Continucare Corporation
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: June 30, 2007
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-12115
CONTINUCARE CORPORATION
(Exact name of registrant as specified in its charter)
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Florida
(State or other jurisdiction of
incorporation or organization)
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59-2716023
(I.R.S. Employer
Identification No.) |
7200 Corporate Center Drive,
Suite 600
Miami, Florida 33126
(Address of principal executive offices)
(305) 500-2000
(Registrants telephone number, including area code:)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
COMMON STOCK
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AMERICAN STOCK EXCHANGE |
$.0001 PAR VALUE |
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act. Check one:
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). o Yes þ No
The aggregate market value of the voting common stock held by non-affiliates of the registrant
on December 31, 2006 was approximately $ 79,025,000 .
As of October 15, 2007, the registrant had outstanding 70,118,086 shares of Common Stock,
$.0001 par value per share.
Documents
Incorporated by Reference:
None.
EXPLANATORY NOTE
This Annual Report on Form 10-K/A is being filed by Continucare Corporation (the Registrant) to
amend the Annual Report on Form 10-K filed by the Registrant with the Securities and Exchange
Commission (the SEC) on September 12, 2007 to include the information required to be disclosed by
Items 10-14 of Part III of Form 10-K.
CONTINUCARE CORPORATION
ANNUAL REPORT ON FORM 10-K/A
FOR THE YEAR ENDED JUNE 30, 2007
TABLE OF CONTENTS
2
PART III
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ITEM 10. |
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
(a) Identification of Directors
The following individuals are directors serving on Continucares Board of Directors.
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Name |
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Age |
Richard C. Pfenniger, Jr. |
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52 |
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Luis Cruz, M.D. |
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46 |
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Robert J. Cresci |
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63 |
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Neil Flanzraich |
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64 |
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Phillip Frost, M.D. |
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70 |
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Jacob Nudel, M.D. |
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59 |
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A. Marvin Strait |
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73 |
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The following additional information is provided for each of the directors listed above.
Richard C. Pfenniger, Jr. has served as one of Continucares directors since March 2002. In
September 2002, Mr. Pfenniger was appointed Chairman of Continucares Board of Directors. In
October 2003, he was appointed as Continucares Chief Executive Officer and President. Mr.
Pfenniger served as the Chief Executive Officer and Vice Chairman of Whitman Education Group, Inc.
from 1997 through June 2003. From 1994 to 1997, Mr. Pfenniger served as the Chief Operating
Officer of IVAX Corporation, and, from 1989 to 1994, he served as the Senior Vice President-Legal
Affairs and General Counsel of IVAX Corporation. Mr. Pfenniger currently serves as a director of
GP Strategies Corporation (corporate education and training) and Cellular Technical Services
Company, Inc. (medical devices).
Luis Cruz, M.D. has served as one of Continucares directors since October 2006. In October
2006, Dr. Cruz was appointed Vice Chairman of Continucares Board of Directors pursuant to a one
year employment agreement with Continucare which expired in October 2007. Prior to joining
Continucare, Dr. Cruz served as an executive officer of each of Miami Dade Health and
Rehabilitation Services, Inc., Miami Dade Health Centers, Inc., West Gables Open MRI Services,
Inc., Kent Management Systems, Inc., Pelu Properties, Inc., Peluca Investments, LLC and Miami Dade
Health Centers One, Inc. (collectively, the MDHC Companies). Continucare acquired the MDHC
Companies effective October 1, 2006.
Robert J. Cresci has served as one of Continucares directors since February 2000. He has
been a Managing Director of Pecks Management Partners Ltd., an investment management firm, since
1990. Mr. Cresci currently serves on the Boards of Directors of Sepracor, Inc. (pharmaceuticals),
Luminex Corporation (biotechnology), j2 Global Communications, Inc. (telecommunications), and
several private companies.
Neil Flanzraich has served as one of Continucares directors since March 2002. Mr. Flanzraich
is a private investor. From May 1998 until February 2006, he served as the Vice Chairman and
President of IVAX Corporation. Mr. Flanzraich served as Chairman of the Life Sciences Legal
Practices Group of Heller Ehrman White & McAuliff, a law firm, from 1995 to 1998. From 1981 to
1994, Mr. Flanzraich served in various capacities at Syntex Corporation and as a member of the
Corporate Executive Committee. From 1994 to 1995, after Syntex Corporation was acquired by Roche
Holding Ltd., Mr. Flanzraich served as Senior Vice President and General Counsel of Syntex (U.S.A.)
Inc., a Roche subsidiary. Mr. Flanzraich was Chairman of the Board of Directors of North American
Vaccine, Inc. from 1989 to 2000. Mr. Flanzraich also currently serves on the Boards of Directors
of Javelin Pharmaceuticals, Inc. (pharmaceuticals), Neurochem, Inc. (pharmaceuticals), Rae Systems,
Inc. (gas detection and security monitoring systems), Equity One, Inc. (real estate), and Chipotle
Mexican Grill, Inc. (a chain of Mexican restaurants).
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Phillip Frost, M.D. has served as one of Continucares directors since January 2004. Dr.
Frost formerly served on Continucares Board of Directors as Vice Chairman from September 1996
until April 2002. Dr. Frost presently serves as the Chairman of the Board and Chief Executive
Officer of Opko Health, Inc. (specialty pharmaceuticals) and is Vice Chairman of the Board of
Directors of TEVA Pharmaceuticals, Ltd. (pharmaceuticals) and Chairman of the Board of Ladenburg
Thalmann Financial Services, Inc. (security brokerage). He is also a director of Northrop Grumman
Corporation (aerospace), Modigene Inc. (biopharmaceuticals) and Protalix Biotherapeutics, Inc.
(pharmaceuticals). He served as the Chairman of the Board of Directors and Chief Executive Officer
of IVAX Corporation from 1987 to 2006. He served as President of IVAX Corporation from July 1991
until January 1995. He was the Chairman of the Department of Dermatology at Mt. Sinai Medical
Center of Greater Miami, Miami Beach, Florida from 1972 to 1990. Dr. Frost was Chairman of the
Board of Directors of Key Pharmaceuticals, Inc. from 1972 to 1986. Dr. Frost is a member of the
Board of Trustees of the University of Miami and a member of the Board of Governors as well as
Co-Vice Chairman of the American Stock Exchange.
Jacob Nudel, M.D. has served as one of Continucares directors since October 2002. He is a
private investor who founded MEDWerks.com Corp., where he served as Chairman from 2000 to 2005.
From 1995 to 2000, Dr. Nudel served as Chief Executive Officer of Allied Health Group, Inc. From
1992 to 2000, Dr. Nudel also served as Chief Executive Officer of Florida Specialty Network, Inc.
A. Marvin Strait has served as one of Continucares directors since March 2004. Mr. Strait
presently practices as a Certified Public Accountant under the name A. Marvin Strait, CPA. He has
practiced in the field of public accountancy in Colorado for over 40 years. He presently serves as
a member of the Board of Trustees of the Colorado Springs Fine Arts Center Foundation, the Sam S.
Bloom Foundation, The Penrose-St. Francis Health Foundation and Peak Education. He also presently
serves as a member of the Board of Directors and Chairman of the Audit Committee of Sturm Financial
Group, Inc., RAE Systems, Inc. and on the Community Advisory Panel of American National Bank. Mr.
Strait previously served as the Chairman of the Board of Directors of the American Institute of
Certified Public Accountants (AICPA), as President of the Colorado Society of Certified Public
Accountants and the Colorado State Board of Accountancy, and serves as a permanent member of the
AICPA Governing Council.
(b) Identification of Executive Officers
The following individuals are Continucares executive officers.
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Name |
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Position |
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Richard C. Pfenniger, Jr.
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52 |
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Chairman of the Board, Chief Executive Officer and President |
Fernando L. Fernandez
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46 |
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Senior Vice President Finance, Chief Financial Officer,
Treasurer and Secretary |
Luis H. Izquierdo
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52 |
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Senior Vice President Marketing and Business Development |
Gemma Rosello
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51 |
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Executive Vice President Operations |
Luis Cruz, M.D
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46 |
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Vice Chairman of the Board |
With the exception of Dr. Cruz who was a party to a one-year employment agreement with
Continucare which expired October 1, 2007, all officers serve until they resign or are replaced or
removed at the pleasure of the Board of Directors.
The following additional information is provided for the executive officers shown above who
are not directors of Continucare.
Fernando L. Fernandez was appointed as Continucares Senior Vice PresidentFinance, Chief
Financial Officer, Treasurer, and Secretary in June 2004. Mr. Fernandez, a certified public
accountant, served as Senior Vice PresidentFinance, Chief Financial Officer, Treasurer, and
Secretary of Whitman Education Group, Inc. from 1996 until 2003. Prior to and since his service at
Whitman Education Group, Inc., Mr. Fernandez served as Chief Financial Officer of several private
investment entities owned by Phillip Frost, M.D. Prior to 1991, Mr. Fernandez served as Audit
Manager for PricewaterhouseCoopers LLP (formerly Coopers & Lybrand) in Miami. Mr. Fernandez
serves as a director of IVAX Diagnostics, Inc. (diagnostic reagent kits).
Luis H. Izquierdo was appointed as Continucares Senior Vice President Marketing and
Business Development in January 2004. Mr. Izquierdo served as Senior Vice President and as a
member of the Board of
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Directors for Neighborhood Health Partnership from 2002 to 2004. Mr.
Izquierdo was Senior Vice President of Marketing and Sales for Foundation Health, Florida from 1999
through 2001. From 1997 through 1999, Mr. Izquierdo served as Senior Vice President and Chief
Marketing Officer for Oral Health Services. From 1995 to 1997, Mr. Izquierdo served as the Vice
President, Corporate Marketing and Sales for Physicians Corporation of America, and, from 1992 to
1995, he served as the Senior Vice President, Marketing and Sales for CAC-Ramsay Health Plans.
Gemma Rosello was appointed as Continucares Executive Vice President Operations in October
2006. Ms Rosello had previously served Continucare as its Senior Vice President Operations from
May 2005. Prior to joining Continucare, Ms. Rosello was the Medicare Business Development Director
for AvMed Health Plan. She served as Vice President of Health Services for Neighborhood Health
Plan from 2003 to 2004. From 1993 to 2002, she served as the Chief Executive Officer of Medical
Utilization Review Associates (MURA), a management service organization and Apex Health Services
which managed Medicare, Medicaid and commercial full risk contracts with national and regional
payors. Prior to her work in the managed care arena, Ms. Rosello served as Chief Operating Officer
for an acute medical/surgical non-profit hospital in Miami, Florida.
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
There are no family relationships between any director, executive officer, or person nominated
or chosen by Continucare to become a director or executive officer.
(e) Business Experience
The business experience of each of Continucares directors and executive officers is set forth
in Item 10(a), Identification of Directors and Item 10(b), Identification of Executive
Officers, respectively, of this Annual Report on Form 10-K/A.
The directorships held by each of Continucares directors in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or
subject to Section 15 of such Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended, are set forth in Item 10(a), Identification of
Directors of this Annual Report on Form 10-K/A.
(f) Involvement in Certain Legal Proceedings
To the best of Continucares knowledge, none of Continucares current directors or executive
officers has been involved during the past five years in any legal proceedings required to be
disclosed pursuant to Item 401(f) of Regulation S-K.
(g) Promoters and Control Persons
Not applicable.
(h) and (i) Audit Committee and Audit Committee Financial Expert
Continucares Audit Committee currently consists of Mr. Cresci, Mr. Flanzraich, Dr. Nudel and
Mr. Strait (Chairman). Continucares Board of Directors has determined that Mr. Strait meets the
attributes of an audit committee financial expert within the meaning of SEC regulations.
(j) Procedures for Stockholder Nominations to Continucares Board of Directors
No material changes to the procedures for nominating directors by Continucares stockholders
were made during the fiscal year ended June 30, 2007.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Continucares
directors and executive officers and persons who own more than ten percent of Continucares
outstanding common stock, to file with the SEC initial reports of ownership and reports of changes
in ownership of common stock. Such persons are required by SEC regulation to furnish Continucare
with copies of all such reports they file.
To Continucares knowledge, based solely on a review of the copies of such reports furnished
to Continucare and written representations that no other reports were required, Continucare
believes that all Section 16(a) filing requirements applicable to Continucares officers, directors
and greater than ten percent beneficial owners for the fiscal year ended June 30, 2007 (Fiscal
2007) were complied with.
Code of Conduct and Ethics
Continucare has adopted a Code of Conduct and Ethics applicable to its directors, officers and
employees, including its Chief Executive Officer, Chief Financial Officer and principal accounting
officer. A copy of Continucares Code of Conduct and Ethics is available on Continucares website
at www.continucare.com. Continucare intends to post amendments to, or waivers from, its Code of
Conduct and Ethics (to the extent applicable to its Chief Executive Officer, Chief Financial
Officer or principal accounting officer) on its website. Continucares website is not part of
this Annual Report on Form 10-K/A.
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ITEM 11. |
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EXECUTIVE COMPENSATION |
Compensation Discussion and Analysis
Overview of Compensation Program
Continucares Compensation Committee administers the compensation program for Continucares
executive officers and also determines compensation for directors. The Compensation Committee
reviews and determines all executive officer compensation, administers Continucares equity
incentive plans (including reviewing and approving grants to Continucares executive officers),
makes recommendations to shareholders with respect to proposals related to compensation matters and
generally consults with management regarding employee compensation programs.
The Compensation Committees charter reflects these responsibilities, and the Compensation
Committee and the Board periodically review and, if appropriate, revise the charter. The Board
determines the Compensation Committees membership. Robert J. Cresci, Neil Flanzraich, Jacob
Nudel, M.D. and A. Marvin Strait, C.P.A., each of whom are non-employee independent directors,
comprise the Compensation Committee. The Compensation Committee meets at regularly scheduled times
during the year, and it may also hold specially scheduled meetings and take action by written
consent. At Board meetings, the Chairman of the Compensation Committee reports on Compensation
Committee actions and recommendations, with all discussions of executive compensation occurring in
executive sessions of the Board.
Continucares executive officers, each of whom are included in the Summary Compensation Table
below, are Richard C. Pfenniger, Jr., Chairman of the Board, Chief Executive Officer and President,
Fernando L. Fernandez, Senior Vice President Finance, Chief Financial Officer, Treasurer and
Secretary, Luis H. Izquierdo, Senior Vice President Marketing and Business Development, Gemma
Rosello, Executive Vice President Operations and Luis Cruz, M.D.- Vice Chairman of the Board of
Directors. Throughout this Annual Report on Form 10-K/A, these individuals are sometimes referred
to collectively as the Named Executive Officers.
Compensation Philosophy and Objectives
The core objectives of Continucares compensation programs are to secure and retain the
services of high quality executives and to provide compensation to Continucares executives that
are commensurate and aligned with Continucares performance and advances both short-and long-term
interests of Continucare and its shareholders. Continucare seeks to achieve these objectives
through three principal compensation programs: a
base salary, long-term equity incentives, in the form of periodic grants of stock options, and
an annual cash incentive bonus. Base
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salaries are designed primarily to attract and retain
talented executives. Annual cash incentives are designed to motivate and reward the achievement of
selected financial goals, generally tied to profitability. Periodic grants of stock options are
designed to provide a strong incentive for achieving long-term results by aligning interests of our
executives with those of our shareholders, while at the same time encouraging our executives to
remain with Continucare. The Compensation Committee does not use benchmarking against peer groups
to establish the compensation levels of the Named Executive Officers nor does it retain a
compensation consultant to advise them on compensation issues. The Compensation Committee believes
that Continucares compensation program for the Named Executive Officers is appropriately based
upon the performance of Continucare and the performance and level of responsibility of the
executive officer.
Role of Executive Officers in Compensation Decisions
The Compensation Committee makes all compensation decisions for the Named Executive Officers.
Continucares Chief Executive Officer works closely with the Compensation Committee on compensation
matters. The Chief Executive Officer annually reviews the performance of each of the Named
Executive Officers (other than the Chief Executive Officer, whose performance is reviewed by the
Compensation Committee) and the compensation paid to those individuals during the past fiscal year,
and makes recommendations regarding compensation to be paid to those individuals during the next
fiscal year. The conclusions reached and recommendations based on these reviews, including those
with respect to setting and adjusting base salary, annual cash incentive awards and stock option
awards, are presented to the Compensation Committee. Following a review of these conclusions and
recommendations, the Compensation Committee will make compensation decisions for these executives
as it deems appropriate, including approving the Chief Executive Officers recommendations or
modifying upward or downward any recommended amounts or awards to the Named Executive Officers.
The Compensation Committee meets with the Chief Executive Officer annually to discuss his
performance, but ultimately decisions regarding his compensation are made solely by the
Compensation Committee based on its deliberations.
Named Executive Officer Compensation Components
For the fiscal year ended June 30, 2007, base salary, an annual cash incentive bonus
opportunity and long-term equity incentive compensation were the principal components of
compensation for the Named Executive Officers, however, as discussed below, no cash incentive
bonuses were paid for Fiscal 2007 under the annual incentive program because the threshold
financial performance target was not met.
A significant portion of total compensation is comprised of base salary, which enables
Continucare to attract and retain talented executive management through the payment of reasonable
current income. Long-term equity incentives, in the form of stock options which generally vest
over a period of three or four years, also form a meaningful percentage of overall compensation
which is tied directly to increases in the price of Continucares common stock and also serves the
goal of retaining key management. Finally, the annual cash incentive bonus, which historically has
been a smaller portion of total cash compensation, provides additional current income to encourage
the attainment of annual profitability goals. In making decisions with respect to any element of a
Named Executive Officers compensation, the Compensation Committee considers the total compensation
that may be awarded to the executive. There is no pre-established target or formula for allocating
among these three elements of compensation. Rather, the Compensation Committee strives to
apportion a mix between cash and equity compensation to provide meaningful current income and to
motivate the attainment of long-term value for our shareholders.
The Compensation Committee generally makes determinations regarding Named Executive Officer
compensation at the regularly scheduled meeting of the Compensation Committee following completion
of each fiscal year, which meeting typically occurs in September. At this meeting, the
Compensation Committee will typically determine base salaries for the upcoming fiscal year, the
amount of any cash incentive bonus payable to the Named Executive Officers under the annual cash
incentive plan for the preceding fiscal year, the terms of the annual cash incentive plan for the
upcoming fiscal year and the grant of any equity incentive awards.
Base Salary
The Compensation Committee approves each Named Executive Officers base salary by considering
the
individuals duties and responsibilities. In setting base salaries for the Named Executive
Officers, the Compensation Committee undertakes an annual review in consultation with and based
upon recommendations from the Chief Executive Officer. The Compensation Committees review
includes, among other things, the functional
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and decision-making responsibilities of each position,
the significance of the Named Executive Officers specific area of individual responsibility to
Continucares financial performance and achievement of overall goals and the experience and past
performance and expected future contribution of each executive officer. Decisions regarding
increases in salary also take into account the executives current salary. With respect to base
salary decisions for the Chief Executive Officer, the Compensation Committee makes an assessment of
Mr. Pfennigers past performance as Chief Executive Officer and its expectations as to his future
contributions to Continucare, as well as the factors described above for the other Named Executive
Officers, including evaluating his individual performance and Continucares financial condition,
operating results and attainment of strategic objectives. The Compensation Committee generally
does not approve a material increase in base salary, absent a significant promotion or other
significant change in responsibility of the executive officer. In determining increases in base
salaries for Fiscal 2008, the Compensation Committee considered the continued improvement in
Continucares results and financial condition under Mr. Pfennigers leadership and the efforts of
the other Named Executive Officers, the completion of the acquisition of the MDHC Companies and the
integration of their operations within Continucare and the successful completion of the initial
compliance with the requirements for maintaining effective internal controls over financial
reporting under Section 404 of the Sarbanes Oxley Act.
The Chief Executive Officers Fiscal 2007 base salary increased 6.1% from Fiscal 2006 and the
other Named Executive Officers Fiscal 2007 base salaries increased in the range of 2.3% to 7.5%
from Fiscal 2006. For Fiscal 2008, the Compensation Committee has approved an increase of 7.1% in
the Chief Executive Officers base salary from Fiscal 2007 and increases ranging from 4.5% to 7.5%
in the base salaries of the other Named Executive Officers.
Effective October 1, 2006, in connection with Continucares acquisition of the MDHC Companies,
the Compensation Committee approved a one-year employment agreement with Dr. Cruz pursuant to which
Dr. Cruz is employed as Vice Chairman of Continucares Board of Directors at an annual salary of
$225,000. The employment agreement for Dr. Cruz expired on October 1, 2007 and was not renewed and
Dr. Cruz is no longer an employee of Continucare, although he continues to serve on the Board of
Directors.
Long-Term Equity Incentive Compensation
Continucares long-term equity incentive compensation program provides an opportunity for the
Named Executive Officers to increase their stake in Continucare through grants of options to
purchase shares of Continucares Common Stock and encourages the Named Executive Officers to manage
Continucare from the perspective of an owner with an equity stake in the business. Each grant
allows the executive to acquire shares of common stock at an exercise price equal to the closing
price of our common stock on the grant date over a specified period of time not to exceed 10 years.
Generally, the options become exercisable in a series of installments over a three or four-year
period, contingent upon the executive officers continued employment with Continucare.
Accordingly, the option grant will provide a positive return to the executive officer only if he or
she remains employed by Continucare during the vesting period, and then only if the market price of
the shares appreciates over the option term.
The Compensation Committees grant of stock options to the Named Executive Officers is
entirely discretionary, subject to any limitations set by Continucares Amended and Restated 2000
Stock Option Plan, and is generally made on a once-a-year basis. Decisions by the Compensation
Committee regarding grants of stock options to the Named Executive Officers (other than the Chief
Executive Officer) are generally made based upon the recommendation of the Chief Executive Officer,
and includes the consideration of the executive officers current position with Continucare, the
executive officers past and expected future performance and the other factors discussed in the
determination of base salaries. In addition, the Compensation Committee considers the number of
outstanding and previously granted options of the executive, as well as the other components of his
or her total compensation in determining the appropriate grant. In Fiscal 2007, all of the Named
Executive Officers were granted options to purchase shares of Continucares common stock, with an
exercise price equal to the market value of the common stock on the date of grant, and which vest
in equal annual amounts over a four-year period.
Continucare generally has approved grants of stock options in specific amounts as part of an
executive officers initial employment with Continucare. The option grant to Dr. Cruz during
Fiscal 2007 was made in
October 2006 pursuant to the terms of his employment agreement with Continucare. Continucare
does not have any program or practice to time annual or other grants of stock options in
coordination with the release of material non-public information or otherwise.
Annual Cash Incentive Program
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Continucare maintains an annual cash incentive bonus plan which provides for the payment of
cash bonuses to eligible members of Continucares management team, including the Named Executive
Officers. The purpose of the cash incentive bonus plan is to provide incentives to those employees
who have the ability to impact operating performance to address and achieve annual performance
goals and to participate in Continucares growth and profitability. Under the terms of the plan
for Fiscal 2007, a pool is established from which any bonuses would be paid in an amount equal to
20% of the amount by which Continucares pre-tax earnings for Fiscal 2007 exceeded a pre-determined
threshold. Distributions of awards from the bonus pool to eligible employees, including the Named
Executive Officers are determined by the Compensation Committee, which considers the
recommendations of the Chief Executive Officer for all participants other than himself. The bonus
payable from the pool to the Chief Executive Officer is based solely upon Compensation Committee
deliberations. No bonuses were paid under the plan for Fiscal 2007 because the amount of pre-tax
earnings for Fiscal 2007 did not exceed the threshold amount and, accordingly, no bonus pool was
established.
The Compensation Committee approved an annual cash incentive bonus plan for Fiscal 2008 under
the same general framework as the Fiscal 2007 plan. The plan for Fiscal 2008 was approved by the
Compensation Committee at a meeting held in September 2007, which was its first meeting after
completion of Continucares fiscal year ended June 30, 2007. Under the terms of the plan for
Fiscal 2008, a bonus pool will be established in an amount equal to 15% of the amount by which
Continucares pre-tax earnings exceed a pre-determined threshold. The pre-tax income threshold is
based upon Continucares Fiscal 2008 budget and for this and other competitive reasons, Continucare
has not disclosed the specific dollar value of the financial target. The Compensation Committee
believes that the threshold target provides a meaningful incentive to executives to improve
performance in a manner that is consistent with the interests of Continucares shareholders. As
with the annual cash incentive plan for Fiscal 2007, no bonuses will be payable under the plan for
Fiscal 2008 if the threshold financial performance target is not exceeded.
Other Compensation and Benefits
Named Executive Officers receive additional compensation in the form of vacation, medical,
401(k), and other benefits generally available to all of Continucares full time employees. While
Continucare generally does not provide perquisites to its executive officers, certain Named
Executive Officers received modest automobile allowances and Continucare paid medical and life
insurance premiums on behalf of all of the Named Executive Officers which exceed the premiums paid
by Continucare on behalf of its non-executive employees.
Internal Revenue Code Limits on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public
corporations for compensation over $1,000,000 paid for any fiscal year to the corporations chief
executive officer and four other most highly compensated executive officers as of the end of any
fiscal year. However, the statute exempts qualifying performance-based compensation from the
deduction limit if certain requirements are met.
The Compensation Committee believes that it is generally in Continucares best interest to
attempt to structure performance-based compensation, including stock option grants and annual
bonuses, to the Named Executive Officers, each of whom are subject to Section 162(m), in a manner
that satisfies the statutes requirements for full tax deductibility for the compensation.
However, the Compensation Committee also recognizes the need to retain flexibility to make
compensation decisions that may not meet Section 162(m) standards when necessary to enable
Continucare to meet its overall objectives, even if Continucare may not deduct all of the
compensation. However, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no assurance can be given,
notwithstanding Continucares efforts, that compensation intended by the Company to satisfy the
requirements for deductibility under Section 162(m) will in fact do so.
Compensation Committee Report
The following Report of the Compensation Committee does not constitute soliciting material and
should not be deemed filed or incorporated by reference into any other Company filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this Report by reference therein.
The Compensation Committee has reviewed and discussed Continucares Compensation Discussion
and
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Analysis with management. Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that Continucares Compensation Discussion and Analysis be
included in this Annual Report on Form 10-K/A.
Submitted by the Members of the Compensation Committee:
Robert J. Cresci
Neil Flanzraich
Jacob Nudel, M.D.
A. Marvin Strait, C.P.A.
Compensation of Named Executive Officers
Summary Compensation Table-Fiscal 2007
The following table sets forth certain summary information concerning compensation paid or
accrued by Continucare to or on behalf of the Named Executive Officers (as defined in the
Compensation Discussion and Analysis section above) for the fiscal year ended June 30, 2007.
With the exception of Dr. Luis Cruz who was a party to a one-year employment agreement with
Continucare which expired October 1, 2007, Continucare does not have employment agreements with any
of the Named Executive Officers.
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Change in |
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Pension |
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Value and |
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Nonqualified |
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Non-Equity |
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Deferred |
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|
|
|
|
|
|
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|
|
|
|
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|
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Stock |
|
Option |
|
Incentive Plan |
|
Compensation |
|
All Other |
|
|
Name and Principal Position |
|
Fiscal Year |
|
Salary |
|
Bonus |
|
Awards |
|
Awards(2) |
|
Compensation |
|
Earnings |
|
Compensation(3) |
|
Total |
|
Richard C. Pfenniger, Jr.,
Chairman of the Board,
President and Chief
Executive Officer |
|
|
2007 |
|
|
$ |
346,077 |
|
|
|
|
|
|
|
|
|
|
$ |
259,195 |
|
|
|
|
|
|
|
|
|
|
$ |
14,312 |
|
|
$ |
619,584 |
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|
|
|
|
|
|
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|
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|
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|
|
|
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|
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|
|
|
Gemma Rosello,
Executive Vice
President Operations |
|
|
2007 |
|
|
$ |
211,596 |
|
|
|
|
|
|
|
|
|
|
$ |
146,004 |
|
|
|
|
|
|
|
|
|
|
$ |
13,416 |
|
|
$ |
371,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Fernando L. Fernandez,
Senior Vice
President-Finance, Chief
Financial Officer, Treasurer
and Secretary |
|
|
2007 |
|
|
$ |
198,038 |
|
|
|
|
|
|
|
|
|
|
$ |
273,951 |
|
|
|
|
|
|
|
|
|
|
$ |
14,312 |
|
|
$ |
486,301 |
|
|
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|
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Luis H. Izquierdo, Senior
Vice President-Marketing and
Business Development |
|
|
2007 |
|
|
$ |
218,789 |
|
|
|
|
|
|
|
|
|
|
$ |
127,883 |
|
|
|
|
|
|
|
|
|
|
$ |
11,956 |
|
|
$ |
358,628 |
|
|
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|
Luis Cruz, M.D.(1)
Vice Chairman of the Board
of Directors |
|
|
2007 |
|
|
$ |
168,750 |
|
|
|
|
|
|
|
|
|
|
$ |
50,775 |
|
|
|
|
|
|
|
|
|
|
$ |
10,969 |
|
|
$ |
230,494 |
|
|
|
|
(1) |
|
Dr. Cruz was not employed by Continucare during all of the fiscal year ended June 30,
2007. Information regarding the compensation of Dr. Cruz set forth above relates only to the
portion of the fiscal year ended June 30, 2007 during which he was employed by Continucare. In
connection with Continucares acquisition of the MDHC Companies, Continucare entered into a
one-year employment agreement with Dr. Cruz effective
October 1, 2006 pursuant to which Dr. Cruz was employed as Vice Chairman of Continucares Board of Directors at an annual salary of
$225,000. The employment agreement for Dr. Cruz expired on October 1, 2007 and was not
renewed. Dr. Cruz is no longer an employee of Continucare although he continues to serve on the
Board of Directors. |
|
(2) |
|
Represents the dollar amount recognized for financial statement reporting purposes for the
fiscal year ended June 30, 2007, in accordance with FAS 123(R), without taking into account an
estimate of forfeitures related to service-based vesting, of stock option grants, including amounts
from awards granted prior to Fiscal 2007. Assumptions used in the calculation of these amounts are
included in footnote 7 to Continucares audited financial statements for the fiscal year ended June
30, 2007 included in Continucares Annual Report on Form 10-K filed with the Securities and
Exchange Commission on September 12, 2007. There were no forfeitures during Fiscal 2007.
Additional information regarding these stock options awarded to the Named Executive Officers in
Fiscal 2007, including the grant date fair value of such stock options, is set forth in the Grants
of Plan-Based Awards Fiscal 2007 table below. |
10
|
|
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(3) |
|
Includes the amount of the insurance premiums paid by Continucare on behalf of the Named
Executive Officers that exceed the insurance premiums paid by Continucare on behalf of its
non-executive employees, and also includes car allowances of $6,231 paid to each of Ms. Rosello and
Mr. Izquierdo,. |
Grants of Plan-Based Awards Fiscal 2007
The following table sets forth certain information concerning grants of awards to the Named
Executive Officers pursuant to Continucares non-equity and equity incentive plans in the fiscal
year ended June 30, 2007.
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All Other |
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All Other |
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Stock |
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Option |
|
Exercise |
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Awards |
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Awards: |
|
or Base |
|
Grant Date |
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Estimated Possible Payouts Under |
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Number of |
|
Number of |
|
Price of |
|
Fair Value |
|
|
|
|
|
|
Non-Equity Incentive Plan |
|
Estimated Future Payouts Under |
|
Shares of |
|
Securities |
|
Option |
|
of Stock |
|
|
Grant |
|
Awards(1) |
|
Equity Incentive Plan Awards |
|
Stock |
|
Underlying |
|
Awards |
|
and Option |
Name |
|
Date |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
or units |
|
Options(2) |
|
($ / Sh) |
|
Awards(3) |
|
Richard C.
Pfenniger, Jr. |
|
|
9/12/06 |
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
$ |
2.77 |
|
|
$ |
228,000 |
|
Gemma Rosello |
|
|
9/12/06 |
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
$ |
2.77 |
|
|
$ |
114,000 |
|
Fernando Fernandez |
|
|
9/12/06 |
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
$ |
2.77 |
|
|
$ |
76,000 |
|
Luis Izquierdo |
|
|
9/12/06 |
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
$ |
2.77 |
|
|
$ |
38,000 |
|
Luis Cruz, M.D. |
|
|
10/1/06 |
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
(4) |
|
$ |
2.59 |
|
|
$ |
140,000 |
|
|
|
|
(1) |
|
Represents the estimated possible payouts of cash awards under Continucares
annual incentive plan which is tied to financial performance goals. No cash awards were made under
the formula-based component of Continucares annual incentive plan for Fiscal 2007 as reflected
under Non-Equity Incentive Plan Compensation in the Summary Compensation Table above.
Continucares annual incentive plan is more fully described in the Compensation Discussion and
Analysis section beginning on page 6. No threshold payment is disclosed because no payments would
be payable under the annual incentive plan until pre-tax profits exceed the threshold amount. Further, no
target amount is provided because no target amounts were established and no maximum amount is
presented because this plan does not limit the maximum potential payout. |
|
(2) |
|
All options are to purchase shares of Continucares common stock granted
under Continucares Amended and Restated 2000 Stock Option Plan. Each grant vests 25% over the
first four years from the date of grant. |
|
(3) |
|
Represents the grant date fair value computed in accordance with FAS 123(R). |
|
(4) |
|
Dr. Cruz was awarded options to acquire 100,000 shares of Continucares common
stock par value $.0001 per share pursuant to his employment agreement with Continucare effective
October 1, 2006 in connection with Continucares acquisition of the MDHC Companies. |
11
Outstanding Equity Awards at Fiscal Year-End 2007
The following table sets forth certain information regarding equity-based awards held by the
Named Executive Officers as of June 30, 2007.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
|
|
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
|
Options |
|
Options |
|
Unearned |
|
Exercise |
|
Expiration |
Name |
|
Exercisable |
|
Unexercisable |
|
Options |
|
Price |
|
Date |
|
Richard C. Pfenniger, Jr. |
|
|
821,970 |
|
|
|
|
|
|
|
|
|
|
$ |
0.66 |
|
|
|
10/1/13 |
|
|
|
|
50,000 |
|
|
|
150,000 |
(1) |
|
|
|
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
37,500 |
|
|
|
112,500 |
(2) |
|
|
|
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
|
|
|
|
150,000 |
(3) |
|
|
|
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
Gemma Rosello |
|
|
50,000 |
|
|
|
50,000 |
(4) |
|
|
|
|
|
$ |
2.69 |
|
|
|
5/26/15 |
|
|
|
|
18,750 |
|
|
|
56,250 |
(1) |
|
|
|
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
18,750 |
|
|
|
56,250 |
(2) |
|
|
|
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
|
|
|
|
75,000 |
(3) |
|
|
|
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
Fernando L. Fernandez |
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
$ |
1.98 |
|
|
|
6/14/14 |
|
|
|
|
18,750 |
|
|
|
56,250 |
(1) |
|
|
|
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
12,500 |
|
|
|
37,500 |
(2) |
|
|
|
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
|
|
|
|
75,000 |
(3) |
|
|
|
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
Luis H. Izquierdo |
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
$ |
1.51 |
|
|
|
1/5/14 |
|
|
|
|
18,750 |
|
|
|
56,250 |
(1) |
|
|
|
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
6,250 |
|
|
|
18,750 |
(2) |
|
|
|
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
|
|
|
|
50,000 |
(3) |
|
|
|
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
Luis Cruz, M.D. |
|
|
25,000 |
|
|
|
75,000 |
(5) |
|
|
|
|
|
$ |
2.59 |
|
|
|
10/2/16 |
|
|
|
|
(1) |
|
Vests in four equal annual installments beginning on December 6, 2006. |
|
(2) |
|
Vests in four equal annual installments beginning on September 12, 2007. |
|
(3) |
|
Vests in four equal annual installments beginning on September 11, 2008. |
|
(4) |
|
Vests in four equal annual installments beginning on May 26, 2006. |
|
(5) |
|
75,000 unvested shares were cancelled in October 2007 upon termination of
employment. |
Option Exercises Fiscal 2007
No stock options were exercised by the Named Executive Officers in the fiscal year ended June
30, 2007.
Potential Payments upon Termination or Change-in-Control
The Named Executive Officers, with the exception of Dr. Cruz whose employment agreement
expired October 1, 2007, do not have employment agreements with Continucare and are all employed on
an at will basis. Continucare does not have arrangements with any of its Named Executive Officers
providing for additional benefits or payments in connection with a termination of employment,
change in job responsibility or change-in-control. Grants of stock options to all employees
eligible to receive such grants under Continucares Amended and Restated 2000 Stock Option Plan
vest immediately in the event of a change in control; therefore, no separate disclosure is
presented herein with respect to the acceleration of stock options held by the Named Executive
Officers upon a change of control under the terms of this stock option plan.
12
Compensation of Directors
Continucares Compensation Committee recommends director compensation to the Board. In
developing its recommendation, the Compensation Committee strives to set a mix of cash and
equity-based compensation in amounts which fairly compensate the directors for their expected time
commitments and responsibilities in serving on the Board and which aligns the directors interests
with the long term interests of shareholders. In Fiscal 2007, each of Continucares non-employee
directors received a cash retainer of $20,000 for his service on the Board. In addition, for Fiscal
2007, the Chairman of each of the Nominating Committee and the Compensation Committee received an
additional cash retainer of $2,500 and the Chairman of the Audit Committee received an additional
cash retainer of $5,000. Also, each of Continucares non-employee Board members were granted fully
vested options to purchase 25,000 shares of common stock during Fiscal 2007.
Effective October 1, 2006, Continucare appointed Luis Cruz, M.D. to its Board of Directors and
entered into a one-year employment agreement with Dr. Cruz
pursuant to which Dr. Cruz was employed
as Vice Chairman of Continucares Board of Directors at an annual salary of $225,000. Dr. Cruz was
re-elected as a director at Continucares annual meeting of shareholders on February 7, 2007. Dr.
Cruzs employment agreement expired effective October 1, 2007. Pursuant to Dr. Cruzs employment
agreement, Dr. Cruz was granted options to acquire 100,000 shares of Continucares common stock at
a per share exercise price of $2.59. The options vest ratably over a term of four years and have a
term of ten years from the date of the grant. In October 2007, 75,000 unvested options were
cancelled upon Dr. Cruzs termination of employment.
Director Compensation Fiscal 2007
The following table sets forth certain information regarding the compensation paid to the
Companys non-employee directors for their service during the fiscal year ended June 30, 2007.
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Deferred |
|
|
|
|
|
|
Fees Earned or |
|
Stock |
|
Option |
|
Incentive Plan |
|
Compensation |
|
All Other |
|
|
Name |
|
Paid in Cash |
|
Awards |
|
Awards(1) |
|
Compensation |
|
Earnings |
|
Compensation |
|
Total |
|
Robert J. Cresci |
|
$ |
22,500 |
|
|
|
|
|
|
$ |
26,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
49,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Flanzraich |
|
$ |
20,000 |
|
|
|
|
|
|
$ |
26,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
46,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip Frost, M.D. |
|
$ |
22,500 |
|
|
|
|
|
|
$ |
26,660 |
|
|
|
|
|
|
|
|
|
|
$ |
45,000 |
(2) |
|
$ |
94,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jacob Nudel, M.D. |
|
$ |
20,000 |
|
|
|
|
|
|
$ |
26,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
46,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Marvin Strait |
|
$ |
25,000 |
|
|
|
|
|
|
$ |
28,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
53,520 |
|
|
|
|
(1) |
|
Represents the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended June 30, 2007, in accordance with FAS 123(R), without taking
into account an estimate of forfeitures related to service-based vesting, of stock option grants,
including amounts from awards granted prior to Fiscal 2007. Assumptions used in the calculation of
these amounts are included in footnote 7 to Continucares audited financial statements for the
fiscal year ended June 30, 2007 included in Continucares Annual Report on Form 10-K filed with the
Securities and Exchange Commission on September 12, 2007. There were no forfeitures during Fiscal
2007. The grant date fair value of the stock option awards granted during Fiscal 2007 and computed
in accordance with FAS 123(R) was $1.07 per share. The table below sets forth the aggregate number
of stock options of each non-employee director outstanding as of June 30, 2007: |
13
|
|
|
|
|
Name |
|
Stock Options |
|
|
|
|
|
Robert J. Cresci |
|
|
165,000 |
|
|
|
|
|
|
Neil Flanzraich |
|
|
65,000 |
|
|
|
|
|
|
Phillip Frost, M.D. |
|
|
65,000 |
|
|
|
|
|
|
Jacob Nudel, M.D. |
|
|
65,000 |
|
|
|
|
|
|
A. Marvin Strait |
|
|
58,334 |
|
|
|
|
(2) |
|
Represents the amount of a Hart-Scott-Rodino Antitrust Improvements Act filing fee paid by
Continucare on behalf of Dr. Frost on April 9, 2007 in connection with a filing relating to his
acquisition of Continucare common stock in a private transaction with a third party. |
Compensation Committee Interlocks and Insider Participation
Continucares Compensation Committee has four members: Robert J. Cresci (Chairman), Neil
Flanzraich, Jacob Nudel, M.D, and A. Marvin Strait. There are no interlocking relationships between
members of Continucares Compensation Committee and the compensation committees of other companies
board of directors.
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
The following table sets forth certain information as of October 15, 2007 concerning the
beneficial ownership of the common stock by (i) each director,
(ii) each executive officer, (iii) all
directors and executive officers as a group, and (iv) each person who Continucare knows beneficially
owns more than 5% of its common stock. All such shares were owned directly with sole voting power
and investment power unless otherwise indicated.
|
|
|
|
|
|
|
|
|
Name and Address |
|
Amount and Nature of |
|
Percent of |
of Beneficial Owner |
|
Beneficial Ownership(1) |
|
Common Stock(2) |
Robert Cresci
|
|
|
365,000 |
(3) |
|
|
* |
|
c/o Pecks Management Partners, Ltd.
One Rockefeller Plaza
Suite 900
New York, NY 10020 |
|
|
|
|
|
|
|
|
Luis Cruz, M.D.
|
|
|
6,151,119 |
(4) (12) |
|
|
8.8 |
% |
3233 Palm Avenue
Hialeah, FL 33012 |
|
|
|
|
|
|
|
|
Neil Flanzraich
|
|
|
265,000 |
(5) |
|
|
* |
|
4400 Biscayne Boulevard
Miami, FL 33137 |
|
|
|
|
|
|
|
|
Phillip Frost, M.D
|
|
|
24,394,801 |
(6) |
|
|
34.8 |
% |
4400 Biscayne Boulevard
Miami, FL 33137 |
|
|
|
|
|
|
|
|
Fernando L. Fernandez
|
|
|
400,000 |
(7) |
|
|
* |
|
Luis H. Izquierdo
|
|
|
343,750 |
(7) |
|
|
* |
|
Jacob Nudel, M.D
|
|
|
165,000 |
(8) |
|
|
* |
|
One Isla Bahia Drive
Fort Lauderdale, FL 33316 |
|
|
|
|
|
|
|
|
Richard C. Pfenniger, Jr |
|
|
1,552,500 |
(9) |
|
|
2.2 |
% |
Gemma Rosello |
|
|
106,250 |
(7) |
|
|
* |
|
14
|
|
|
|
|
|
|
|
|
Name and Address |
|
Amount and Nature of |
|
Percent of |
of Beneficial Owner |
|
Beneficial Ownership(1) |
|
Common Stock(2) |
A. Marvin Strait
|
|
|
85,000 |
(10) |
|
|
* |
|
2 North Cascade Avenue
Suite 1300
Colorado Springs, CO 80903 |
|
|
|
|
|
|
|
|
Jose M. Garcia, Sr. |
|
|
5,380,204 |
(11) (12) |
|
|
7.7 |
% |
Carlos Garcia |
|
|
3,380,204 |
(11) (12) |
|
|
4.8 |
% |
Pecks Management Partners Ltd.
|
|
|
6,511,584 |
(13) |
|
|
9.3 |
% |
One Rockefeller Plaza
Suite 900
New York, NY 10020 |
|
|
|
|
|
|
|
|
All directors and executive officers
|
|
|
33,828,420 |
|
|
|
46.7 |
% |
as a group (10 persons) |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
For purposes of this table, beneficial ownership is computed pursuant to Rule 13d-3
under the Securities Exchange Act of 1934 (the Exchange Act); the inclusion of shares as
beneficially owned should not be construed as an admission that such shares are beneficially
owned for purposes of the Exchange Act. |
|
(2) |
|
Based on 70,118,086 shares outstanding as of October 15, 2007. |
|
(3) |
|
Includes 165,000 shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(4) |
|
Luis Cruz, M.D. does not hold any shares of common stock in his individual name, but rather
may be deemed the beneficial owner of the shares of common stock held by Luis Cruz Irrevocable
Trust A, Luis Cruz Irrevocable Trust B, Luis Irrevocable Trust C and Luis Cruz Irrevocable
Trust D, of which trusts Dr. Cruz is the sole trustee. Includes 25,000 shares of common stock
underlying options that are currently exercisable or exercisable within 60 days after October
15, 2007 by Dr. Cruz. |
|
(5) |
|
Includes 65,000 shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(6) |
|
Includes (i) 23,110,488 shares owned beneficially through Frost Gamma Investments Trust; (ii)
819,313 shares beneficially owned through Frost Nevada Investments Trust; (iii) 400,000 shares of
stock owned directly by Dr. Frost and (iv) 65,000 shares of
common stock underlying options that
are currently exercisable or exercisable within 60 days after October 15, 2007. |
|
(7) |
|
Represents shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(8) |
|
Includes 65,000 shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(9) |
|
Includes 959,470 shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(10) |
|
Includes 58,334 shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(11) |
|
Includes 25,000 shares of common stock underlying options that are currently exercisable or
exercisable within 60 days after October 15, 2007. |
|
(12) |
|
On October 12, 2006, Jose M. Garcia, Sr., Carlos Garcia
and Luis Cruz Irrevocable Trust A, Luis Cruz Irrevocable Trust B,
Luis Cruz Irrevocable Trust C and Luis Cruz Irrevocable Trust D (the
Group),
collectively, as a group, filed a Schedule 13D with regard to the
shares of common stock beneficially owned by the Group. |
|
(13) |
|
The information set forth herein is based solely on the most recent Schedule(s) 13G/A filed
with the SEC by the entity and, accordingly, may not reflect their respective holdings as of
the date of this report. |
15
Securities Authorized For Issuance Under Equity Compensation Plans
The following table provides information as of October 15, 2007, with respect to all of
Continucares equity compensation plans under which equity securities are authorized for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
securities to be |
|
|
|
|
|
Number of securities |
|
|
issued upon |
|
Weighted average |
|
remaining available for |
|
|
exercise of |
|
exercise price of |
|
future issuance |
|
|
outstanding |
|
outstanding |
|
(excluding securities |
|
|
options, warrants |
|
options, warrants |
|
reflected in first |
Plan Category |
|
and rights |
|
and rights |
|
column) |
|
Plans approved by shareholders |
|
|
5,240,054 |
|
|
$ |
1.94 |
|
|
|
2,367,167 |
|
Plans not approved by shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,240,054 |
|
|
$ |
1.94 |
|
|
|
2,367,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 2006, Continucare completed its acquisition (the Acquisition) of substantially
all of the assets of Miami Dade Health and Rehabilitation Services, Inc. (MDHRS), Miami Dade
Health Centers, Inc., West Gables Open MRI Services, Inc., Kent Management Systems, Inc. (Kent),
Pelu Properties, Inc. (Pelu), Peluca Investments, LLC, and Miami Dade Health Centers One, Inc.
(collectively, the MDHC Companies). Upon completion of the Acquisition, Continucare entered into
a registration rights agreement with the MDHC Companies and their principal shareholders, including
Luis Cruz, M.D., Continucares Vice Chairman. Pursuant to the terms of the registration rights
agreement, Continucare filed a registration statement with the SEC with respect to the shares
subject to the agreement and maintained the effectiveness of the registration statement until
October 1, 2007.
Upon completion of the Acquisition, Continucare entered into one-year employment agreements
with each of Luis Cruz, M.D., Jose Garcia and Carlos Garcia, the principal shareholders of the MDHC
Companies. Under these employment agreements, Dr. Cruz was employed as Continucares Vice Chairman
at an annual salary of $225,000 and was appointed to Continucares Board of Directors, Mr. Jose
Garcia was employed as Continucares Executive Vice President at an annual salary of $275,000, and
Mr. Carlos Garcia was employed as Continucares President Diagnostics Division at an annual
salary of $225,000. Pursuant to the terms of the employment agreements, each of Dr. Cruz and
Messrs. Jose and Carlos Garcia also received options to acquire 100,000 shares of Continucares
common stock at a per share exercise price of $2.59, the closing price of Continucares common
stock on October 2, 2006. The options vest ratably over a term of four years and have a term of
ten years from the date of the grant. Each of these employment agreements expired October 1, 2007
and Dr. Cruz and Mr. Carlos Garcia are no longer employees of Continucare, although Dr. Cruz
continues to serve on the Board of Directors. Mr. Jose Garcia remains an employee of Continucare
on an at-will basis at an annual salary of $190,000.
Upon completion of the Acquisition, Continucare became a party to two lease agreements with
certain of the MDHC Companies and their affiliates. Effective October 1, 2006, Kent assigned to
Continucare a lease agreement between Kent and Pelu, dated May 1, 2006, pursuant to which
Continucare leased from Pelu, an entity wholly-owed by Dr. Luis Cruz and Messrs. Jose and Carlos
Garcia, an 8,000 square foot warehouse in Hialeah, Florida for a five-year term expiring April 30,
2011 with monthly rent ranging from $3,031.67 per month during the first year to $3,412.17 per
month during the fifth year. Continucare terminated this lease effective September 30, 2007. Also
effective October 1, 2006, MDHRS assigned to Continucare a lease agreement dated January 1, 2000
between MDHRS and Cruz & Cruz Partnership, an affiliate of Dr. Luis Cruz pursuant to which
Continucare is leasing a medical clinic from Cruz & Cruz Partnership for a monthly rent of $32,100.
16
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table presents fees for professional services rendered by the independent
registered public accounting firm for the audit of Continucares annual financial statements, fees
for audit-related services, tax services and all other services.
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
Audit fees (a) |
|
$ |
1,452,844 |
|
|
$ |
426,160 |
|
|
|
|
|
|
|
|
|
|
Audit related fees (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax fees (c) |
|
|
26,400 |
|
|
|
67,292 |
|
|
|
|
|
|
|
|
|
|
All other fees (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,479,244 |
|
|
$ |
493,452 |
|
|
|
|
(a) |
|
Audit fees consist of audit and review work performed in the
preparation of financial statements, including the Fiscal 2007 audit of
effectiveness of internal controls over financial reporting, as well as fees
related to technical accounting and auditing consultations, assistance with SEC
filings and audit procedures related to the Acquisition of the MDHC Companies.
The auditors were not required to audit the effectiveness of Continucares
internal controls over financial reporting in Fiscal 2006. |
|
(b) |
|
No audit related fees were incurred in Fiscal 2007 and 2006. |
|
(c) |
|
Tax fees consist of services provided for tax compliance, tax
advice and tax planning. |
|
(d) |
|
No other fees were incurred in Fiscal 2007 and 2006. |
All audit related services, tax services and other services were pre-approved by Continucares
Audit Committee, which concluded that the provision of such services by Ernst & Young LLP was
compatible with the maintenance of that firms independence in the conduct of its auditing
functions. Continucares Audit Committee must review and pre-approve both audit and permitted
non-audit services provided by the independent auditors and shall not engage the independent
auditors to perform any non-audit services prohibited by law or regulation. At each Audit Committee
meeting, Continucares Audit Committee receives updates on the services actually provided by the
independent auditor, and management may present additional services for pre-approval. Continucares
Audit Committee has delegated to the Chairman of the Audit Committee the authority to evaluate and
approve engagements on behalf of the Audit Committee in the event that a need arises for
pre-approval between regular Audit Committee meetings. If the Chairman so approves any such
engagements, he will report that approval to the full Audit Committee at the next Audit Committee
meeting.
Each year, the independent registered public accounting firms retention to audit
Continucares financial statements, including the associated fee, is approved by Continucares
Audit Committee before the filing of the preceding years Annual Report on Form 10-K.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(3) Exhibits
The following is a list of exhibits filed as part of this Annual Report on Form 10-K/A.
17
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Description |
|
Method Filing |
31.1 |
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Filed herewith. |
31.2 |
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Filed herewith. |
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
CONTINUCARE CORPORATION
|
|
Dated: October 26, 2007 |
By: |
/s/ Richard C. Pfenniger, Jr.
|
|
|
|
RICHARD C. PFENNIGER, JR. |
|
|
|
Chairman of the Board, Chief Executive Officer
and President |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
SIGNATURE |
|
TITLE |
|
DATE |
|
|
|
|
|
/s/ Richard C. Pfenniger, Jr.
Richard C. Pfenniger, Jr.
|
|
Chairman of the Board, Chief Executive
Officer, President and Director
(Principal Executive Officer)
|
|
October 26, 2007 |
|
|
|
|
|
/s/ Fernando L. Fernandez
Fernando L. Fernandez
|
|
Senior Vice President Finance, Chief
Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
|
|
October 26, 2007 |
|
|
|
|
|
/s/ Luis Cruz, M.D.
Luis Cruz, M.D.
|
|
Vice Chairman of the Board and Director
|
|
October 26, 2007 |
|
|
|
|
|
/s/ Robert J. Cresci
Robert J. Cresci
|
|
Director
|
|
October 26, 2007 |
|
|
|
|
|
/s/ Neil Flanzraich
Neil Flanzraich
|
|
Director
|
|
October 26, 2007 |
|
|
|
|
|
/s/ Phillip Frost, M.D.
Phillip Frost, M.D.
|
|
Director
|
|
October 26, 2007 |
|
|
|
|
|
/s/ Jacob Nudel, M.D.
Jacob Nudel, M.D.
|
|
Director
|
|
October 26, 2007 |
|
|
|
|
|
/s/ A. Marvin Strait
A. Marvin Strait
|
|
Director
|
|
October 26, 2007 |
19
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
20