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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
COMMISSION FILE NUMBER: 0-18192
MEGAMATION INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3372947
(State of incorporation or organization) (IRS Employer Identification No.)
51 Everett Drive, Building B#4 Lawrenceville, NJ 08648
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 609-799-7711
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value per Share
(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 and (2) has been subject to such filing
requirements for the past 90 days: [X] Yes [ ] No
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the average of the Bid and Asked price of the common
Stock on July 31, 1995, as reported by the Over-the-Counter Bulletin Board, was
approximately $1,471,800, (assuming, but not admitting for any purpose, that all
directors and executive officers of the registrant are affiliates).
The number of shares of Common Stock, $0.01 par value, issued and
outstanding as of July 31, 1995 was: 14,358,666.
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]
Page 1 of 10
There are no Exhibits
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PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information as of October 1, 1995,
concerning the directors and executive officers of the Company. Directors hold
office from the date of their election until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers
serve at the pleasure of the Board of Directors.
Date First Became A
Name Title Age Director or Officer
- ---- ----- --- -------------------
Tristram C. Colket Jr./(1)/ Director and Chairman 57 November 1992
of the Board
Max Cooper/(1)/ Director 79 November 1992
Gerald W. Klein President and CEO, 47 November 1994 (officer)
Treasurer and CFO; May 1995 (director)
Director
Richard J. Kornblum Vice President and 51 January 1995
Chief Operating Officer; May 1995 Director
Director
Alan R. Leiderman* Director 37 May 1986
Thomas W. Murphy Controller and Chief 37 February 1995
Accounting Officer;
Secretary
Thomas D. Schmidt Vice President 42 June 1990
* Pursuant to the policies of his employer prohibiting certain employees from
acting as directors of publicly traded companies, Mr. Leiderman will cease
serving as a director of the Company as of November 1, 1995.
The principal occupations of each named officer and nominee for director
for at least the past five years are as follows:
Tristram C. Colket, Jr. Mr. Colket has served as a Director of the Company
and Chairman of the Board since November 1992. Mr. Colket is a private investor
doing business as Tekloc Enterprises since 1984. He has been the Chairman of the
Board of Cressona Aluminum Company since 1979, and is also a member of various
other Boards of Directors including The Children's Hospital of Philadelphia, the
Aircraft Owners and Pilots Association, and the QLF Foundation.
Max Cooper. Mr. Cooper has served as a Director of the Company since
November 1992. Mr. Cooper is the Chairman of the Board of CLP, Inc., a
franchisee of McDonald's Corporation, which currently controls 37 restaurants.
Mr. Cooper started CLP, Inc. in 1966. He is also a member of the National
Operators Advisory Board, a franchisee organization which supervises the
national co-op advertising expenditures of McDonald's
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/1/Members of the Compensation Committee
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USA. Mr. Cooper is also a general partner in Cooper Investments, whose primary
investment is in Megamation Inc.
Gerald W. Klein. Mr. Klein joined the Company in November 1994 as Vice
President and Chief Financial Officer. On May 5, 1995 Mr. Klein was elected
President and Chief Executive Officer, Treasurer and Chief Financial Officer and
a director of the Company. From January 1993 to November 1994 he was the
President and Chief Executive Officer of PricePoint, Inc., a development stage
company that provided electronic pricing systems primarily to supermarkets. From
August 1991 to December 1992 he was President and Chief Operating Officer of
Pricelink, a predecessor company to PricePoint. From April 1986 to July 1991 he
served as President and Chief Operating Officer of Checkpoint Systems, Inc., a
manufacturer and supplier of electronic article merchandising and access control
systems to retailers. Mr. Klein is a director of Rom Tech, Inc., a reseller and
publisher of multimedia software on CD-ROM discs.
Richard J. Kornblum. Mr. Kornblum joined the Company in January 1995 as
Vice President and Chief Operating Officer. On May 5, 1995 Mr. Kornblum was
elected a director of the Company. From 1991-1994 he was Vice President of
Technology for the Measurement and Control Division of Betz Laboratories. From
1988-1991 he was an independent consultant for Venture Capitalists in the
greater Boston area, including acting as Chief Operating Officer for Transtrack,
a venture backed startup. From 1984-1989 he was Vice President of Engineering
and Systems Integration for the Foxboro Company, a Fortune 500 supplier of
Process Automation Systems.
Alan R. Leiderman. Mr. Leiderman served as Secretary of the Company from
May 1986 to October 1995 and has served as a Director of the Company since May
1986. From July 1992 through December 1994, he was a Senior Vice President of
Mabon Securities, Inc., a securities broker/dealer. From September 1989 until
July 1992, he was an institutional bond salesman for the same firm. Since March
1995 Mr. Leiderman has been Senior Vice President and Director of Mortgage
Securities Trading and Sales with Oppenheimer & Co.
Thomas W. Murphy. Mr. Murphy joined the Company in January 1995 as
Controller and Chief Accounting Officer. On October 1, 1995 he became Secretary
of the Company. From 1993 through 1994 he was the Accounting Manager for
Ohmicron Inc., a manufacturer of analytical test kits able to detect small
levels of various toxins in water, soil and food. From 1990 through 1992 he was
the Accounting Manager for Checkpoint Systems Inc., a manufacturer and supplier
of electronic article merchandising and access control systems to retailers.
Thomas D. Schmidt. Mr. Schmidt joined the Company in June 1990 as Senior
Vice President-Marketing/Sales. In July, 1992, he was named Chief Executive
Officer, and appointed to the Board of Directors. In April 1991, he was
appointed President and Chief Operating Officer. In April 1995 Mr. Schmidt
became Vice President - Sales. From October 1989 to June 1990, he served as the
Vice President for automotive operations with Motoman Inc., a robotics
manufacturer. Prior to serving in such capacity, from June 1989 to October 1989
he was Vice President of Motoman Inc.'s welding and joining system group.
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Compliance with Section 16(a) of the Securities Exchange Act of 1939
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Based solely on a review of Forms 3 and 4 (and amendments thereto)
furnished to the Company during its fiscal year ended June 30, 1995, and certain
written representations received by it, the Company is not aware of any person
who, during the prior fiscal year, was an officer or director of the Company or
the beneficial owner of more than 10% of its outstanding Preferred Stock or
Common Stock, and who, during the prior or previous fiscal years, failed to file
on a timely basis reports as required by Section 16(a) of the Securities
Exchange Act of 1934.
Item 11. Executive Compensation
The following table sets forth as to the person who served as the chief
executive officer of the Company during the year ended June 30, 1995, and as to
certain other Executive Officers, all compensation earned, awarded, or paid
during the fiscal years ended June 30, 1995, 1994, and 1993.
Annual Long Term
Compensation Compensation
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Awards
-------
Name and Fiscal Options/
Positions Held Year Salary(1) Bonus SARs(#)(2)
- -------------- ------ --------- ----- ----------
Gerald W. Klein
President and 1995 $ 63,750 -- 1,015,538(3)
Treasurer 1994 N/A
1993 N/A
Richard J. Kornblum
Vice President 1995 $ 53,250 -- 1,015,538(3)
1994 N/A
1993 N/A
Thomas D. Schmidt
President/Vice
President 1995 $100,000 -- 1,015,538(3)
President 1994 $ 90,833 --
President 1993 $113,167 -- 800,000
(1) Salaries for Mr. Klein and Mr. Kornblum are from their respective
dates of hire. Mr. Klein and Mr. Kornblum are currently receiving salary
at the rate of $120,000 per annum.
(2) Represents options to purchase Common Stock.
(3) Represents options granted subject to stockholder approval of the 1995
Incentive and Non-Qualified Stock Option Plan ("1995 Plan"). See
"Options/SAR Grants in Last Fiscal Year" below for information concerning
the terms of these options.
Registration Rights
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On September 4, 1992, the Company entered into a Registration Rights
Agreement with Max Cooper, Cooper Investments, a partnership controlled by Mr.
Cooper and Tristram C. Colket, Jr. pursuant to which the Company agreed, at its
expense, to register for sale under the Securities Act of 1993, up to all of the
shares of Common Stock currently owned in the aggregate by them upon demand
given before September 4, 1997 by holders of at least 50% of the shares. The
obligation of the Company is conditioned upon
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the shares to be registered having a market value of at least $5,000,000 and
upon certain other matters. The Company is only obligated to honor one demand
for registration. The agreement also grants certain rights to include shares of
Common Stock in registered offerings of shares which the Company proposes to
make.
Indemnification
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The Company's Certificate of Incorporation includes a provision that
eliminates or limits the personal financial liability of the Company's
directors, except in situations where there has been a breach of the duty of
loyalty, a failure to act in good faith, intentional misconduct or a knowing
violation of the law. In addition, the Company's By-laws include provisions to
indemnify its officers and directors and other persons against expenses,
judgments, fines and amounts paid in settlement in connection with threatened,
pending or completed suits or proceedings against such persons by reason of
serving or having served as officers, directors or in other capacities, except
in relation to matters with respect to which such persons shall be determined to
have acted not in good faith, unlawfully or not in the best interests of the
Company. With respect to matters as to which the Company's officers and
directors are determined to be liable for misconduct or negligence in the
performance of their duties, the Company's By-laws provide for indemnification
only to the extent that the Company determines that such person acted in good
faith and in a manner not opposed to the best interests of the Company.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value
Percent of at Assumed Annual Rates
Total Exercise of Stock Price
Options/SAR's or Appreciation For
Granted to Base Option Term
Employees in Price Expiration -----------------------
Name Granted(#)(1) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ---- ------------- ------------- -------- ----------- -- ---
Gerald W. Klein 1,015,538 29.4% $.15 May 4, 2001 $209,138 $269,863
Richard J. Kornblum 1,015,538 29.4% $.15 May 4, 2001 $209,138 $269,863
Thomas D. Schmidt 1,015,538 29.4% $.15 May 4, 2001 $209,138 $269,863
(1) Represents options to purchase Common Stock, each of which is subject to
stockholder approval of the 1995 Plan. Each option becomes exercisable as to
101,554 shares upon approval of the 1995 Plan; as to 203,108 shares on December
31, 1995; as to 101,554 shares in December 31, 1996; as to 355,438 shares on
December 31, 1997; and as to 253,884 shares on December 31, 1999. Each option
becomes fully exercisable in the event of the termination of the employee's
employment due to death or disability or in the event of certain stock or assets
sales or mergers resulting in a transfer of control of the Company. Each option
terminates 90 days (one year in the case of death) after termination of
employment.
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AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES (1)(2)
Value of Unexercised
Number of Unexercised In-the-Money
Options/SAR's at Options/SARs
Fiscal Year-End (#)(1) at Fiscal Year End ($)(4)
----------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------------- ----------- -------------
Gerald W. Klein - 0 - 1,015,538(2)
Richard J. Kornblum - 0 - 1,015,538(2)
Thomas D. Schmidt 145,000 1,020,538(3)
(1) No options were exercised by the named individuals during fiscal 1995.
(2) Represents options to purchase Common Stock, each of which is subject to
stockholder approval of the 1995 Plan.
(3) Includes an option to purchase 1,015,538 shares which is subject to
stockholder approval of the 1995 Plan.
(4) None of the reported options were in the money at June 30, 1995.
Report of Compensation Committee Regarding Option Cancellation and Issuance
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In fiscal 1995 the Company's senior management was restructured with Gerald
Klein becoming Chief Executive Officer, Richard Kornblum becoming Chief
Operating Officer and Thomas Schmidt, who had been the Company's Chief Executive
Officer, becoming Vice President of Sales. In the spring of 1995, the
Compensation Committee determined to grant Mr. Klein and Mr. Kornblum options to
purchase a substantial number of shares at the market price at the time of grant
but with a vesting schedule which would encourage their long term commitment to
the Company. The Committee also determined that it would be appropriate to
provide Mr. Schmidt with the same incentive. The Committee therefor determined
that it was in the Company's best interests that each of Messrs. Klein, Kornblum
and Schmidt receive options to purchase 1,015,538 shares of Common Stock,
representing, in each case, 5.4% of the number of shares of Common Stock which
would be issued and outstanding if each of the options were exercised in full
and warrants held by Cooper Investments and Tristram C. Colket, Jr. were also
exercised in full.
At that time, Mr. Schmidt held options to acquire 150,000 shares of Common
Stock at $1.00 per share as to 50,000 shares and $.75 per share as to 100,000
shares, of which 100,000 were exercisable only through November 1995. He also
held options to acquire 800,000 shares of Common Stock exercisable at $.50 per
share through September 1998. As of September 4, 1995, 540,000 of the 800,000
shares would be fully vested. The Committee determined that in order to achieve
the alignment of Mr. Schmidt's option with those of Messrs. Klein and Kornblum,
it would be necessary to cancel the 800,000 share option, but, given its
exercise price and term, not the 150,000 share option. The Committee considered
that Mr. Schmidt would realize a reduction in the exercise price as to 800,000
shares and an extension of the term during which the option would be exercisable
if he remained employed by the Company and that he would also suffer a material
reduction in the number of shares as to which he held vested options.
Tristram C. Colket, Jr.
Max Cooper
Alan R. Leiderman
Members of the Compensation Committee
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of October 1, 1995, certain information
concerning the ownership of the Company's Common Stock (i) by each person who is
known by the Company to own of record or beneficially more than five percent of
the outstanding shares of the Company's Common Stock ("5% Owners"), (ii) by each
of the Company's directors, (iii) by certain of its officers, and (iv) by all
directors and executive officers as a group, based upon reports filed by such
persons. Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment power with respect to the shares indicated.
Names and Addresses Number of Shares Percentage
of 5% Owners and Names of Directors Beneficially Owned of Class
- ----------------------------------- ------------------ --------
Max Cooper (1)(2) 4,538,167 30.4%
c/o CLP Inc.
124 Summit Parkway
Birmingham, Alabama 35209
Cooper Investments (2) 1,650,000 11.3%
124 Summit Parkway
Birmingham, Alabama 35209
Tristram C. Colket, Jr. (3) 2,656,667 17.3%
500 Chester Field Parkway Suite 170
Malvern, Pennsylvania 19355
Gerald W. Klein (4) - 0 - --
Richard J. Kornblum (4) - 0 - --
Alan R. Leiderman 250,000 1.7%
Steven H. Pollack (5) 1,251,666 8.7%
51 Everett Drive
Building B#4
Lawrenceville, New Jersey 08648
Thomas D. Schmidt (4) 100,000 0.7%
All Directors and 7,544,834 47.2%
Executive Officers as
a group (7 persons) (6)
Notes to Ownership Table
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(1) Includes: (i) 509,000 shares held by certain individual stockholders, for
which Mr. Cooper is proxy (together with Mr. Cooper, CLP, Inc. and Cooper
Investments, collectively the "Cooper Shareholders"), (ii) 1,400,000 shares
owned by Cooper Investments, an Alabama general partnership, of which Mr. Cooper
is a general partner and (iii) 400,000 shares owned by CLP, Inc., an Alabama
corporation of which Mr. Cooper is Chairman of the Board. Mr. Cooper has shared
voting and dispositive power with respect to the foregoing shares. Also
includes warrants to purchase 500,000 shares of Common Stock held by Cooper
Investments and warrants to purchase 72,000 shares of Common Stock held by Mr.
Cooper.
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(2) Includes 250,000 shares issuable upon exercise of warrants. The shares set
forth are also included in the shares beneficially owned by Max Cooper.
(3) Includes 960,000 shares issuable upon exercise of warrants.
(4) Excludes for each of Messrs. Klein, Kornblum and Schmidt 1,015,538 shares
which may become issuable upon exercise of an option held by each of them. Each
such option is subject to stockholder approval of the option plan pursuant to
which it was issued. If such plan is approved, each such option will become
exercisable for 101,554 shares. Includes, in the case of Mr. Schmidt 100,000
shares issuable upon exercise of other options.
(5) Includes 100,000 shares issuable upon exercise of options.
(6) Excludes 3,452,829 shares issuable upon exercise of options which are
subject to stockholder approval of the option plan pursuant to which they were
granted. Had the option plan been approved as of October 1, 1995, 345,284
shares of Common Stock would have been exercisable within 60 days after October
1, 1995.
Voting Agreement
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On September 4, 1992, the Cooper Shareholders, Dr. Pollack, and Messrs.
Colket, Hoffman, Schmidt, and Mr. Alan Leiderman entered into a Shareholders
Agreement, which provides, among other things, that, until September 1997, each
party to the Shareholders Agreement will vote the shares they control in favor
of such actions as may be necessary to elect and maintain in office on the Board
of Directors, each of (i) Mr. Cooper or a designee; (ii) Mr. Colket or a
designee; (iii) each of Mr. Hoffman, Dr. Pollack and Mr. Schmidt (the
"Management Directors") or up to three individuals designated by a majority of
the Management Directors (or their respective successors); (iv) Mr. Leiderman,
if nominated by the Board of Directors; and (v) one additional Independent
Director, if nominated by the Board of Directors.
Mr. Leiderman's obligations under the Shareholders Agreement terminate if
he is no longer serving as a Director of the Company, and each of Mr. Cooper's
and Mr. Colket's rights and obligations under the Shareholders Agreement
terminate if either ceases to have a pecuniary interest in at least 5% of the
outstanding Common Stock.
Item 13. Certain Relationships and Related Party Transactions
The Company has a Credit Agreement with each of Cooper Investments and
Tristram C. Colket, Jr. for a Term Loan, each of which has a current balance of
$230,000, incurs interest at prime plus 4% with a maximum rate of 12%, and is
due January 1, 1996, pursuant to extensions granted in August 1994, March 1995
and May 1995. Mr. Cooper received warrants to purchase 72,000 shares of the
Company's Common Stock at $0.55 per share in consideration of the August 1994
extension. Mr. Colket received warrants to purchase 460,000 shares of the
Company's Common Stock at $0.55 per share in consideration of the granting of
his Term Loan.
On December 16, 1994, the Company entered into an agreement with Cooper
Investments and Colket providing for loans to the Company of $500,000, which
were made at various times between December 1994 and February 1995, incurring
interest at a rate of prime plus 4%, with a maximum rate of 12%. The loans are
due and payable on January 1, 1996. In connection with these loans, each of
Cooper Investments and Mr. Colket received warrants to purchase 500,000 shares
of Common Stock at $.50 per share.
On March 3, 1995 and May 11, 1995, the Company entered into agreements with
Messrs. Colket and Cooper pursuant to which they agreed, among other things, to
lend the Company an aggregate of $700,000 at various intervals through June 30,
1995, and to defer payment of $100,000 of interest due on previously outstanding
loans from them. The payment
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dates for the $700,000 of loans, for the $100,000 of deferred interest and for
$960,000 of other loans from Messrs. Colket and Cooper to the Company were fixed
at, or extended to, January 1, 1996. In addition, on May 11, 1995 Messrs.
Colket and Cooper extended their guarantees of the Company's $1,700,000 bank
line of credit in connection with an extension of the due date of the line from
July 1, 1995 to January 1, 1996. Each of Messrs. Colket and Cooper receives a
guarantee fee of 1.5% of the outstanding balance of the bank line. The parties
also agreed, subject to certain conditions, to negotiate an agreement whereby
the Company would issue equity securities to Messrs. Colket and Cooper in
consideration of the cancellation of the $800,000 of loans and deferred
interest. No such agreement had been entered into as of October 1, 1995.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has caused this Amendment to Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
MEGAMATION INC.
Dated: October 23, 1995 By: /s/ Gerald W. Klein
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Gerald W. Klein
President, Treasurer and Chief
Executive and Financial Officer
Dated: October 23, 1995 By: /s/ Thomas W. Murphy
------------------------------------
Thomas W. Murphy
Controller and Chief Accounting
Officer
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