U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark one)
[x] Annual Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act
of 1934
For the Fiscal Year Ended July 31, 2003
OR
[ ] Transition Report Pursaunt to Section 13 or 15(d) of the Securites Exchange
Act of 1934
For the transition period from ______________ to _____________
Commission File No. 0-15284
NATIONAL LAMPOON, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4053296
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
10850 Wilshire Blvd., Suite 1000
Los Angeles, California 90024
(Address of principal executive office)
Registrants telephone number: (310) 474-5252
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common
Stock, $0.001 par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants 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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defefined in Exchange Act Rule 12b-2). Yes [ ] No [X]
As of January 31, 2003, the aggregate market value of the voting and non-voting
common stock held by non-affiliates of the Registrant (based on the closing
sales price as reported by the OTC Bulletin Board) was $2,271,465 assuming all
officers and directors are deemed affiliates for this purpose).
As of November 6, 2003 the Registrant had 1,533,418 shares of its common stock,
par value $.0001, outstanding.
Documents Incorporated by Reference: None
1
TABLE OF CONTENTS
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
SIGNATURES
2
INTRODUCTORY NOTE:
This Form 10-K/A is being filed solely for the purpose of correcting certain
inadvertent omissions in the Form 10-K filed on November 13, 2003 in Part III,
Items 10, 11 and 12, including the fact that the Equity Compensation Plan
information was included in Item 5 instead of Item 12. This Form 10-K/A does not
reflect events occurring after the filing of the original Form 10-K, or modify
or update the disclosures therein in any way other than as required to reflect
the amendment set forth below.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information with respect to our directors and
executive officers. Directors are elected at the annual meeting of stockholders
to serve a one-year term and until their successors are elected and qualified.
Officers serve at the request of the Board of Directors. There are no family
relationships among any of the directors or executive officers.
Director
Name Age Position Since
==================================== === =============================================== ========
James P. Jimirro 66 Director, Chairman, President and 1986
Chief Executive Officer
James Fellows 66 Director 1986
Bruce P. Vann 47 Director 1986
Daniel S. Laikin 41 Director and Chief Operating Officer 2000
Timothy S. Durham 41 Director 2002
Paul Skjodt 45 Director 2002
Joshua A. Finkenberg 30 Director 2002
Douglas Bennett 44 Executive Vice President
Jim Toll 50 Chief Finanical Officer
EXECUTIVE OFFICERS AND DIRECTORS
In connection with the consummation of the Reorganization Transactions, Messrs.
Durham, Skjodt and Finkenberg were elected to the Board on May 17, 2002. Messrs.
Durham and Skjodt filled the vacancies created by the resignations on that date
of Messrs. De Simio and Cowan and Mr. Finkenberg was elected to fill the vacancy
created by the expansion of the Board from six to seven members.
JAMES P. JIMIRRO has been employed as our President and Chief Executive
Officer since its inception. From 1980 to 1985, he was the President of Walt
Disney Telecommunications Company, which included serving as President of Walt
Disney Home Video, a producer and distributor of family home video programming.
While in this position, he also served as Corporate Executive Vice President of
Walt Disney Productions. In addition, from 1983 to 1985, Mr. Jimirro served as
the first President of the Disney Channel, a national cable pay-television
channel, which Mr. Jimirro conceived and implemented. Mr. Jimirro continued in a
consulting capacity for the Walt Disney Company through July 1986. From 1973 to
1980, he served as Director of International Sales and then as Executive Vice
President of the Walt Disney Educational Media Company, a subsidiary of the Walt
Disney Company. Prior to 1973, Mr. Jimirro directed international sales for CBS,
Inc., and later for Viacom International. Mr. Jimirro also served as a member of
the Board of Directors of Rentrak Corporation between January 1990 and September
2000.
JAMES FELLOWS has been a member of the Board of Directors and the President
of the Central Education Network, Inc., a Chicago, Illinois association of
public television and educational associations, since 1983. From 1962 through
1982, Mr. Fellows worked in a variety of positions for the National Association
of Educational Broadcasters in Washington, D.C., and became its President and
Chief Executive Officer in 1978. Mr. Fellows is a director of numerous nonprofit
corporations, including the Hartford Gunn Institute, a research and planning
service for public telecommunications; the Maryland Public Broadcasting
Foundation, a corporate fund-raiser for public television; and the American
Center for Children and Media, a coalition of organizations committed to
improving media services for children and youth.
BRUCE P. VANN has been a principal of the law firm of Kelly Lytton Vann LLP
since December 1995. Mr. Vann specializes in corporate and securities matters.
From January 1994 through December 1998, Mr. Vann served, on a non-exclusive
basis, as Senior Vice President, Business and Legal Affairs, of Largo
Entertainment, Inc., a subsidiary of the Victor Company of Japan.
DANIEL S. LAIKIN has been employed as our Chief Operating Officer since May
17, 2002. Mr. Laikin served as Co-Chairman of Biltmore Homes, Inc., an
Indiana-based home building and real estate development company until 2000. He
also served as a managing partner of Four Leaf Partners, LLC, a closely held
investment company, concentrating on the startup and financing of high tech and
Internet-related companies. He is also on the Board of Directors of Obsidian
Enterprises, Inc.
TIMOTHY S. DURHAM has served as the Chief Executive and Chairman of the
Board of Directors of Obsidian Enterprises, Inc. (formerly Danzer Corporation)
since June 2001. Since April 2000, he has served as a Managing Member and Chief
Executive Officer of Obsidian Capital Company LLC, which is the general partner
of Obsidian Capital Partners LP. Since 1998, Mr. Durham has founded and
maintained a controlling interest in several investment funds, including Durham
Capital Corporation, Durham Hitchcock Whitesell and Company LLC, and Durham
Whitesell Associates LLC. From 1991 to 1998, Mr. Durham served in various
capacities at Carpenter Industries, Inc., including as Vice Chairman, President
and Chief Executive Officer. Mr. Durham serves as a director of Obsidian
Enterprises, Inc.
3
PAUL SKJODT is the Chairman and Chief Executive Officer of Biltmore Homes,
Inc., an Indiana-based home building and real estate development company.
JOSHUA A. FINKENBERG is the Director of Acquisitions for California
Investment Fund, LLC, a specialized investment company that acquires and invests
in undervalued assets and companies. Previously, Mr. Finkenberg was the Chairman
and President of AF Investments LLC, a holding company focused on acquisitions
of and investments in businesses located in the Southern California area. From
August 2000 through January 2002, Mr. Finkenberg was a Senior Associate with
Batchelder & Partners, a financial advisory firm based in San Diego, California.
From July 1996 through July 2000, Mr. Finkenberg was an Associate in the
Investment Banking Department of SunTrust Equitable Securities Corporation, a
full-service investment bank located in Nashville, Tennessee. Mr. Finkenberg
graduated with highest honors from the Robert C. Goizueta Business School at
Emory University with a dual concentration in Finance and Management Information
Systems/Information Technology.
DOUGLAS BENNETT has over 22 years of experience in managing businesses in
the publishing, software and Internet space. Prior to his joining the Company he
was the President of iUniverse, Inc., the largest independent publisher in the
United States. iUniverse produced over 5,000 titles a year through the Internet.
Prior to that he was the Chairman & CEO of EoExchange, Inc., an Internet search
engine business. From 1992 until 1999 Mr. Bennett worked for Macmillan
Publishing, the largest computer book and reference publisher in the world. Mr.
Bennett started in the software and Internet division of Macmillian's business
and eventually became the President of the entire Macmillan Publishing business.
Prior to his employment with Macmillian, Mr. Bennett worked for 11 years for CCH
Computax, the largest tax software company in the United States. At CCH
Computax, Mr. Bennett held numerous senior level positions.
JAMES TOLL has been employed as our Chief Financial Officer since August
2001. Mr. Toll has worked in the financial area for 22 years, including CBS
Television Network in Los Angeles and Warner/Electra/Atlantic International (WEA
International) Records in Burbank as a Senior Financial Analyst. Mr. Toll spent
three years as head of the accounting department for the non-profit company
WQED-West, and was involved with the production of the Emmy award winning seven
part series, "The Planet Earth", and the production of National Geographic
Specials during his tenure. From 1996 to 1999, Mr. Toll was employed as the
Chief Financial Officer of Keller Entertainment Group, an international
television production and distribution company. Mr. Toll also worked for the
Company from approximately May 1987 through March 1993 as its Chief Financial
Officer. Mr. Toll received his Bachelor of Arts degree from the University of
California, Berkeley with Distinction and Honors in his major and a Master of
Business Administration (Finance and Accounting) from the University of Southern
California in l979 where he graduated in the top 15% of his class.
CONSULTANTS
We are party to a consulting agreement, approved by our Board of Directors on
August 7, 2002, with Zelnick Media Group (ZM), headed by Stauss Zelnick, the
former head of 20th Century Fox and Bertlesman, the European media
conglomerates. Mr. Zelnick and his affiliates are providing marketing,
development, production and branding assistance to us. In particular, Scott
Ziegler, a partner of ZM, is assisting directly in certain television
activities. ZM is being compensated solely by the issuance to it of 300,000
warrants (the ZM Warrants) which have been issued directly to ZM and an
affiliate. Two of the ZM Warrants will entitle ZM and an affiliate to purchase
up to 150,500 of the shares of our Common Stock at an exercise price of $6.50
per share the other two ZM Warrants will entitle ZM and an affiliate to purchase
up to 150,500 of the ZM Warrant Shares at an exercise price of $10.00 per share.
The number and exercise price of the ZM Warrants are subject to adjustments
customarily contained in warrants of a similar nature. One-third of the ZM
Warrant Shares become exercisable upon issuance of the ZM Warrants and the
remainder of the ZM Warrants will first become exercisable in monthly
installments during the 13th through 36th months following the issuance of the
ZM Warrants, provided that no ZM Warrant Shares become exercisable after the
termination of the consulting agreement.
We are party to a year to year consulting agreement with Mr. Daniel Sarnoff,
originally dated as of September 1, 2002 pursuant to which Mr. Sarnoff serves in
a non-exclusive capacity as the CEO of our newly formed subsidiary NL Games,
Inc. ("NLG"), as well as assisting us in sales of the National Lampoon Networks.
Pursuant to the terms of his agreement with us, Mr. Sarnoff is to receive an
annual compensation of $60,000 per year, and a percentage of revenue from NLG
games. Mr. Sarnoff is also to receive stock options and other bonuses, subject
to approval of the Board of Directors.
Pursuant to the terms of an oral year-to-year (August 2003 to August 2004)
agreement, Errol Gerson has been retained as a consultant responsible for
implementing our operations regarding the Burly Bear acquisition. Mr. Gerson is
being paid $12,500 per month.
ADVISORY BOARD.
We have established a creative advisory board and a corporate advisory board.
The members of these boards have agreed to assist us in identifying business
opportunities, as well as opportunities to leverage our brand and increase our
exposure in the creative community. The composition of these two boards is as
follows:
CORPORATE ADVISORY BOARD:
DOUGLAS BENNETT- Mr. Bennett, who is currently serving as an Executive Vice
President, has more than 20 years of experience in management, sales and
marketing in the publishing industry. Mr. Bennett was formerly president of
Macmillan Digital and Macmillan USA.
STEVE LEHMAN- Mr. Lehman was one of the founders of Premier Radio. He is
currently a partner in Broadstream Capital Partners,
MARK ROESSLER- Mr. Roessler is currently head of CMG Worldwide, an agency
representing over 200 diverse personalities and entities, as well as the estates
of celebrities, in various enterprises.
CHARLES SEGARS- Mr. Segars was formerly an executive at DreamWorks Television,
and is currently an E.W. Scripps cable and television executive.
BRIAN WOOD- Mr. Wood is president of Columbia House, the leading book, record
and DVD club.
4
Each of the members of the Corporate Advisory Board is entitled to receive
options to acquire 5,000 shares of our common stock at an exercise price
determined on the date of grant
CREATIVE ADVISORY BOARD:
CHARLES FINK- Mr. Fink, formerly a senior executive of AOL Time Warner, is
currently the president of American Greetings.com.
ERROL GERSON- Mr. Gerson is currently a consultant to the Company, and has a
twenty year background in the entertainment. industry. Mr. Gerson, in addition
to acting as design consultant to various internet ventures, formerly was the
Director of New Media for the Creative Artists Agency. For the past two and half
years, Mr. Gerson was the CEO of iNetnow.
DEBBIE GOLDFARB- Ms. Goldfarb is a television agent at Abrams, Rubeloff in Los
Angeles, and was formerly an agent of the Creative Artist Agency.
RICHARD LEWIS- The founder of Ovation Entertainment, Mr. Lewis was one of the
founders of Trilogy Entertainment, the producers of such hits as Robin Hood:
Prince of Thieves and Backdraft.
SCOTT MCCAIN- Mr. McCain is chairman of McCain Performance Group, an association
of companies specializing in trade shows and professional business speaking.
CHRIS MILLER- Mr. Miller was formerly a writer for National Lampoon and one of
the original writers of National Lampoon's Animal House.
DAN PASTERNACK- Mr. Pasternack was formerly an executive for Granada
Entertainment, USA, and was a senior vice president of drama at studios USA, an
affiliate of Universal Pictures.
BRAD YONOVER- Formerly a principal of Greenstreet Productions, he is currently a
consultant focusing of development and production of feature films.
Each of the members of the Creative Advisory Board is entitled to receive
options to acquire 2,000 shares of our common stock at an exercise price
determined on the date of grant.
AUDIT COMMITTEE FINANCIAL EXPERT
The Company's Board of Directors has determined that no member of the Audit
Committee qualifies as an "audit committee financial expert" (as defined in the
SEC rules). As disclosed in previous filings with the SEC, the composition of
the Company's Board of Directors is determined pursuant to the provisions of a
Voting Agreement. None of the individuals nominated for and elected to the Board
in accordance with the Voting Agreement qualifies as an "audit committee
financial expert."
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 own more than 10% of the Company's
common stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. These persons are required to provide the
Company with copies of all Section 16(a) forms that they file. Based solely on
the Company's review of these forms and written representations from certain of
the executive officers and directors, National Lampoon believes that all Section
16(a) filing requirements were met during fiscal year 2003, except as follows:
(i) Form 4s to report stock option grants on June 30, 2003 were late in
being filed for James P. Jimirro, James Toll, Timothy Durham, Paul
Skjodt and Josh Finkenberg. James Fellows and Douglas Bennett also
received option grants of June 30, 2003, which grants have not yet
been reported on Form 4s.
(ii) Douglas Bennett also received stock option grants on August 7, 2002
and October 14, 2002, which grants have not yet been reported on Form
4s. Mr. Bennett has not yet filed a Form 3.
CODE OF ETHICS
We are in the process of preparing a new Code of Ethics which will be filed as
an exhibit to a future filing.
5
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the last three
fiscal years of our Chief Executive Officer and up to four of our executive
officers ("Named Officers") whose annual salary and bonus exceeded $100,000
during the fiscal year ended July 31, 2003.
Annual Compensation Long Term
Compensation
==================================== ==========================
Other Annual Stock All Other
Compensation SARs Options Compensation
Name and Position Year Salary($) ($) (Shares) (Shares) ($)
===================================================================================================================================
James P. Jimirro 2003 500,000() 0 0 35,000(2) 0
Chairman, President and 2002 1,471,146(1) 0 0 608,335(2) 0
Chief Executive Officer 2001 190,750(3) 0 25,000 25,000 0
Daniel Laikin 2003 200,000(4)
Chief Operating Officer
Douglas Bennett 2003 131,667 190,000 21,300
Executive Vice President
James Toll 2003 132,737 15,000
Chief Financial Officer 2002 36,364 15,000
(1) Includes 1,215,069 received as apart of the Reorganization Transactions.
(2) Iincludes options to acquire 450,000 shares of common stock granted during
the fiscal year ended December 31, 2002, plus 158,335 stock options that
were converted from SARs as part of the Reorganization Transactions.
(3) Mr. Jimirro had voluntarily deferred all Base Salary, as defined by the
applicable employment agreement, in excess of $190,750. Such deferred
amounts are payable only upon a Change of Control of the Company as defined
by the applicable employment agreement and are included in All Other
Compensation hereunder. Under the terms of Mr. Jimirro's Restated
Employment Agreement the amounts due to him have been forgiven.
(4) Represents one year of salary to Mr. Laikin that was paid in the form of
Series B Preferred.
6
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS GRANTS
The following table sets forth the individual grants of stock options and stock
appreciation rights made during the fiscal year ended July 31, 2003 to the Named
Officers:
Potential Realized Value
at Assumed Annual
% of Total Rates of Stock Price
Options/SARs Appreciation
Options/ Granted to Exercise for Option Term
SARs Employees in Or Base Expiration =================================
Name Granted Fiscal Year Price($/Sh) Date 5%($) 10%($)
=============================================================================================================================
James P. Jimirro 35,000(1) 9% $ 4.64 05/13/10 285,057 453,905
Daniel Laikin -- -- -- -- -- --
Douglas Bennett 190,000 49% $ 5.59 10/14/09 1,336,745 1,851,281
James Toll 15,000 4% $ 6.00 6/30/10 105,533 146,154
(1) The options granted to Mr. Jimirro were immediately exercisable.
STOCK OPTION AND STOCK APPRECIATION RIGHTS EXERCISES AND YEAR END VALUES
Shown below is information for the Named Officers with respect to the exercise
of stock options and the ownership of stock options and stock appreciation
rights and their values as of July 31, 2003.
Value of Unexercised
Number of Unexercised In-the-Money Options/
Options/SARs at July 31, 2003 SARs at July 31, 2003(1)
Shares =================================== ===============================
Acquired Value Exercisable Unexercisable Exercisable Unexercisable
Name On Exercise Realized($) (Shares) (Shares) ($) ($)
============================================================================================================================
James P. Jimirro 66,664 180,037 635,001 -- 52,709 --
Daniel Laikin -- -- 102,333 -- -- --
Douglas Bennett -- -- 37,917 152,083 -- --
James Toll 6,500 16,500 8,500 15,000 -- --
(1) Based upon the difference between the closing price on July 31, 2003 and
the option exercise price or stock appreciation rights base price.
DIRECTOR COMPENSATION
At the organization meeting of the Board of Directors following our annual
meeting of shareholders in June 2002, all directors, excluding Mr. Jimirro and
Mr. Laikin, were granted options to purchase up to 7,500 shares of our common
stock at the market price on the date of grant that are immediately exercisable.
Mr. Jimirro's and Mr. Laikin's compensation as directors is pursuant to their
employment agreements described under Employment Agreements.
EMPLOYMENT AGREEMENTS
On May 17, 2002, we entered into a new employment agreement with James P.
Jimirro (the "Jimirro Employment Agreement"). The Jimirro Employment Agreement
will terminate on December 31, 2007; provided, however, that if Mr. Jimirro
remains employed by us on December 31, 2003, the Jimirro Employment Agreement
will automatically be extended for an additional year. As of December 31, 2004
and December 31 of each year thereafter, so long as Mr. Jimirro remains employed
by us on such date, the Jimirro Employment Agreement will again be automatically
extended for an additional year so that at no time will the remaining term under
the Jimirro Employment Agreement be less than five years.
The Jimirro Employment Agreement will provide Mr. Jimirro with an annual salary
of $500,000 and, commencing on January 31, 2003 and continuing on the last day
of each month thereafter during the period that Jimirro is employed by us, will
provide for the monthly grant by the Company to Mr. Jimirro of fully vested
options to purchase 5,000 shares of our common stock. Pursuant to the Jimirro
Employment Agreement, Mr. Jimirro will receive fifty percent of our gross
receipts from the movie National Lampoon's Van Wilder. The Jimirro Employment
Agreement also provides Mr. Jimirro with other benefits, including medical and
life insurance, an automobile and the reimbursement of business expenses.
The Jimirro Employment Agreement is terminable by us without Cause (as defined
below) or for convenience after December 31, 2002 upon written notice to Mr.
Jimirro, payment to Mr. Jimirro of a cash severance payment in the amount of
$1,400,000, and delivery of a promissory note providing for our payment to Mr.
Jimirro of $1,000,000 in twelve equal monthly installments. Prior to December
31, 2002, the Jimirro Employment Agreement will only be terminable by us for
Cause. For us to terminate Mr. Jimirro for Cause under the Jimirro Employment
Agreement, six of the members of the Board of Directors (excluding Mr. Jimirro)
must determine at a meeting called for such purpose, that Mr. Jimirro is guilty
of the conduct triggering the right to terminate him for Cause. Under the
Jimirro Employment Agreement, Cause is defined as (i) the willful and continued
failure by Mr. Jimirro to substantially perform his duties with us in good faith
(other than any such failure resulting from his incapacity due to physical or
mental illness or any such actual or anticipated failure resulting from his
termination by us for convenience (or without Cause)), after a demand for
substantial performance is delivered to him by the Board of Directors that
specifically identifies the manner in which the Board of Directors believes that
Mr. Jimirro has not substantially performed his duties in good faith; or (ii)
the willful engaging by Mr. Jimirro in conduct which is demonstrably and
materially injurious to us, monetarily or otherwise. For purposes of the
definition of Cause under the Jimirro Employment Agreement, no act, or failure
to act, on Mr. Jimirros part shall be considered willful unless done, or omitted
to be done, by him in bad faith and without reasonable belief that his action or
omission was in our best interest.
The Jimirro Employment Agreement is terminable by Mr. Jimirro upon the
occurrence of certain events, with Mr. Jimirro being entitled to receive the
same severance benefits, including the $1,400,000 cash severance payment and
$1,000,000 promissory note (detailed above), as if Mr. Jimirro had been
terminated by us without Cause or for convenience.
In addition, under the Jimirro Employment Agreement, in the event that Mr.
Jimirro incurs an excise tax under the Internal Revenue Code of 1986, as amended
(the "Code"), because he receives any compensation or payments from us that
constitute excess parachute payments under Section 280G of the Code, we will
reimburse Mr. Jimirro for that excise tax, and for the income and excise taxes
on such reimbursement on a fully grossed up basis if either (i) Mr. Jimirros
employment with us is terminated by us at any time before the first anniversary
of the date on which the Reorganization Transactions are consummated, or (ii)
after the effectiveness of the Jimirro Employment Agreement a transaction
(excluding the Reorganization Transactions, if applicable) involving us occurs
that results in Mr. Jimirro incurring such an excise tax.
All of our obligations to Mr. Jimirro under the Jimirro Employment Agreement, as
well as under an indemnification agreement and a registration rights agreement,
are secured by a first priority lien on all of our assets, pursuant to a
security agreement between Mr. Jimirro and us, executed in connection with the
Reorganization Transactions.
DANIEL S. LAIKIN EMPLOYMENT AGREEMENT
On May 17, 2002, we entered into an Employment Agreement with Daniel S. Laikin
(the "Laikin Employment Agreement") effective for a period of one year and
subject to automatic extension for successive one-year terms thereafter unless
and until the Board of Directors elects not to renew the Laikin Employment
Agreement and notifies Mr. Laikin within sixty days prior to the end of the
then-current one-year term of the Employment Agreement or unless the Laikin
Employment Agreement has been terminated according to its terms and conditions.
7
Pursuant to the Laikin Employment Agreement, Mr. Laikin receives an annual
salary of $200,000. He also was granted options to purchase 100,000 shares of
our common stock as of the effective date of the Laikin Employment Agreement,
which options were immediately exercisable and will expire, to the extent not
exercised, prior to the close of business on the day ten years from the date of
grant. The Laikin Employment Agreement also provides Mr. Laikin with other
benefits, including vacation, pension, retirement, medical and life insurance
and reimbursement of business expenses. Mr. Laikin has agreed to receive his
entire salary in SeriesB Units.
The Laikin Employment Agreement may be terminated voluntarily by us at any time
during its term for Cause (which is defined as in the Jimirro Employment
Agreement described above). For us to terminate Mr. Laikin for Cause, five of
the members of the Board of Directors (not including Mr. Laikin) must determine
at a meeting held for such purpose that Mr. Laikin is guilty of the conduct
triggering the right to terminate him for Cause. If Mr. Laikins employment is
terminated by us for Cause, or by Mr. Laikin, in addition to any benefits
mandated by law, we shall pay Mr. Laikin his full annual salary in effect at the
date of termination and other benefits to which he is entitled through the date
of termination at the rate in effect at the time notice of termination is given.
DOUGLAS BENNETT EMPLOYMENT AGREEMENT
We entered into an at-will employment agreement with Douglas Bennett, effective
October 14, 2002 (the "Bennett Employment Agreement"). As there is no specified
term, Mr. Bennett is free to resign at any time and we are free to terminate the
Bennett Employment Agreement at any time, with or without cause.
Mr. Bennett receives a base salary of $175,000 per year, effective December 1,
2002. Mr. Bennett's title is initially Executive Vice President, but will
succeed to the title of President when that title becomes available. Mr. Bennett
is entitled to calender quarterly bonuses of $31,250, which bonuses are payable
in the month subsequent to the end of calender quarter to which they were
granted. Concurrent with the signing of the Bennett Employment Agrement, Mr.
Bennett was granted options to purchase 135,0000 shares of common stock at the
then current market price, which options vest ratably over a 3 year period. Mr.
Bennett is also entitled to an option grant of 50,000 shares of common stock for
the period January 3, 2003 through June 3, 2003 and an option grant of 50,000
shares of common stock for the period July 3, 2003 through Decemmber 3, 2003.
These options shall also vest ratably over three year periods and are to be
issued at then current market prices. Upon a change in control of the Company,
all unvested options are to vest immediately.
Mr. Bennett is entitled to communte to Los Angeles from his home in the San
Francisco area. By December 31 2003, Mr. Bennett, the Chief Executive Officer
and the Board of Directors have agreed to decide whether Mr. Bennett should
relocate to the Los Angeles area.
If Mr. Bennett is "Terminated without Cause" (as such term is defined in the
Bennett Employemnt Agreement), or in the event of "Constructive Termination" (as
such term is defined in the Bennett Employemnt Agreement), if dies or is
disablited, he shall be entitled to: (a) continue his base salary for 6 months;
(b) continue his employee beneifts for 6 months; and (c) continue vesting of any
outstanding and unvested stock options for 6 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Employment Agreements with Messrs. Jimirro and Laikin were negotiated as
part of the Reorganization Transactions involving Mr. Jimirro and the NLAG Group
and were approved by our entire Board of Directors (other than Messrs. Jimirro
and Laikin who excused themselves from the meetings during the Boards
consideration of the Employment Agreements) at special meetings of the Board of
Directors held on April 25, 2002 and May 17, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the shares of common
stock and Series B Preferred for (i) each person known by the Company to be the
beneficial owner of more than five percent of the outstanding shares of common
stock or Series B Preferred; (ii) each director; (iii) the Chief Executive
Officer and each of the Company's other executive officers named in the Summary
Compensation Table; and (iv) the directors and executive officers as a group.
Beneficial ownership information in the table is as of November 1, 2003. Unless
otherwise indicated, beneficial ownership represents both sole voting and sole
investment power.
8
NAME OF BENEFICIAL OWNER COMMON STOCK** SERIES B PREFERRED STOCK
- ------------------------ -------------- ------------------------
Number of Shares of Percentage of Shares Number of Shares of Percentage of Shares
Beneficially Owned Beneficially Owned Beneficially Owned Beneficially Owned
------------------ ------------------ ------------------ ------------------
DIRECTOR AND EXECUTIVE
OFFICER S: (1)
James P. Jimirro, 876,887 (2) 40.4% -- --
Chairman of the Board,
President and Chief
Executive Officer
James A. Fellows, 30,833 (3) 2.0% -- --
Director
Bruce P. Vann, Director 20,331 (3) 1.3%* -- --
Daniel S. Laikin, Chief 1,945,186 (4) 58.9% 29,796 48.4%
Operating Officer and
Director
Timothy S. Durham, 1,192,203 (4) 47% 17,148 27.9%
Director
Paul Skjodt, Director 542,247 (4) 28.4% 6,500 10.6%
Joshua A. Finkenberg, 15,000 (3) 1.0% -- --
Director
Douglas Bennett, 67,069 (5) 4.2% 426 *
Executive Vice
President
James Toll, Chief 15,000 (3) 1.0% -- --
Financial Officer
All Executive Officers
and Directors as a
group (consisting of 9
members) 4,710,756 85.9% 53,587 87.3%
OTHER 5% OWNERS:
NLAG Group (1), (4) 3,957,329 (4) 82.0 % 56,394 91.9%
Ronald Holzer 321,790 (6) 17.8% 5,000 8.1%
* Less than one percent.
** The number of shares of common stock includes the shares of Series B
Preferred Stock converted to common stock equivalents.
(1) The address for Messrs. Jimirro, Laikin, Fellows and Vann is 10850 Wilshire
Blvd., Suite 1000, Los Angeles, California 90024. The address for Mr.
Durham and the NLAG Group is 111 Monument Circle, Suite 4800, Indianapolis,
Indiana 46204. The address for Mr. Skjodt is 9910 Towne Road, Carmel,
Indiana 46032. The address for Mr. Finkenberg is 4080 Front Street, Suite
105, San Diego, California 92123. The address for Mr. Holzer is 600 Central
Avenue, Suite 240, Highland Park, Illinois 60035.
(2) Includes options to purchase 645,001 shares of common stock.
(3) Consists of options to purchase shares of common stock.
(4) The following individuals and entities are referred to collectively as the
NLAG Group: Daniel Laikin; Paul Skjodt; Timothy S. Durham; Diamond
Investments, LLC; DC Investments, LLC; Judy B. Laikin; Betty A. Morgan;
Samerian LLP; and DW Leasing Company, LLC. Each member of the NLAG Group
may be deemed to beneficially own all of the shares of common stock that
are deemed to be beneficially owned collectively by the NLAG Group, which
includes shares of common stock that the members could acquire upon the
conversion of shares of Series B Preferred and pursuant to warrants and
options. As of October 1, 2003, the individual members of the NLAG Group
have the following holdings:
(a) Mr. Durham directly owns 73,200 shares of common stock, 12,648 shares
of Series B Preferred and warrants to acquire 356,282 shares of common
stock. He also has the right to acquire 15,000 shares of common stock
pursuant to stock options. Mr. Durham may be deemed to share voting
and dispositive power with respect to the securities listed below for
Diamond Investments, LLC and DC Investments, LLC, for both of which
Mr. Durham serves as Managing Member, and DW Leasing Company, LLC, in
which Mr. Durham has an ownership interest.
(b) Mr. Laikin directly owns 168,150 shares of common stock, 29,726 shares
of Series B Preferred and warrants to acquire 837,352 shares of common
stock. He also has the right to acquire 102,333 shares of common stock
pursuant to stock options. He may be deemed to share voting and
dispositive power with respect to securities listed below for Judy B.
Laikin.
(c) Mr. Skjodt directly owns 141,050 shares of Common Stock, 6,500 shares
of Series B Preferred and warrants to acquire 183,099 shares of common
stock. He also has the right to acquire 15,000 shares of common stock
pursuant to stock options. He may be deemed to share voting and
dispositive power with respect to the securities listed below for
Samerian LLP, in which Mr. Skjodt is a Partner.
(d) Diamond Investments, LLC directly owns 92,399 shares of common stock.
(e) DC Investments, LLC directly owns 5,000 shares of Series B Preferred
and warrants to purchase 140,845 shares of common stock.
(f) Judy B. Laikin directly owns 26,000 shares of common stock.
(g) Betty A. Morgan owns 121,721 shares of common stock, 2,307 shares of
Series B Preferred and warrants for 64,986 shares of common stock.
(h) Samerian LLP directly owns 20,000 shares of common stock.
(i) DW Leasing Company, LLC directly owns 17,350 shares of common stock.
Each member of the NLAG Group disclaims beneficial ownership of the securities
held by the other members of the NLAG Group.
9
(5) Consists of options to acqurie 55,069 shares of common stock, 213 shares of
Series of Series B Preferred and warrants to acquire 6,000 shares of common
stock.
(6) Includes 5,000 shares of Series B Preferred and warrants to purchase
140,845 shares of common stock.
EQUITY COMPENSATION PLAN INFORMATION
=================================== ================= ================== ====================================================
Plan category Number of Weighted-average Number of securities remaining available for future
Securities exercise price of issuance under equity compensation plans
To be issued outstanding (excluding securities reflected in column (a))
Upon exercise of options
outstanding warrants and
options rights
warrants and
rights
=================================== ================= ================== ====================================================
Equity Compensation
plans approved by
security holders 5,304,323(1) 4.37 59,834(2)
================================= ================= ================== ====================================================
Equity compensation
plans not approved
by security holders
================================= ================= ================== ====================================================
Total: 5,304,323(1) 4.37 59,834(2)
================================= ================= ================== ====================================================
1) Includes 63,607 Series B Preferred units authorized. The units include one
share of Series B Preferred and one warrant. Both the Series B Preferred
and the warrant can be converted into 28.169 shares of common stock.
2) The Amended and Restated 1999 Stock Option Plan reserved and made available
for issuance 1,500,000 shares of our common stock, 1,440,166 options have
been granted as of November 6, 2003.
10
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
3.1 Company's Certificate of Incorporation
3.2 Company's Bylaws
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley - James P. Jimirro
31.2 Certification pursuant to Section 302 of Sarbanes-Oxley - James Toll
32 Certification pursuant to Section 906 of Sarbanes-Oxley
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: December 18, 2003
By: /s/ James P. Jimirro
---------------------------------------
James P. Jimirro,
Chief Executive Officer
By: /s/ James Toll
---------------------------------------
James Toll,
Chief Financial Officer
11