Continucare Corporation
UNITED STATES SECURITIES AND EXCHANGE COMMISSION`
WASHINGTON, D.C. 20549
_______________
FORM 10-K/A
| |
|
|
| (Mark One) |
x
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
| For the fiscal year ended: June 30, 2008 |
|
|
|
OR
|
|
|
|
o
|
|
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)
| |
|
|
Florida
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
59-2716023
(I.R.S. Employer Identification No.) |
| |
|
|
7200 Corporate Center Drive
Suite 600
Miami, Florida
(Address of Principal Executive Offices)
|
|
33126
(Zip Code) |
Registrant’s Telephone Number, Including Area Code (305) 500-2000
Securities registered pursuant to Section 12(b) of the Act:
| |
|
|
Title of Each Class
COMMON STOCK
$.0001 PAR VALUE
|
|
Name of Each Exchange On Which Registered
AMERICAN STOCK EXCHANGE |
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 x
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 x
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 x 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 registrant’s 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. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. Check one:
|
|
|
|
|
|
|
| Large accelerated filer o
|
|
Accelerated filer x
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
| |
|
|
(Do not check if a smaller reporting company) |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
that Act). oYes x No
The aggregate market value of the voting common stock held by non-affiliates of the registrant
on December 31, 2007 was approximately $100,907,000.
Number of shares outstanding of each of the registrant’s classes of Common Stock at October 15,
2008: 62,514,053 shares of Common Stock, $.0001 par value per share.
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 9, 2008 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, 2008
TABLE OF CONTENTS
2
PART III
|
|
|
| ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
(a) Identification of Directors
The following individuals are directors serving on our Board of Directors.
| |
|
|
|
|
| Name |
|
Age |
|
|
|
|
|
Richard C. Pfenniger, Jr. |
|
|
53 |
|
Luis Cruz, M.D. |
|
|
47 |
|
Robert J. Cresci |
|
|
64 |
|
Neil Flanzraich |
|
|
65 |
|
Phillip Frost, M.D. |
|
|
71 |
|
Jacob Nudel, M.D. |
|
|
60 |
|
Jacqueline M. Simkin |
|
|
65 |
|
A. Marvin Strait |
|
|
74 |
|
The following additional information is provided for each of the directors listed above.
Richard C. Pfenniger, Jr. has served as one of our directors since March 2002. In September
2002, Mr. Pfenniger was appointed Chairman of the Board of Directors. In October 2003, he was
appointed 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), Safestitch Medical, Inc. (medical devices) and OPKO Health, Inc. (pharmaceuticals).
Luis Cruz, M.D. has served as one of our directors since October 2006. In October 2006, Dr.
Cruz was appointed Vice Chairman of the Board of Directors pursuant to a one year employment
agreement which expired in October 2007. Prior to joining us, 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”). We acquired the MDHC Companies effective October 1, 2006. In October 2007, Dr. Cruz
opened the Centers of Medical Excellence (CME). CME is operated under an agreement with us and
CarePlus.
Robert J. Cresci has served as one of our 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 our 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), Bellus Health Inc. (formerly Neurochem, Inc.)
(healthcare), Rae Systems, Inc. (gas detection and security monitoring systems), Equity One, Inc.
(real estate), and Chipotle Mexican Grill, Inc. (a chain of Mexican restaurants).
3
Phillip Frost, M.D. has served as one of our directors since January 2004. Dr. Frost formerly
served on our 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., a
specialty pharmaceutical company. He is Vice Chairman of the Board of Directors of TEVA
Pharmaceuticals, Ltd. (pharmaceuticals), Chairman of the Board of Ladenburg Thalmann Financial
Services, Inc. (security brokerage) and Ideation Acquisition Corporation (special purpose
acquisition corporation). He also serves as a director of Northrop Grumman Corporation
(aerospace), and Modigene Inc. (biopharmaceuticals). Previously, he served as the Chairman of the
Board of Directors and Chief Executive Officer of IVAX Corporation from 1987 to 2006 and 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 1986. Dr. Frost serves on the Board of Regents of the Smithsonian Institution, is a member
of the Board of Trustees of the University of Miami, and is a Trustee of each of the Scripps
Research Institutes, the Miami Jewish Home for the Aged and the Mount Sinai Medical Center and is
Co-Vice Chairman of the American Stock Exchange.
Jacob Nudel, M.D. has served as one of our directors since October 2002. He is a private
investor who founded MDwerks.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.
Jacqueline M. Simkin has served as one of our directors since September 2008. Ms. Simkin has
been the owner and president of Simkin Management Inc., an investment management firm that invests
in public and private companies, since 1996. She was a member of the boards of Alpnet Inc. and
Thompson Nutritional Technology Inc. from 1998 through 2000. From 1987 to 1995, Ms. Simkin served
on the Board of Directors of the Intercontinental Bank. Ms. Simkin served in various management
capacities at The Denver Brick Company including serving as the Chairperson and Chief Executive
Officer from 1999 through 2001. Ms. Simkin developed real estate from 1976 to 1986 and is a
retired member of the British Colombia Bar Association.
A. Marvin Strait has served as one of our 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 Pikes Peak Educational Foundation. 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., GP Strategies Corporation, and on the Community
Advisory Panel of American National 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 our executive officers.
| |
|
|
|
|
|
|
| Name |
|
Age |
|
Position |
|
|
|
|
|
|
|
Richard C. Pfenniger, Jr.
|
|
|
53 |
|
|
Chairman of the Board, Chief Executive Officer and President |
Fernando L. Fernandez
|
|
|
47 |
|
|
Senior Vice President — Finance, Chief Financial Officer,
Treasurer and Secretary |
Luis H. Izquierdo
|
|
|
53 |
|
|
Senior Vice President — Marketing and Business Development |
Gemma Rosello
|
|
|
52 |
|
|
Executive Vice President — Operations |
All officers serve until they resign or are replaced or renamed at the discretion of the Board
of Directors.
The following additional information is provided for the executive officers shown above who
are not directors.
Fernando L. Fernandez was appointed Senior Vice President-Finance, Chief Financial Officer,
Treasurer, and Secretary in June 2004. Mr. Fernandez, a certified public accountant, served as
Senior Vice President-Finance, 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, Florida.
Luis H. Izquierdo was appointed 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
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.
4
Gemma Rosello was appointed Executive Vice President — Operations in October 2006. Ms.
Rosello had previously served as Senior Vice President — Operations from May 2005. Prior to
joining us, 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 us to become a director or executive officer.
(e) Business Experience
The business experience of each of our 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 our 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 our knowledge, none of our 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
Our Audit Committee currently consists of Mr. Cresci, Mr. Flanzraich, Ms. Simkin and Mr.
Strait (Chairman). All members of our Audit Committee are independent within the meaning of the
listing Standards of the American Stock Exchange (“AMEX”) and applicable law. Our 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 the Board of Directors
No material changes to the procedures for nominating directors by our shareholders were made
during the fiscal year ended June 30, 2008.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and
executive officers and persons who own more than ten percent of our 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 us with copies of all such reports they
file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and
written representations that no other reports were required, we believe that all Section 16(a)
filing requirements applicable to our officers, directors and greater than
ten percent beneficial owners for the fiscal year ended June 30, 2008 (“Fiscal 2008”) were complied
with.
5
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics applicable to our directors, officers and
employees, including our Chief Executive Officer and Chief Financial Officer. A copy of our Code
of Conduct and Ethics is available on our website at www.continucare.com. We intend to post
amendments to, or waivers from, our Code of Conduct and Ethics (to the extent applicable to our
Chief Executive Officer and Chief Financial Officer) on our website. Our website is not part of
this Annual Report on Form 10-K/A.
|
|
|
| ITEM 11. |
|
EXECUTIVE COMPENSATION |
Compensation Discussion and Analysis
Overview of Compensation Program
Our Compensation Committee administers the compensation program for our executive officers and
also determines compensation for our non-employee directors. The Compensation Committee reviews
and determines all executive officer compensation, administers our equity incentive plans
(including reviewing and approving grants to our 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 Committee’s charter reflects these responsibilities, and the Compensation
Committee and the Board periodically review and, if appropriate, revise the charter. The Board
determines the Compensation Committee’s membership. During Fiscal 2008, Robert J. Cresci, Neil
Flanzraich, Jacob Nudel, M.D. and A. Marvin Strait, C.P.A., each of whom are non-employee
independent directors, comprised the Compensation Committee. In September 2008, Ms. Jacqueline M.
Simkin was appointed a member of the Compensation Committee and in October 2008 Dr. Nudel resigned
as a member of 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.
Our 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, and Gemma Rosello,
Executive Vice President — Operations. 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 our compensation programs are to secure and retain the services of high
quality executives and to provide compensation to our executives that are commensurate and aligned
with our performance and advances both short and long-term interests of ours and our shareholders.
We seek 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 salaries are designed primarily to attract and retain talented executives.
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 us. Annual cash incentives are designed to motivate
and reward the achievement of selected financial goals, generally tied to profitability. 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 our compensation program for the
Named Executive Officers is appropriately based upon our performance 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.
Our 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
6
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 Officer’s 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, 2008, 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.
A significant portion of total compensation is comprised of base salary, which enables us 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 our 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 Officer’s 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 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 Officer’s base salary by considering
the individual’s 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 Committee’s review
includes, among other things, the functional and decision-making responsibilities of each position,
the significance of the Named Executive Officer’s specific area of individual responsibility to our
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 executive’s current salary. With respect to base salary decisions for
the Chief Executive Officer, the Compensation Committee makes an assessment of Mr. Pfenniger’s past
performance as Chief Executive Officer and its expectations as to his future contributions, as well
as the factors described above for the other Named Executive Officers, including evaluating his
individual performance and our 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 2009, the Compensation
Committee considered the continued improvement in our results and financial condition under Mr.
Pfenniger’s leadership and the efforts of the other Named Executive Officers.
The Chief Executive Officer’s Fiscal 2008 base salary increased 7.1% from Fiscal 2007 and the
other Named Executive Officers’ Fiscal 2008 base salaries increased in the range of 4.5% to 7.5%
from Fiscal 2007. Effective September 2007, the Named Executive Officers’ Fiscal 2008 base
salaries were as follows: Mr. Pfenniger — $375,000; Mr. Fernandez — $215,000; Mr. Izquierdo -
$230,000 and Ms. Rosello — $230,000. For Fiscal 2009, the Compensation Committee has approved an
increase of 10.7% in the Chief Executive Officer’s base salary from Fiscal 2008 and increases
ranging from 3.0% to 7.0% in the base salaries of the other Named Executive Officers. Effective
September 2008, the Named Executive Officers’ Fiscal 2009 base salaries are as follows: Mr.
Pfenniger — $415,000; Mr. Fernandez — $230,000; Mr. Izquierdo $237,000 and Ms. Rosello — $245,000.
Long-Term Equity Incentive Compensation
Our long-term equity incentive compensation program provides an opportunity for the Named
Executive Officers to increase their stake in us through grants of options to purchase shares of
our common stock and encourages the Named Executive Officers to manage us 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
7
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 officer’s continued employment with
us. Accordingly, the option grant will provide a positive return to the executive officer only if
he or she remains employed by us during the vesting period, and then only if the market price of
the shares appreciates over the option term.
The Compensation Committee’s grant of stock options to the Named Executive Officers is
entirely discretionary, subject to any limitations set by our Amended and Restated 2000 Stock
Incentive 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 officer’s current position with us, the executive
officer’s 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 2008 and 2009, all of the Named
Executive Officers were granted options to purchase shares of our 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, in connection with their services for Fiscal 2007 and
Fiscal 2008, respectively. In September 2007, the following grants of options were made to our
Named Executive Officers in connection with their services for Fiscal 2007: Mr. Pfenniger — option
to purchase 150,000 shares; Ms. Rosello — option to purchase 75,000 shares; Mr. Fernandez —
option to purchase 75,000 shares; and Mr. Izquierdo — option to purchase 50,000 shares. In
September 2008, the following grants were made to our Named Executive Officers in connection with
their services for Fiscal 2008: Mr. Pfenniger — option to purchase 175,000 shares; Ms. Rosello —
option to purchase 100,000 shares; Mr. Fernandez — option to purchase 100,000 shares; and Mr.
Izquierdo — option to purchase 50,000 shares.
We have generally approved grants of stock options in specific amounts as part of an executive
officer’s initial employment with us. We do 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
We maintain an annual cash incentive bonus plan which provides for the payment of cash bonuses
to eligible members of our 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
our growth and profitability. Under the terms of the plan for Fiscal 2008, a pool was established
from which bonuses would be paid in an amount equal to 15% of the amount by which our pre-tax
earnings for Fiscal 2008 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. In September 2008, the Compensation
Committee met to determine bonuses under the plan for Fiscal 2008 to Named Executive Officers.
Based on Continucare’s performance during Fiscal 2008, and based upon Mr. Pfenniger’s
recommendations with respect to the Named Executive Officers other than himself, the Compensation
Committee awarded annual cash incentive program compensation to the named executive officers as
follows: Mr. Pfenniger — $300,000; Mr. Fernandez — $150,000; Ms. Rosello — $150,000 and Mr.
Izquierdo — $100,000.
The Compensation Committee approved an annual cash incentive bonus plan for Fiscal 2009 under
the same general framework as the Fiscal 2008 plan. The plan for Fiscal 2009 was approved by the
Compensation Committee at a meeting held in September 2008, which was its first meeting after
completion of our fiscal year ended June 30, 2008. Under the terms of the plan for Fiscal 2009, a
bonus pool will be established in an amount equal to 15% of the amount by which our pre-tax
earnings exceed a pre-determined threshold. 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 our shareholders. As with the annual cash incentive plan for
Fiscal 2008, no bonuses will be payable under the plan for Fiscal 2009 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 our full time employees. While we
generally do not provide perquisites to its executive officers, certain Named Executive Officers
received modest automobile allowances and we paid medical and life insurance premiums on behalf of
all of the Named Executive Officers which exceed the premiums paid by us on behalf of our
non-executive employees.
8
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 corporation’s 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 our 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 statute’s 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 us to meet our
overall objectives, even if we 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 our efforts, that
compensation intended by us 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 with management the Compensation
Discussion and Analysis. Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that the 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
Jacqueline M. Simkin
A. Marvin Strait, C.P.A.
Compensation of Named Executive Officers
Summary Compensation Table
The following table sets forth certain summary information concerning compensation paid or
accrued by us to or on behalf of the Named Executive Officers (as defined in the “Compensation
Discussion and Analysis” section above) for the fiscal years ended June 30, 2008 and 2007. We do
not have employment agreements with any of the Named Executive Officers.
9
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Deferred |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
Compensation |
|
|
All Other |
|
|
|
|
| Name and Principal Position |
|
Fiscal Year |
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards(1) |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation(2) |
|
|
Total |
|
Richard C. Pfenniger, Jr., |
|
|
2008 |
|
|
$ |
371,539 |
|
|
|
— |
|
|
|
— |
|
|
$ |
208,907 |
|
|
$ |
300,000 |
|
|
|
— |
|
|
$ |
15,940 |
|
|
$ |
896,386 |
|
Chairman of the Board, |
|
|
2007 |
|
|
$ |
346,077 |
|
|
|
— |
|
|
|
— |
|
|
$ |
259,195 |
|
|
|
— |
|
|
|
— |
|
|
$ |
14,312 |
|
|
$ |
619,584 |
|
President and Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gemma Rosello, |
|
|
2008 |
|
|
$ |
227,942 |
|
|
|
— |
|
|
|
— |
|
|
$ |
158,082 |
|
|
$ |
150,000 |
|
|
|
— |
|
|
$ |
14,237 |
|
|
$ |
550,261 |
|
Executive Vice |
|
|
2007 |
|
|
$ |
211,596 |
|
|
|
— |
|
|
|
— |
|
|
$ |
146,004 |
|
|
|
— |
|
|
|
— |
|
|
$ |
13,416 |
|
|
$ |
371,016 |
|
President — Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fernando L. Fernandez, |
|
|
2008 |
|
|
$ |
212,885 |
|
|
|
— |
|
|
|
— |
|
|
$ |
84,805 |
|
|
$ |
150,000 |
|
|
|
— |
|
|
$ |
15,940 |
|
|
$ |
463,630 |
|
Senior Vice President-Finance, |
|
|
2007 |
|
|
$ |
198,038 |
|
|
|
— |
|
|
|
— |
|
|
$ |
273,951 |
|
|
|
— |
|
|
|
— |
|
|
$ |
14,312 |
|
|
$ |
486,301 |
|
Chief Financial Officer,
Treasurer and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luis H. Izquierdo, Senior |
|
|
2008 |
|
|
$ |
228,923 |
|
|
|
— |
|
|
|
— |
|
|
$ |
65,934 |
|
|
$ |
100,000 |
|
|
|
— |
|
|
$ |
14,912 |
|
|
$ |
409,769 |
|
Vice President-Marketing |
|
|
2007 |
|
|
$ |
218,789 |
|
|
|
— |
|
|
|
— |
|
|
$ |
127,883 |
|
|
|
— |
|
|
|
— |
|
|
$ |
11,956 |
|
|
$ |
358,628 |
|
and Business Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Represents the dollar amount recognized for financial statement reporting purposes for the
fiscal year ended June 30, 2008, 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 2008. Assumptions used in the calculation of these amounts are
included in footnote 7 to our audited financial statements for the fiscal year ended June 30, 2008
included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on
September 9, 2008. There were no forfeitures during Fiscal 2008. Additional information regarding
these stock options awarded to the Named Executive Officers in Fiscal 2008, including the grant
date fair value of such stock options, is set forth in the “Grants of Plan-Based Awards — Fiscal
2008” table below. |
| |
| (2) |
|
Includes the amount of the insurance premiums paid by us on behalf of the Named Executive
Officers that exceed the insurance premiums paid by us on behalf of our non-executive employees,
and also includes car allowances of $6,228 paid to each of Ms. Rosello and Mr. Izquierdo. |
Grants of Plan-Based Awards — Fiscal 2008
The following table sets forth certain information concerning grants of awards to the Named
Executive Officers pursuant to our non-equity and equity incentive plans in the fiscal year ended
June 30, 2008.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
All Other |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Exercise |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
Awards: |
|
|
or Base |
|
|
Grant Date |
|
| |
|
|
|
|
|
Estimated Possible Payouts Under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
|
Price of |
|
|
Fair Value |
|
| |
|
|
|
|
|
Non-Equity Incentive Plan |
|
|
Estimated Future Payouts Under |
|
|
Shares of |
|
|
Securities |
|
|
Option |
|
|
of Stock |
|
| |
|
|
|
|
|
Awards(1) |
|
|
Equity Incentive Plan Awards |
|
|
Stock or |
|
|
Underlying |
|
|
Awards |
|
|
and Option |
|
| |
|
Grant |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Units |
|
|
Options(2) |
|
|
($/Sh) |
|
|
Awards(3) |
|
| Name |
|
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. |
|
|
9/11/07 |
|
|
|
— |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
$ |
2.51 |
|
|
$ |
191,000 |
|
Pfenniger, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gemma Rosello |
|
|
9/11/07 |
|
|
|
— |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
75,000 |
|
|
$ |
2.51 |
|
|
$ |
95,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fernando Fernandez |
|
|
9/11/07 |
|
|
|
— |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
75,000 |
|
|
$ |
2.51 |
|
|
$ |
95,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luis Izquierdo |
|
|
9/11/07 |
|
|
|
— |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,000 |
|
|
$ |
2.51 |
|
|
$ |
60,000 |
|
|
|
|
| (1) |
|
Represents the estimated possible payouts of cash awards under our annual
incentive plan which is tied to financial performance goals. Our annual incentive plan is more
fully described in the “Compensation Discussion and Analysis” section beginning on page 8. 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. The Compensation Committee determines payouts under our Annual
Cash Incentive Program after determining amounts available to be paid out following the end of the
fiscal year. |
| |
| (2) |
|
All options are to purchase shares of our common stock granted under our
Amended and Restated 2000 Stock Incentive Plan. Each grant vests 25% over the first four years
from the date of grant. |
| |
| (3) |
|
Represents the approximate grant date fair value computed in accordance with FAS
123(R). |
10
Outstanding Equity Awards at Fiscal Year-End — 2008
The following table sets forth certain information regarding equity-based awards held by the
Named Executive Officers as of June 30, 2008.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
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 |
|
|
|
|
100,000 |
|
|
|
100,000 |
(1) |
|
|
— |
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
75,000 |
|
|
|
75,000 |
(2) |
|
|
— |
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
37,500 |
|
|
|
112,500 |
(3) |
|
|
— |
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gemma Rosello |
|
|
75,000 |
|
|
|
25,000 |
(4) |
|
|
— |
|
|
$ |
2.69 |
|
|
|
5/26/15 |
|
|
|
|
37,500 |
|
|
|
37,500 |
(1) |
|
|
— |
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
37,500 |
|
|
|
37,500 |
(2) |
|
|
— |
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
18,750 |
|
|
|
56,250 |
(3) |
|
|
— |
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fernando L. Fernandez |
|
|
350,000 |
|
|
|
— |
|
|
|
— |
|
|
$ |
1.98 |
|
|
|
6/14/14 |
|
|
|
|
37,500 |
|
|
|
37,500 |
(1) |
|
|
— |
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
25,000 |
|
|
|
25,000 |
(2) |
|
|
— |
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
18,750 |
|
|
|
56,250 |
(3) |
|
|
— |
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luis H. Izquierdo |
|
|
300,000 |
|
|
|
— |
|
|
|
— |
|
|
$ |
1.51 |
|
|
|
1/5/14 |
|
|
|
|
37,500 |
|
|
|
37,500 |
(1) |
|
|
— |
|
|
|
2.42 |
|
|
|
12/6/15 |
|
|
|
|
12,500 |
|
|
|
12,500 |
(2) |
|
|
— |
|
|
|
2.77 |
|
|
|
9/12/16 |
|
|
|
|
12,500 |
|
|
|
37,500 |
(3) |
|
|
— |
|
|
|
2.51 |
|
|
|
9/11/17 |
|
|
|
|
| (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. |
Option Exercises and Stock Vested — Fiscal 2008
No stock options were exercised by the Named Executive Officers in the fiscal year ended June
30, 2008.
Potential Payments upon Termination or Change-in-Control
The Named Executive Officers do not have employment agreements with us and are all employed on
an “at will” basis. We do not have arrangements with any of our 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 our Amended and Restated 2000 Stock Incentive 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 incentive plan.
11
Compensation of Directors
Our Compensation Committee recommends director compensation to the Board. In developing their
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 2008, each of our non-employee directors received a cash
retainer of $25,000 for his service on the Board. In addition, for Fiscal 2008, 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 our non-employee directors were granted fully vested options to purchase
25,000 shares of common stock during Fiscal 2008. In May 2008, the cash retainer for non-employee
directors serving on the Board was increased to $30,000, the additional cash retainers for the
Chairman of each of the Nominating Committee and the Compensation Committee were increased to
$5,000 and the additional cash retainer for the Chairman of the Audit Committee was increased to
$10,000. The options to be granted annually to non-employee directors remained unchanged.
Director Compensation — Fiscal 2008
The following table sets forth certain information regarding the compensation paid to our
non-employee directors for their service during the fiscal year ended June 30, 2008.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
29,375 |
|
|
|
— |
|
|
$ |
20,263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
49,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luis Cruz, M.D. |
|
$ |
13,750 |
|
|
|
— |
|
|
$ |
20,263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
34,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Flanzraich |
|
$ |
26,250 |
|
|
|
— |
|
|
$ |
20,263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
46,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip Frost, M.D. |
|
$ |
29,375 |
|
|
|
— |
|
|
$ |
20,263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
49,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jacob Nudel, M.D. |
|
$ |
26,250 |
|
|
|
— |
|
|
$ |
20,263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
46,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Marvin Strait |
|
$ |
32,500 |
|
|
|
— |
|
|
$ |
20,263 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
52,763 |
|
|
|
|
| (1) |
|
Represents the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended June 30, 2008, 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 2008. Assumptions used in the calculation of
these amounts are included in footnote 7 to our audited financial statements for the fiscal year
ended June 30, 2008 included in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on September 9, 2008. There were no forfeitures during Fiscal 2008. The grant
date fair value of the stock option awards granted during Fiscal 2008 and computed in accordance
with FAS 123(R) was $0.81 per share. The table below sets forth the aggregate number of stock
options of each non-employee director outstanding as of June 30, 2008: |
| |
|
|
|
|
| Name |
|
Stock Options |
| |
Robert J. Cresci
|
|
|
190,000 |
|
| |
Luis Cruz, M.D.
|
|
|
25,000 |
|
| |
Neil Flanzraich
|
|
|
90,000 |
|
| |
Phillip Frost, M.D.
|
|
|
90,000 |
|
| |
Jacob Nudel, M.D.
|
|
|
90,000 |
|
| |
A. Marvin Strait
|
|
|
83,334 |
|
Compensation Committee Interlocks and Insider Participation
During Fiscal 2008, our Compensation Committee was comprised of the following four members:
Robert J. Cresci (Chairman), Neil Flanzraich, Jacob Nudel, M.D, and A. Marvin Strait. There are no
interlocking relationships between members of our Compensation Committee and the compensation
committees of other companies’ board of directors.
12
|
|
|
| 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, 2008 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 we know 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
|
|
|
390,000 |
|
|
(3)
|
|
|
* |
|
c/o Pecks Management Partners, Ltd. |
|
|
|
|
|
|
|
|
|
|
One Rockefeller Plaza |
|
|
|
|
|
|
|
|
|
|
Suite 900 |
|
|
|
|
|
|
|
|
|
|
New York, NY 10020 |
|
|
|
|
|
|
|
|
|
|
Luis Cruz, M.D.
|
|
|
1,456,531 |
|
|
(4)
|
|
|
2.3 |
% |
3233 Palm Avenue |
|
|
|
|
|
|
|
|
|
|
Hialeah, FL 33012 |
|
|
|
|
|
|
|
|
|
|
Neil Flanzraich
|
|
|
290,000 |
|
|
(5)
|
|
|
* |
|
4400 Biscayne Boulevard |
|
|
|
|
|
|
|
|
|
|
Miami, FL 33137 |
|
|
|
|
|
|
|
|
|
|
Phillip Frost, M.D.
|
|
|
25,735,873 |
|
|
(6)
|
|
|
41.1 |
% |
4400 Biscayne Boulevard |
|
|
|
|
|
|
|
|
|
|
Miami, FL 33137 |
|
|
|
|
|
|
|
|
|
|
Fernando L. Fernandez
|
|
|
450,000 |
|
|
(7)
|
|
|
* |
|
Luis H. Izquierdo
|
|
|
381,250 |
|
|
(7)
|
|
|
* |
|
Jacob Nudel, M.D.
|
|
|
190,000 |
|
|
(8)
|
|
|
* |
|
One Isla Bahia Drive |
|
|
|
|
|
|
|
|
|
|
Fort Lauderdale, FL 33316 |
|
|
|
|
|
|
|
|
|
|
Richard C. Pfenniger, Jr.
|
|
|
1,676,720 |
|
|
(9)
|
|
|
2.6 |
% |
Gemma Rosello
|
|
|
212,500 |
|
|
(7)
|
|
|
* |
|
Jacqueline M. Simkin
|
|
|
572,640 |
|
|
(10)
|
|
|
* |
|
A. Marvin Strait
|
|
|
110,000 |
|
|
(11)
|
|
|
* |
|
2 North Cascade Avenue |
|
|
|
|
|
|
|
|
|
|
Suite 1300 |
|
|
|
|
|
|
|
|
|
|
Colorado Springs, CO 80903 |
|
|
|
|
|
|
|
|
|
|
Jose M. Garcia, Sr.
|
|
|
3,972,228 |
|
|
(12)
|
|
|
6.3 |
% |
T. Rowe Price
|
|
|
4,160,000 |
|
|
(13)
|
|
|
6.7 |
% |
Owings Mills Corporate Campus |
|
|
|
|
|
|
|
|
|
|
4515 Painters Mill Road |
|
|
|
|
|
|
|
|
|
|
Owings Mills, Maryland 21117-4903 |
|
|
|
|
|
|
|
|
|
|
All directors and executive officers
as a group (11 persons).
|
|
|
31,465,514 |
|
|
|
|
|
48.3 |
% |
|
|
|
| * |
|
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 62,514,053 shares outstanding as of October 15, 2008. |
| |
| (3) |
|
Includes 190,000 shares of common stock underlying options that are currently
exercisable or exercisable within 60 days after October 15, 2008. |
| |
| (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 D, of which trust 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, 2008 by Dr. Cruz. |
| |
| (5) |
|
Includes 90,000 shares of common stock underlying options that are currently
exercisable or exercisable within 60 days after October 15, 2008. |
| |
| (6) |
|
Includes (i) 24,426,560 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) 90,000 shares of common stock
underlying options that are currently exercisable or exercisable within 60 days after October
15, 2008. |
| |
| (7) |
|
Represents shares of common stock underlying options that are currently exercisable
or exercisable within 60 days after October 15, 2008. |
| |
| (8) |
|
Includes 90,000 shares of common stock underlying options that are currently
exercisable or exercisable within 60 days after October 15, 2008. |
| |
| (9) |
|
Includes 1,083,690 shares of common stock underlying options that are currently
exercisable or exercisable within 60 days after October 15, 2008. |
| |
| (10) |
|
Includes shares of common stock held by the Jacqueline Simkin Trust, of which Ms.
Simkin is a beneficiary. |
| |
| (11) |
|
Includes 83,334 shares of common stock underlying options that are currently
exercisable or exercisable within 60 days after October 15, 2008. |
| |
| (12) |
|
Includes 50,000 shares of common stock underlying options that are currently
exercisable or exercisable within 60 days after October 15, 2008. Includes 600,000 shares
that are pledged as security. The information set forth herein is based solely on
representations made by Mr. Garcia. |
| |
| (13) |
|
We have reason to believe such information is accurate; however, to date T. Rowe
Price has not filed a Schedule 13G with the SEC. |
13
Securities Authorized For Issuance Under Equity Compensation Plans
The following table provides information as of June 30, 2008, with respect to all of our
equity compensation plans under which equity securities are authorized for issuance.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Number of securities |
| |
|
|
|
|
|
|
|
|
|
remaining available |
| |
|
Number of securities to |
|
Weighted average |
|
for future issuance |
| |
|
be issued upon exercise |
|
exercise price of |
|
(excluding securities |
| |
|
of outstanding options, |
|
outstanding options, |
|
reflected in first |
| Plan Category |
|
warrants and rights |
|
warrants and rights |
|
column) |
Plans approved by shareholders
|
|
|
5,373,804 |
|
|
$ |
1.95 |
|
|
|
2,224,667 |
|
Plans not approved by
shareholders
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,373,804 |
|
|
$ |
1.95 |
|
|
|
2,224,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ITEM 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The Board of Directors considered transactions and relationships between each director or any
member of his immediate family and Continucare and its subsidiaries and affiliates. The Board of
Directors also examined transactions and relationships between directors or their known affiliates
and members of our senior management or their known affiliates. The purpose of this review was to
determine whether any such relationships or transactions were inconsistent with a determination
that the director is independent under the listing standards of AMEX and applicable law. The Board
of Directors affirmatively determined that a majority of our directors, including Mr. Cresci, Mr.
Flanzraich, Dr. Frost, Ms. Simkin and Mr. Strait, are “independent” directors within the meaning of
the listing standards of AMEX and applicable law.
The Audit Committee reviews and approves transactions in which Continucare was or is to be a
participant, where the amount involved exceeded or will exceed $120,000 annually and any of our
directors, executive officers or their immediate family members had or will have a direct or
indirect material interest. We have a written policy stating that the Audit Committee is
responsible for reviewing and, if appropriate, approving or ratifying any related party
transactions. The related party transaction will not be approved unless at a minimum it is for our
benefit and is upon terms no less favorable to us than if the related party transaction was with an
unrelated third party. In Fiscal 2008, no related party transaction occurred where this process
was not followed.
As a result of the acquisition of Miami Dade Health Centers, Inc. and its affiliated companies
(collectively, the “MDHC Companies”) effective October 1, 2006, we became a party to two lease
agreements for office space owned by Dr. Luis Cruz and Jose Garcia, principal owners of the MDHC
Companies, one of which we terminated effective September 30, 2007. Dr. Cruz is a director of
Continucare and Mr. Garcia is Executive Vice President of Continucare. For Fiscal 2008 and 2007,
expenses related to these two leases were approximately $0.4 million and $0.3 million,
respectively.
On February 5, 2008, we repurchased an aggregate of 600,000 shares of our common stock from
Dr. Luis Cruz, a director of the Company, as trustee of the Luis Cruz Irrevocable Trust A, the Luis
Cruz Irrevocable Trust B and the Luis Cruz Irrevocable Trust C. We paid $2.25 per share for the
shares for an aggregate purchase price of $1,350,000. The per share purchase price paid by us
represented a 10% discount from the closing price of our common stock on February 4, 2008.
Effective July 16, 2008, Dr. Cruz reported he was no longer the trustee of Luis Cruz Irrevocable
Trusts A, B and C and accordingly, had no beneficial interest in the shares of our common stock
held by Luis Cruz Irrevocable Trusts A, B and C. On September 19, 2008, we purchased an aggregate
of 100,000 shares of our common stock from Dr. Cruz, as trustee of the Luis Cruz Irrevocable Trust
D. We paid $2.14 per share for the shares for an aggregate purchase price of $214,000. The per
share purchase price paid by us represented a 10% discount from the closing price of our common
stock on September 19, 2008.
14
|
|
|
| ITEM 14. |
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table presents fees for professional services rendered by the independent
registered public accounting firm for the audit of our annual financial statements, fees for
audit-related services, tax services and all other services.
| |
|
|
|
|
|
|
|
|
| |
|
Fiscal |
|
|
Fiscal |
|
| |
|
2008 |
|
|
2007 |
|
Audit fees (a) |
|
$ |
926,255 |
|
|
$ |
1,452,844 |
|
Audit related fees (b) |
|
|
— |
|
|
|
— |
|
Tax fees (c) |
|
|
24,000 |
|
|
|
26,400 |
|
All other fees (d) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
$ |
950,255 |
|
|
$ |
1,479,244 |
|
|
|
|
| (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. |
| |
| (b) |
|
No audit related fees were incurred in Fiscal 2008 and 2007. |
| |
| (c) |
|
Tax fees consist of services provided for tax compliance, tax
advice and tax planning. |
| |
| (d) |
|
No other fees were incurred in Fiscal 2008 and 2007. |
All audit related services, tax services and other services were pre-approved by our Audit
Committee, which concluded that the provision of such services by Ernst & Young LLP was compatible
with the maintenance of that firm’s independence in the conduct of its auditing functions. Our
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, our Audit Committee
receives updates on the services actually provided by the independent auditor, and management may
present additional services for pre-approval. Our 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 firm’s retention to audit our
financial statements, including the associated fee, is approved by our Audit Committee before the
filing of the preceding year’s 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.
| |
|
|
|
|
| Exhibit Number |
|
Description |
|
Method of 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. |
15
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 27, 2008 |
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 27, 2008 |
| /s/ Fernando L. Fernandez
Fernando L. Fernandez |
|
Senior Vice President — Finance, Chief
Financial
Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
|
|
October 27, 2008 |
| /s/ Luis Cruz, M.D.
Luis Cruz, M.D. |
|
Vice Chairman of the Board and Director
|
|
October 27, 2008 |
| /s/ Robert J. Cresci
Robert J. Cresci |
|
Director
|
|
October 27, 2008 |
| /s/ Neil Flanzraich
Neil Flanzraich |
|
Director
|
|
October 27, 2008 |
| /s/ Phillip Frost, M.D.
Phillip Frost, M.D. |
|
Director
|
|
October 27, 2008 |
| /s/ Jacob Nudel, M.D.
Jacob Nudel, M.D. |
|
Director
|
|
October 27, 2008 |
| /s/ Jacqueline M. Simkin
Jacqueline M. Simkin |
|
Director
|
|
October 27, 2008 |
| /s/ A. Marvin Strait
A. Marvin Strait |
|
Director
|
|
October 27, 2008 |
16
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. |
17