10-K405/A 1 d10k405a.txt AMENDMENT TO FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- 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, 2000 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: 1-13263 CASTLE DENTAL CENTERS, INC. Delaware (State or other jurisdiction of incorporation or organization) 76-0486898 (I.R.S. Employer Identification No.) 1360 Post Oak Boulevard, Suite 1300 Houston, Texas (Address of principal executive offices) 77056 (Zip Code) (713) 479-8000 (Registrant's telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.001 Par Value (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 the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( 229.405 under the Securities Exchange Act of 1934) 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 16, 2001, there were 6,417,206 shares of Castle Dental Centers, Inc. Common Stock, $.001 par value, issued and outstanding, of which 3,293,363, having an aggregate market value of approximately $0.4 million, were held by non-affiliates of the registrant. Documents Incorporated by Reference: None. ================================================================================ PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Board of Directors The following sets forth information as to the current directors and executive officers of the Company, including their ages, present principal occupations, other business experience during the last five years, memberships on committees of the Board of Directors and directorships in other publicly-held companies. Director Name Age Position with the Company Since ---- --- ------------------------- -------- Ira Glazer 49 Chief Executive Officer Jack H. Castle, Jr. 46 Chairman of the Board 1995 Jack H. Castle, D.D.S. 79 Director 1995 Robert J. Cresci (1)(2) 57 Director 1995 G. Kent Kahle (1) 49 Director 1995 Emmett E. Moore(1) 58 Director 1997 John M. Slack 53 Vice President and Chief Financial Officer ________________________ (1) Member of the Audit Committee. (2) Member of the Compensation Committee. Jack H. Castle, Jr. became a director in December 1995. He was a co-founder of the Company in 1981 and served as Chief Executive Officer from 1990 until February 2001. He became the Company's Chairman in August 1996. Mr. Castle received a B.A. from Rollins College and a Masters of Business Administration from Wake Forest University. Mr. Castle is the son of Jack H. Castle, D.D.S. Jack H. Castle, D.D.S. became a director in December 1995 and served as Chairman of the Company from 1981 until August 1996. He is also the sole owner of Jack H. Castle, D.D.S., P.C., a dental practice managed by the Company (the "Texas PC"). Prior to co-founding the Company, Dr. Castle operated a single location dental practice. Dr. Castle graduated from the University of Houston in 1943 and received a Doctorate of Dental Surgery from the University of Texas Health Science Center in Houston in 1945. He served in the United States Navy from 1947 to 1949. Dr. Castle is the father of Jack H. Castle, Jr. Robert J. Cresci became a director in December 1995. Mr. Cresci has been a Managing Director of Pecks Management Partners Ltd., an investment management firm, since September 1990. Mr. Cresci currently serves on the boards of Sepracor, Inc., Inc., Aviva Petroleum Ltd., Film Roman, Inc., Quest Educational Corporation, Jfax.Com, Inc., Candlewood Hotel Co., Inc., SeraCare, Inc., E-Stamp Corporation and several private companies. G. Kent Kahle became a director in December 1995. He has been a Managing Director of The GulfStar Group, Inc., an investment banking firm, since 1990. From 1982 to 1990 Mr. Kahle held various positions with Rotan Mosle, Inc., most recently as Senior Vice President and Director. Mr. Kahle has a Masters of Business Administration from The Wharton School of the University of Pennsylvania and an A.B. from Brown University. He currently serves on the board of Total Safety Corporation, U.S. Legal Support, Inc, Plassein Packaging Corp. and De-Ro Products, Inc. 2 Emmett E. Moore became a director in September 1997. Since June 1999, Mr. Moore has been Chairman of the Board and Chief Executive Officer of MedEvolve, Inc., a provider of internet-based information technology solutions to physicians' offices. From November 1997 until joining MedEvolve, he was engaged in private consulting and investments related to healthcare. From April 1995 until November 1997, Mr. Moore was the Chairman of the Board and Chief Executive Officer of Physicians Resource Group, Inc., a publicly-traded ophthalmology practice management company. Mr. Moore received B.B.A., J.D. and M.P.A. degrees from the University of Texas, and is a certified public accountant. Executive Officers The Board elects executive officers annually at its first meeting following the annual meeting of stockholders. Information concerning Ira Glazer and John M. Slack is set forth below. Ira Glazer became acting Chief Executive Officer of the Company in February 2001. He is a Senior Vice President of Getzler & Co., a New York-based turnaround specialist. Prior to joining Getzler & Co., Mr. Glazer was with Maidenform Worldwide Inc., where he served as Chief Financial Officer and Chief Operating Officer. Before joining Maidenform, Mr. Getzler spent ten years with Chase Manhattan Bank, where he was a Vice President and Division Executive in middle market lending. Mr. Glazer received a B.B.A. from Pace University in 1974. John M. Slack joined the Company in December 1995 as Vice President and Chief Financial Officer. From November 1994 through November 1995, he served as Vice President and Chief Financial Officer of Team, Inc., a publicly-held environmental services company. From 1985 through August 1994, Mr. Slack was Vice President and Chief Financial Officer of Serv-Tech, Inc., a publicly-held industrial services company. Mr. Slack received a B.S. in international economics from Georgetown University in 1969. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, officers and persons holding more than ten percent of a registered class of the Company's equity securities to file with the SEC and any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted (i) initial reports of ownership, (ii) reports of changes in ownership and (iii) annual reports of ownership of Common Stock and other equity securities of the Company. Such directors, officers and ten-percent stockholders are also required to furnish the Company with copies of all such filed reports. Based solely upon review of the copies of such reports furnished to the Company and written representations that no other reports were required during 2000, the Company believes that all of the Company's executive officers and directors complied with Section 16(a) reporting requirements during 2000. 3 ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following table provides certain summary information concerning compensation earned by the Company's Chief Executive Officer and each of the other executive officers of the Company (the "Named Executive Officers") whose compensation exceeded $100,000 during the year ended December 31, 2000.
Annual Compensation Long-term Compensation --------------------------------------------- ----------------------- Other Annual Restricted Number of All Other Name and Principal Salary Bonus Compensation Stock Awards Options Compensation Position Year ($) ($) ($) ($) Granted ($)(1) ------------------ ---- ------ ----- ------------ ------------ --------- ------------ Jack H. Castle, Jr.(2) 2000 251,790 - - - - 3,365 Chief Executive 1999 249,925 - - - 75,000 3,504 Officer 1998 243,663 - - - 75,000 12,388 G. Daniel Siewert III (2) 2000 202,115 - - - - 12,000 President, 1999 199,929 - - - 75,000 12,000 Chief Operating Officer 1998 199,320 - - - 75,000 12,000 John M. Slack 2000 150,000 - - - - 9,912 Vice President, 1999 144,231 - - - 50,000 7,407 Chief Financial Officer, 1998 142,026 - - - 50,000 - Treasurer and Secretary
(1) Other compensation paid to Mr. Castle, Mr. Siewert and Mr. Slack in 1998, 1999 and 2000 consisted of automobile allowances. (2) Mr. Castle resigned as Chief Executive Officer and Mr. Siewert resigned as President and Chief Operating Officer, each as of February 15, 2001. Stock Options There were no stock options granted to the Named Executive Officers during 2000. Aggregate Option Exercises in 2000 and Year-End 2000 Option Values The following table reflects certain information concerning the number of unexercised options held by the Named Executive Officers and the value of such officers' unexercised options as of December 31, 2000. No options were exercised by the Named Executive Officers during the year ended December 31, 2000.
Number of Value of Unexercised Unexercised Options "In-the-Money" Options at December 31, 2000 at December 31, 2000(1) Shares Acquired Value --------------------------- ---------------------------- Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- ----------- -------- ----------- ------------- ----------- ------------- Jack H. Castle, Jr................... 0 $0 116,250 133,750 $0 $0 G. Daniel Siewert III................ 0 0 126,250 133,750 0 0 John M. Slack........................ 0 0 75,500 74,500 0 0
(1) Options are "in-the-money" if the closing market price of the Company's Common Stock exceeds the exercise price of the options. The exercise price of the options granted to the Named Executive 4 Officers ranges from $2.3125 to $10.00 per share. None of the options granted to the Named Executive Officers were "in-the-money" at December 31, 2000. Compensation Committee Interlocks and Insider Participation In 2000, the members of the Compensation Committee were Elizabeth A. Tilney and Robert J. Cresci. Ms. Tilney resigned from the board of directors in February 2001. Mr. Cresci is a party to certain transactions with the Company. See "Certain Relationships and Related Transactions." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Principal Stockholders The following table sets forth information as of March 31, 2001 with respect to beneficial ownership of the Company's Common Stock by (i) each director, (ii) each executive officer, (iii) the executive officers and directors as a group, and (iv) each person known to the Company who beneficially owns 5% or more of the outstanding shares of its voting securities. Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned.
Number of Percentage Shares of Shares Name and Address of Beneficially Beneficially Beneficial Owner Owned Owned ------------------- ------------ ------------ Jack H. Castle, Jr. (1)(2).......................... 1,444,450 22.2 Jack H. Castle, D.D.S. (2)(3)....................... 974,000 15.2 Loretta Castle (2)(3)............................... 974,000 15.2 Castle Interests, Ltd. (2).......................... 514,000 8.0 1360 Post Oak Boulevard, Suite 1300, Houston, Texas 77056 Pecks Management Partners, Ltd. (4)................. 913,243 14.2 One Rockefeller Plaza, Suite 900 New York, New York 10020 Robert J. Cresci (5)................................ 928,423 14.5 Capital Group International, Inc.................... 625,000 9.7 11100 Santa Monica Blvd., 15th Floor Los Angeles, California 90025 Hathaway & Associates Ltd........................... 449,400 7.0 119 Rowayton Avenue Rowayton Connecticut 06853 Benson Associates, LLC.............................. 400,400 6.2 111 S.W. Fifth Avenue, Suite 2130 Portland, Oregon 97204 G. Kent Kahle (6)................................... 23,750 * John M. Slack (7)................................... 90,000 1.4 Emmett E. Moore (8)................................. 15,000 * All directors and executive officers as a group (8 persons) (9).................................... 2,961,243 44.5%
5 * Less than 1% (1) Includes 714,000 shares held by the Castle 1995 Gift Trust f/b/o Jack H. Castle, Jr., of which Mr. Castle is Trustee. Includes options to acquire 116,250 shares of Common Stock issued under the Castle Dental Centers, Inc. Omnibus Stock and Incentive Plan (the "Plan") which are exercisable within 60 days. Excludes options to acquire 133,750 shares of Common Stock which are not exercisable within 60 days. (2) Includes 514,000 shares of Common Stock owned of record by Castle Interest, Ltd., a Texas limited partnership of which Jack H. Castle, D.D.S., Loretta Castle and Jack H. Castle, Jr. are the three general partners. The general partners of Castle Interests, Ltd. cannot act to vote or dispose of shares of Common Stock held by Castle Interests, Ltd. without the unanimous vote of all of the general partners. Loretta Castle is the wife of Jack H. Castle, D.D.S. and the mother of Jack H. Castle, Jr. (3) Includes 103,000 shares of Common Stock owned jointly by Jack H. Castle, D.D.S. and Loretta Castle. (4) Includes 615,033, 121,708, and 176,502 shares of Common Stock owned of record by Delaware State Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. and Declaration of Trust for Defined Benefit Plans of Zeneca Holdings Inc., respectively (the "Pecks Investors"). Pecks Management Partners Ltd. ("Pecks"), as investment manager for the Pecks Investors, has sole investment and voting power with respect to such shares. Mr. Cresci, a director of the Company, is a Managing Director of Pecks. Pecks disclaims beneficial ownership of such shares. (5) Includes all shares deemed to be beneficially owned by Pecks, of which Mr. Cresci is a Managing Director. As a result, Mr. Cresci may be deemed to share voting and investment power with respect to such shares. Mr. Cresci disclaims beneficial ownership of such shares. See note 4 above. Also includes options to acquire 15,000 shares of Common Stock under the Directors' Plan which are exercisable within 60 days. Excludes options to acquire 10,000 shares of Common Stock which are not exercisable within 60 days. (6) Includes options to acquire 17,500 shares of Common Stock under the Directors' Plan which are exercisable within 60 days. Excludes options to acquire 15,000 shares of Common Stock which are not exercisable within 60 days. (7) Includes options to acquire 75,500 shares of Common Stock issued under the Plan which are exercisable within 60 days. Excludes options to acquire 74,500 shares of Common Stock which are not exercisable within 60 days. (8) Includes options to acquire 15,000 shares of Common Stock issued under the Plan which are exercisable within 60 days. Excludes options to acquire 10,000 shares of Common Stock which are not exercisable within 60 days. (9) Includes (i) 714,000 shares of Common Stock held by the Castle 1995 Gift Trust f/b/o Jack H. Castle, Jr., (ii) 514,000 shares of Common Stock held by Castle Interests, Ltd. and (iii) 913,243 shares of Common Stock beneficially owned by the Pecks Investors. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Mr. Kahle, a director of the Company, is a Managing Director of The GulfStar Group, Inc., which has provided investment banking and advisory services to the Company. The Company has paid The GulfStar 6 Group, Inc. for investment banking and financial advisory services provided to the Company in connection with certain acquisitions. In 1998, The GulfStar Group, Inc. received a $183,332 advisory fee in connection with the acquisition of Dental Consulting Services, LLC. The directors of the Company other than Mr. Kahle approve the payments made to The GulfStar Group, Inc. by the Company. At December 31, 2000, Jack H. Castle, Jr., the Company's Chief Executive Officer, G. Daniel Siewert, the Company's President and Chief Operating Officer, and John M. Slack, Vice-President and Chief Financial Officer, had outstanding loans in the aggregate amount of $307,000 from the Company. These loans are repayable over varying periods ranging from one to five years and bear interest at rates ranging from zero to six percent. Mr. Cresci, a director of the Company, is a Managing Director of Pecks Management Partners Ltd., the investment advisor to the Pecks Investors, which owns 948,243 shares of Common Stock. Pursuant to the provisions of the Stockholders Agreement between the Company, Pecks Management Partners Ltd. and certain members of Jack H. Castle, Jr.'s family, for so long as certain ownership thresholds with respect to the Common Stock are maintained, the other shareholders party to such agreement are obligated to vote their shares of Common Stock in favor of the designee of the Pecks Investors to be a member of the Company's board of directors and Mr. Cresci is currently such nominee. In December 1995, the Company acquired all of the stock of Jack H. Castle, D.D.S., Inc., a professional corporation of which Jack H. Castle, D.D.S., a director of the Company, was the sole owner. In connection with that transaction, the Company paid Jack H. Castle, D.D.S. $6.0 million in cash and entered into a Deferred Compensation Agreement with Jack H. Castle, D.D.S. pursuant to which the Company has agreed to pay Jack H. Castle, D.D.S. $2.6 million in 20 quarterly installments of $131,500 beginning March 1996 and ending in December 2000. In connection with the purchase of the stock of Jack H. Castle, D.D.S., Inc., the Company also entered into a management services agreement with Jack H. Castle, D.D.S., P.C., a professional corporation of which Jack H. Castle, D.D.S. is the sole owner. Pursuant to the management services agreement, Jack H. Castle, D.D.S., P.C. receives an annual payment of $100,000 for services performed in connection therewith. The professional corporation employs or contracts with all of the dental professionals practicing at the Company's dental offices in Texas under the Management Agreement. The Company provides the professional corporation with, among other things, equipment, supplies, support services, non-dental personnel, office space, management, administration, financial record keeping and reporting services. The Management Agreement is for a term of 25 years, with automatic renewal thereafter. The Company receives a management fee under the Management Agreement with Jack H. Castle, D.D.S., P.C. equal to the Company's costs plus a base management fee and a performance fee. The base management fee is equal to 12.5% of adjusted gross revenues and the performance fee is equal to the professional corporation's net income after payment of all other fees and expenses. The Company's costs include all direct and indirect costs, overhead and expenses relating to the Company's provision of services to the professional corporation under the Management Agreement. In addition to the Management Agreement with Jack H. Castle, D.D.S., P.C., the Company has a contractual right to designate or approve the licensed dentist or dentists who own the professional corporation's capital stock in the event Jack H. Castle, D.D.S. ceases to be affiliated with the Company for any reason. The Company is party to a lease agreement with Goforth, Inc., a company owned by Jack H. Castle, Jr., the Company's Chairman and Chief Executive Officer. The lease agreement relates to the Castle Dental Center located at 2101 West Loop South in Houston, Texas, a 6,781 square foot free-standing building. The Company has agreed to pay Goforth, Inc. a minimum guaranteed rental of $12,000 per month through January 2001 and $13,200 per month from January 2001 through January 2006. The Company has also agreed to pay 7 additional rent of approximately $1,600 per month for insurance, taxes and common area maintenance. The Company believes that this lease agreement is on terms no less favorable to the Company than could have been obtained with an independent third party. Pursuant to a Registration Rights Agreement dated as of December 18, 1995, as amended, the Pecks Investors and certain members of Jack H. Castle, Jr.'s family have been granted certain registration rights by the Company with respect to the shares of Common Stock owned by them. 8 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K/A-1 to be signed on its behalf by the undersigned, thereunto duly authorized, on this 30th day of April, 2001. CASTLE DENTAL CENTERS, INC. By: /s/ JOHN M. SLACK ------------------------------------------ John M. Slack Vice President and Chief Financial Officer Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K/A-1 has been signed below by the following persons in the capacities indicated below on this 30th day of April, 2001. Signature Title --------- ----- /s/ JACK H. CASTLE, JR.* Chairman of the Board ------------------------------------------- Jack H. Castle, Jr. /s/ IRA GLAZER* Chief Executive Officer ------------------------------------------- (Principal Executive Officer) Ira Glazer /s/ JOHN M. SLACK* Vice President and ------------------------------------------- Chief Financial Officer John M. Slack (Principal Financial and Accounting Officer) /s/ JACK H. CASTLE, D.D.S.* Director ------------------------------------------- Jack H. Castle, D.D.S. /s/ ROBERT J. CRESCI* Director ------------------------------------------- Robert J. Cresci /s/ G. KENT KAHLE* Director ------------------------------------------- G. Kent Kahle /s/ EMMETT E. MOORE* Director ------------------------------------------- Emmett E. Moore *By: /s/ JOHN M. SLACK ------------------------------------------- John M. Slack, Attorney-in-Fact 9