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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1999
OR
[ ] 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: 0-21910
CONTINUCARE CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-2716023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
80 S.W. 8TH STREET, SUITE 2350
MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 350-7515
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
COMMON STOCK, AMERICAN STOCK EXCHANGE
$.0001 PAR VALUE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(Title of Class)
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 10-K/A or any
amendment to this Form 10-K/A. [ ]
Aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant at October 7, 1999 (computed by reference to
the last reported sale price of the registrant's Common Stock on the American
Stock Exchange on such date): $6,517,563.
Number of shares outstanding of each of the registrant's classes of
Common Stock at October 7, 1999: 14,540,091 shares of Common Stock, $.0001 par
value per share.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
The executive officers and directors of Continucare are as follows:
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------------------------
Charles M. Fernandez............... 37 Chairman of the Board, Chief Executive Officer and President
Phillip Frost, M.D................. 63 Vice Chairman of the Board
Spencer Angel...................... 33 Executive Vice President, Chief Operating Officer and Director
Neil Flanzraich.................... 56 Director
Carlos E. Padron................... 34 Director
CHARLES M. FERNANDEZ co-founded Continucare in February of 1996 and has
been involved in all aspects of its operations since that time serving as its
Chairman of the Board, President and Chief Executive Officer. Since 1985 and
prior to founding Continucare, Mr. Fernandez was the Executive Vice President
and Director of Heftel Broadcasting Corporation ("HBC"), a public company owning
a network of radio stations. At HBC, Mr. Fernandez was involved in the
acquisition of 17 broadcast companies and played an instrumental role in HBC's
growth in revenues from $4 million in 1985 to approximately $65 million in 1995.
Mr. Fernandez has also been a director of IVAX Corporation, a Florida
corporation ("IVAX") since June 1998. Mr. Fernandez has also served as the
Chairman of Hispanic Internet Holdings, Inc. since July 1999.
PHILLIP FROST, M.D. has served as Vice Chairman of Continucare since
September 1996. Dr. Frost has served, since 1987, as Chairman of the Board and
Chief Executive Officer of IVAX, the world's largest generic pharmaceutical
manufacturer. He served as IVAX's President 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 1970 to 1992. Dr. Frost was Chairman
of the Board of Directors of Key Pharmaceutical, Inc. from 1972 to 1986. He is
Vice Chairman of the Board of Directors of North American Vaccine, Inc.,
Chairman of the Board of Directors of Whitman Education Group, which is engaged
in proprietary education and a director of Northrup Grumman which is in the
aerospace industry. He is Vice Chairman of the Board of Trustees of the
University of Miami and a member of the Board of Governors of the American Stock
Exchange.
SPENCER ANGEL has served as Executive Vice President and Chief
Operating Officer since July 12, 1999 and as a member of the Board of Directors
since September 30, 1999. Mr. Angel has served, since 1996, as Director, Chief
Executive Officer, President and Treasurer of Harter Financial, Inc. a
diversified consulting firm providing services relating to mergers and
acquisitions, financing and reorganization. See "Certain Relationships and
Related Transactions." Mr. Angel served as President and CEO of Fidelity
Medical, Inc. and Director, President and CEO of Medical Laser Technologies,
Inc. makers of Digital X-Ray Picture Archiving and Communications System for
Cardiac Catheterization labs. He was the Secretary, Treasurer and Director of
Autoparts Warehouse, Inc. from September 1997 to January 1999. From December
1994 through August 1996 Mr. Angel was President of 5 East 41 Check Cashing
Corp. a company engaged in the payroll service and armored car business. From
July 1994 to December 1994 Mr. Angel was a consultant to Zion Financial Group,
Inc. a venture capital company. From November 1991 to July 1994 Mr. Angel was an
associate with Platzer, Fineberg & Swergold, a law firm specializing in
bankruptcy related matters.
NEIL FLANZRAICH has served as a director since January 26, 1999. He has
served as the Vice Chairman and President of IVAX since May 1998. From September
1995 to May 1998, Mr. Flanzraich was a shareholder and served as Chairman of the
Life Sciences Legal Practice at the law firm of Heller Erhman White & McAuliffe.
Prior to his position at the law firm, Mr. Flanzraich was the Senior Vice
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President and General Counsel of Syntex Corporation, an international
diversified life science company, which was acquired by Roche Holding, Ltd.
CARLOS E. PADRON was appointed as a director in October 1999. He is a
partner with the law firm of Vila, Padron & Carrillo, P.A. and has practiced
with the firm since 1991. Mr. Padron also serves on the board of Caribbean Cigar
Company, S.A., Inter-Continental Cigar Corporation and Transcontinental
Investment, Inc.
Officers serve at the pleasure of the board of directors, subject to
the terms of any employment agreements. See "-Employment Agreements."
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
satisfied.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by Continucare and its subsidiaries to or on behalf
of (i) our Chief Executive Officer, (ii) the most highly compensated executive
officers who was serving as an executive officer at the end of the last fiscal
year, whose total annual salary and bonus, determined as of the end of the
fiscal year ended June 30, 1999, exceeded $100,000 and (iii) two individuals for
whom disclosure would have been provided, but for the fact that they were not
serving as executive officers at the end of the last fiscal year (collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ -----------------
OTHER NO. OF SECURITIES
NAME AND FISCAL ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS COMPENSATION
- --------------------------- ------ ---------- ---------- ------------ ----------------- ------------
Charles M. Fernandez, 1999 352,782 15,000 (1) -0- -0-
President and Chief 1998 334,547 0 (1) 100,000 -0-
Executive Officer........ 1997 327,880 70,000(7) 36,360(2) -0- -0-
Susan Tarbe, Executive 1999 184,230 -0- (1) 50,000(3)
Vice President and 1998 168,462 -0- (1) -0- 3,167(4)
General Counsel(5)....... 1997 97,000 40,000(6) (1) 100,000 1,118(4)
Norman B. Gaylis, M.D.
Senior Vice President,
Chief Operating Officer 1999 328,846 -0- (1) -0- -0-
of Physician Practice 1998 464,193 -0- (1) 50,000 -0-
Division(8).............. 1997 92,094 50,000(7) -0- -0- -0-
Bruce Altman
Chief Financial
Officer(9)............... 1999 104,615 10,000 (1) 62,500 -0-
- -------------------
(1) The total perquisites and other personal benefits provided is less than 10%
of the total annual salary and bonus to such officer.
(2) Includes $13,155 in car allowance and $20,205 in insurance benefits.
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(3) Includes a severance payment of $25,000 in August 1999 and a severance
payment of $25,000 in September 1999.
(4) Reflects matching contributions to the Company's 401(k) plan which is earned
during the fiscal year indicated but not paid until the following fiscal
year.
(5) Mrs. Tarbe joined the Company in September 1996 and resigned in September
1999.
(6) Includes a signing bonus in the amount of $2,500 and a bonus paid in
September 1997 for services rendered in fiscal 1997.
(7) Represents a bonus paid in fiscal 1998 for services rendered in fiscal 1997.
(8) Dr. Gaylis joined the Company in April 1997 and resigned in March 1999.
(9) Mr. Altman joined the Company in October 1998 and resigned in April 1999.
OPTION GRANTS DURING FISCAL 1998
OPTION GRANTS TABLE. The following table sets forth certain information
concerning grants of stock options made during fiscal 1999 to each of the Named
Executive Officers. We did not grant any stock appreciation rights in fiscal
1999.
INDIVIDUAL OPTION GRANTS IN 1999 FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------
SHARES OF POTENTIAL REALIZABLE VALUE AT ASSUMED
COMMON STOCK ANNUAL RATES OF STOCK PRICE APPRECIATION
UNDERLYING % OF TOTAL FOR OPTION TERM (1)
OPTIONS GRANTED TO OPTION EXPIRATION ----------------------------------------
NAME GRANTED EMPLOYEES PRICE($) DATE 5% 10%
- ------------------------- ------------ ---------- -------- ---------- ------------------ -------------------
Charles M. Fernandez 0 -- -- -- -- --
Susan Tarbe 0 -- -- -- -- --
Norman B. Gaylis, M.D. 0 -- -- -- -- --
Bruce Altman 62,500(2) 38.5%(3) $5.125 7/15/99 201,443 510,496
- ------------------
(1) The dollar amounts set forth in these columns are the result of calculations
at the five percent and ten percent rates set by the Securities and Exchange
Commission, and therefore are not intended to forecast possible future
appreciation, if any, of the market price of the Common Stock.
(2) Mr. Altman resigned from his position as Chief Financial Officer in April
1999 and his options expired in July 1999.
(3) Based upon 162,500 options granted during fiscal 1999.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR END OPTION VALUES
The following table sets forth information with respect to (i) the
number of unexercised options held by the Named Executive Officers as of June
30, 1999, and (ii) the value as of June 30, 1999 of unexercised in-the-money
options. No options were exercised by any of the Named Executive Officers in
1999.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT JUNE 30, 1999 AT JUNE 30, 1999 ($)(1)
---------------------------------------- ----------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ -------------------- ----------------- ---------------------
Charles M. Fernandez 110,000 25,000 0 0
Susan Tarbe 80,000 20,000 0 0
Norman B. Gaylis, M.D. 33,334 16,666 0 0
Bruce Altman 31,250 31,250 0 0
- ------------------
(1) Market value of shares covered by in-the-money options on June 30, 1999,
less option exercise price. Options are in-the-money if the market value of
the shares covered thereby is greater than the option exercise price.
DIRECTOR COMPENSATION
Our directors do not currently receive any cash compensation for
service on the board of directors but may be reimbursed for certain expenses in
connection with attendance at board of director meetings or other meetings on
our behalf. Our directors are eligible to receive options under the Continucare
Stock Option Plan.
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EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Charles M.
Fernandez, Susan Tarbe, Norman B. Gaylis and Bruce Altman. Mr. Fernandez's
employment agreement is for a term of three years plus one additional year for
each year of service and became effective on September 11, 1996, and provides
for an annual base salary of $350,000 and a bonus of $100,000 payable in 20
equal installments of $5,000 over the first five years of such agreement.
Pursuant to the terms of Mr. Fernandez's employment agreement, he may receive
additional bonuses at the discretion of the Board. Mr. Fernandez is prohibited
from competing with the Company for the duration of his employment agreement and
for a period of two years thereafter unless he is terminated without cause, and
he is additionally prohibited from disclosing confidential information. If Mr.
Fernandez is terminated without cause, Mr. Fernandez is entitled to receive his
base salary for a period of three years following the effective date of
termination and any amount of unpaid bonus. In June 1999 Mr. Fernandez
voluntarily reduced his annual salary to $275,000. On October 1, 1999 Mr.
Fernandez entered into an employment modification agreement which provided for
the further reduction in Mr. Fernandez's annual salary to $250,000 and a bonus
commencing with the fiscal year commencing July 1, 1999, to equal 5% of
Continucare's EBITDA in excess of $3 million for the fiscal year. His modified
employment agreement provides that if Mr. Fernandez is terminated without cause,
Mr. Fernandez is entitled to receive his base salary for one year after his
termination. Pursuant to the terms of his modified agreement, Mr. Fernandez is
prohibited from competing with Continucare for a period of six months following
his termination, unless terminated without cause.
Ms. Tarbe's employment agreement, as amended, was effective until
August 24, 2001, and provided for an annual base salary of $185,000 and a bonus
as may be determined by the Chairman and approved by the Board. Under the terms
of Ms. Tarbe's employment agreement, she received an option to purchase 100,000
shares of the Company at $5.00 per share. Upon a change in control of the
Company, Ms. Tarbe was entitled to an acceleration of the remainder of her
employment agreement and automatic vesting of any unvested portion of her
aforementioned option. Ms. Tarbe is prohibited from competing with the Company
for the duration of her employment agreement and for a period of ninety days
thereafter unless she is terminated without cause, and she is additionally
prohibited from disclosing confidential information. Ms. Tarbe resigned from
Continucare in September 1999, at which time her employment agreement was
terminated. Ms. Tarbe received $50,000 in severance payments.
Dr. Gaylis' employment agreement was for a period of four years
commencing April, 1997, and provided for an annual base salary of $450,000
renewable at the sole discretion of the Company, subject to adjustment upon
certain conditions. Under the terms of Dr. Gaylis' employment agreement, Dr.
Gaylis was entitled to annual incentive compensation of 50% of earnings before
interest, taxes, depreciation and amortization ("EBITDA") derived from his
professional services at designated offices where EBITDA is in excess of
$365,000. Dr. Gaylis is prohibited from competing with the Company and
soliciting any employee or contractor of the Company for the duration of his
employment agreement and for a period of two years thereafter. Additionally, Dr.
Gaylis is prohibited form disclosing confidential information. Dr. Gaylis
resigned from Continucare in March 1999, at which time his employment agreement
was terminated.
Mr. Altman's employment agreement was for a period of two years
commencing on August 24, 1998 and provided for an annual base salary of $160,000
and a bonus equal to at least 10% of his base salary and any additional bonus as
may be determined by the compensation committee. Under the terms of Mr. Altman's
employment agreement, he received an option to purchase 62,500 shares of common
stock at a $5.125 exercise price. Upon a change of control, Mr. Altman was
entitled to an acceleration of the remainder of his employment agreement, up to
a maximum of one year salary and the automatic vesting of the stock option. Mr.
Altman is prohibited form competing with Continucare for the duration of his
employment agreement and for a period of ninety days thereafter unless he is
terminated without cause, and he is additionally prohibited from disclosing
confidential information. Mr. Altman resigned from Continucare in April 1999, at
which time his employment agreement was terminated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Phillip Frost, Chairman of our compensation committee, is also a
director and executive officer of IVAX Corporation. Mr. Fernandez serves on the
Board of Directors of IVAX Corporation. During fiscal 1999, Mr.
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Fernandez served on the board of directors of Frost Hanna Capital Group, Inc.
Mark Hanna, President and a director of Frost Hanna Capital Group, Inc., served
on our compensation committee in fiscal 1999 until his resignation in February
1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 25,
1999 concerning the beneficial ownership of the common stock by (i) each person
known by Continucare to be the beneficial owner of more than 5% of the
outstanding common stock, (ii) each of the directors and director nominees who
own our shares, (iii) Named Executive Officers (as defined hereafter), and (iv)
all of our executive officers and directors as a group. All holders listed below
have sole voting power and investment power over the shares beneficially owned
by them, except to the extent such power may be shared with such person's
spouse.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) COMMON STOCK(2)
- -------------------------------------------- --------------------------- --------------------
Charles M. Fernandez 1,454,167(3) 9.8%
80 S.W. 8th Street
Miami, FL 33131
Spencer Angel 200,800(4) 1.4
80 S.W. 8th Street
Miami, FL 33131
Dr. Phillip Frost 2,414,133(5) 16.3
4400 Biscayne Boulevard
Miami, FL 33137
Neil Flanzraich 0 0
4400 Biscayne Boulevard
Miami, FL 33137
Carlos E. Padron 10,000 *
338 Minorca Avenue
Coral Gables, FL 33134
Susan Tarbe 80,000(6) *
80 S.W. 8th Street
Miami, FL 33131
Bruce Altman 0 0
80 S.W. 8th Street
Miami, FL 33131
Strategic Investment Partners, Ltd. 2,250,000(7) 15.3
Kaya Flamboyan 9
Willemstad, Curacao
Netherlands Antilles
Franklin Resources, Inc. 2,620,607(8) 15.1
777 Mariners Island Boulevard
San Mateo, CA
Pecks Management Partners Ltd. 1,862,069(8) 11.2
One Rockefeller Plaza
Suite 900
New York, NY
All directors and executive officers 4,079,100(9) 27.3
as a group (5 persons)
- --------------------
* Less than one percent.
(1) For purposes of this table, beneficial ownership is computed pursuant to
Rule 13d-3 under 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. Under the rules of the
Securities and Exchange Commission, a person is deemed to be a "beneficial
owner" of a security he or she has or shares the power to vote or direct the
voting of such security or the power to dispose of or direct the disposition
of such security. Accordingly, more than one person may be deemed to be a
beneficial owner of the same security.
(2) Based on 14,740,091 shares outstanding as of October 25, 1999.
(3) Includes (i) 1,316,667 shares of Common Stock are owned of record by the
Fernandez Family Limited Partnership, (ii) 27,500 shares held directly by
Mr. Fernandez and (iii) 110,000 shares of Common Stock underlying options
granted that are currently exercisable.
(4) Includes (i) 800 shares held by Ark Angel, Inc. and (ii) 200,000 shares held
by Harter Financial, Inc.
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(5) Based on the most recent Schedule 13D, includes (i) shares owed beneficially
through Frost Nevada Limited Partnership and Frost-Nevada Corporation and
(ii) 75,000 shares of common stock underlying options granted that are
currently exercisable.
(6) Represents shares of common stock underlying options granted which are
currently exercisable, but expire on December 16, 1999.
(7) Based on the most recent Schedule 13D, beneficial ownership of these shares
is shared by (i) Quasar Strategic Partners LDC, (ii) Quantum Industrial
Partners LDC, (iii) QIH Management Advisor, L.P., (iv) QIH Management, Inc.,
(v) Soros Fund Management LLC, (vi) Mr. Stanley F. Druckenmiller and (vii)
Mr. George Soros.
(8) Represents shares of Common Stock that may be issued upon the conversion (at
a conversion price of $7.25) of 8% Convertible Subordinated Notes due 2002
issued by the Company on October 30, 1997. Share information based on the
most recent Schedule 13G.
(9) Includes 185,000 shares of Common Stock underlying options granted that are
currently exercisable.
On October 30, 1997, the Company issued $46,000,000 of 8% Convertible
Subordinated Notes due 2002 (the "Notes"). The Company defaulted on its
April 30, 1999 semi-annual payment of interest on the Notes. In September 1999
the Company announced that it had reached an agreement in principle with the
holders of the remaining $41,000,000 Notes outstanding that includes, among
other terms, the conversion on a pro rata basis of $31,000,000 principal balance
of Notes into the Company's common stock at a conversion rate of $2.00 (or
15,500,000 shares of common stock). In connection with this agreement in
principle, the Company is required to obtain a guarantor to personally guarantee
a $3,000,000 bank facility. In consideration for providing the guaranty, the
Company will issue the guarantor 3,000,000 shares of the Company's common stock.
The successful completion of the proposed agreement is subject to a number of
significant risks and uncertainties including, but not limited to, the need to
draft and execute a final settlement agreement with the holders of the Notes,
the need to consummate a new credit facility, and the need to obtain shareholder
ratification of the agreement on or before December 31, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
On May 4, 1999 the Company retained Harter Financial, Inc. ("Harter")
to negotiate a consensual restructuring (the "Restructuring") of the Company's
obligations to holders of the 8% Convertible Subordinated Notes due 2002. As
compensation for its services, Harter received a retainer fee of $50,000. In
October 1999, the Company's Board of Directors approved additional compensation
to be paid to Harter of $150,000 and the issuance of 200,000 shares of the
Company's common stock. Mr. Angel, the Company's executive vice president, chief
operating officer and director is also director, chief executive officer,
president, treasurer and a shareholder of Harter.
In April 1999 the Company sold substantially all of the assets of one
of its subsidiaries to Kessler Rehabilitation of Florida, Inc. ("Kessler") for
$5,500,000. Mr. Looloian, a director of the Company during fiscal 1999, was also
a director of Kessler at the time of the sale.
In February 1997, the Company entered into an agreement with Bally
Total Fitness ("Bally"), relating to the establishment of outpatient
rehabilitation centers at Bally fitness centers. During the fiscal year ended
June 30, 1999, the Company earned $381,000 in management fees from Bally and, as
of June 30, 1999, $760,442 was included in accounts receivable for these
services. The Bally agreement was terminated in April 1999. Mr. Looloian, a
director of the Company during fiscal 1999 is an affiliate of Bally.
On April 10, 1997, the Company, through Continucare Physician Practice
Management, Inc., a wholly owned subsidiary, acquired all of the outstanding
stock of certain arthritis rehabilitation centers and affiliated physician
practices, including practices (the "Practices") affiliated with Norman G.
Gaylis, M.D., a former executive officer of the Company. In connection with the
acquisition, the Company entered into a management agreement with ZAG Group,
Inc. ("ZAG"). Dr. Gaylis is an affiliate of ZAG. The management agreement, among
other things, provided for ZAG to perform certain services in exchange for
specified compensation. In addition, the Company entered into a put/call
agreement with ZAG, which allowed each of the parties to require the other
party, after a two-year period, to either sell or purchase all the issued and
outstanding capital stock of ZAG for a specified price to be paid in a
combination of cash and common stock of the Company. In August 1998, the Company
entered into an agreement with ZAG (the "ZAG Agreement") pursuant to which, (i)
the management agreement was terminated and (ii) the Company paid approximately
$2 million to ZAG in connection with the cancellation of the put/call agreement
of which $115,000 was paid in cash and the remaining $1,885,000 was paid by
issuing 575,000 shares (the "ZAG Shares") of the Company's common stock with a
fair market value of approximately $1.6 million. The ZAG Agreement also
included provisions that, in the event that the ZAG Shares did not have an
aggregate fair market value of $1,885,000 on October 15, 1999, the Company could
be obligated to pay additional cash consideration or issue additional shares of
its common stock (the "Additional Consideration") so that the aggregate value of
the ZAG Shares would equal $1,885,000. Based on the value of the Company's
common stock on October 15, 1999, Additional Consideration of approximately
$1,562,000 in cash or approximately 2,777,000 shares of the Company's common
stock could be required to be issued under the ZAG Agreement. Also, effective
March 1999 Continucare transferred substantially all of the assets of the
Practices to Dr. Gaylis (excluding cash and accounts receivables) in exchange
for Dr. Gaylis assuming certain liabilities and a cash payment of $39,000 to Dr.
Gaylis. The Company is currently reviewing these transactions including the
obligations under the ZAG Agreement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
Reference is made to the Index set forth on Page F-1 of this
Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
All schedules have been omitted because they are inapplicable
or the information is provided in the consolidated financial
statements, including the notes hereto.
(a)(3) Exhibits
3.1 Restated Articles of Incorporation of Company, as
amended.(4)
3.2 Restated Bylaws of Company.(4)
4.1 Form of certificate evidencing shares of Common Stock.(4)
4.2 Indenture, dated as of October 30, 1997, between the
Company and American Stock Transfer & Trust Company, as
Trustee, relating to 8% Convertible Subordinated Notes due
2002.(9)
4.3 Registration Rights Agreement, dated as of October 30,
1997, by and between the Company and Loewenbaum & Company
Incorporated.(9)
4.4 Continucare Corporation Amended and Restated 1995 Stock
Option Plan.(11)
10.1 Employment Agreement between the Company and Charles M.
Fernandez dated as of September 11, 1996.(2)
10.2 Employment Agreement between the Company and Susan Tarbe
dated as of September 23, 1996.(3)
10.3 Agreement and Plan of Merger by and among Continucare
Corporation, Zanart Entertainment Incorporated and Zanart
Subsidiary, Inc. dated August 9, 1996.(1)
10.4 Stock Purchase Agreement dated April 10, 1997 by and among
Continucare Corporation, Continucare Physician Practice
Management, Inc., AARDS, Inc. and Sheridan Healthcorp.
Inc.(6)
10.5 Stock Purchase Agreement dated April 10, 1997 by and among
Continucare Corporation, Continucare Physician Practice
Management, Inc., Rosenbaum, Weitz & Ritter, Inc. and
Sheridan Healthcorp, Inc.(6)
10.6 Stock Purchase Agreement dated April 10, 1997 by and among
Continucare Corporation, Continucare Medical Management,
Inc., Arthritis & Rheumatic Disease Specialties, Inc. and
Sheridan Healthcare, Inc.(6)
10.7 Acquisition Facility ($3,000,000), Revolving Credit
Facility ($2,000,000) and Security Agreement among
Continucare Corporation, Borrower and First Union National
Bank of Florida, dated November 14, 1996, as amended on
March 4, 1997.(7)
10.8 Lease Agreement, dated as of the 29th day of August 1996,
between Miami Tower Associates Limited Partnership and
Continucare Corporation, as amended.(8)
10.9 Physician Employment Agreement, dated as of the 10th day of
April, 1997, by and between Arthritis and Rheumatic Disease
Specialties, Inc. and Norman Gaylis, M.D.(8)
10.10 First Amendment, dated as of the 17th day of September,
1997, to Employment Agreement, dated August 23, 1996,
between the Company and Susan Tarbe.(8)
10.11 Employment Agreement, dated as of the 20th day of October,
1997, by and between Continucare Corporation and Joseph P.
Abood.(8)
10.12 Placement Agreement, dated as of October 27, 1997, between
the Company and Loewenbaum & Company Incorporated (the
"Placement Agent").(9)
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10.13 Purchase Agreement, dated as of September 4, 1997, by and
among Continucare Corporation, Continucare Physician
Practice Management, Inc., a wholly owned subsidiary of
Continucare Corporation, DHG Enterprises, Inc. f/k/a
Doctor's Health Group, Inc. and Doctor's Health
Partnership, Inc., both Florida corporations, and Claudio
Alvarez and Yvonne Alvarez.(10)
10.14 Stock Purchase Agreement, dated as of February 13, 1998, by
and among Continucare Corporation, Continucare
Rehabilitation Services, Inc., Integrated Health Services,
Inc., Rehab Management Systems, Inc., IntegraCare, Inc. and
J.R. Rehab Associates, Inc.(12)
10.15 Asset Purchase Agreement, dated as of April 7, 1998, by and
among: (i) SPI Managed Care, Inc., SPI Managed Care of
Hillsborough County, Inc., SPI Managed Care of Broward,
Inc., Broward Managed Care, Inc., each a Florida
corporation; (ii) First Medical Corporation, a Delaware
corporation and First Medical Group, Inc., a Delaware
corporation; and (iii) CNU Acquisition Corporation, a
Florida corporation. (13) and (15)
10.16 Asset Purchase Agreement, dated as of August 18, 1998, by
and among: (i) Caremed Health Systems, Inc.; (ii) Caremed
Medical Management, Inc.; Caremed Health Administrators,
Inc., each a Florida corporation; and (iii) Continucare
Managed Care, Inc., a Florida corporation.(16)
10.17 Asset Purchase Agreement, dated April 7, 1999, by and
among: (i) Kessler Rehabilitation of Florida, Inc., a
Florida Corporation; Rehab Management Systems, Inc., a
Florida Corporation; Continucare Occmed Services, Inc., a
Florida Corporation; and Continucare Corporation, a Florida
Corporation.(17)
10.18 Second Amendment To Acquisition Facility, revolving Credit
Facility and Security Agreement among Continucare
Corporation, Borrower and First Union National Bank of
Florida, dated April 7, 1999(19).
10.19 Lease Termination Agreement as of the 28th day of June
1999, between NOP 100 2nd Street Tower, LLC (Assignee in
interest of Miami Tower Associates Limited Partnership) and
Continucare Corporation.(19).
10.20 Employment Agreement, dated July 12, 1999 between the
Company and Spencer J. Angel.(20)
10.21 First Amendment to Employment Agreement between the Company
and Charles M. Fernandez, dated October 1, 1999.(20)
21.1 Subsidiaries of the Company(19)
23.1 Consent of Ernst & Young LLP(19)
23.2 Consent of Deloitte & Touche LLP(19)
27.1 Financial Data Schedule(19)
99.1 Notification of failure to make the April 30, 1999
semi-annual payment of interest on its 8% Convertible
Subordinated Notes Payable due 2002.(18)
Documents incorporated by reference to the indicated exhibit to the following
filings by the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934.
(1) Current Report Form 8-K dated August 9, 1996.
(2) Form 10-KSB filed with the Commission on September 30,
1996.
(3) Form 10-KSB filed with the Commission on October 21, 1996.
(4) Post Effective Amendment No. 1 to the Registration
Statement on SB-2 on Form S-3 Registration Statement filed
on October 29, 1996.
(5) Form 8-K/A filed with the Commission on December 3, 1996.
(6) Form 8-K filed with the Commission on April 25, 1997.
(7) Form 10-KSB for the fiscal year ended June 30, 1997, filed
with the Commission on September 29, 1997.
(8) Form 10-KSB/A for the fiscal year ended June 30, 1997,
filed with the Commission on October 28, 1997.
(9) Form 8-K dated October 30, 1997 and filed with the
Commission on November 13, 1997.
(10) Form 8-K dated October 31, 1997 and filed with the
Commission on November 13, 1997.
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(11) Schedule 14A dated December 26, 1997 and filed with the
Commission on December 30, 1997.
(12) Form 8-K dated February 13, 1998 and filed with the
Commission on February 26, 1997.
(13) Form 8-K dated April 14, 1998 and filed with the Commission
on April 27, 1998.
(14) Form 8-K dated May 6, 1998 and filed with the Commission on
May 11, 1998.
(15) Form 8-K/A dated May 11, 1998 and filed with the Commission
on May 15, 1998.
(16) Form 8-K dated and filed with the Commission on September
2, 1998.
(17) Form 8-K dated April 21, 1999 and filed with the Commission
on April 23, 1999.
(18) Form 8-K dated April 30, 1999 and filed with the Commission
on May 3, 1999.
(19) Form 10-K for the fiscal year ended June 30, 1999.
(20) Filed herewith.
(b) Reports on Form 8-K
There were two reports on Form 8-K filed with the Securities and
Exchange commission ("SEC") in the fourth quarter of Fiscal 1999. Form 8-K was
filed on April 23, 1999 regarding the sale of substantially all of the assets of
Rehab Management Systems, Inc., a Florida Corporation to Kessler Rehabilitation
of Florida, Inc., a Florida Corporation. Form 8-K was filed on May 3, 1999
regarding the Company's failure to make the April 30, 1999 semi-annual payment
of interest on its Subordinated Notes Payable.
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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
By: /s/ Spencer J. Angel
---------------------------------------
Spencer J. Angel
Executive Vice President and
Chief Operating Officer
Dated: October 28, 1999
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EXHIBIT INDEX
Exhibit Description
- ---------------- ------------------------------------------------------------
10.20 Employment Agreement, dated July 12, 1999 between the
Company and Spencer J. Angel
10.21 First Amendment to Employment Agreement between the Company
and Charles M. Fernandez, dated October 1, 1999
21.1* Subsidiaries of the Company
23.1* Consent of Ernst & Young LLP
23.2* Consent of Deloitte & Touche LLP
27.1* Financial Data Schedule
- --------------------------
* Previously filed