles H. Robbins, Grantor, (vi) 100,000 shares held by Trustee, FBO
Lee S. Robbins, Charles H. Robbins, Grantor, and (vii) 100,000 shares held by
Charles B. Robbins, of our report dated July 10, 1996 on our audits of the
consolidated financial statements and schedules of PHP Healthcare Corporation
and Subsidiaries as of April 30, 1996 and 1995 and for the years then ended
appearing in the Company's 1996 Form 10-K. We also consent to the reference to
our firm under the caption "Independent Public Accountants."
COOPERS & LYBRAND L.L.P.
Washington, D.C.
April 29, 1997
<PAGE>
EXHIBIT 23.2
The Board of Directors
PHP Healthcare Corporation
We consent to the use of our reports on the consolidated financial
statements for the year ended April 30, 1994 included in the Annual Report on
Form 10-K for the fiscal year ended April 30, 1996 and in the January 11, 1996
Form 8-K of PHP Healthcare Corporation incorporated herein by reference and to
the reference to our firm under the heading of "Independent Public Accountants"
in the prospectus. Our report refers to a change in the method of accounting for
income taxes.
KPMG Peat Marwick LLP
Washington D.C.
April 29, 1997
