SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NO. 0-17821
THE CARE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-2962027
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE HOLLOW LANE, LAKE SUCCESS, NEW YORK 11042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516)869-8383
Securities registered pursuant to Section 12(b) of the Act:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
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
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 10K or any amendment in
this Form 10K.[X]
As of March 26, 1997, the registrant had outstanding 12,597,053 shares of
Common Stock, $.001 par value per share.
As of March 26, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $14,683,000
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information relating to the current
directors and executive officers of the Company.
NAME POSITION WITH THE COMPANY
- ------------------------------------------ -------------------------------------------------------
CLASS I DIRECTORS
Ann T. Mittasch Chairman of the Board
Randolph J. Mittasch Secretary/Treasurer, Director
CLASS II DIRECTOR
Dr. Derace Lan Schaffer (1),(2) Director
CLASS III DIRECTORS
Pat H. Celli (2) Chief Financial Officer, Assistant Secretary and
Treasurer
John Pappajohn (1), (2) Director
- ---------------------------
(1) Member of the Audit and Compensation Committees.
(2) Member of the Executive Committee
ANN T. MITTASCH, CHAIRMAN OF THE BOARD OF DIRECTORS: (Age 66): Ms. Mittasch
has been Chairman of the Company since 1984 and was President and Chief
Executive Officer of the Company from 1984 through August, 1996. Prior to
1984, Ms. Mittasch served as President and then Chairman of Superior Care,
Inc. (predecessor to Lifetime Corporation), a national home care corporation
whose securities traded on the New York Stock Exchange, Inc. Ms. Mittasch is
the mother of Randolph J. Mittasch, Secretary/Treasurer and a director of the
Company.
RANDOLPH J. MITTASCH, SECRETARY/TREASURER AND DIRECTOR: (Age 35): Mr. Mittasch
has been Secretary/Treasurer of the Company since February, 1989 and has been
a director of the Company since 1985. From 1988 to February, 1992, he was
employed by the American Stock Exchange, Inc. as a Senior Accountant. Mr.
Mittasch received an MBA from Adelphi University in 1987 and in 1989 became a
Certified Public Accountant. Mr. Mittasch is the son of Ann T. Mittasch,
Chairman of the Board of Directors of the Company.
DR. DERACE LAN SCHAFFER, DIRECTOR: (Age 48): Dr. Schaffer was named to the
Board of Directors in August 1996 pursuant to the terms of the Private
Placement. Dr. Schaffer, a practicing radiologist, has served as Chairman of
the Board and President of the Ide Group, a medical group, since 1980, and as
President of The Lan Group, a health care and biomedical consulting company,
since 1990. Dr. Schaffer also serves as a director of various other privately
held health care related organizations.
JOHN PAPPAJOHN, DIRECTOR: (Age 68): Mr. Pappajohn was named to the Board of
Directors in August 1996 pursuant to the terms of the Private Placement. Since
1969, Mr. Pappajohn has been the sole owner of Pappajohn Capital Resources, a
venture capital firm, and President of Equity Dynamics, Inc., a financial
consulting firm in Des Moines, Iowa. Mr. Pappajohn serves as a director of the
following public companies: CORE, Inc., Drug Screening Systems, Inc., Fuisz
Technologies Ltd., OncorMed, Inc., PACE Health Management Systems, Inc.,
Patient Info System, Inc., HealthDesk Corporation and GalaGen.
PAT H. CELLI, CHIEF FINANCIAL, ASSISTANT SECRETARY AND OFFICER TREASURER: (Age
43): Mr. Celli has been Chief Financial Officer of the Company since October,
1990 and a director since 1996. From 1985 to September 1990, Mr. Celli was
employed as President of Alternative Health Care Systems, Inc., a health care
holding company that owned physician clinics, a health insurance company and a
health maintenance organization. Prior to that, Mr. Celli was employed as a
Certified Public Accountant with Touche Ross & Co.
2
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned (calculated in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934) as of April 10, 1997 or by (i) owners of more
than 5% of the Company's outstanding Common Stock, (ii) each directors and
director nominees of the Company, (iii) each named executive officers referred
to in the "Executive Compensation" section of this Proxy Statement and (iv)
all officers and directors of the Company as a group:
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED TOTAL SHARES
- ------------------------ ------------ --------------
Ann T. Mittasch (1) 1,620,200 11.28%
1 Hollow Lane
Lake Success, NY 11042
John Pappajohn(2) 2,735,364 17.68%
2116 Financial Center
Des Moines, IA 50309
Edgewater Private 2,719,808 17.64%
Equity Fund II, L.P. (3)
666 Grand Avenue, Suite 200
Des Moines, IA 50309
Randolph J. Mittasch (4) 298,500 2.11%
Pat H. Celli (5) 397,534 2.78%
Dr. Derace Lan Schaffer (6) 320,000 2.26%
All officers, directors as and affiliates
a group (total of 5 persons and 1 company) (7) 7,951,406 44.58%
- ---------
(1) Ms. Mittasch, Chairman of the Company, directly owns 1,013,200 shares of
Common Stock for her own account and may be deemed to beneficially own an
additional 245,000 shares of Common Stock subject to a voting trust (the
"Voting Trust") expiring February 27, 1999 of which she is the sole
voting trustee with respect to 140,000 shares of Common Stock directly
owned by Randolph J. Mittasch, and an additional 105,000 shares directly
owned by one other person. Ms. Mittasch also holds options totaling
282,000 shares with an average exercise price of $1.97 per share of
Common Stock that expire between the year 2000 and 2005, Ms. Mittasch
holds warrants to purchase an aggregate of 80,000 shares of common stock
at $2.50.
(2) John Pappajohn, a director of the Company, directly owns 1,230,000 shares
of Common Stock and holds warrants to purchase an aggregate of 1,310,000,
59,808 and 55,556 shares of Common Stock at an exercise price of $2.50,
$2.09 and $2.25 per share of Common Stock, respectively. Mr. Pappajohn
has options to purchase an aggregate of 80,000 shares of Common Stock at
an exercise price of $1.25 per share of Common Stock.
(3) Edgewater Private Equity Fund II, L.P. directly owns 1,330,000 shares of
Common Stock and holds warrants to purchase an aggregate of 1,330,000 and
59,808 shares of Common Stock at an exercise price of $2.50 and $2.09 per
share of Common Stock, respectively.
3
(4) Randolph J. Mittasch, Secretary/Treasurer and a director of the
Company, directly owns 181,000 shares of Common Stock, 140,000 of which
shares are subject to the Voting Trust. Mr. Mittasch also holds options
expiring between the years 2001 and 2005 to acquire 97,500 shares of
Common Stock at an average exercise price of $1.77 per share of Common
Stock. Plus warrants to purchase 20,000 shares of common stock at an
exercise price of $2.50. Randolph J. Mittasch disclaims beneficial
ownership of the shares of Common Stock owned by Ann T. Mittasch, except
for his 140,000 shares that are subject to the Voting Trust.
(5) Pat H. Celli, Chief Financial Officer of the Company, directly owns
94,534 shares of Common Stock for his own account. Mr. Celli has options
expiring between the years 2001 and 2005 to acquire an aggregate of
213,000 shares of Common Stock at an average exercise price of $1.88 per
share of Common Stock and warrants to purchase 90,000 shares of Common
Stock at an exercise price of $2.50 per share of Common Stock.
(6) Dr. Derace Lan Schaffer, a director of the Company, directly owns 160,000
shares of Common Sock and warrants to purchase 160,000 shares of Common
Stock and warrants to purchase 160,000 shares at an exercise price of
$2.50 per share of Common Stock.
(7) Includes options and warrants held by all officers and directors and
affiliates of the Company to acquire a total of 3,837,672 shares of
Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Exchange Act Rule 15a-3(e) during its
fiscal year ended December 31, 1996, Form 5 and amendments thereto furnished
to the Company with respect to its fiscal year ended December 31, 1996, and my
written representations, from a reporting person that no Form 5 was required
to be filed, no person who was a director, officer or beneficial owner of more
than ten percent (10%) of Common Stock and otherwise subject to Section 16 of
the Exchange Act with respect to the Company failed to file on a timely basis,
as discussed in the above Forms, reports required by Section 16(a) of the
Exchange Act during the Company's fiscal year ended December 31, 1996.
EMPLOYMENT AGREEMENTS
Richard G. Jung, President and Chief Executive Officer of the Company,
entered into an employment agreement with the Company on August 19, 1996 (the
"RJ Agreement"). Under the RJ Agreement, Mr. Jung agreed to serve as President
and Chief Executive Officer and Director of the Company for a period of one
year, commencing on August 19, 1996. Mr. Jung received an annual salary of
$200,000, prorated for the 1996 fiscal year. Mr. Jung received options to
purchase 300,000 shares of Common Stock at an exercise price of $2.13 which
was equal to the fair market value of the Common Stock on the date of grant.
Mr. Jung resigned on February 12, 1997.
Ann T. Mittasch, former President and Chief Executive Officer of the
Company, entered into an employment agreement with the Company on January 1,
1996 whereby Ms. Mittasch shall serve as Chairman of the Company (the
"Chairman Agreement"). Under the Chairman Agreement, Ms. Mittasch shall serve
as Chairman of the Company until December 31, 2000. Ms. Mittasch will receive
a base compensation of $250,000 per year for her services as Chairman and an
annual bonus not to exceed $50,000 per year. There were no bonuses paid in
1996.
Randolph J. Mittasch, Secretary of the Company, entered into an
employment agreement with the Company on January 1, 1996 (the "RJM
Agreement"). Under the RJM Agreement, Mr. Mittasch shall serve as Secretary of
the Company for a period of five years, commencing on January 1, 1996 and
ending on December 31, 2000, with a base compensation of $90,000 for the 1996
fiscal year. Mr. Mittasch shall receive options to purchase shares of Common
Stock at the exercise price of two dollars ($2.00) per share within 120 days
following the end of each fiscal year of the Company based upon the Company's
net income.
4
Pat H. Celli, Chief Financial Officer of the Company, entered into an
employment agreement with the Company on January 1, 1996 (the "PHC
Agreement"). Under the PHC Agreement, Mr. Celli shall serve as Chief Financial
Officer of the Company for a period of five years, commencing on January 1,
1996 and ending on December 31, 2000 with a base compensation of $130,000 for
the 1996 fiscal year. Mr. Celli shall receive options to purchase shares of
Common Stock at the exercise price of two dollars ($2.00) per share within 120
days following the end of each fiscal year of the Company based upon the
Company's net income.
COMPENSATION OF DIRECTORS
None of the Company's directors received a fee for their services as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions on compensation of the company's executives in the fiscal year of
1996 are generally made by the Compensation Committee in accordance with the
General Corporation Law of the State of Delaware. On August 23, 1996 the Board
of Directors established a Compensation committee consisting of two
non-employee directors, Mr. Pappajohn and Dr. Schaffer. None of such persons
has ever been an officer or employee of the Company.
5
EXECUTIVE COMPENSATION AND RELATED INFORMATION
ITEM 11.
The following table contains information with respect to the
compensation earned by the Company's former Chief Executive Officer and the
one other most highly compensated executive officers of the Company whose
compensation exceeded $100,000 for the 1996 fiscal year for services rendered
in all capacities to the Company and its subsidiaries, for each of the last
three fiscal years. The listed individuals shall be hereafter referred to as
the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
------------------------ -------------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS (#)
--------------------------- ---- ---------- --------- ----------------
Richard G. Jung (4) 1996 $69,231 $ -0- 300,000
President and Chief Executive Officer 1995 -0- -0- -0-
1994 -0- -0- -0-
Ann T. Mittasch (5) 1996 $282,737 $ -0- 235,000(1)
Chairman of the Board 1995 227,559 -0- 295,000(1)
1994 197,877 7,630 -0-
Pat H. Celli 1996 $128,712 $ -0- 210,000(3)
Chief Financial Officer, Assistant Secretary & Treasurer 1995 127,300 2,500 170,000(2)
1994 107,808 5,750 -0-
- ------------------
(1) All of these shares consist of previously repriced outstanding options.
(2) 60,000 of these shares consist of previously repriced outstanding
options.
(3) 110,000 of these shares consist of a previously repriced outstanding
options.
(4) Mr. Jung served as President and Chief Executive Officer from
August 19, 1996 to February 12, 1997.
(5) Ms. Mittasch served as President and Chief Executive Officer until
August 19, 1996.
6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers of the
Company, certain information concerning the grant of stock options in fiscal
year 1996. No stock appreciation rights were granted to these individuals
during fiscal year 1996.
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM (3)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED (1) IN FISCAL YEAR PER SHARE (2) DATE 5%($) 10%($)
- ---- ------------------- -------------- ------------- ---- ----- ------
Richard G. Jung 300,000 20.60% $ 2.13 8/19/97 $ 31,950 $ 63,900
Ann T. Mittasch 175,000(4) 12.02 1.75 2/27/03 124,241 286,992
Ann T. Mittasch 60,000(4) 4.12 1.75 2/27/03 57,725 142,260
Pat H. Celli 110,000(4) 7.55 1.75 2/27/03 78,094 162,269
Pat H. Celli 100,000 6.87 2.00 2/27/05 114,462 244,222
- ------------
(1) Except for Pat Celli's 100,000 which vest over 5 years, the remaining
options are immediately exercisable subject to repurchase and all shares
are fully vested at the time of grant.
(2) The exercise price may be paid only in cash.
(3) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the option term will be at the 5% or 10% assumed annual
rates of compounded stock price appreciation or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grant made to the
Named Executive Officer.
(4) These shares consisted of repriced options that were previously
outstanding.
7
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following tables set forth certain information with respect to the Named
Executive Officers regarding stock option holdings as of December 31, 1996. No
stock appreciation rights were granted to any Named Executive Officer during
the 1996 fiscal year.
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(3)
---------------------- ----------------------
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ --------------------- ------------- -------------
Richard G. Jung -0- $-0- 300,000-(1) -0-
Ann T. Mittasch -0- -0- 282,000-(1) $7,050
Pat H. Celli -0- -0- 213,000-(2) 3,300
- -------------------
(1) All stock options are immediately exercisable for fully vested shares
upon the date of grant.
(2) 113,000 stock options are immediately exercisable and fully vested
shares, and 100,000 stock options vest over 5 years with the first 20%
vesting in October 1997
(3) The closing price on December 31, 1996 was $1.78.
8
TEN YEAR STOCK OPTION REPRICING
NO. OF OPTIONS MARKET PRICE OF
THAT WERE STOCK AT TIME OF
NAME TITLE DATE REPRICED REPRICING
---- ----- ---- -------- ---------
Ann T. Mittasch Chairperson 3/12/96 235,000 $1.75
Ann T. Mittasch Chairperson 08/21/95 60,000 3.75
Ann T. Mittasch Chairperson 10/13/95 60,000 2.75
Ann T. Mittasch Chairperson 10/13/95 175,000 2.75
Ann T. Mittasch Chairperson 03/05/93 227,000 2.38
Pat H. Celli Chief Financial 3/12/96 110,000 1.75
Officer, Treasurer
Pat H. Celli Chief Financial 08/21/95 60,000 3.75
Officer, Treasurer
Pat H. Celli Chief Financial 10/13/95 60,000 2.75
Officer, Treasurer
Pat H. Celli Chief Financial 10/13/95 50,000 2.75
Officer, Treasurer
Pat H. Celli Chief Financial 03/05/93 80,000 2.38
Officer, Treasurer
Randolph J. Mittasch Secretary 3/12/96 95,000 1.75
Randolph J. Mittasch Secretary 08/21/95 25,000 3.75
Randolph J. Mittasch Secretary 10/13/95 25,000 2.75
Randolph J. Mittasch Secretary 10/13/95 50,000 2.75
Randolph J. Mittasch Secretary 03/05/93 22,500 2.38
[TABLE RESTUBBED FROM ABOVE]
EXERCISE PRICE AT LENGTH OF ORIGINAL TERM
TIME OF NEW EXERCISE REMAINING AT DATE OF
NAME REPRICING PRICE REPRICING OR AMENDMENT
---- --------- ----- ----------------------
Ann T. Mittasch $2.75 $1.75
Ann T. Mittasch 5.88 3.75 6 years, 6 months
Ann T. Mittasch 3.75 2.75 6 years, 4 months
Ann T. Mittasch 3.75 2.75 6 years, 4 months
Ann T. Mittasch 4.13 2.38 6 years
Pat H. Celli 2.75 1.75
Pat H. Celli 4.75 3.75 6 years, 6 months
Pat H. Celli 3.75 2.75 6 years, 4 months
Pat H. Celli 3.75 2.75 6 years, 4 months
Pat H. Celli 4.13 2.38 6 years
Randolph J. Mittasch 2.75 1.75
Randolph J. Mittasch 6.00 3.75 6 years, 6 months
Randolph J. Mittasch 3.75 2.75 6 years, 4 months
Randolph J. Mittasch 3.75 2.75 6 Yrs. 4 months
Randolph J. Mittasch 4.13 2.38 6 years
9
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.
THE CARE GROUP, INC.
Date: April 29, 1997 By:/S/ PAT CELLI
----------------------------------
Pat Celli
Chief Financial Officer, Treasurer &
Director
Pursuant to the requirements of the Securities 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:
Date: April 29, 1997 /S/ ANN T. MITTASCH
-----------------------------------------
Ann T. Mittasch,
Chairman
Date: April 29, 1997 /S/ RANDOLPH J. MITTASCH
-----------------------------------------
Randolph J. Mittasch,
Secretary and Director
Date: April 29, 1997 /S/ JOHN PAPPAJOHN
-----------------------------------------
John Pappajohn, Director
Date: April 29, 1997 /S/ PAT H. CELLI
-----------------------------------------
Pat H. Celli, Chief Financial Officer,
Treasurer & Director
(Principal Financial and
Accounting Officer)
Date: April 29, 1997 /S/ DR. DERACE SCHAFFER
-----------------------------------------
Dr. Derace Schaffer
Director
10