-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RpQkq9nPakGyh5XWSfqzXc+4MdFDvcD3AFMriIVZSdZMRgXqh/ChDWjMer5MYIOJ 1UCqgElEFrp2XYhhIb4mYA== 0000950116-97-000827.txt : 19970508 0000950116-97-000827.hdr.sgml : 19970508 ACCESSION NUMBER: 0000950116-97-000827 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970501 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCO GROUP INC CENTRAL INDEX KEY: 0001022608 STANDARD INDUSTRIAL CLASSIFICATION: 7320 IRS NUMBER: 232858652 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21639 FILM NUMBER: 97592707 BUSINESS ADDRESS: STREET 1: 1740 WALTON RD CITY: BLUE BELL STATE: PA ZIP: 19422-0987 BUSINESS PHONE: 6108321440 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year ended December 31, 1996 ------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________ to ___________ Commission File No. 0-21639 ------- NCO GROUP, INC. - - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Pennsylvania 23-2858652 - - ------------------------------- --------------------------------- (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 1740 Walton Road Blue Bell Pennsylvania 19422-0987 ---------------------- ---------- (Address of principal (Zip Code) executive offices) Registrant's Telephone Number, Including Area Code (610) 832-1440 -------------- Securities Registered Pursuant to Section 12(b) of the Act: None ---- Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, no par value 7,058,625 - - -------------------------- ----------------------------- (Title of Class) (Number of Shares Outstanding as of March 27, 1997) Indicate by check mark whether the Registrant (i) 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 (ii) 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 the 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. [ ] The aggregate market value of voting stock held by non-affiliates of the Registrant is $80,052,177. (1) Documents incorporated by reference are listed in the Exhibit Index. - - ----------------- (1) The aggregate dollar amount of the voting stock set forth equals the number of shares of the Company's Common Stock outstanding, reduced by the amount of Common Stock held by officers, directors and shareholders owning 10% or more of the Company's Common Stock, multiplied by $24.875, the last reported sale price for the Company's Common Stock on March 27, 1997. The information provided shall in no way be construed as an admission that any officer, director or 10% shareholder in the Company may be deemed an affiliate of the Company or that he is the beneficial owner of the shares reported as being held by him, and any such inference is hereby disclaimed. The information provided herein is included solely for recordkeeping purposes of the Securities and Exchange Commission. In accordance with instruction G(3) to Form 10-K, NCO Group, Inc. ("NCO" or the "Company") is amending its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1997 to provide information required in Part III. TABLE OF CONTENTS Page ---- PART III Item 10. Directors and Executive Officers of the Registrant...............1 Item 11. Executive Compensation...........................................3 Item 12. Security Ownership of Certain Beneficial Owners and Management...6 Item 13. Certain Relationships and Related Transactions...................7 Signatures.......................................................9 PART III Item 10. Directors and Executive Officers of the Registrant. The following table sets forth information concerning the Company's directors. Information concerning the Company's executive officers who are not directors is set forth in Item 4.1 of the Annual Report on Form 10-K previously filed.
Director Name Age Position Since ---- --- -------- ------ Michael J. Barrist 35 Chairman of the Board, President and Chief Executive 1986 Officer Charles C. Piola, Jr. 49 Executive Vice President and Director 1986 Bernard R. Miller 49 Senior Vice President, Development and Director 1996 Eric S. Siegel 40 Director 1996 Allen F. Wise 54 Director 1996
The following information about the Company's directors is based, in part, upon information supplied by such persons. Michael J. Barrist has served as Chairman of the Board, President and Chief Executive Officer of the Company since purchasing the Company in 1986. Mr. Barrist was employed by U.S. Healthcare Inc. from 1984 to 1986, most recently as Vice President of Operations, and was employed by Gross & Company, a certified public accounting firm, from 1980 through 1984. Mr. Barrist is a certified public accountant. Charles C. Piola, Jr. joined the Company in 1986 as Executive Vice President, Sales and Marketing and has served as a director since that time. Prior to joining NCO, Mr. Piola was the Regional Sales Manager for Trans World Systems from 1983 to 1986 and IC Systems from 1979 to 1981, both accounts receivable management companies. Bernard R. Miller joined the Company as Senior Vice President of Development in 1994 when NCO acquired B. Richard Miller, Inc. ("BRM"), a Philadelphia-based accounts receivable management company owned principally by Mr. Miller. Mr. Miller became a director in 1996. Prior to joining the Company, Mr. Miller served as President and Chief Executive Officer of BRM since he founded it in 1980. Eric S. Siegel was appointed to the Board of Directors of the Company in December 1996. Mr. Siegel has been president of Siegel Management Company, a management consulting firm, since 1983. Mr. Siegel also is an adjunct faculty member at the Wharton School of the University of Pennsylvania and is co-author of The Ernst & Young Business Plan Guide. Allen F. Wise was appointed to the Board of Directors of the Company in December 1996. Mr. Wise has been a director and Chief Executive Officer of Coventry Corporation, a managed care company, since October 1996. Prior thereto, he was Executive Vice President of United Healthcare Corporation since October 1994, President of Wise Health Systems, a healthcare management company, from September 1993 to October 1994, Chief Executive Officer of Keystone Health Plan and Chief Operating Officer of Independence Blue Cross from September 1991 to September 1993 and Vice President of US Healthcare, Inc. from April 1985 to September 1991. Mr. Wise is also a director of Transition Systems Inc. Board Reorganization Following completion of the Company's initial public offering in the fourth quarter of 1996, the Board of Directors was reorganized by increasing the number of directors from three to five, appointing Eric S. Siegel and Allen F. Wise as outside directors to fill the vacancies created by the increase and dividing the Board into three classes. Class I consists of Mr. Michael J. Barrist, whose term will expire at the 1997 annual meeting of shareholders; Class II consists of Messrs. Bernard R. Miller and Allen F. Wise, whose terms will expire at the 1998 annual meeting of shareholders; and Class III consists of Messrs. Charles C. Piola and Eric S. Siegel, whose terms will expire at the 1999 annual meeting of shareholders. Beginning with the 1997 annual meeting of shareholders, directors whose terms are expiring will be elected by the shareholders to serve for three year terms. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers, directors and persons who beneficially own more than ten percent of a registered class of the Company's Common Stock to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Executive officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms 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 the Company's executive officers, directors and greater than ten percent beneficial shareholders were complied with during the year ended December 31, 1996 except that Mr. Miller filed one late report on Form 4. -2- Item 11. Executive Compensation. Summary Compensation Table The following table sets forth the Compensation earned by the Chief Executive Officer and the four next most highly compensated executive officers of the Company whose aggregate salaries and bonuses exceeded $100,000 for services rendered in all capacities to the Company during 1996.
Long-Term Compensation Awards (1) Annual Compensation ---------- ------------------- Securities Name and Underlying All Other Principal Position Year Salary($) Bonus($) Options (#) Compensation($)(2) ------------------ ---- --------- -------- ----------- ------------------ Michael J. Barrist Chairman of the Board, 1996 208,653 53,862(3) -- 5,957 President and Chief Executive Officer 1995 200,000 242,641 -- 5,993 Charles C. Piola, Jr. 1996 202,884 33,333(3) -- 16,413 Executive Vice President and Director 1995 200,000 135,714 -- 15,835 Bernard R. Miller 1996 136,730 26,448(3) 50,000 7,926 Senior Vice President, Development 1995 130,000 21,645 -- 5,955 Steven L. Winokur, Vice President, 1996 149,422 35,000 31,201 -- Finance and Chief Financial Officer 1995 -- -- 33,257 -- Joseph C. McGowan 1996 117,000 18,000 41,600 3,664 Vice President, Operations 1995 100,000 30,000 44,344 5,088
- - -------------------- (1) The Company did not grant any restricted stock awards or stock appreciation rights during 1996. (2) For 1996, consists of premiums for disability policies paid by the Company of $3,582, $14,038, $6,217, $-0-, and $1,989 and the Company matching contribution under the 401(k) Profit Sharing Plan of $2,375, $2,375, $1,709, $-0- and $1,675 for the benefit of Messrs. Barrist, Piola, Miller, Winokur and McGowan, respectively. (3) These bonus amounts represent the bonuses earned by the respective officers from September 3, 1996, the date of the Company's termination of its status as an S Corporation, until December 31, 1996. The total bonus amounts for 1996 for Mr. Barrist, Mr. Piola and Mr. Miller would have been $161,587, $100,000 and $79,343, respectively. Option Grants in 1996 The following table sets forth certain information concerning stock options granted during 1996 to each of the executive officers of the Company named in the Summary Compensation Table. -3-
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term (1) ------------------------------------------------------ ----------------------------- Percent of Number of Total Securities Options Underlying Granted to Exercise Options Employees in Price Per Expiration Name Granted Fiscal Year Share Date 5% 10% ---- --------- ------------ ------- ------ --------- ---------- Michael J. Barrist -- -- -- -- -- -- Charles C. Piola, Jr. -- -- -- -- -- -- Bernard R. Miller 50,000(2) 17.1% $ 17.00 12/18/06 $534,560 $1,354,681 Steven L. Winokur 31,201(3) 10.6% 13.00 10/17/06 255,088 646,443 Joseph C. McGowan 41,600(3) 14.2% 13.00 10/17/06 340,106 861,896
(1) Represents the difference between the market value of the Common Stock for which the option may be exercised, assuming that the market value of the Common Stock on the date of grant appreciates in value to the end of the ten-year option term at annualized rates of 5% and 10%, respectively, and the exercise price of the option. The rates of appreciation used in this table are prescribed by regulation of the SEC and are not intended to forecast future appreciation of the market value of the Common Stock. (2) These options were granted on 12/18/96 at the fair market value of the Common Stock on the date of grant and become exercisable in three equal annual installments beginning one year after the date of grant. (3) The options were granted on 10/17/96 at the initial public offering price of the Common Stock and become exercisable in three equal annual installments beginning one year after the date of grant. Aggregated Option Exercises in 1996 and 1996 Year-End Option Values No stock options were exercised in 1996. The following table sets forth certain information concerning the number of unexercised options and the value of unexercised options at December 31, 1996 held by each of the executive officers of the Company named in the Summary Compensation Table. -4-
Number of Securities Underlying Value of Unexercised Unexercised Options at In-the-Money Options at Shares Acquired Value December 31, 1996 December 31, 1996(1) Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable ---- ----------- -------- ------------------------- ------------------------- Michael J. Barrist -- -- --/-- --/-- Charles C. Piola, Jr. -- -- --/-- --/-- Bernard R. Miller -- -- --/50,000 --/$0 Steven L. Winokur -- -- 11,086/53,373 $156,811/$434,513 Joseph C. McGowan -- -- 14,781/71,163 $209,077/$579,369
- - ------------------- (1) Represents the difference between the last sale price of the Common Stock on December 31, 1996 ($16.875 per share), as reported on the Nasdaq National Market, and the exercise price of in-the-money options, multiplied by the number of exercisable or unexercisable options held, as the case may be. Employment Agreements In September 1996, the Company entered into five-year employment agreements with Messrs. Barrist, Piola, Miller, Winokur and McGowan pursuant to which they are entitled to receive annual base salaries of $275,000, $225,000, $150,000, $150,000, and $125,000, respectively, adjusted each year in accordance with the Consumer Price Index. Mr. Barrist is entitled to receive an annual bonus of $50,000 if the Company reaches performance goals determined by the Board of Directors. He is also entitled to a bonus of $100,000 if the Company's net income increases by 20% over the prior year and a bonus equal to 5% of any increase in net income in excess of 20%, in each case adjusted for dilution. Mr. Piola is eligible for an annual bonus of $50,000, $75,000, or $100,000 if the Company's annual increase in net income (adjusted for dilution) over the prior year exceeds 20%, 30%, or 40%, respectively. Mr. Miller is entitled to a bonus equal to .00375 of the annualized revenue resulting from companies acquired during the preceding year, subject to a maximum bonus of $100,000. Messrs. Winokur and McGowan receive such annual bonuses as are determined by the Board of Directors. Each of the employment agreements provides that, in the event of the death of the employee or the termination of employment by the Company other than "for cause" (as defined in the agreements), the Company shall continue to pay the employee's full compensation, including bonuses, for the balance of the employment term. In addition to a non-disclosure covenant, each employee agreement also contains a covenant-not-to compete with the Company for a period of two years following the date that the Company ceases to pay the employee any compensation pursuant to the terms of the agreement. Director Compensation Each director of the Company who is not also an employee receives an annual fee of $5,000 and a fee of $500 for each meeting of the Board or any committee of the Board attended, plus reimbursement of expenses incurred in attending meetings. Pursuant to the Company's 1996 Non-Employee Director Stock Option Plan which was approved by the shareholders in September of 1996 (the "Director Plan"), each person who is not an employee of the Company is automatically granted an option to purchase 1,000 shares of Common Stock upon their initial election or appointment to the Board at the fair market value of the Common Stock on the date of the grant. Immediately after the 1997 Annual Meeting of Shareholders and at each annual meeting of shareholders thereafter, each individual who is re-elected or continues as a non-employee director automatically is granted an option to purchase 1,000 shares of Common Stock at the fair market value of the Common Stock on the date of the grant. The Director Plan authorizes the issuance of options to purchase an aggregate of 24,258 shares of Common Stock. The Director Plan was amended in April 1996, subject to shareholder approval, to increase the initial option grant to 10,000 shares of Common Stock and the annual option grant to 2,000 shares of Common Stock and to increase the number of shares authorized to be issued under the Director Plan to 100,000 shares. All options are exercisable immediately and, unless terminated earlier by the terms of the Director Plan, expire ten years after the date of grant. -5- Item 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth as of the April 30, 1997, certain information regarding the beneficial ownership of the Common Stock by: (i) each person known by the Company to own beneficially more than five percent of the outstanding Common Stock; (ii) each of the Company's directors; (iii) each of the executive officers of the Company named in the Summary Compensation Table; and (iv) the Company's directors and executive officers as a group. Except as otherwise indicated, to the knowledge of the Company, the beneficial owners of the Common Stock listed below have sole investment and voting power with respect to such shares. Shares Beneficially Owned(1) ---------------------------------- Name of Beneficial Owner Number Percent -------------- ------------- Michael J. Barrist (2)(3) 2,302,650 32.6% CRW Financial, Inc. (4) 595,178 8.1 Joseph C. McGowan(5) 29,563 * Bernard R. Miller 191,934 2.7 Charles C. Piola, Jr.(2)(6) 1,062,827 15.1 Eric S. Siegel 2,000 * Steven L. Winokur (7) 162,689 2.3 Allen F. Wise -- * All directors and executive officers as a group (8 persons)(8) 3,751,663 52.8 - - -------------------- *Less than one percent. (1) The securities "beneficially owned" by a person are determined in accordance with the definition of "beneficial ownership" set forth in the regulations of the Securities and Exchange Commission and, accordingly, include securities owned by or for the spouse, children or certain other relatives of such person as well as other securities as to which the person has or shares voting or investment power or has the right to acquire within 60 days after the Record Date. The same shares may be beneficially owned by more than one person. Beneficial ownership may be disclaimed as to certain of the securities. (2) The address of such person is c/o NCO Group, Inc., 1740 Walton Road, Blue Bell, Pennsylvania 19422-0987. (3) Includes: (i) 231,501 shares of Common Stock owned by Mrs. Annette Barrist which Mr. Barrist has the sole right to vote pursuant to an irrevocable proxy and (ii) 60,192 shares held in trust for the benefit of members of Mrs. Annette Barrist's family for which Mr. Barrist is a co-trustee. Excludes 140,518 shares held in trust for the benefit of Mr. Barrist's child, as to which Mr. Barrist disclaims beneficial ownership. Mrs. Annette Barrist is the mother of Michael J. Barrist. (4) Based upon a Schedule 13D, dated February 12, 1997, provided to the Company by CRW Financial, Inc. Includes 250,000 shares issuable upon exercise of a warrant. The address of CRW Financial, Inc. is 443 South Gulph Road, King of Prussia, PA 19406. (5) Represents shares issuable upon the exercise of options which are exercisable within 60 days of April 30, 1997. -6- (6) Excludes 140,518 shares held in trust for the benefit of Mr. Piola's children, as to which Mr. Piola disclaims beneficial ownership. (7) Includes: (i) 140,518 shares held in trust for the benefit of Mr. Barrist's child for which Mr. Winokur is a co-trustee; and (ii) 22,171 shares issuable upon the exercise of options which are exercisable within 60 days of the Record Date. (8) Includes: (i) 231,501 shares of Common Stock owned by Mrs. Barrist which Mr. Barrist has the sole right to vote pursuant to an irrevocable proxy, (ii) 60,192 shares held in trust for the benefit of members of Mrs. Barrist's family for which Mr. Barrist is a co-trustee, (iii) 140,518 shares held in trust for the benefit of Mr. Barrist's child for which Mr. Winokur is a co-trustee and (iv) an aggregate of 51,734 shares issuable upon exercise of options which are exercisable within 60 days of April 30, 1996. Excludes 140,518 shares held in trust for the benefit of Mr. Piola's children. Item 13. Certain Relationships and Related Transactions. Real Estate Matters The Company currently leases four facilities in Blue Bell, Pennsylvania. These facilities are leased from limited partnerships, in each case the general partner of which is a corporation with Mr. Barrist as the sole shareholder and the limited partners of which are the current shareholders of the Company except that, in certain partnerships, an unaffiliated person is also a limited partner. The leases for the four facilities provide for terms expiring between 1998 and 2005. Under the facilities leases, the Company paid the limited partnerships controlled by the Company's current shareholders approximately $489,926 for the year ended December 31, 1996. At one of the facilities, the Company has sublet the space to an affiliate of the limited partnership owning the facility for a monthly rent of $1,454, which is equal to the monthly rent paid by the Company. While the Company believes that the terms of the leases are no less favorable to the Company than would have been obtained by unaffiliated parties, there can be no assurance that conflicts of interest will not arise in the future with respect to these leases. Any material transactions that may arise in the future with respect to these leases or any other future material transactions between the Company and its directors, executive officers or principal shareholders will be subject to approval by the Company's independent directors and will be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. The Company made interest-free advances to the limited partnerships for the purpose of making improvements to these facilities. The largest aggregate amount of indebtedness outstanding during 1996 was $249,820 which was repaid in June 1996. S Corporation Distributions On September 3, 1996 (the "Termination Date"), the Company terminated its status as an S Corporation. In connection therewith, the Company declared a distribution to the then existing shareholders in an amount equal to the Company's undistributed S Corporation earnings as of such date, and paid such distributions with a portion of the proceeds of its initial public offering, including distributions of $1,815,042, $1,015,193 and $170,508 to Messrs. Barrist, Piola and Miller, respectively. -7- Distribution and Tax Indemnification Agreement In 1996, the Company entered into a distribution and tax indemnification agreement with its shareholders as of the Termination Date which provided for: (i) the payment of the estimated S Corporation distribution described above, (ii) the adjustment of the S Corporation distributions based on the final determination of the Company's actual undistributed S Corporation earnings through the Termination Date, (iii) an indemnification by the Company of the current shareholders for any losses or liabilities with respect to any additional taxes (including interest, penalties, legal and accounting fees and any additional taxes resulting from any indemnification) resulting from the Company's operations during the period in which it was an S Corporation (the "S Corporation Period") and (iv) an indemnification by the shareholders as of the Termination Date of the Company for the amount of any tax refund received by such shareholders due to a reduction in their share of the Company's S Corporation taxable income for the S Corporation Period less any taxes, interest or penalties imposed by any tax authority on any distributions to such shareholders with respect to the S Corporation Period in excess of such shareholder's share of taxable income of the Company for the S Corporation Period. Loan to Bernard R. Miller In 1995, the Company loaned $135,888 to Bernard R. Miller at an interest rate of 7.0% per year to enable him to exercise an option to purchase 86,881 shares of Common Stock, which option was issued to him in connection with the acquisition of BRM, a company which has principally owned by Mr. Miller. This loan was repaid in May 1996. Professional Services The Company paid consulting fees of $40,000 to Siegel Management Company for 1996. The Company also paid a fee to Siegel Management Company of $240,000 after the consummation of its initial public offering in November, 1996 for various consulting and advisory services rendered to the Company in connection with such public offering. Eric S. Siegel is a director of the Company and is the President and owner of Siegel Management Company. In 1996, Mr. Siegel received options to purchase 11,086 shares of Common Stock under the Company's 1995 Stock Option Plan at an exercise price of $13.00 per share. -8- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized. NCO GROUP, INC. Date: April 30, 1997 By: /s/ Michael J. Barrist ------------------------------------------ Michael J. Barrist, Chairman of the Board, President and Chief Executive Officer -9- -----END PRIVACY-ENHANCED MESSAGE-----