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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A-1
__X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1996
_____ 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 0-20240
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AMERICAN WHITE CROSS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 06-1342417
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
349 Lake Road
Dayville, Connecticut 06241 06241
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 774-8541
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
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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 or any amendment to this
Form 10-K. [X]
As of April 15, 1997, 6,675,891 shares of Common Stock were outstanding. The
aggregate market value of Common Stock held by nonaffiliates as of April 15,
1997 was approximately $835,920.00, based on the bid price as reported on such
date on the Nasdaq SmallCap market.
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DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
This Report on Form 10-K/A-1 amends and restates in their entirety the following
Items of the Annual Report on Form 10-K of American White Cross, Inc. (the
"Company") for the fiscal year ended December 31, 1996.
PART III
Item 10. Directors and Executive Officers of the Registrant.
As of April 15, 1997, the directors and executive officers of the Company,
their ages and positions with the Company were as follows:
Name Age Position
- ---- --- --------
Howard Koenig 47 Chairman of the Board of Directors,
President and Chief Executive Officer
Scott Vertrees 34 Vice Chairman of the Board of Directors,
Executive Vice President and
Chief Financial Officer
Roberta M. Goldring 67 Director
Clifford J. Gundle 61 Director
Edgar J. Wadley 63 Director
Julius Wagman 71 Director
Norbert R. Markert 36 Senior Vice President, Corporate Development
Thomas M. Rallo 44 Senior Vice President, Finance and
Administration
Mr. Koenig has served as Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since May 1992 and, prior to the
Company's initial public offering of Common Stock in November 1992 (the "IPO"),
served as a member of the Executive Committee of the Company's predecessor
entity, a Delaware limited partnership (the "Partnership"). In addition, he has
been a principal as well as President of Vamic, Inc. ("Vamic") since 1988 and
its predecessors, Clifcor Holdings, Inc. and Clifcor Inc., since 1984. Mr.
Koenig was also a principal as well as President of U.S. Netting, Inc. from 1988
to 1995. He has also served as an officer and director of private manufacturing
companies acquired by Vamic and its affiliates.
Mr. Vertrees has served as Executive Vice President and Chief Financial
Officer of the Company since May 1992 and as Vice Chairman of the Board of
Directors of the Company since August 1994, and, prior to the IPO, served as a
member of the Executive Committee of the Partnership. Mr. Vertrees is a
principal of Vamic and has served as Chief Financial Officer for Vamic and
certain of its affiliates since January 1990
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with overall financial and administrative responsibilities for all operations of
Vamic and such affiliates. From 1988 to 1990, Mr. Vertrees served as Vice
President-Finance of Vamic and certain of its affiliates. Prior thereto Mr.
Vertrees was employed by Arthur Andersen LLP and received a license as a
Certified Public Accountant in the State of Texas in 1986.
Dr. Goldring has served as a director of the Company since May 1992, and is
currently a Professor of Medicine at New York University School of Medicine,
where she has been on the faculty since 1966. In addition to serving as an
attending physician at Bellevue Hospital in New York, Dr. Goldring has been
Co-Director of the Medical Intensive Care Unit and is currently Director of the
Pulmonary Physiology Laboratory at Bellevue Hospital.
Mr. Gundle has served as a director of the Company since May 1992. Prior
thereto, he served on a series of other committees and boards and had experience
with acquisitions, new ventures and turnaround situations. Mr. Gundle was the
founder of Gundle Lining Systems in America, the predecessor of Gundle/SLT
Environmental, Inc., which was sold in 1986 and is now a New York Stock Exchange
listed company. For more than the past five years, Mr. Gundle has acted as
advisor to a number of companies in the plastics industry, including U.S.
Netting, Inc., Aquatan Lining Systems, Inc. and Zedcor Ltd.
Mr. Wadley has served as a director of the Company since October 1995. Mr.
Wadley is a consultant to Morris Venture Capital Ltd. and also serves as a
Director of East African Holdings Ltd., EMCO Ltd., Independent Sugar Corporation
Ltd. and Inpace Ltd.
Mr. Wagman has served as a director of the Company since May 1992 and,
prior to the IPO, served as a member of the Executive Committee of the
Partnership. Mr. Wagman has also served as a director of various companies since
1989. Mr. Wagman is the founder of, and serves as President of the firm of
Wagman & Tannenbaum, P.C., Certified Public Accountants.
Mr. Markert joined the Company in August 1991 as Vice President, Operations
and was promoted to Senior Vice President, Corporate Development in June 1994.
Prior thereto, he was a Manager with A.T. Kearney, Inc., a general management
consulting firm based in Chicago, Illinois, where he was a member of the firm's
Business and Marketing Strategy group and worked in numerous industries,
including textiles, aerospace, construction, food and electronics.
Mr. Rallo joined the Company in April 1989 as Vice President, Finance and
was promoted to Senior Vice President, Finance and Administration in June 1994.
Prior to that time, he was employed by the Chicopee subsidiary of Johnson &
Johnson. In his 15 years at Chicopee, Mr. Rallo held a variety of executive
positions in the marketing, operations and general accounting areas.
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
executive officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file initial reports of
ownership and changes in ownership with the SEC. Such officers, directors and
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on a review of the copies of
such forms furnished to the Company, all persons subject to the reporting
requirements of Section 16(a) filed the required reports on a timely basis.
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid or accrued by the
Company for services rendered during the years indicated to or for the accounts
of its Chief Executive Officer and its four most highly compensated executive
officers (the "Named Executive Officers").
Long Term
Compensation
Annual Compensation Securities All Other
Name and Underlying Compen-
Principal Position Year Salary Bonus Options(1) sation(2)
- ------------------ ---- ------ ----- ---------- ---------
Howard Koenig 1996 $310,000(4) $ 0 95,000 $950
Chairman of the Board of 1995 310,000 0 0 924
Directors, President and 1994 310,000 0 0 924
Chief Executive Officer
Scott Vertrees 1996 $195,000(4) $ 0 65,000 $950
Vice Chairman of the Board of 1995 195,000 0 0 924
Directors, Executive Vice 1994 195,000 0 0 924
President and Chief Financial
Officer
Norbert R. Markert 1996 $156,253(5) $ 0(6) 0 $950
Senior Vice President, 1995 157,455 0 10,000 886
Corporate Development 1994 167,500 0 0 924
Thomas M. Rallo 1996 $149,519(5) $ 0(7) 0 $569
Senior Vice President, 1995 144,276 0 10,000 559
Finance and Administration 1994 132,211 0 0 507
Andrew S. Macey 1996 $129,654(5) $ 0 0 $0
Senior Vice President, 1995 137,023 20,000 10,000 0
Business Development(3) 1994 115,818 0 0 0
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(1) Granted pursuant to the Company's 1992 Stock Option Plan, as amended (the
"Plan").
(2) Represents matching contributions pursuant to the Company's 401(k) Plan.
(3) Mr. Macey resigned from the Company in December of 1996.
(4) Includes amounts voluntarily deferred subject to a voluntary salary
deferral program commencing April 1, 1996. The voluntary deferral program
was suspended in January 1997 and payment was made on the portion deferred
subsequent to the filing by the Company of a voluntary petition for
reorganization (the "Filing") under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). Mr. Koenig deferred
$19,375
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prior to the Filing and Mr. Vertrees deferred $6,094 prior to the Filing,
which amounts remain unpaid and each executive has filed a claim with the
Bankruptcy Court.
(5) Includes amounts voluntarily deferred subject to a voluntary salary
deferral program commencing April 1, 1996 to July 17, 1996. Mr. Markert
deferred $4,521 prior to the Filing, Mr. Rallo deferred $4,327 prior to the
Filing, and Mr. Macey deferred $3,750 prior to the Filing, which amounts
remain unpaid and each of Mr. Markert, Mr. Rallo and Mr. Macey has filed a
claim with the Bankruptcy Court.
(6) Mr. Markert is eligible for a stay bonus payable in certain circumstances,
including upon confirmation of the Company's plan of reorganization under
Chapter 11, in the amount of 25% of his salary, subject to his remaining
employed by the Company until that time.
(7) Mr. Rallo was eligible for a stay bonus payable upon the closing of the
sale of the Company's cotton business in the amount of 25% of his salary,
which sale occurred on April 22, 1997.
Stock Option Grants and Exercises
The following table sets forth information concerning individual grants of
stock options under the Plan during the year ended December 31, 1996 to each of
the Named Executive Officers.
Option Grants in Year Ended December 31, 1996(1)
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% of Total
Options
Number of Granted to Exercise or Grant Date
Options Employees in Base Price Per Expiration Present
Name Granted Fiscal Year Share Date Value(2)
- ---- --------- ------------ -------------- ---------- --------
Howard Koenig 95,000 47.5% $2.3125 Jan. 2006 $128,595
Scott Vertrees 65,000 32.5% 2.3125 Jan. 2006 87,986
Norbert R. Markert 0 0 -- -- --
Thomas M. Rallo 0 0 -- -- --
Andrew S. Macey 0 0 -- -- --
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(1) One-third of the options vest on each of the six-month, 18-month and
30-month anniversaries of the date of grant.
(2) Based on the Black-Scholes option pricing model. The model assumes an
interest rate that represents the interest rate on a U.S. Treasury Bond
with a 10-year maturity (5.65%) and a volatility rate based on the Common
Stock for the three-year period preceding the grant date (44.1%) and no
dividends. The result is a Black-Scholes option value of $1.35 per share.
The Company does not believe that the values estimated by the Black-Scholes
model, or any other model, will necessarily be indicative of the value to
be realized by an executive.
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The following table sets forth information concerning the value of
unexercised stock options held by each of the Named Executive Officers at
December 31, 1996. No stock options were exercised by any of the Named Executive
Officers during 1996.
December 31, 1996 Option Values(1)
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Value of Unexercised
Number of Unexercised Options In-the-Money Options
Held at December 31, 1996 at December 31, 1996(2)
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Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Howard Koenig 190,000 95,000 $-- $--
Scott Vertrees 77,000 65,000 -- --
Norbert R. Markert 51,334 6,667 -- --
Thomas R. Rallo 51,334 6,667 -- --
Andrew S. Macey 28,333 6,667 -- --
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(1) Based upon a price of $.25 per share, the last sale price of the Common
Stock as reported by the Nasdaq SmallCap Market on December 31, 1996.
(2) No options held by any of the Named Executive Officers were in-the-money
options at December 31, 1996.
Directors' Compensation
The Company's non-employee directors each receive an annual fee of $10,000.
Additionally, pursuant to the Company's 1992 Directors' Stock Option Plan, each
non-employee director receives options to purchase 7,500 shares of Common Stock
upon becoming a director of the Company and options to purchase 5,000 shares of
Common Stock following each annual meeting of stockholders of the Company, in
each case vesting in three equal installments on each of the first, second and
third anniversary of the date of grant. No additional compensation is paid to a
director for his or her service upon a committee of the Board of Directors. All
directors are reimbursed for expenses incurred in connection with attending
Board of Directors and committee meetings.
Employment Agreements
Messrs. Koenig, Vertrees and Rallo are parties to employment agreements
with the Company.
Mr. Koenig's employment agreement was assumed by the Company and approved
by the Bankruptcy Court on April 15, 1997, as modified. Mr. Koenig's contract
term continues through December 31, 1998. Mr. Koenig's annual base salary
currently is $310,000 and is subject to increase to $356,500 upon the
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achievement of certain performance criteria by the Company. The prior provisions
for an annual bonus upon the attainment of certain operating income thresholds,
as well as termination payments in the event of certain changes in control of
the Company, have been waived.
Mr. Vertrees' employment agreement was assumed by the Company and approved
by the Bankruptcy Court on April 15, 1997, as modified. Mr. Vertrees' contract
term continues through December 31, 1998. Mr. Vertrees' annual base salary
currently is $195,000 and is subject to increase to $224,250 upon the
achievement of certain performance criteria by the Company. The prior provisions
for an annual bonus upon the attainment of certain operating income thresholds,
as well as termination payments in the event of certain changes in control of
the Company, have been waived.
Mr. Rallo's employment agreement has neither been assumed nor rejected by
the Company and requires approval of the Bankruptcy Court. Mr. Rallo's contract
term continues through December 31, 1998. Mr. Rallo's annual base salary is
currently $150,000. In addition, Mr. Rallo will be entitled to an annual bonus
of $6,840 in the event that the Company's annual income from operations equals
or exceeds $3,700,000 but is less than $3,800,000, an additional $6,960 in the
event that the Company's annual income from operations equals or exceeds
$3,800,000 and an additional bonus equal to 1.26% of the amount by which the
Company's annual income from operations exceeds $3,800,000.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Common Stock by (i) each person known by the Company to
beneficially own 5% or more of the Common Stock, (ii) each director and
executive officers of the Company and (iii) all directors and executive officers
of the Company as a group.
Percent of
Name and Address of Number of Class on
Beneficial Owners Shares April 15, 1997
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Vamic, Inc. (1) (2) 1,326,000 19.9
33971 Selva Road
Suite 240
Dana Point, CA 92629
Electra Investment 1,101,523 14.2
Trust P.L.C. ("Electra") (3)
65 Kingsway
London, England WC2B 6QT
Michael S. Spatacco (4) 473,000 7.1
Howard Koenig (2) 221,667(5) 3.2
Scott Vertrees (2) 1.5
98,667(5)
Norbert R. Markert *
56,067(6)
Thomas M. Rallo *
54,667(5)
Clifford J. Gundle *
15,000(5)
Julius Wagman *
18,200(7)
Roberta M. Goldring *
17,500(5)
Edgar J. Wadley *
6,667(5)
All directors and executive officers 488,435(8) 6.8
group (8 persons) (2)
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* Less than 1%
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(1) Pursuant to a stockholders' agreement (the "Stockholders' Agreement"),
National Patent Medical Inc. ("NPMI") has agreed to vote all shares of
Common Stock owned by it in favor of Vamic's nominees for director. The
beneficial ownership of Vamic set forth in the table above does not include
any shares of Common Stock owned by NPMI.
(2) Mr. Koenig and Mr. Vertrees are officers and directors of Vamic and own an
aggregate of 55% of the outstanding capital stock of Vamic. The beneficial
ownership of Mr. Koenig and Mr. Vertrees set forth in the table above
excludes any shares of Common Stock the beneficial ownership of which may
be attributable to them by virtue of such relationship.
(3) Pursuant to a securities purchase agreement dated December 1, 1995 (the
"Purchase Agreement"), Electra Investment Trust P.L.C. and Electra
Associates, Inc. ("EAI"), an affiliate of Electra, received warrants to
purchase up to 1,149,163 and 185,348 shares of Common Stock of the Company,
respectively, of which 948,534 and 152,989, respectively, are currently
exercisable. Neither Electra nor EAI has exercised any such warrants as of
the date hereof. Based on a Schedule 13D dated December 8, 1995 filed with
the Securities and Exchange Commission, Electra will have sole voting and
dispositive power with respect to any shares of Common Stock received upon
exercise of warrants held by it and EAI will vote and dispose of any shares
of Common Stock received upon exercise of warrants held by it in accordance
with the written instructions of Selectra Investment and Management Ltd.
(4) Based on a Schedule 13D dated August 8, 1996 filed with the SEC, Michael S.
Spatacco has sole voting power with respect to all such shares. The
Schedule 13D did not provide an address.
(5) Represents shares of Common Stock issuable upon the exercise of options
which are exercisable within 60 days from the date hereof.
(6) Includes 54,667 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days from the date hereof.
(7) Includes 17,200 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days from the date hereof.
(8) Includes 486,035 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days from the date hereof.
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Item 13. Certain Relationships and Related Transactions.
The Company is a party to operating lease agreements with an affiliate of
NPMI for the Company's primary manufacturing, distribution and administrative
facility and a warehouse. For the year ended December 31, 1996, rental expense
under these leases was approximately $764,000. The Company believes that the
terms of these leases were consistent with prevailing market terms at the time
agreement was reached as to the terms of such leases. Such lease agreements
provide for an affiliate of NPMI to pay an affiliate of Vamic 50% of (i) the
excess of the monthly rental payments under the leases over the monthly
interest, principal and other payments due under the related mortgage obligation
and (ii) any proceeds in excess of the outstanding mortgage obligation upon sale
of the properties. These leases have neither been assumed nor rejected by the
Company and require approval of the Bankruptcy Court.
The Company leases a manufacturing and distribution facility in Houston,
Texas from an affiliate of Vamic. The lease provides for annual rent through
2013 based on percentage occupancy by the Company and subject to a cost of
living escalator. For the year ended December 31, 1996, rental expense under
this lease was approximately $825,000. The Company believes that the terms of
the lease are comparable to the terms the Company could have negotiated with an
unrelated third party. This lease has neither been assumed nor rejected by the
Company and requires approval of the Bankruptcy Court.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April 30, 1997 AMERICAN WHITE CROSS, INC.
By:/s/ Scott Vertrees
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Name: Scott Vertrees
Title: Vice Chairman of the Board of
Directors, Executive Vice President
and Chief Financial Officer