<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19600
-------
CORE, INC.
----------
(Exact name of registrant as specified in its charter)
AMENDMENT NO 2.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for the fiscal
year ended December 31, 1997 on Form 10-K as set forth in the pages attached
hereto:
Items 10, 11, 12 and 13. Directors and Executive Officers of the
Registrant; Executive Compensation; Security Ownership of Certain
Beneficial Owners and Management; and Certain Relationships and
Related Transactions, respectively. The information required by
these Items is filed herewith by amendment pursuant to Rule
12b-15.
Pursuant to the requirements 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.
CORE, INC.
<TABLE>
<S> <C>
Date: April 29, 1998 By: /s/ George C. Carpenter IV
George C. Carpenter IV
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
Date: April 29, 1998 By: /s/ William E. Nixon
William E. Nixon
Executive Vice President, Chief
Financial Officer, Treasurer and
Clerk (Principal Financial Officer)
</TABLE>
<PAGE>
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information with respect to the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
George C. Carpenter IV 39 Chairman of the Board of Directors and Chief
Executive Officer
Craig C. Horton 43 Director, President and Chief Operating Officer
William E. Nixon 37 Executive Vice President, Chief Financial
Officer, Treasurer and Clerk
Nancy S. Moore 48 Senior Vice President, Operations
Michael E. Darkoch 54 Senior Vice President, Client Development
R. Gary Dolenga 53 President, SSDC Corp.
Ophelia Galindo 40 Corporate Vice President, Product Management and
Technical Development
Leslie Alexandre, Dr.P.H. (1) 40 Director
Stephen C. Caulfield (1) 57 Director
Richard H. Egdahl, M.D., Ph.D. (2) 71 Director
John Pappajohn (1)(2) 69 Director
</TABLE>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
The Company's Board of Directors is divided into three classes, each of
whose members serve for staggered three-year terms. The term of the Class I
Directors (presently Dr. Alexandre and Mr. Caulfield) expires in 1998; the
term of the Class II Directors (presently Dr. Egdahl and Mr. Pappajohn)
expires in 1999; and the term of the Class III Directors (presently Mr.
Carpenter and Mr. Horton) expires in the year 2000. At each annual meeting
of stockholders, directors are elected for a three-year term to succeed the
directors of the same class whose terms are then expiring.
Executive officers of the Company are elected by the Board of Directors
on an annual basis and serve at the discretion of the Board of Directors.
George C. Carpenter IV was re-elected a Class III Director at the June
1997 Annual Stockholders Meeting, and was elected the Chairman of the Board
of Directors and Chief Executive Officer of the Company effective with the
Company's March 24, 1995 merger involving Core Management, Inc. (the "CMI/PRA
Merger"). Mr. Carpenter served as the Chief Executive Officer and a Director
of Core Management, Inc., a Delaware corporation ("CMI") and now
wholly-owned subsidiary of the Company, since its formation in 1990. In
addition, Mr. Carpenter served as the Chairman, Chief Executive Officer,
Secretary and a Director of Core Management, Inc., a California corporation
and wholly-owned subsidiary of CMI ("CMI-California"), from its formation in
1990. As a result of the reorganization of CMI-California and Integrated
Behavioral Health ("IBH"), a California corporation and wholly-owned
subsidiary of CMI in March 1993, Mr. Carpenter was appointed as a Director of
IBH. From 1988 to 1990, Mr. Carpenter served as a Vice President, Operations
of The Health Data Institute, Inc., a provider of utilization review, case
management and analytic services and a developer of related software, a
subsidiary of Baxter International, Inc.
Craig C. Horton was re-elected a Class III Director at the June 1997
Annual Stockholders Meeting and was elected the President and Chief Operating
Officer of the Company on March 30, 1995. Mr. Horton served as the President
and a Director of CMI and CMI-California from their respective formations in
1990, and also served as the acting Chief Financial Officer of CMI from 1994
to 1995. In December 1994, Mr. Horton was named as a Director and Chief
Executive Officer of IBH. From 1988 to 1990, Mr. Horton was Vice President,
Operations of The Health Data Institute, Inc., a subsidiary of Baxter
International, Inc.
William E. Nixon is the Executive Vice President, Chief Financial
Officer, Treasurer and Clerk of the Company. Mr. Nixon joined the Company in
December 1988 as Controller. In June 1989, Mr. Nixon became Assistant
Treasurer; in September 1990, he was elected Vice President, Finance and
Administration; in September 1991, he assumed his position as Treasurer. In
December 1993, Mr. Nixon was elected Chief Financial Officer of the Company.
In December 1994, Mr. Nixon was elected Executive Vice President and in March
1995, he was elected Clerk. Prior to his employment with the Company, from
1985 to 1988, Mr. Nixon served as a Senior Accountant at Gray, Gray and Gray,
a public accounting firm.
2
<PAGE>
Nancy S. Moore was elected Senior Vice President, Operations in
September 1997. Previously, Ms. Moore had served as Vice President, Eastern
Operations of the Company since the March 24, 1995 CMI/PRA merger. Ms. Moore
joined the Company in July 1990 as Manager, Case Management. In November
1992 she became Director, Operations and was promoted to Vice President,
Operations in May 1994. Prior to her employment with the Company, Ms. Moore
served as Administrator, Behavioral Health Utilization Review Department of
Blue Cross and Blue Shield of Massachusetts and Director of Nursing Services
of Charles River Hospital, Community Care Systems, Inc.
Michael E. Darkoch joined the Company in September 1997 and was elected
Senior Vice President, Client Development in December 1997. Mr. Darkoch came
to CORE from Caremark International, where from 1974 to 1997 he held several
senior management positions, including Vice President of Corporate Account
Management and Vice President of Business Development. His background
includes account management process design and sales development. Mr.
Darkoch has over 23 years of experience in the health care industry.
R. Gary Dolenga joined the Company in June 1997 upon CORE's acquisition
of certain assets of Social Security Disability Consultants and Disability
Services, Inc. (collectively, "SSDC"). Mr. Dolenga formed SSDC in 1979. For
the 18 years prior to the acquisition of SSDC by CORE, Mr. Dolenga served as
the Managing Director and President of SSDC where he was responsible for the
administration, professional service and sales of the social security
disability benefits advocacy and Medicare coordination of benefit components
of SSDC.
Ophelia Galindo was elected the Corporate Vice President, Product
Management and Technical Development of the Company on March 30, 1995.
Formerly, Ms. Galindo was employed by CMI, beginning in February 1986 as a
senior consultant; in June 1994 Ms. Galindo was promoted by CMI to be its
Vice President, Disability Analysis.
Leslie Alexandre, Dr. P.H. was appointed a Class I Director in March
1995, effective with the CMI/PRA Merger, and was elected a Class I Director
by the Company's stockholders in July 1995. Formerly, Dr. Alexandre served
as a Director of CMI from 1993 to 1995. Since February 1995, Dr. Alexandre
has been the Vice President, Corporate Affairs for OncorMed, Inc., a provider
of genetic testing and information services for the early detection and
management of cancer. From 1992 to 1995, Dr. Alexandre was employed as
Government Affairs Representative, Health Policy for EDS, Inc., an
information technology company. Prior to joining EDS in 1992, Dr. Alexandre
was Senior Health Legislative Assistant for United States Senator David
Durenberger. From January 1990 until the death of U.S. Senator John Heinz in
April 1991, she served as Professional Staff on the Senate Special Committee
on Aging. Prior to 1990, Dr. Alexandre was an independent health care
consultant.
Stephen C. Caulfield was appointed a Class I Director by the Board
effective December 1994, and was elected a Class I Director by the Company's
stockholders in July 1995. Since February 1997, Mr. Caulfield has been the
Chairman of The Chickering Group, a student health insurance company. Prior
to this position, Mr. Caulfield was a Managing Director of William M. Mercer,
Incorporated, a management consulting firm, where he had specialized in
health care issues since 1987. Mr. Caulfield has more than 30 years of
experience in the health care field, having previously been employed as a
faculty member and Assistant Dean of the Albert Einstein College of Medicine
in New York, as the Director of Health Affairs and Regional Operations for
the United Mine Workers Multi-Employer Trust, and as the President and Chief
Executive Officer of Government Research Corporation, a consulting firm
previously located in Washington, D.C. (subsequently acquired by Hill and
Knowlton).
Richard H. Egdahl, M.D., Ph.D. has been a Director since 1985, and was
re-elected a Class II Director by the Company's stockholders in 1996. Dr.
Egdahl is the Alexander Graham Bell Professor of Health Care Entrepreneurship
at Boston University. He was Director of the Boston University Medical
Center and academic vice president for health affairs at Boston University
from 1973 to July 1996. A surgeon by training, Dr. Egdahl is professor of
surgery at Boston University School of Medicine (chairman 1964-73), in
addition to professor of public health in the Boston University School of
Public Health and professor of management in the Boston University School of
Management. He is a University Professor at Boston University and
established the Boston University Health Policy Institute in 1975 and is its
Director. Dr. Egdahl is a Trustee of the Pioneer Group of Mutual Funds, a
Trustee of Boston Medical Center and a member of the Institute of Medicine of
the National Academy of Sciences.
John Pappajohn was appointed a Class II Director in March 1995 effective
with the CMI/PRA Merger and was re-elected a Class II Director by the
Company's stockholders in 1996. Formerly, Mr. Pappajohn was a Director of
CMI from its formation in 1990 to 1995; Mr. Pappajohn served on the Board of
Directors of Integrated Behavioral Health, a California corporation ("IBH"),
from 1991 to the time of its acquisition by CMI in 1993. Since 1969, Mr.
Pappajohn has been the sole
3
<PAGE>
owner of Pappajohn Capital Resources, a venture capital fund, 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:
American Physician Partners, Inc., The Care Group, Inc., DSSI Corporation,
HealthDesk Corporation, OncorMed, Inc., PACE Health Management Systems, Inc.
and Patient InfoSystems, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
As required by the Securities and Exchange Commission rules under
Section 16 of the Securities and Exchange Act of 1934, the Company notes that
in 1998 two executive officers filed untimely reports on Forms 3 and 4.
Michael Darkoch filed a Form 3 untimely (related to his election as an
Officer) and a Form 4 untimely (related to his acquisition of stock).
Ophelia Galindo filed a Form 4 untimely (related to the issuance of stock
options to her by the Company).
4
<PAGE>
Item 11. Executive Compensation.
Summary Compensation Table
The following table sets forth information for 1997, 1996 and 1995
concerning the compensation paid or accrued by the Company and its
subsidiaries to the chief executive officer and certain other executive
officers whose aggregate salary and bonus exceeded $100,000 in the most
recent fiscal year (the "Named Executive Officers"). Although only principal
capacities are listed, the compensation figures include all compensation
received in any capacity, for services rendered during the fiscal years
indicated.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options (#) Compensation($)
- ----------------------------------- ------ ---------- --------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
George C. Carpenter IV 1997 179,146 50,000
Chairman of the Board Directors 1996 166,645 10,000 50,000
and Chief Executive Officer 1995(1) 146,249 95,000
Craig C. Horton 1997 169,127 50,000
Director, President and Chief 1996 158,196 10,000 50,000
Operating Officer 1995(1) 136,342 95,000
William E. Nixon 1997 143,127 25,000
Executive Vice President, 1996 143,233 71,796(2) 24,000
Chief Financial Officer, 1995 127,000 56,750
and Treasurer
Nancy S. Moore 1997 110,468 29,500
Senior Vice President, 1996 98,987 12,000
Operations 1995 84,461 12,000
R. Gary Dolenga (3) 1997 73,018 160,000
President, SSDC Corp.
Fredric L. Sattler (4) 1997 148,946
Vice President, Partnership 1996 146,100
Development 1995 75,000 45,000(5)
</TABLE>
(1) Prior to the March 1995 merger involving the Company and Core Management,
Inc. (the CMI/PRA Merger"), Mr. Carpenter and Mr. Horton were officers and
employees of Core Management, Inc. The compensation amounts for Mr.
Carpenter and Mr. Horton in this table for periods prior to the CMI/PRA
Merger were paid by Core Management, Inc.
(2) Represents relocation expenses incurred as well as additional amounts paid
to Mr. Nixon to reimburse him for income taxes payable by him with respect
to such relocation costs.
(3) Mr. Dolenga, the founder of SSDC, joined the Company in June 1997 upon
CORE's acquisition of certain assets of SSDC. See Item 13, "Certain
Relationships and Related Transactions."
(4) Mr. Sattler joined the Company as an executive officer in January 1996
pursuant to employment arrangements agreed to in December 1995. In
September 1997, Mr. Sattler resigned from his position as Executive Vice
President and is currently serving the Company as Vice President,
Partnership Development.
(5) Represents a one-time bonus agreed to by the Company in December 1995 in
conjunction with the hiring of Mr. Sattler.
5
<PAGE>
The following two stock option tables summarize option grants and exercises
during 1997 for the Named Executive Officers, and the values of options granted
during 1997 and held by such persons at December 31, 1997.
Option Grants in 1997
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------- Potential Realizable Value
% of Total at Assumed Annual Rates
Number of Options of Stock Price Appreciation
Securities Underlying Granted to Exercise For Option Term (2)
Options Employees in Price Expiration ---------------------------
Name Granted (#) Fiscal Year (1) ($/sh) Date 5% ($) 10% ($)
- ------ ------------------ ---------------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
George C. Carpenter IV 50,000 6.29% $10.125 9/22/2002 139,868 309,071
Craig C. Horton 50,000 6.29% $10.125 9/22/2002 139,868 309,071
William E. Nixon 25,000 3.14% $10.125 9/22/2002 69,934 154,535
Nancy S. Moore 19,500 2.45% $ 8.625 6/24/2002 46,467 102,680
10,000 1.26% $ 9.250 9/10/2002 25,556 56,472
R. Gary Dolenga 160,000 3.14% $ 8.250 6/14/2002 364,692 805,873
</TABLE>
(1) The Company granted a total of 795,126 options to its employees and
consultants in 1997.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast
future appreciation of the Company's stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock. This table
does not take into account any appreciation in the price of the Common
Stock to date.
Aggregated Option Exercises in 1997 and Year-End Option Values
The following table presents information regarding options exercised in
1997 and the value of options outstanding at December 31, 1997 for each of
the Named Executive Officers:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Year End (#) Year-End ($)(1)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ----- --------------- -------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
George C. Carpenter IV 0 N/A 87,000/108,000 $617,875/$557,750
Craig C. Horton 0 N/A 87,000/108,000 $617,875/$557,750
William E. Nixon 4,000 $24,500 53,700/48,050 $399,199/$229,616
Nancy S. Moore 0 N/A 21,900/36,600 $140,928/$158,592
R. Gary Dolenga 0 N/A 0/160,000 $0/$560,000
Fredric L. Sattler 0 N/A 45,000/30,000 $247,500/$165,000
</TABLE>
(1) Based upon the closing price of $11.75 per share for the Company's Common
Stock as quoted by the Nasdaq National Market on December 31, 1997.
6
<PAGE>
Compensation of Non-Employee Directors
Pursuant to a formula adopted in 1995, each non-employee director was
granted options in 1995 for the purchase of 3,000 shares of the Company's
common stock for each calendar quarter of service as a Director through 1997.
Accordingly, 12,000 options vested in 1997 to each of the non-employee
directors for their 1997 services.
In following the above mentioned formula, in March 1998, the Company
granted each non-employee director options for the purchase of up to 36,000
shares of the Company's common stock at the then fair market exercise price
of $13.75 per share. The options vest quarterly, subject to continued
service as a Director, through the year 2000.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
The Company entered into an employment agreement with William E. Nixon,
the Company's Executive Vice President and Chief Financial Officer, effective
as of November 19, 1993, which has an initial one year term and is
automatically renewed on an annual basis unless written notice of non-renewal
is delivered prior to the scheduled date. Pursuant to the agreement, Mr.
Nixon is entitled to receive compensation and fringe benefits for a period of
six months if his employment is terminated without cause by the Company, and
for a period of nine months if his employment is terminated by the Company
within one year of any change of control of the Company.
The Company entered into an employment agreement with R. Gary Dolenga,
the President of its subsidiary, SSDC Corp., effective as of June 25, 1997.
The employment agreement has a two-year term and is subject to earlier
termination as set forth in the agreement. See Item 13, "Certain
Relationships and Related Transactions."
Compensation Committee Interlocks and Insider Participation
Leslie Alexandre, Stephen C. Caulfield and John Pappajohn were members
of the Board of Directors' Compensation Committee in fiscal 1997.
7
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of March 31, 1998,
regarding the beneficial ownership of the Company's Common Stock by (i) each
person who is known by the Company to own beneficially more than five percent
(5%) of the Company's Common Stock; (ii) each director of the Company; (iii)
each executive officer of the Company identified in the Summary Compensation
Table set forth herein; and (iv) all directors and executive officers of the
Company as a group. Unless otherwise indicated, the address of the persons
listed below is in care of CORE, INC., 18881 Von Karman Avenue, Irvine,
California 92612.
<TABLE>
<CAPTION>
Number of Shares Percent
Name Beneficially Owned (1) Owned
- ----- ------------------------ ---------
<S> <C> <C>
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 754,200 (2) 10.30%
John Pappajohn 507,969 (3) 6.74%
Craig C. Horton 483,264 (4) 6.43%
George C. Carpenter 451,595 (5) 6.01%
Richard H. Egdahl, M.D. 185,426 (6) 2.51%
R. Gary Dolenga 167,000 (7) 2.23%
Stephen C. Caulfield 137,276 (8) 1.85%
William E. Nixon 101,941 (9) 1.37%
Fredric L. Sattler 77,000 (10) 1.04%
Leslie Alexandre 74,575 (11) 1.01%
Nancy S. Moore 59,100 (12) *
All directors and executive officers as a group (12 individuals) 2,344,536 (13) 27.10%
</TABLE>
* Less than one percent.
(1) Except as otherwise indicated, represents sole voting and investment power.
(2) Based on Schedule 13G, dated January 9, 1997. Includes 31,400 shares with
shared voting power.
(3) Includes 70,200 shares owned by Mr. Pappajohn's wife, 40,200 shares owned
by an entity owned by Mr. Pappajohn's wife (Mr. Pappajohn disclaims
beneficial ownership of such 110,400 shares); also 214,575 shares issuable
to Mr. Pappajohn pursuant to options (33,000 of which remain subject to
future vesting).
(4) Includes 1,000 shares held by Mr. Horton as custodian for Mr. Horton's son
and 195,000 shares issuable to Mr. Horton pursuant to options (98,000 of
which remain subject to future vesting).
(5) Includes 256,595 shares held jointly by Mr. Carpenter and his wife and
195,000 shares issuable to Mr. Carpenter pursuant to options (98,000 of
which remain subject to future vesting).
(6) Includes 78,275 shares issuable to Dr. Egdahl pursuant to options (33,000
of which remain subject to future vesting).
(7) Includes 7,000 shares held in trust for which Mr. Dolenga is a Trustee and
his family members are beneficiaries and 160,000 shares issuable to Mr.
Dolenga pursuant to options (all of which remain subject to future
vesting).
(8) Includes 15,000 shares owned by Mr. Caulfield's wife and 87,875 shares
issuable to Mr. Caulfield pursuant to options (33,000 of which remain
subject to future vesting).
(9) Includes 1,191 shares held jointly by Mr. Nixon and his wife and 100,750
shares issuable to Mr. Nixon pursuant to options (43,250 of which remain
subject to future vesting).
(10) Includes 75,000 shares issuable to Mr. Sattler pursuant to options
(45,000 of which remain subject to future vesting).
(11 Includes 74,575 shares issuable to Dr. Alexandre pursuant to options
(33,000 of which remain subject to future vesting).
(12) Includes 58,500 shares issuable to Ms. Moore pursuant to options (34,200
of which remain subject to future vesting).
(13) Includes 1,333,050 shares issuable pursuant to options (660,650 of which
remain subject to future vesting).
8
<PAGE>
Item 13. Certain Relationships and Related Transactions.
On June 25, 1997, SSDC Corp., a wholly-owned subsidiary of CORE,
acquired certain assets of Social Security Disability Consultants Limited
Partnership ("SSDC") and Disability Services, Inc. ("DSI"), based in Novi,
Michigan, pursuant to an asset purchase agreement dated June 14, 1997 (the
"Purchase Agreement"). R. Gary Dolenga and his wife, Phylis M. Dolenga, were
the founders and owners of SSDC and DSI. Pursuant to the Purchase Agreement,
certain of the assets of SSDC/DSI were acquired in exchange for the payment
of an initial purchase price of $5 million, additional purchase price of $1.5
million, payable quarterly through June 24, 1998, and up to an additional
$920,000 in future, performance-related payments. Prior to the consummation
of this transaction, there was no material relationship between SSDC, DSI, or
their stockholders and officers, R. Gary Dolenga and Phylis M. Dolenga, and
CORE or any of CORE's affiliates, its directors or officers, or any associate
of any such director or officer.
In connection with CORE's acquisition of SSDC, CORE also entered into an
Employment Agreement dated June 25, 1997 pursuant to which Mr. Dolenga would
serve as President of SSDC Corp. through June 25, 1999 (unless earlier
terminated) with a base annual salary of $150,000, and an Option Agreement
dated June 14, 1997 with R. Gary Dolenga for the purchase of up to 160,000
shares of CORE common stock. These options vest annually over a two-year
period on the anniversary of the grant date. These options have a five-year
term and an exercise price of $8.625 per share (the fair market value of the
Company's common stock as quoted on the Nasdaq National Market on the date of
grant).
In 1996, at the request of the Company, Mr. Nixon, Executive Vice
President, Chief Financial Officer and Treasurer relocated his principal
residence to California. In connection with this requested relocation, the
Company loaned Mr. Nixon approximately $80,000 for the purpose of enabling
him to relocate and purchase a home. As of March 31, 1998, the loan balance
is approximately $77,000. The loan bears interest at the lowest rate required
to avoid the imputation of interest.
9
