<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(AMENDMENT NO. 5)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
COVALENT GROUP, INC.
--------------------
(NAME OF THE ISSUER)
COMMON STOCK, $0.001 PAR VALUE PER SHARE
----------------------------------------
(TITLE OF CLASS OF SECURITIES)
222815 10 2
-----------
(CUSIP NUMBER)
JOEL E. HAND, ESQ.
COVALENT PARTNERS, LLC
4350 LA JOLLA VILLAGE DRIVE
SUITE 970
SAN DIEGO, CALIFORNIA 92122
(858) 558-3443
--------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
AUGUST 23, 2000
--------------
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Page 1 of 14 Pages)
(Continued on following pages)
1.
<PAGE>
CUSIP NO. 222815 10 2 13D PAGE 2 OF 13 PAGES
--- ------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
COVALENT PARTNERS, LLC
33-08-78998
-----------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X] (B) [ ]
3 SEC USE ONLY
------------
4 SOURCE OF FUNDS
WC, 00
------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
------------------ ---
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
--------
NUMBER 7 SOLE VOTING POWER
OF 21,438
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 6,219,500
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
21,438
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,219,500 - SEE ITEM 5
----------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES
[X]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51.6% - SEE ITEM 5
----- ----------
14 TYPE OF REPORTING PERSON CO
------------------------ --
* Calculated pursuant to Rule 13d-3 of the Securities Exchange Act of
1934, as amended. Includes any rights to acquire beneficial ownership of
securities of the Issuer within 60 days of the date of the filing of this
Schedule 13D.
** Based upon 12,059,693 shares of Common Stock issued and outstanding
as reported on the Issuer's Quarterly Report filed on Form 10-QSB for the
quarter ended June 30, 2000.
2.
<PAGE>
CUSIP NO. 22815 10 2 13D PAGE 3 OF 13 PAGES
--- ------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
RICHARD D. PROPPER
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X] (b) [ ]
3 SEC USE ONLY
------------
4 SOURCE OF FUNDS
PF
--
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [X]
------------------ ---
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
-------------
NUMBER 7 SOLE VOTING POWER
OF 1,490,419
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 6,219,500
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 1,490,419
10 SHARED DISPOSITIVE POWER
2,029,406
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,666,100 - SEE ITEM 5
--------- ----------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES
[X]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
55.27% - SEE ITEM 5
------ ----------
14 TYPE OF REPORTING PERSON IN
------------------------ --
* Calculated pursuant to Rule 13d-3 of the Securities Exchange Act of
1934, as amended. Includes any rights to acquire beneficial ownership of
securities of the Issuer within 60 days of the date of the filing of this
Schedule 13D.
** Based upon 12,059,693 shares of Common Stock issued and outstanding
as reported on the Issuer's Quarterly Report filed on Form 10-QSB for the
quarter ended June 30, 2000.
3.
<PAGE>
CUSIP NO. 22815 10 2 13D PAGE 4 OF 13 PAGES
--- ------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
MICHAEL D. CHERMAK
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X] (b) [ ]
3 SEC USE ONLY
------------
4 SOURCE OF FUNDS
PF
--
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
------------------ ---
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
-------------
NUMBER 7 SOLE VOTING POWER
OF 669,062
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 6,219,500
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 669,062
----
10 SHARED DISPOSITIVE POWER
1,690,587
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,275,000 - SEE ITEM 5
--------- ----------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES
[X]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
52% - SEE ITEM 5
--- ----------
14 TYPE OF REPORTING PERSON IN
------------------------ --
* Calculated pursuant to Rule 13d-3 of the Securities Exchange Act of
1934, as amended. Includes any rights to acquire beneficial ownership of
securities of the Issuer within 60 days of the date of the filing of this
Schedule 13D.
** Based upon 12,059,693 shares of Common Stock issued and outstanding
as reported on the Issuer's Quarterly Report filed on Form 10-QSB for the
quarter ended June 30, 2000.
4.
<PAGE>
CUSIP NO. 22815 10 2 13D PAGE 5 OF 13 PAGES
--- ------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
SALMAN J. CHAUDHRY
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X] (b) [ ]
3 SEC USE ONLY
------------
4 SOURCE OF FUNDS
PF
--
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
------------------ ---
6 CITIZENSHIP OR PLACE OF ORGANIZATION
PAKISTAN
--------
NUMBER 7 SOLE VOTING POWER
OF 12,700
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 12,700
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,700 - SEE ITEM 5
------ ----------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES
[X]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) LESS THAN
1% - SEE ITEM 5
---------------
14 TYPE OF REPORTING PERSON IN
------------------------ --
* Calculated pursuant to Rule 13d-3 of the Securities Exchange Act of
1934, as amended. Includes any rights to acquire beneficial ownership of
securities of the Issuer within 60 days of the date of the filing of this
Schedule 13D.
** Based upon 12,059,693 shares of Common Stock issued and outstanding
as reported on the Issuer's Quarterly Report filed on Form 10-QSB for the
quarter ended June 30, 2000.
5.
<PAGE>
This Amendment No. 5 amends and restates the Schedule 13D filed by the Reporting
Persons (as defined in Item 2) on November 10, 1999, as amended by Amendment No.
1 to Schedule 13D filed on November 27, 1999, and Amendment No. 2 to Schedule
13D filed on January 26, 2000, and as amended by Amendment No. 3 filed on July
15, 2000, and Amendment number 4 filed on August 7, 2000.
ITEM 1. SECURITY AND THE ISSUER
(a) TITLE OF SECURITY:
Common Stock, $0.001 par value per share.
(b) NAME OF THE ISSUER:
Covalent Group, Inc., a Nevada corporation.
(c) THE ISSUER'S PRINCIPAL EXECUTIVE OFFICE:
One Glenhardie Corp. Center 1275 Drummers Lane, Suite 100 Wayne, PA
19087
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement is being filed jointly on behalf of (i) Covalent
Partners, LLC, a Delaware limited liability company ("Covalent
Partners"), (ii) Richard D. Propper ("Propper"), (iii) Michael D.
Chermak ("Chermak") and (iv) Salman J. Chaudhry ("Chaudhry")
(collectively, the "Reporting Persons").
Covalent Partners is principally in the business of acquiring equity
securities of the Issuer, including without limitation, the right to
vote and dispose of such securities.
(b)-(c) Set forth in Schedule I to this Schedule 13D is information
concerning the Reporting Persons as required to be disclosed in
response to this Item 2.
(d) To the best knowledge of the Reporting Persons, during the last
five years, there have been no criminal proceedings against the
Reporting Persons.
(e) On June 24, 1996, the SEC initiated an administrative proceeding
against Propper and others alleging that Propper violated Sections
13(d), 13(g) and 16(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and Rules 13d-1, 13d-2; 16a-2, 16a-3 and
former Rule 16a-1 promulgated thereunder, by untimely filing Schedules
13D and 13G, and Forms 3, 4 and 5 with respect to certain transactions
relating to the beneficial ownership of securities held by Montgomery
Medical Ventures, L.P., Montgomery Medical Ventures II, L.P.,
Montgomery Medical Partners, L.P. and Montgomery Medical Partners II,
L.P. The Commission accepted an offer of settlement submitted by
Propper whereby Propper agreed to the Commission's order to cease and
6.
<PAGE>
desist from committing or causing any violation or future violation of,
Sections 13(d), 13(g) and 16(a) of the Exchange Act and Rules 13d-1,
13d-2, 16a-2 and 16a-3 promulgated thereunder.
Other than described in the foregoing paragraph, during the last five
years, to the best knowledge of the Reporting Persons none of the
Reporting Persons has been a party to any civil proceeding of a
judicial or administrative body of competent jurisdiction resulting in
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Propper and Chermak are citizens of the United States. Chaudhry is
a citizen of Pakistan.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Pursuant to an Option Agreement, dated as of November 1, 1999, by and
between Bruce LaMont ("LaMont") and Covalent Partners (the "Option
Agreement"), LaMont granted Covalent Partners the option to purchase
6,015,500 shares of the outstanding common stock of the Issuer held by
LaMont (the "Shares"), at a per share price of $2.00 (the "Option"). On
November 1, 1999 pursuant to the terms of the Option Agreement,
Covalent Partners elected to purchase 1,000,000 Shares of the Issuer
for an aggregate purchase price of $2,000,000. On November 27, 1999,
pursuant to the terms of the Option Agreement, Covalent Partners
elected to purchase 250,000 Shares of the Issuer for an aggregate
purchase price of $500,000. On January 15, 2000, pursuant to the terms
of the Option Agreement, Covalent Partners elected to purchase the
remaining 4,765,500 shares of the Issuer for an aggregate purchase of
$9,531,000.
Covalent Partners obtained funds to make the purchases on November 1,
1999 and November 27, 1999 through capital contributions and loan
agreements with its members. Chermak, through personal funds, made a
loan to Covalent Partners in the amount of $1,000,000. Propper made a
loan to Covalent Partners in the amount of $1,000,000. Propper obtained
such funds through a loan agreement with California Bank & Trust
whereby interest accrues monthly at a prime rate plus .5% and principal
and interest is due and payable on April 15, 2000.
Covalent Partners obtained funds to make the final purchase pursuant to
the Option Agreement through capital contributions from Propper and
promissory notes (the "Promissory Notes") with the following entities
and individuals: (i) Acorn Technology Fund, in the amount of
$1,800,000; (ii) Bedford Oak Partners, L.P., in the amount of
$1,800,000; (iii) Thomas Hodapp, in the amount of $1,500,000; (iv)
Hassan Nemazee, in the amount of $1,125,000; (v) Houston Ventures,
Inc., in the amount of $1,125,000; (vi) Montpellier International LDC,
7.
<PAGE>
in the amount of $360,000; (vii) Maxwell H. Gluck Foundation, in the
amount of $300,000; (viii) David Smith, in the amount of $225,000; (ix)
Gerry Beemiller, in the amount of $150,000; (x) Emerald International,
in the amount of $105,000; (xi) Ashish Vibhakar, in the amount of
$100,000; (xii) U.S. Equity Portfolio LP, in the amount of $75,000; and
(xiii) United Congregation Mesorah, in the amount of $60,000 (each
individually, the "Lender" and collectively, the "Lenders"). Pursuant
to the terms of the Promissory Notes, the loans were repayable by
Covalent Partners by either (i) payment of the outstanding principal
plus accrued interest on the unpaid principal at the rate of 5.88% per
annum; or (ii) provided that the Shares were purchased under the Option
Agreement, delivery of Shares of Common Stock of the Issuer. Covalent
Partners elected to purchase the Shares pursuant to the Option
Agreement and each of the Lenders received Shares held by Covalent
Partners in full payment of the outstanding principal and accrued
interest under the Promissory Notes.
The foregoing summary of the source of the funds used by Covalent
Partners to purchase the shares of Common Stock of the Issuer is
qualified in its entirety by reference to a copy of (i) the Promissory
Note between Chermak and Covalent Partners included as Exhibit 99.1 and
incorporated herein in its entirety by reference, (ii) the Promissory
Note between Propper and Covalent Partners included as Exhibit 99.2 and
incorporated herein in its entirety by reference, (iii) the loan
agreement between Propper and California Bank and Trust included as
Exhibit 99.3 and incorporated herein in its entirety by reference, and
(iv) the form of Promissory Note attached hereto as Exhibit 99.8 and
incorporated herein in its entirety by reference.
Covalent Partners purchased 204,000 shares of the Issuer in open
market, transactions for an aggregate approximate amount of $505,871.
Covalent Partners obtained funds to make such purchases through capital
contributions from its non-controlling members.
Propper purchased, through personal funds, 447,600 shares of Common
Stock of the Issuer in open market transactions for an aggregate
approximate amount of $1,241,543.
Chermak purchased, through personal funds, 65,500 shares of Common
Stock of the Issuer in open market transactions for an aggregate
approximate amount of $163,971.
Chaudhry purchased, through personal funds, 16,700 shares of Common
Stock of the Issuer in open market transactions for an aggregate
approximate amount of $32,838.
8.
<PAGE>
ITEM 4. PURPOSE OF THE TRANSACTION
The August 23, 2000 transaction that is the subject of the fifth
amendment of this Form 13D reports the sales of stock in Covalent Group
by Covalent Partners, LLC to the following individuals in the
quantities indicated. Agreement was reached with Cerami and Borow for
the sale of shares on August 20, 2000. Covalent Partners reached
agreement with all other individuals listed below on August 23, 2000.
Instructions will be given to the transfer agent for Covalent Group to
transfer the shares to Borow, Cerami and the other individuals listed
below on August 24, 2000.
Kenneth Borow, M.D. 460,000
Anthony Cerami 75,000
Javed I. Chaudhry 231,500
Kerry Propper 300,000
John Belknap 40,000
Patti Davis 10,000
Daniel Beharry 25,000
Joel Hand 7,500
In addition, Covalent Partners, LLC transferred the shares indicated
below on or about August 23, 2000 to the Members of Covalent Partners,
LLC, representing a pro rata distribution of the individuals'
membership interest in the LLC:
Richard Propper 338,819
Michael Chermak 53,399
Also, the number of shares reported as purchased in open market
transactions on the fourth amendment to this 13D by Michael Chermak
should have been reported as 65,500 shares.
The August 4, 2000 transaction that is the subject of the fourth
amendment of this Form 13D reports the transfer of 159,422 shares of
Covalent Group, Inc. from Covalent Partners, LLC to Michael Chermak.
The transferred shares are a pro rata distribution of Chermak's
interest in Covalent Partners, LLC. The number of shares transfered to
Chermak in the July 13 transaction were miscalculated, and this
transfer corrects that error.
The July 13, 2000 transaction that is the subject of the third
amendment of this Form 13D relates to the transfer of shares from
Covalent Partners, LLC to certain Lenders previously identified in
prior filings of this 13D. Covalent Partners has transferred additional
shares (as identified below) to certain of the Lenders based upon a
feature of their agreement with Covalent Partners that if a private
transaction by which those lenders could recover the entire amount of
their investment yet retain a substantial portion of their stock
(roughly 50%) did not occur by a certain date, these Lenders would
receive an additional number of shares that would reduce the effective
purchase price of the stock that they had acquired from $3 per share
down to $2.68.
The amounts are
David H. Smith 4,975
Interim Advantage 1,990
Contra VC, LLC 1,990
Bedford Oak Partners 71,642
Montpellier International LDC 14,328
Maxwell H. Gluck Foundation 11,940
Emerald International 4,179
US Equity Portfolio LP 2,985
United Congregation Mesorah 2,388
In addition to these above distributions, Propper and Chermak are
members of Covalent Partners; the shares being transferred to Propper
and Chermak represent a partial, prorata distribution of their
membership interest.
Richard Propper 704,000
Michael Chermak 390,741
Total distributions 1,211,158
9.
<PAGE>
Propper, Chermak and Chaudhry originally acquired shares of the Issuer
for general investment purposes.
Propper initiated discussions with LaMont regarding an extraordinary
transaction involving the acquisition of all of the outstanding Common
Stock of the Issuer held by LaMont. On September 1, 1999, LaMont
entered into a No-Shop Agreement with Propper through his related
investment firm, RP Associates, LLC. A copy of the No-Shop Agreement is
attached hereto as Exhibit 99.4. In connection with such discussions,
Covalent Partners was formed for the purpose of acquiring the shares of
the Issuer in order to change the management and Board of Directors of
the Issuer (the "Board").
Pursuant to the Option Agreement, and subject to the conditions set
forth therein, LaMont granted Covalent Partners the Option. On November
1, 1999, pursuant to the terms of the Option Agreement, Covalent
Partners elected to purchase 1,000,000 shares of the Issuer held by
LaMont for an aggregate purchase price of $2,000,000. On November 27,
1999, Covalent Partners elected to exercise its rights to purchase
250,000 additional Shares. On January 15, 2000, Covalent Partners
elected to exercise its rights to purchase the remaining 4,765,500
shares pursuant to the Option. Upon completion of the purchase of the
Shares and as payment in full of the principal amounts and all accrued
and unpaid interest pursuant to the Promissory Notes, Covalent Partners
delivered to each of the Lenders, shares of common stock of the Issuer
in the following amounts: (i) Acorn Technology Fund, in the amount of
600,000 shares; (ii) Bedford Oak Partners, L.P., in the amount of
600,000 shares; (iii) Thomas Hodapp, in the amount of 500,000 shares;
(iv) Hassan Nemazee, in the amount of 500,000 shares; (v) Houston
Ventures, Inc., in the amount of 500,000 shares; (vi) Montpellier
International LDC, in the amount of 120,000 shares; (vii) Maxwell H.
Gluck Foundation, in the amount of 100,000 shares; (viii) David Smith,
in the amount of 75,000 shares; (ix) Gerry Beemiller, in the amount of
50,000 shares; (x) Emerald International, in the amount of 35,000
shares; (xi) Ashish Vibhakar, in the amount of 33,333 shares; (xii)
U.S. Equity Portfolio LP, in the amount of 25,000 shares; and (xiii)
United Congregation Mesorah, in the amount of 20,000 shares.
Upon Covalent Partners' election to exercise the Option in full on
January 15, 2000, LaMont was required to immediately resign as a Board
member, Chief Executive Officer, President and employee of the Issuer.
The foregoing summary of the Option Agreement is qualified in its
entirety by reference to the copy of the Option Agreement included as
Exhibit 99.5 to this Schedule 13D and incorporated herein in its
entirety by reference.
10.
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) - (b) Based on the Issuer's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2000, there were 12,059,693 shares of Common
Stock outstanding. The following summarizes the shares of the Issuer
beneficially owned by the Reporting Persons:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
STOCK (BUT FOR STOCK BENEFICIALLY PERCENTAGE OF CLASS
INVESTOR RULE 13D-5(b)(1)) OWNED BENEFICIALLY OWNED
-------- ----------------- ----- ------------------
<S> <C> <C> <C>
Covalent Partners, LLC 6,219,500 6,219,500 51.6%
Richard D. Propper 1,490,419 6,666,100 55.27%
Michael D. Chermak 681,562 6,275,000 52.03%
Salman J. Chaudhry 12,700 12,700 Less than 1%
</TABLE>
Beneficial ownership of 6,219,500 shares of Common Stock of the Issuer
otherwise beneficially owned by Covalent Partners is attributed to
Propper and Chermak by virtue of Rule 13d-5(b)(1) of the Exchange Act.
Pursuant to Rule 13d-4 of the Exchange Act, Covalent Partners disclaims
beneficial ownership of 1,490,419 shares of Common Stock of the Issuer
beneficially owned by Propper, 669,062 shares beneficially owned by
Chermak and 14,700 shares beneficially owned by Chaudhry; Propper
disclaims beneficial ownership of 669,062 shares of Common Stock of the
Issuer beneficially owned by Chermak and 14,700 shares held by
Chaudhry; Chermak disclaims beneficial ownership of 1,490,419 shares of
Common Stock of the Issuer beneficially owned by Propper and 14,700
shares beneficially owned by Chaudhry; Chaudhry disclaims beneficial
ownership of 6,219,500 shares of Common Stock of the Issuer
beneficially owned by Covalent Partners, 6,666,100 shares beneficially
owned by Propper and 6,275,000 shares beneficially owned by Chermak.
Propper has sole voting and dispositive power with respect to 1,490,419
shares of Common Stock of the Issuer. Chermak has sole voting and
dispositive power with respect to 681,562 shares of Common Stock of the
Issuer. Chaudhry has sole voting and dispositive power with respect to
14,700 shares of Common Stock of the Issuer. Covalent Partners shares
voting power with its managing members with respect to 1,690,587 shares
of Common Stock of the Issuer and shares dispositive power with its
managing members with respect to 1,690,587 shares of Common Stock of
the Issuer.
Pursuant to Section 6(b) of the Option Agreement, until the earlier of
(i) January 31, 2000 or (ii) the date Covalent Partners exercises the
Option in full, Covalent Partners agreed to grant voting rights to
LaMont with respect to all of the shares of Common Stock of the Issuer
purchased by Covalent Partners, including 1,250,000 shares purchased by
Covalent Partners pursuant to the Option Agreement. The grant of such
voting rights terminates immediately prior to a lawful sale of the
shares purchased by Covalent Partners in the public market. In
addition, if Covalent Partners fails to exercise the option in full by
January 15, 2000, LaMont has the right to buy back from Covalent
Partners, on or before January 31, 1999, any and all the Shares
acquired by Covalent Partners' exercise of the Option at a price of
$2.00 per share. Covalent Partners exercised the Option in full thereby
terminating the grant of voting rights to LaMont with respect to the
Shares.
11.
<PAGE>
Pursuant to Stockholder Agreements, dated as of January 20, 2000,
entered into by and between Covalent Partners and each of the Lenders,
the Lenders have agreed to vote the Shares delivered pursuant to the
Promissory Notes in accordance with those voted by Covalent Partners.
The agreement to vote terminates with respect to any shares being sold
immediately prior to the lawful sale of such shares in the public
market. The foregoing summary of such voting requirements is qualified
in its entirety by reference to a copy of a form of Stockholder
Agreement included as Exhibit 99.9 and incorporated in its entirety by
reference.
Set forth in Schedule II to this Schedule 13D is the name of and
certain information regarding the individuals with whom Covalent
Partners shares the power to vote or to direct the vote or to dispose
or direct the disposition of Common Stock of Issuer.
During the past five years, to the Reporting Persons' knowledge, no
person named in Schedule II to this Schedule 13D, has been convicted in
a criminal proceeding.
During the past five years, to the Reporting Persons' knowledge, no
person named in Schedule II to this Schedule 13D was a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of or
prohibiting or mandating activity subject to federal or state
securities laws or finding any violation with respect to such laws.
To Covalent Partners' knowledge, all persons named in Schedule II to
this Schedule 13D are citizens of the United States.
(c) Set forth in Schedule III to this Schedule 13D are the
transactions, other than the Option Agreement as described in this
Schedule, involving the Common Stock of the Issuer, entered into by the
Reporting Persons within the last 60 days. All such transactions were
made for cash in open market transactions.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
In connection with the Option Agreement, Kenneth M. Borow ("Borow") and
Covalent Partners entered into a Letter Agreement dated November 1,
1999 (the "Letter Agreement"). Pursuant to the Letter Agreement, Borow
agreed to remain employed as the President, Chief Operating Officer and
Chief Medical Office of the Issuer until the earlier of Covalent
Partners' exercise of the Option in full and January 15, 2000. In
consideration of the above, Covalent Partners agreed to grant an option
to Borow to acquire from Covalent Partners 460,000 shares of the
Issuer's Common Stock at a price of $2.00 per share upon Covalent
Partners' exercise of the Option in full ("Borow Option"). Prior to the
exercise of the Option in full by Covalent Partners, Borow waived all
rights to receive the Borow Option and any Common Stock thereunder.
Covalent Partners and Borow have agreed that the Issuer will not grant
any options to Borow pursuant to the Letter Agreement.
The foregoing summary of the Letter Agreement is qualified in its
entirety by reference to a copy of the Letter Agreement included as
Exhibit 99.7 to this Schedule 13D and incorporated herein in its
entirety by reference.
12.
<PAGE>
Other than as described in the foregoing paragraphs and in Item 4
above, to Covalent Partners' knowledge, there are no contracts,
arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 and between such persons and any
person with respect to any securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
*99.1 Promissory Note dated October 29, 1999 by and between
Michael D. Chermak and Covalent Partners, LLC.
*99.2 Promissory Note dated October 29, 1999 by and between
Richard D. Propper and Covalent Partners, LLC.
*99.3 Business Loan Agreement dated October 26, 1999 by and
between Richard D. Propper and California Bank &
Trust.
*99.4 No-Shop Agreement dated September 1, 1999 by and
between Bruce LaMont and RP Associates, LLC.
*99.5 Option Agreement dated November 1, 1999 by and
between Bruce LaMont and Covalent Partners, LLC.
*99.6 Form of Employment Agreement to be entered into by
and between Kenneth M. Borow and the Issuer.
*99.7 Letter Agreement dated November 1, 1999 by and
between Kenneth M. Borow and Covalent Partners, LLC.
*99.8 Form of Promissory Note.
*99.9 Form of Stockholder Agreement.
* Previously filed by the Reporting Persons.
13.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
DATED: August 23, 2000
COVALENT PARTNERS, LLC,
a Delaware limited liability company
By: /s/ RICHARD D. PROPPER
---------------------------------------
Dr. Richard D. Propper
Managing Member
/s/ RICHARD D. PROPPER, M.D.
---------------------------------------
RICHARD D. PROPPER
/s/ MICHAEL D. CHERMAK
-------------------------------
MICHAEL D. CHERMAK
/s/ SALMAN J. CHAUDHRY
-------------------------------
SALMAN J. CHAUDHRY
14.
<PAGE>
SCHEDULE I
REPORTING PERSONS,
CONTROLLING MEMBERS AND MANAGERS OF
COVALENT PARTNERS, LLC
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
----------------------------------
<S> <C>
Covalent Partners, LLC N/A
4350 La Jolla Village Drive, Suite 970
San Diego, CA 92121
Dr. Richard D. Propper Member and Manager of Covalent Partners, LLC
4350 La Jolla Village Drive, Suite 970
San Diego, CA 92122
Michael D. Chermak Member and Manager of Covalent Partners, LLC
4350 La Jolla Village Drive, Suite 970
San Diego, CA 92122
Salman Chaudhry Financial Consultant
4350 La Jolla Village Drive, Suite 970
San Diego, CA 92122
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT
----------------------------------
<S> <C>
Acorn Technology Fund, LP N/A
Five Vaughn Drive
Princeton, NJ 08540-6313
Bedford Oak Partners, L.P., N/A
a Delaware limited partnership
100 South Bedford Road
Mt. Kisco, NY 10549
Thomas Hodapp Investment Advisor
254 Glenn Drive
Sausalito, CA 94965
Hassan Nemazee Investment Advisor
720 5th Avenue
New York, NY 10019
Houston Venture Inc., N/A
a Texas corporation
720 5th Avenue
New York, NY 10019
Montpellier International, LDC N/A
Harbour Chambers, 3rd Floor
P.O. 1348 Harbour Center
Georgetown, Grand Caymen Islands
Maxwell H. Gluck Foundation N/A
10375 Wilshire Boulevard
Los Angeles, CA 90024
David Smith Investment Advisor
82 Beachside Ave.
Greens Farms, CT 06436
Gerry Beemiller Senior Vice President of Sales,
3300 Zaker Rd. Sony Semiconductor Company of
Maildrop 5J 3C 4 America
San Jose, CA 95134
Emerald International N/A
Strategic Restructuring Partners
1114 Avenue of the Americas, 38th Floor
New York, NY 10036
Ashish Vibhakar Chief Executive Officer,
23639 Hawthorne Boulevard Cyberoffice.com, Inc.
Torrance, CA 90505
</TABLE>
<PAGE>
US Equity Portfolio LP N/A
Strategic Restructuring Partners
1114 Avenue of the Americas, 38th Floor
New York, New York 10036
United Congregation Mesorah N/A
1 State Street
New York, New York 10004
2.
<PAGE>
<TABLE>
SCHEDULE III
<CAPTION>
AMOUNT OF
DATE OF THE COMMON STOCK
INVESTOR TRANSACTION OF ISSUER PRICE PER SHARE ($) TYPE OF TRADE BROKER
----------- --------- ------------------- ------------- ------
<S> <C> <C> <C> <C> <C>
Propper
05/10/00 900 4.41666 Purchase RJ*
05/19/00 3,000 4.15420 Purchase BOA**
05/22/00 2,000 4.12500 Purchase BOA
05/24/00 1,000 4.00000 Purchase BOA
05/25/00 2,000 3.75000 Purchase BLC
05/26/00 2,000 4.03133 Purchase BOA
06/02/00 5,500 4.82840 Purchase BOA
06/30/00 900 4.43750 Purchase BOA
07/19/00 1,000 4.25000 Purchase BOA
Chaudhry 07/26/00 4,000 3.9375 Sale ML***
</TABLE>
** Bank of America ("BOA")
* Raymond James ("RJ")
*** Merrill Lynch ("ML")
<PAGE>
JOINT FILING AGREEMENT
In accordance with Rule 13d-(1)(k) under the Securities Exchange Act of 1934, as
amended, each of the persons named below agrees to the joint filing of a
Statement on Schedule 13D (including amendments thereto) with respect to the
acquisition of Common Stock, par value $0.001, of Covalent Group, Inc., a
Delaware corporation, and further agrees that this Joint Filing Agreement be
included as an exhibit to such filings provided that, as contemplated by Section
13d-1(k)(ii), no person shall be responsible for the completeness or accuracy of
the information concerning the other persons making the filing, unless such
person knows or has reason to believe that such information is inaccurate. This
Joint Filing may be executed in any number of counterparts, all of which
together shall constitute one and the same instrument.
August 23, 2000
COVALENT PARTNERS, LLC,
a Delaware limited liability company
By: /s/ RICHARD D. PROPPER M.D.
----------------------------------------
Dr. Richard D. Propper
Managing Member
/s/ RICHARD D. PROPPER M.D.
---------------------------------------
RICHARD D. PROPPER
/s/ MICHAEL D. CHERMAK
---------------------------------------
MICHAEL D. CHERMAK
/s/ SALMAN J.CHAUDHRY
---------------------------------------
SALMAN J. CHAUDHRY
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
-----------------------
*99.1 Promissory Note dated October 29, 1999 by and between
Michael D. Chermak and Covalent Partners, LLC.
*99.2 Promissory Note dated October 29, 1999 by and between
Richard D. Propper and Covalent Partners, LLC.
*99.3 Business Loan Agreement dated October 26, 1999 by and
between Richard D. Propper and California Bank &
Trust.
*99.4 No-Shop Agreement dated September 1, 1999 by and
between Bruce LaMont and RP Associates, LLC.
*99.5 Option Agreement dated November 1, 1999 by and
between Bruce LaMont and Covalent Partners, LLC.
*99.6 Form of Employment Agreement to be entered into by
and between Kenneth M. Borow and the Issuer.
*99.7 Letter Agreement dated November 1, 1999 by and
between Kenneth M. Borow and Covalent Partners, LLC.
*99.8 Form of Promissory Note.
*99.9 Form of Stockholder Agreement.
* Previously filed by the Reporting Persons
