<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER: 0-16332
NATIONAL INSURANCE GROUP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-3031790
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
395 OYSTER POINT BLVD., SUITE 500, SO. SAN FRANCISCO, CALIFORNIA 94080
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 872-6772
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
(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 twelve (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 ninety (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 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]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 1,
1996 on the Nasdaq National Market was approximately $11,472,299. Shares of
Common Stock held by each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in that such persons may
be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares outstanding of the Registrant's Common
Stock as of March 1, 1996 was 4,679,697.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE FOLLOWING DOCUMENT ARE INCORPORATED BY REFERENCE INTO THE PART
OF THIS FORM 10-K AS INDICATED: NONE.
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The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
year ended December 31, 1995 as set forth below:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
<TABLE>
<CAPTION>
Name Age (1) Principal Occupation
- ---- ------- ---------------------------------------------------
<S> <C> <C>
Melvyn D. Croner 59 Founder and Chairman of the Board of The Croner
Company, a management consulting firm.
John R. Gaulding 50 President and Chief Executive Officer and Chairman
of the Board of National, the Agency, Fastrac, the
Insurance Subsidiary, and Pinnacle Data Corporation
("PDC").
Howard L. Herman 55 Director of National, the Agency, Fastrac, the
Insurance Subsidiary and PDC.
Kenneth Ross 53 President and Chief Executive Officer, Augmentum
Software, Inc.
Mark A. Speizer 52 Director of National, the Agency, Fastrac, the
Insurance Subsidiary and PDC.
</TABLE>
- -------------
(1) As of March 29, 1996.
Except as set forth below, each of the directors has been engaged in
his principal occupation set forth above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Mr. Croner is Chairman of the Board and the principal consultant of The
Croner Company, a specialized management consulting firm he founded in 1978. Mr.
Croner has served as a director of National and its subsidiaries since May 1995.
Mr. Gaulding has served as Chief Executive Officer, President and
Chairman of the Board of National, the Agency, Fastrac, the Insurance Subsidiary
and PDC since April 1996 and served as a consultant for each such corporation
between February and April 1996. From 1989 to January 1996, Mr. Gaulding served
as President and Chief Executive Officer of ADP Claims Solutions Group, a
subsidiary of ADP, Inc.
Mr. Herman, a co-founder of the Company, has served on the Board of
Directors of National since its inception. Between November 1986 and June 1995,
Mr. Herman served as President of National and served as its Chief Financial
Officer and General Counsel from 1986 to 1991. Between 1975 and
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June 1995, Mr. Herman also served in various executive level capacities and
as a director for National's subsidiaries. Mr. Herman is a member of both the
California and New York bars.
Mr. Ross is the President and Chief Executive Officer of Augmentum
Software, Inc., a supplier of electronic commerce software. Between November
1994 and May 1995, Mr. Ross was a Senior Advisor of Hyperion Software. From
April 1991 to November 1994, he was President and Chief Executive Officer of
IMRS/Pillar Corporation, a California corporation which develops financial
planning and business software. From December 1988 to March 1991, Mr. Ross was
an independent consultant to companies in the software industry. From August
1972 to November 1988, Mr. Ross founded and served as President and Chief
Executive Officer of Ross Systems, Inc., a computer consulting company. Mr. Ross
has served as a director of National and its subsidiaries since May 1991.
Mr. Speizer, a co-founder of the Company, has served on the Board of
Directors of National since its inception. Between November 1986 and October
1995, Mr. Speizer served as Chairman of the Board and Chief Executive Officer of
National, and between June 1995 and October 1995 served as President of
National. Between 1972 and October 1995, Mr. Speizer also served in various
executive level capacities and as a director for National's subsidiaries.
Each non-employee director of the Company is paid at the rate of $1,000
per month, payable quarterly. Employee directors are not compensated for their
services on the Board of Directors or on committees of the Board. Non-employee
directors also participate in the 1991 Director Option Plan (the "Director
Plan"). The Director Plan provides for the automatic grant of a nonstatutory
stock option to purchase 50,000 shares of Common Stock of the Company on the
date such person first becomes a director (which number was increased from
25,000 shares at the May 1995 Annual Meeting of Shareholders). All options
granted under the Director Plan vest at the rate of one-fourth of the shares
subject to the option on the first anniversary of the date of grant, with
one-forty-eighth of such shares vesting at the end of each month thereafter.
During the fiscal year ended December 31, 1995, director Ross was automatically
granted an option to purchase 25,000 shares at a per share exercise price of
$6.50 (the Director Plan provides that any non-employee director who was a
member of the Board on May 24, 1995 and who had been a member of the Board for
at least one month prior to such date would receive an automatic grant of a
25,000 share option ), and directors Croner, Herman and Speizer were each
automatically granted an option to purchase 50,000 shares at per share exercise
prices of $6.50, $6.125 and $6.25, respectively.
EXECUTIVE OFFICERS
Information regarding executive officers is included in Part I hereof
under the caption "Executive Officers of the Company" and is hereby incorporated
by reference into this Item 10.
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COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires National's officers and directors and persons who own
more than ten percent (10%) of a registered class of National's equity
securities, to file certain reports regarding ownership of, and transactions in,
National's securities with the SEC. Such officers, directors and ten percent
(10%) shareholders are also required by SEC rules to furnish National with
copies of all Section 16(a) forms that they file.
Based solely on its review of such forms received by it, or written
representations from certain reporting persons, National believes that during
fiscal 1995 all Section 16(a) filing requirements applicable to its officers,
directors and ten percent (10%) shareholders were complied with.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation received in the last three
fiscal years by (i) each individual who served as National's Chief Executive
Officer during the last fiscal year, (ii) each of the two other most highly
compensated executive officers whose salary plus bonus exceeded $100,000 during
the last fiscal year who served as executive officers at the end of the fiscal
year ended December 31, 1995, and (iii) David B. Brody and Douglas H. Helm, who
would have qualified as executive officers pursuant to item (ii) but for the
fact that they were not serving as executive officers as of the end of the
fiscal year ended December 31, 1995 (collectively, the "Named Officers").
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<TABLE>
<CAPTION>
Long Term
Compensation
----------------------------
Annual Compensation Awards
-----------------------------------------------------
All Other
Salary Bonus Options Compensation
Name and Principal Position Year ($) ($) (#) ($)
- --------------------------- ---- ---------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
Mark A. Speizer(1) 1995 280,212 0 50,000 887,000(2)
Former Chairman of the Board, CEO 1994 297,711 0 50,000(3) 0
and President 1993 310,000 0 50,000(4) 0
- -----------------------------------------------------------------------------------------------------------------------
Melvyn D. Croner(5) 1995 75,000 0 50,000 6,000(6)
Former Acting President, CEO and 1994 --- --- --- ---
Chairman of the Board 1993 --- --- --- ---
- -----------------------------------------------------------------------------------------------------------------------
David B. Brody(7) 1995 201,493 0 100,000 0
Executive Vice President, Information 1994 250,000 0 24,000(8) 0
Services 1993 250,000 0 5,000(4) 0
- -----------------------------------------------------------------------------------------------------------------------
Paulette J. Taylor 1995 144,231 0 5,000 0
Executive Vice President, General 1994 121,635 0 16,000(9) 0
Counsel and Secretary 1993 120,672 0 5,000(4) 0
- -----------------------------------------------------------------------------------------------------------------------
Douglas H. Helm(10) 1995 677,556(11) 0 0 0
Former Executive Vice President, Sales 1994 699,740(12) 0 40,000(13) 0
and Marketing 1993 883,563(14) 0 5,000(4) 0
- -----------------------------------------------------------------------------------------------------------------------
Howard L. Herman(15) 1995 387,535(16) 0 50,000 789,754(17)
Former President and Acting Chief 1994 258,767 0 32,500(3) 0
Financial Officer 1993 270,754 0 32,500(4) 0
</TABLE>
------------
(1) Mr. Speizer terminated his employment with National in October 1995.
(2) Represents severance payment of $885,000 and $2,000 payable to
non-employee director of National.
(3) Pursuant to National's February 1994 option repricing program (the
"February Repricing"), this option was granted upon the simultaneous
cancellation of an option to purchase a like number of shares granted in
fiscal 1993.
(4) Pursuant to the February Repricing, this option was cancelled upon the
simultaneous grant of an option to purchase a like number of shares in
fiscal 1994.
(5) Mr. Croner served as Acting President, CEO and Chairman of the Board until
John R. Gaulding assumed such positions in April 1996. Mr. Croner continues
to serve on the Board of Directors of National.
(6) Represents compensation payable to non-employee director of National.
(7) Mr. Brody terminated his employment with National in January 1996.
(8) Pursuant to National's November 1994 option repricing program (the
"November Repricing"), options to purchase an aggregate of 19,000 shares
were granted upon the simultaneous cancellation of options to purchase
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an aggregate of 19,000 shares granted in prior fiscal years. In addition,
an option to purchase 5,000 shares was granted pursuant to the November
Repricing upon the simultaneous cancellation of an option to purchase 5,000
shares granted pursuant to the February Repricing.
(9) Pursuant to the November Repricing, options to purchase an aggregate of
11,000 shares were granted upon the simultaneous cancellation of options to
purchase an aggregate of 11,000 shares granted in prior fiscal years. In
addition, an option to purchase 5,000 shares was granted pursuant to the
November Repricing upon the simultaneous cancellation of an option to
purchase 5,000 shares granted pursuant to the February Repricing.
(10) Mr. Helm terminated his employment with National in June 1995.
(11) Includes $616,172 of employee's commission received as a percentage of net
sales revenue.
(12) Includes $579,740 of employee's commission received as a percentage of net
sales revenue.
(13) Pursuant to the November Repricing, options to purchase an aggregate of
35,000 shares were granted upon the simultaneous cancellation of options to
purchase an aggregate of 35,000 shares granted in prior fiscal years. In
addition, an option to purchase 5,000 shares was granted pursuant to the
November Repricing upon the simultaneous cancellation of an option to
purchase 5,000 shares granted pursuant to the February Repricing.
(14) Includes $763,563 of employee's commission received as a percentage of net
sales revenue.
(15) Mr. Herman terminated his employment with National in June 1995.
(16) Includes severance payment of $245,754 attributable to salary.
(17) Represents severance payment of $782,754 and $7,000 payable to
non-employee director of National.
OPTION GRANTS IN LAST FISCAL YEAR
The following tables set forth, as to the Named Officers, certain
information relating to stock options granted during fiscal 1995.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------- Potential Realizable
Number of Percent Value at Assumed
Securities of Total Annual Rates of Stock
Underlying Options Price Appreciation
Options Granted to Exercise or for Option Term (3)
Granted Employees in Base Price Expiration ---------------------
Name (#) Fiscal Year (1) ($/Sh) Date (2) 5% ($) 10% ($)
- ------------------ ---- --------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Speizer 50,000 (4) 6.25 10/20/05 196,530 498,045
Melvyn D. Croner 50,000 (4) 6.50 05/23/05 204,391 517,966
David B. Brody 100,000 54.6% 5.125 01/01/05 322,309 816,793
Paulette J. Taylor 5,000 2.7% 6.50 05/23/05 20,439 51,797
Douglas H. Helm 0 -- --- --- --- ---
Howard L. Herman 50,000 (4) 6.125 06/01/95 192,599 488,084
</TABLE>
- ------------
(1) The total number of shares subject to options granted to employees in
fiscal 1995 was 183,000.
(2) Options may terminate before their expiration upon the termination of
optionee's status as an employee or consultant, the optionee's death or an
acquisition of National.
(3) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (10 years) at the annual
rate specified (5% and 10%). Annual compounding results in total
appreciation of 63% (at 5% per year) and 159% (at
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10% per year). If the price of National's Common Stock were to increase at
such rates from the price at 1995 fiscal year end ($5.875 per share) over
the next 10 years, the resulting stock price at 5% and 10% appreciation
would be $9.57 and $15.24, respectively. The assumed annual rates of
appreciation are specified in SEC rules and do not represent National's
estimate or projection of future stock price growth. National does not
necessarily agree that this method can properly determine the value of an
option.
(4) The 50,000 share options granted to Messrs. Speizer, Croner and Herman were
granted pursuant to the 1991 Director Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
There were no option exercises in fiscal 1995 by the Named Officers.
The following table provides information with respect to the value of
unexercised options held by the Named Officers at the close of business on
December 29, 1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End (#) at Fiscal Year End ($)(2)
------------------------------- ---------------------------
Name Exercisable(1) Unexercisable Exercisable Unexercisable
- ------------------ -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark A. Speizer 40,000(3) 50,000 -- --
Melvyn D. Croner 0 50,000 -- --
David B. Brody 84,741(4) 0 15,936 --
Paulette J. Taylor 22,250(5) 0 8,250 --
Douglas H. Helm 27,633(3) 0 7,109 --
Howard L. Herman 23,000(3) 50,000 -- --
</TABLE>
- ----------
(1) Options granted under National's 1986 Stock Option Plan are fully
exercisable from their date of grant, whether or not vested. Unvested
shares purchased upon exercise of an option are subject to a repurchase
option in favor of National, which repurchase option lapses over time.
(2) Market value of underlying securities based on the closing price of $5.875
of National's Common Stock on the Nasdaq National Market on December 29,
1995, minus the exercise price.
(3) All of such shares are vested as of December 29, 1995.
(4) Includes 45,886 vested shares and 38,855 unvested shares as of December 29,
1995.
(5) Includes 9,000 vested shares and 13,250 unvested shares as of December 29,
1995.
COMPENSATION OF DIRECTORS
See Part III, Item 10, "Directors and Executive Officers of the
Registrant--Compensation of Directors."
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
See Part III, Item 13, "Certain Relationships and Related
Transactions," for a discussion of employment contracts and severance
agreements with certain of the Named Officers.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors is
composed of two non-employee directors, Melvyn D. Croner and Kenneth Ross. No
interlocking relationship exists between the Company's Board of Directors or the
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock
of National as of March 29, 1996, by (i) each person or entity who is known by
National to beneficially own more than 5% of National's Common Stock, (ii) the
Named Officers, (iii) each of National's current directors, and (iv) all current
directors and executive officers as a group. A total of 4,679,697 shares of
National's Common Stock were issued and outstanding as of March 29, 1996.
<TABLE>
<CAPTION>
Number Percent
Name and Address of Shares(1) of Total
----------------
<S> <C> <C>
Mark A. Speizer (2)....................................... 1,100,914 23.3%
400 Oyster Point Boulevard, Suite 115
South San Francisco, CA 94080
Howard L. Herman (3)...................................... 737,415 15.7%
3282 Jackson Street
San Francisco, CA 94118
Ryback Management Corporation (4)
and its affiliated entities............................... 613,800 13.1%
7711 Carondelet Avenue, Suite 700
Box 16900
St. Louis, MO 63105
Brinson Partners, Inc. (5)
and its affiliated entities............................... 520,599 11.1%
209 South LaSalle Street
Chicago, IL 60604-1295
Kalmar Investments Inc. (6)............................... 260,300 5.6%
1300 Market Street, Suite 500
Wilmington, DE 19801
David B. Brody (7) ....................................... 119,611 2.5%
Kenneth Ross (8).......................................... 35,000 *
Douglas H. Helm (9) ...................................... 28,633 *
Paulette J. Taylor (10)................................... 22,250 *
Melvyn D. Croner.......................................... __ __
John R. Gaulding.......................................... __ __
All directors and executive officers
as a group (9 persons) (11)............................... 2,050,323 41.8%
</TABLE>
- ---------
* Less than 1%
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(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission (the "SEC"), and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
within 60 days of March 29, 1996 through the exercise of any stock option
or other right. Unless otherwise indicated in the footnotes, each person
has sole voting and investment power (or shares such powers with his or her
spouse) with respect to the shares shown as beneficially owned.
(2) Includes: (i) 40,000 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of March 29, 1996, (ii)
2,400 shares held by Mr. Speizer's wife, Linda Speizer, (iii) 2,400 shares
held by each of Mr. Speizer's two daughters, and (iv) an aggregate of
636,614 shares which have been pledged to The Pacific Bank and The
Commercial Bank as collateral for loans to Mr. Speizer, the operation of
which pledge could result in a change of control of National. Mr. Speizer,
whose employment with National terminated in October 1995, is the former
President, Chief Executive Officer and Chairman of the Board.
(3) Includes: (i) 49,800 shares held by a trust of which Mr. Herman is
co-trustee, (ii) 23,000 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of March 29, 1996, (iii) an
aggregate of 651,563 shares which have been pledged to The Pacific Bank and
The Commercial Bank as collateral for loans to Mr. Herman, the operation of
which pledge could result in a change of control of National, and (iv)
10,000 shares which have been pledged to Dean Witter Reynolds Inc. as
collateral for a loan to Mr. Herman. Mr. Herman, formerly President and
Acting Chief Financial Officer, terminated his employment with National in
June 1995.
(4) Based on Amendment No. 1 to Schedule 13G dated January 25, 1996, filed by
Ryback Management Corporation with the SEC. Includes 466,800 shares owned
by Lindner Growth Fund and 147,000 shares owned by Ryback Management
Corporation.
(5) Based on Amendment No. 6 to Schedule 13G dated February 9, 1996, filed by
Brinson Partners, Inc. ("BPI") with the SEC on behalf of itself, Brinson
Trust Company ("BTC"), Brinson Holdings, Inc. ("BH"), SBC Holding (USA),
Inc. ("SBCUSA") and Swiss Bank Corporation ("SBC"). BTC is a wholly-owned
subsidiary of BPI. BPI is a wholly-owned subsidiary of BH. BH is a
wholly-owned subsidiary of SBCUSA. SBCUSA is a wholly-owned subsidiary of
SBC. BPI, BH, SBCUSA and SBC share voting and dispositive power with
respect to 520,599 shares, of which shares BTC shares voting and
dispositive power with respect to 147,064 shares.
(6) Based on Schedule 13G dated January 25, 1996, filed by Kalmar Investments
Inc. with the SEC.
(7) Includes 84,741 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of March 29, 1996. Mr.
Brody, formerly Executive Vice President, Information Services, terminated
his employment with National in January 1996.
(8) Includes 25,000 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of March 29, 1996.
(9) Includes 27,633 shares of Common Stock issuable upon exercise of
outstanding options exercisable within 60 days of March 29, 1996. Mr. Helm,
formerly Executive Vice President, Sales and Marketing, terminated his
employment with National in June 1995.
(10) All such shares of Common Stock are issuable upon exercise of outstanding
options exercisable within 60 days of March 29, 1996.
(11) Includes an aggregate of 222,624 shares issuable upon exercise of
outstanding options exercisable within 60 days of March 29, 1996.
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<PAGE> 10
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1995, David B. Brody entered into an employment agreement
with National and its current and future subsidiaries for an annual salary of
$227,000 and certain fringe benefits. Mr. Brody's employment agreement expired
in January 1996, at which time Mr. Brody resigned from his position with
National.
In January 1990, Douglas H. Helm entered into an employment agreement
with National, the Insurance Subsidiary, FASTRAC and PDC which provides for an
annual aggregate salary of $120,000, certain fringe benefits and commission
agreement income based on schedules set forth in the employment agreement. In
the event Mr. Helm's employment is terminated (i) voluntarily by Mr. Helm, (ii)
by Mr. Helm for cause, or (ii) due to the death or permanent disability of Mr.
Helm, or if the employment agreement is not renewed or substituted, Mr. Helm or
his beneficiaries, as the case may be, shall be entitled to receive commissions,
based on the commission schedules set forth in the employment agreement, for a
certain period following such termination of employment (the "Post Termination
Commission Provision"). Mr. Helm's employment agreement terminated in December
1994; however, he continued to be employed by National through July 1, 1995. The
Post Termination Commission Provision remains in effect.
Pursuant to a Severance Agreement and Full Release of All Claims
entered into on May 23, 1995 between National and its current and future
subsidiaries (collectively, the "Companies") and Howard L. Herman, the former
President of National, Mr. Herman's employment with the Companies was
terminated on May 31, 1995. In connection with Mr. Herman's termination, he was
paid approximately $783,000 in settlement of certain claims and to cover
certain miscellaneous expenses. In addition, National agreed to extend the
exercise period of Mr. Herman's unexercised stock options under National's 1986
Stock Option Plan through the dates on which such options would have expired
had he continued to be employed by the Companies. In addition, Mr. Herman
agreed to perform consulting services for the Companies relating to matters on
which he worked during his employment by the Companies and, for a period of one
year following termination, not to compete with the Companies in selected
areas of the United States.
Pursuant to a Severance Agreement and Release of Claims entered into on
October 19, 1995 between the Companies and Mark A. Speizer, the former
President, Chief Executive Officer and Chairman of the Board of the Companies,
Mr. Speizer's employment with the Companies was terminated on even date
therewith. In connection with Mr. Speizer's termination, he was paid $885,000
in settlement of certain claims and to cover certain miscellaneous expenses. In
addition, National agreed to extend the exercise period of Mr. Speizer's
unexercised stock options under National's 1986 Stock Option Plan through the
dates on which such options would have expired had he continued to be employed
by the Companies. In addition, Mr. Speizer agreed, for a period of one year
following termination, (i) not to compete with the Companies in selected areas
of the United States and (ii) to perform consulting services for the Companies
up to a maximum of seven hours per week.
In February 1996, John R. Gaulding entered into a Consulting Agreement
with the Companies, pursuant to which he agreed to provide consulting services
to the Companies for the months of February and March 1996 at a rate of $25,000
per month. In February 1996, the Companies entered into an At-Will Employment
Agreement (the "Agreement") with Mr. Gaulding, pursuant to which Mr. Gaulding
agreed to serve, commencing April 1, 1996, as Chief Executive Officer and
President of National and each of its subsidiaries, and the Companies agreed to
pay Mr. Gaulding a signing bonus of $100,000, payable in installments of
$50,000 on April 1, 1996 and $25,000 on each of October 1, 1996 and January 1,
1997 (the "Signing Bonus"), and an annual salary of $300,000. Pursuant to an
incentive performance program recommended by the Compensation Committee of the
Board of Directors and approved by the Board of Directors, which program will
set specific goals and performance criteria and targets for fiscal years 1996
and 1997 ("Incentive Plan Criteria and Targets"), Mr. Gaulding is eligible to
receive an annual incentive award of (i) up to $150,000 for achieving the at
target goal of the Incentive Plan Criteria and Targets, (ii) up to $90,000 for
achieving an acceptable but not at target goal, and (iii) $300,000 for
achieving an exceptional above target goal, provided that the incentive
compensation for 1996 shall be pro rated based upon the months Mr. Gaulding is
a full time employee and officer of the Companies. New goals and incentives for
calendar years subsequent to 1997 will be defined by the Board of Directors;
however, the at target incentive award shall not be less than $100,000,
pro-rated for the year. Pursuant to the Agreement, Mr. Gaulding was granted an
option to purchase 250,000 shares of Common Stock of National, all of which
shares vest on March 31, 1998, subject to acceleration of vesting in the event
of Mr. Gaulding's termination of employment in connection with a "change in
control of the Companies" or in the event of an "adverse change in the board of
directors," as such terms will be defined by June 30, 1996. The Companies also
agreed to provide Mr. Gaulding with a monthly automobile allowance of $1,000
and provided for participation by Mr. Gaulding and his immediate family in such
group insurance plans and other employee benefits as the Companies shall
maintain. In addition, the Companies agreed to reimburse the premium cost of
$1.3 million life insurance policy for the period April 1, 1996 through March
31, 1998, up to a maximum premium amount of $10,000 per year. In addition, the
Agreement provides that in the event of
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<PAGE> 11
termination of employment by the Companies without cause, Mr. Gaulding shall
receive any installment of the Signing Bonus not yet paid and a severance
payment ranging from (i) $150,000, in the event his employment is terminated
more than 18 months but less than twenty-four months following the date of the
Agreement, to (ii) $300,000, in the event his employment is terminated within
nine months following the date of the Agreement
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 25th day of April,
1996.
NATIONAL INSURANCE GROUP
By: /s/ John R. Gaulding
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John R. Gaulding
President and Chief Executive Officer
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