SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended June 30, 1997.
Commission file number: 0-11895
CONTINENTAL HEALTH AFFILIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2362097
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
910 Sylvan Avenue
Englewood Cliffs, N.J. 07632
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 567-4600
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 $.02
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 September 23, 1997 the aggregate market value of the voting stock held by
non-affiliates of the registrant was $17,598,098.
As of September 23, 1997, 10,127,151 shares of the registrant's common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
None
1
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
DIRECTORS
Served on
the Board of
Directors
Name Age Since
Jack Rosen................................. 51 1981
Joseph Rosen............................... 46 1981
Israel Ingberman........................... 51 1981
Joseph Giglio.............................. 56 1981
Bruce Slovin............................... 61 1988
Carl D. Glickman........................... 71 1989
Jack Rosen has served as the chief executive officer (the President or
Chairman of the Board) and as a Director of the Company since its incorporation
in 1981 and of its subsidiaries from their respective dates of incorporation,
the first of which was in 1976. Mr. Rosen is also the President and a Director
of CompreMedx Corporation ("CompreMedx"), an 89.1%-owned subsidiary of the
Company, and the Chairman of the Board of Directors and Chief Executive Officer
of Infu-Tech, Inc. ("Infu-Tech"), a 59% owned subsidiary of the Company. He
first became involved in the health care field in September 1971 when he became
a director of Garden State Health Care Center of East Orange, New Jersey. He is
actively engaged, together with Joseph Rosen and Israel Ingberman, who are
officers and directors, and along with Jack Rosen, are the three principal
stockholders of the Company (the "Principal Stockholders"), in a variety of
enterprises, including real estate development and hotel ownership (the
"Rosen-Ingberman Enterprises"). Jack Rosen is the brother of Joseph Rosen.
Joseph Rosen has served as a Vice President and as a Director of the
Company since its incorporation in 1981 and as a director and officer of all its
subsidiaries (including CompreMedx and Infu-Tech) from their respective dates of
incorporation. He became an Assistant Secretary of the Company in March 1983. He
first became involved in the health care field in October 1974 with the
organization of Jayber Inc., which operates a nursing home in West Orange, New
Jersey and now is a subsidiary of the Company. He is actively engaged, together
with the other Principal Stockholders, in the Rosen-Ingberman Enterprises and
with Israel Ingberman in nursing home ownership and management ("R-I nursing
homes"). He is the brother of Jack Rosen.
Israel Ingberman has served as Secretary, Treasurer and as a Director of
the Company since its incorporation in 1981 and as a director and officer of all
its subsidiaries (including CompreMedx and Infu-Tech) from their respective
dates of incorporation. He first became involved in the health care field in
October 1974 with the organization of Jayber Inc. He is actively engaged,
together with the other Principal Stockholders, in the Rosen- Ingberman
Enterprises and in the R-I nursing homes with Joseph Rosen.
Joseph M. Giglio has been a director of the Company since January 1983
and is also a Director of Infu-Tech. Since December 1993, he has been serving as
the Chairman of Apogee Research, Inc., an infrastructure consulting firm. From
December 1993 until August 1994, he was the Senior Advisor to the First
Southwest Company. From April 1992 to November 1993, he was an Executive Vice
President of Smith Barney & Co. And from June 1991 to April 1992, he was a
Managing Director of that firm. From January 1990 to June 1991, he was the
President of Chase Municipal Securities, Inc., an affiliate of The Chase
Manhattan Bank, N.A. From August 1988 through December 1989, Mr. Giglio was a
Senior Vice President at Chase Securities, Inc. in the Municipal Finance
Division. For more than five years prior to joining Chase, Mr. Giglio was the
Senior Managing Director of the Public Finance Department at Bear Stearns & Co.,
Inc. Mr. Giglio served as Chairman of the National Council on Public Works
Improvement, which released its final report, "Fragile Foundation," in February
1988. Mr. Giglio chaired the U.S. Senate Budget Committee's Private Sector
Advisory Panel on Infrastructure Financing. He serves on the board of directors
of The Hudson Institute. Mr. Giglio has served as an Associate Professor of
Finance at New York University. He is a graduate of Rutgers University, and
holds a Master of Public Administration degree from New York University and a
Master's degree in Business from Columbia University.
2
<PAGE>
Carl D. Glickman has been a director of the Company since August 1989 and
is also a Director of Infu-Tech. Since 1953, he has been the president of The
Glickman Organization, a real estate ownership and management company. In
addition, Mr. Glickman is a director of Bear Stearns Companies, Inc. (an
investment banking company), Jerusalem Economic Corporation (an Israeli real
estate company), Alliance Tyre and Rubber Co. (an Israeli tire manufacturer),
Franklin Holdings, Inc. (an investment company), Lexington Corporate Properties,
Inc. (a real estate investment trust), Modern Video Co. (a motion picture
production company) and Office Max, Inc. (an office supply retailer).
Bruce Slovin has been a Director of the Company since June 1988 and is
also a Director of Infu-Tech. Mr. Slovin is a graduate of Harvard Law School and
Cornell University. Since 1980, he has been president and a director of
MacAndrews & Forbes Group, Inc., an industrial holding company. Since 1985, he
has been president and a director of Revlon Group Incorporated, a consumer
products holding company. In addition, Mr. Slovin is a director of Andrews Group
Incorporated (industrial holding company), M&F Worldwide Corp., (producer of
licorice extract and other flavoring agents), Cantel Industries, Inc.
(distributor of medical equipment) and The Coleman Company, Inc. (outdoor
recreational equipment manufacturer).
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation received during each of
the years ended June 30, 1997, 1996 and the six months ended June 30, 1995, by
the Company's chief executive officer and its other executive officers:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Rosen, Chairman, 1997 368,000** $150,000**
President and Chief 1996 300,000** None
Executive Officer 1995* 150,000** None None None None None None
Israel Ingberman
Treasurer, Secretary 1997 150,000 None None None None
and President of TNS 1996 150,000 None None
Nursing Homes, Inc. 1995* 75,000
S. Colin Neill 1997 147,212 25,000
Vice President and 1996 -- None None None None
Chief Financial Officer 1995* -- None None None
1997
Benjamin Geizhals, 1996 137,712 5,000
Vice President 1995* 130,000 None None None 2,000 None None
65,000 --
* Six months ended June 30, 1995
** Includes compensation paid by Infu-Tech
DIRECTORS' FEES
Since 1993, the directors have waived directors' fees (which, prior to
1993, had been paid to directors who were not employees at the rate of $10,000
plus $500 for each directors' meeting attended). Since 1994 Directors have
received options in consideration of their waiver of directors fees. In January
1997 the Board of Directors approved the annual grant of options to purchase
10,000 shares of the Company's common stock to each of the independent
directors.
</TABLE>
<PAGE>
OPTION PLANS
The following table sets forth certain information with regard to
options granted during the year end June 30, 1997 to the Company's executive
officers:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation For
Individual Grants Option Term
----------------- -----------
Number of Percent of Total
Securities Options/SARs
underlying Granted to )Exercise or
option/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year (% ($/Sh) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benjamin Geizhals 5,000 3.4 2.22 10/18/06 7,000 17,000
- ------------------------- ------------ ------------- ------------ ----------- ----------- ----------
S. Colin Neill 25,000 17% 2.17 0/7/08/06 34,000 86,500
========================= ============ ============= ============ =========== =========== ==========
</TABLE>
The following table sets forth certain information with regard to exercises
of options and SARs during year end June 30, 1997 and options and SARs held at
June 30, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
nderlying Unexercised in-the-Money
Options/SARs Options/SARs
at Fiscal Year-End* at Fiscal Year End
U (#) ($)**
Shares Value
Acquired on Realized Exercisable(E)/ Exercisable(E)/
Name Exercise (#) ($) Unexercisable(U) Unexercisable(U)
---- ------------ --- ---------------- ----------------
<S> <C> <C> <C> <C>
Jack Rosen -- -- 500,000(E) $875,000(E)
0(U) 0(U)
Benjamin Geizhals -- -- 17,000(E) $25,025(E)
0(U) 0(U)
S. Colin Neill -- -- 25,000(E) $14,500(E)
0(U) 0(U)
* The Corporation has not granted any SARs.
** Based upon the amount by which the high bid price of the Company's Common Stock on June 30, 1997 ($2.75 per share) exceeded
the exercise price of the options.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the year ended June 30, 1997, the Company's Compensation
Committee reviewed and approved the compensation of the Chairman of the Board.
Compensation of the Company's senior executive officers, other than its Chairman
of the Board, was set by the Chairman of the Board.
Transactions between the Company and members of its Board of Directors
during 1997 were as follows:
<PAGE>
Early in 1990 a dispute over management fees between the Company and
three nursing homes owned by the Principal Stockholders was resolved by the
nursing homes' agreeing to pay a total of $1,940,000 in satisfaction of all
their December 31, 1989 obligations to the Company. In early 1992, the
settlement agreement between the Company and the three nursing homes was
modified to provide that the then-existing balance of $1,046,000 would be paid
in sixteen equal quarterly payments of $76,000 each (which included interest at
7 1/2% and principal) beginning June 15, 1992 and continuing through March 15,
1996. The balances remaining on the modified settlement agreement at December
31, 1994 and 1993 (including accrued interest due to payment delinquencies) were
$839,000 and $783,000. In January 1995 the settlement agreement was further
modified to provide for a $227,000 principal and interest payment to be made on
or before March 30,1995 and the remaining balance of $626,000 to be paid in
twelve equal quarterly installments of $60,000 each (including interest at 8
1/2%) beginning July 1, 1995 and continuing through March 31, 1998. In June
1997, a credit of $300,000 was applied against the balance then due, because the
purchase price obtained by the Company for the sale of one of its properties was
enhanced by $300,000 due to the contemporaneous sale of a property owned by the
principal stockholders to the same buyer. As of June 30, 1997, the balance was
$326,000 including interest, and scheduled payments of $88,000 were in arrears.
At June 30, 1997, the Company was owed a total of $246,000 from two
entities owned by the Principal Stockholders resulting from loans to the
entities from various corporations which now are subsidiaries of the Company,
but which were not owned by the Company when the loans were made. The Company is
also owed $15,000 for health insurance premiums and other charges with regard to
the R-I nursing homes.
During 1997, the Company (including its Infu-Tech subsidiary) was
charged $46,000 by a corporation owned by Jack Rosen for use of an airplane
owned by that corporation. The Company believes the rates it was charged for use
of that airplane were lower than those which would have been available from an
independent charter company for use of a similar airplane.
During 1997, the Company issued 600,000 shares of common stock to U.S.
Management, Inc. in exchange for the extinction of $2,542,174 of trade debt owed
by the Company.
During 1997, Carl Glickman, a director of the Company and Infu-Tech, was
paid $59,000 by the Company for financial consulting fees, including his $5,000
fee as a director of Infu-Tech.
In November 1993, as part of a financial restructuring, the Company
offered to exchange 530 shares of its Common Stock for each $1,000 principal
amount of its 14-1/8% Subordinated Debentures due 1996 ("Subordinated
Debentures"). In response to this offer, The 1965 Trust, of which Carl D.
Glickman, a director of the Company and of Infu-Tech is the sole trustee,
tendered $1,774,000 principal amount of Subordinated Debentures, which it had
purchased on October 12, 1993 for $709,600 (40% of their principal amount) and
received in exchange 940,220 shares of the Company's Common Stock. Prior to the
purchase of the Subordinated Debentures, the Board of Directors had been
informed of the proposed purchase and had determined that the Company would not
at that time be able to purchase the Subordinated Debentures for the price at
which they were being made available to The 1965 Trust. The day after it
purchased the Subordinated Debentures, The 1965 Trust gave the Company the
option, exercisable until October 12, 1994, to purchase 939,160 of the shares it
would receive in exchange for the Subordinated Debentures for $779,680 (which
was 110% of the amount The 1965 Trust paid for the Subordinated Debentures). The
option expired without being exercised.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table contains information concerning the ownership of the
Company's Common Stock on September 30, 1997 by each person known to the Company
to be a beneficial owner of more than 5% of any class of the Company's voting
securities, by the Company's directors, by each of the executive officers of the
Company who was among the five most highly compensated executive officers of the
Company in 1997 and by directors and executive officers as a group are as
follows:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of
Title of Class Of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------ ----------------------------------- ---------------------- --------------------
<S> <C> <C> <C>
Common Stock Colonial Management Associates, Inc. 530,000 shares 5.2%
1 Financial Center
Boston, MA 02111
Common Stock Michael Klein 939,160 shares 9.3%
Preferred Stock 100 Shoreline Highway 3,305 shares 23.8%
Building A, Suite 190
Mill Valley, CA 94941
Common Stock U.S. Management, Inc. 600,000 shares 5.9%
129 South 8th Street
Brooklyn, NY 11211
Common Stock Private Opportunity Partners, II Ltd. 775,000 shares 7.7%
201 South Biscayne Blvd., Suite 2950
Miami, FL 33131
Common Stock Carl D. Glickman 96,000 shares (a) (b)
The Leader Building, Suite 1140
Cleveland, OH 44114
Common Stock Israel Ingberman 875,372 shares 8.6%
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
Common Stock Jack Rosen 1,398,876 shares (a)(c) 13.2%
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
Common Stock Joseph Rosen 922,827 shares (c)(d) 9.1%
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
Common Stock Bruce Slovin 112,000 shares (a) 1.1%
35 E. 62nd Street
New York, NY 10021
Common Stock Joseph M. Giglio 115,517 shares (a) 1.1%
4350 East West Highway, Suite 600
Bethesda, MD 20814
Common Stock S. Colin Neill 25,000 shares (a) (b)
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
Common Stock Benjamin Geizhals 17,000 shares (a) (b)
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
Common Stock All directors and executive officers 3,562,592 shares 32.5%
as a group (8 persons)
-----------------
(a) Includes shares of Common Stock issuable on exercise of outstanding stock options as follows: Mr. Rosen 500,000
shares; Mr. Giglio, 105,000 shares; Mr. Glickman, 95,000 shares; Mr. Slovin, 105,000 shares; Mr. Geizhals,
17,000 shares; Mr. Neill, 25,000 shares; all directors and executive officers as a group, 847,000 shares.
(b) Less than 1%.
(c) Includes shares of common stock held by children as follows: Jack Rosen,19,500 shares, Joseph Rosen, 9,750 shares and Israel
Ingberman, 41,666 shares.
(d) Includes shares of common stock held as Custodian for children as
follows: Jack Rosen, 125,000 shares, Joseph Rosen, 144,500 shares and
Israel Ingberman, 83, 333 shares.
</TABLE>
<PAGE>
On September 23, 1997, Cede & Co. owned of record 6,608,773 shares of
the Company's Common Stock, constituting 65.3% of the outstanding Common Stock.
The Company understands those shares were held beneficially for members of the
New York Stock Exchange, some of whom may in turn have been holding shares
beneficially for customers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions between the Company and members of its Board of Directors
are described under "Compensation Committee Interlocks and Insider
Participation."
FILING OF REPORTS
To the best of the Company's knowledge, no director, officer, or
beneficial owner of more than 10% of the Company's stock failed to file on a
timely basis reports required by ss. 16(a) of the Securities and Exchange Act of
1934, as amended, with regard to the year ended June 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Amended Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CONTINENTAL HEALTH AFFILIATES, INC.
By: /S/ BENJAMIN GEIZHALS
-------------------------------------
Date: October 29, 1997 Benjamin Geizhals
Vice President and General Counsel
S-1
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