SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K/A
________________________
Amendment to Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1998 Commission File No. 0-17295
THE KUSHNER-LOCKE COMPANY
(Exact name of registrant as specified in its charter)
California 95-4079057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11601 Wilshire Blvd., 21st Floor, Los Angeles, California 90025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 481-2000
Securities registered pursuant to Section 12 (b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
10% Convertible Subordinated Debentures, Series A due 2000
13-3/4% Convertible Subordinated Debentures, Series B due 2000
Common Stock Purchase Warrants, Class C
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 1 No0
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or 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. 0
The aggregate market value based on the closing price of the Registrant's
Common Stock held by nonaffiliates of the Registrant was approximately
$103,166,000 as of January 27, 1999. There were 10,608,141 shares of
outstanding Common Stock of the Registrant as of January 27, 1999.
Total number of pages:17. Exhibit 21 begins on page 17.
The undersigned registrant (the "Company") hereby amends the following
items of its Annual Report on Form 10-K for the fiscal year ended September
30, 1998 (the "Report") as follows:
PART III
The Company hereby deletes the information set forth under Items 10, 11,
12 and 13 of the Report and replaces such items in their entirety as set
forth below, amends the information set forth under Item 14 of the Report, and
provides an updated Exhibit 21 of subsidiaries and affiliates of the Company.
Item 10. Directors and Executive Officers of Registrant
Executive Officers and Directors
Directors of the Company are elected annually by the shareholders to serve
for a term of one year or until their successors are duly elected and
qualified. Set forth below is certain information concerning each person who
was an executive officer or director of the Company as of September 30, 1998.
<TABLE>
<CAPTION>
Director
Name Age Since Position
---- --- ----- --------
<S> <C> <C> <C>
Peter Locke 55 1983 Co-Chairman and Co-Chief Executive Officer;
Director
Donald Kushner 53 1983 Co-Chairman, Co-Chief Executive Officer and
Secretary; Director
Irwin Friedman+ 64 1998 Director
Stuart Hersch+ 48 1989 Director
John Lannan+ 52 1998 Director
Bruce St. J.
Lilliston 47 - Chief Operating Officer and President
Robert Swan 51 - Senior Vice President and Chief Financial
Officer
</TABLE>
______________________
+ Member of Audit Committee and Compensation Committee
Background of Executive Officers and Directors
The business experience, principal occupations and employment of each of the
directors and executive officers of the Company, for at least the past five
years, are as follows:
Peter Locke co-founded the Company with Donald Kushner in 1983 and currently
serves as Co-Chairman and Co-Chief Executive Officer of the Company. Mr. Locke
has served as executive producer on substantially all of the Company's
programming since its inception. Prior to 1983, Mr. Locke produced several
prime-time television programs, including two years of the Stockard Channing
Show and the NBC television mini-series The Star Maker, starring Rock Hudson.
Mr. Locke also produced two made-for-television movies telecast on CBS and the
films The Hills Have Eyes Parts I and II. Mr. Locke is President and
Co-Chairman of the board of directors of 800-U.S. Search ("Search"), an
80%-owned subsidiary of the Company.
Donald Kushner co-founded the Company with Peter Locke in 1983 and currently
serves as Co-Chairman, Co-Chief Executive Officer and Secretary. Mr. Kushner
has served as executive producer on substantially all of the Company's
programming since its inception. Mr. Kushner was the producer of Tron, a 1982
Walt Disney theatrical film starring Jeff Bridges, which was nominated for two
Academy Awards. Mr. Kushner is Co-Chairman of the board of directors of
Search.
Irwin Friedman has served as a director of the Company since 1998. Mr.
Friedman is President of I. Friedman Equities, Inc., a corporate financial
services firm, which he founded more than twenty years ago. Since 1991 Mr.
Friedman has rendered financial consulting services to the Company through I.
Friedman Equities, Inc. Mr. Friedman was responsible for introducing the
Company to various investment banking firms and has advised and assisted the
Company with six financing transactions. Mr. Friedman is a director of
Recoton Corporation, a consumer electronics company.
Stuart Hersch has served as a director of the Company since August 1989.
Since February 1996, Mr. Hersch has been a consultant to several entertainment
companies. In April 1996, Mr. Hersch became a consultant to the Company. Mr.
Hersch assists the Company in analyzing potential strategic acquisitions and
provides the Company consulting services in connection with the Company's
infomercial operations. From August 1990 to January 1996, Mr. Hersch was
President of the WarnerVision Entertainment division of Atlantic Records, a
subsidiary of Time-Warner, Inc. From 1988 to August 1989, Mr. Hersch was
Chairman of Hersch Diener & Company, an independent consulting firm. From 1983
to 1987, Mr. Hersch was the Chief Operating and Chief Financial Officer of
King World Productions, Inc.
John Lannan has served as a director of the Company since 1998. Mr. Lannan is
the President of Brentwood Partners, Inc., a mortgage banking company. From
May 1995 to May 1998 Mr. Lannan was Vice President of Westco Real Estate
Finance Corp., a mortgage banking company. Previously he was Vice-Chairman of
Hollingsworth & Lord, a mortgage banking company. Mr. Lannan is a director of
Centennial Bank and of Orange County Bancorp, treasurer of the Lannan
Foundation, a not-for-profit organization, and is a member of the California
Bar.
Bruce St. J. Lilliston became President and Chief Operating Officer of the
Company in October 1996. Prior to joining the Company, Mr. Lilliston
practiced entertainment law for 19 years. He represented the Company in
various transactions for the two years preceding his appointment as Company
President and Chief Operating Officer. Mr. Lilliston served as an arbitrator
for the American Film Marketing Association, and also served a special master
for the Los Angeles Superior Court. He graduated from the University of
Chicago Law School in 1977, where he was an associate editor of the University
of Chicago Law Review. He received his bachelor of arts degree with honors
from Brown University in 1974. Mr. Lilliston was a partner in the law firm of
Paul, Hastings, Janofsky & Walker from 1989 to 1991, where he was managing
partner of that firm's entertainment finance and transactions practice.
Robert Swan joined the Company as Controller on October 28, 1996. On May 1,
1997 Mr. Swan was appointed Chief Financial Officer and on May 1, 1998 became
Senior Vice President and Chief Financial Officer. Prior to assuming the
Chief Financial Officer role for the Company, Mr. Swan had been Chief
Financial Officer of AVI Entertainment Group, Inc., a music publishing and
distribution company since 1994. From 1991 to 1994 Mr. Swan was Chief
Financial Officer of Global Releasing Corporation and several affiliated
companies which produced and distributed feature films. One affiliated
company, Cannon Television, Inc., was placed in voluntary bankruptcy several
months after Mr. Swan left its employ. From 1986 to 1991 Mr. Swan was an
audit partner at KPMG Peat Marwick. Mr. Swan is a Certified Public
Accountant.
Directors who are also executive officers of the Company do not receive any
additional compensation for serving as members of the Board of Directors or
any committee thereof. Peter Locke and Donald Kushner receive no compensation
for serving as a member of the Board of Directors. Irwin Friedman and Stuart
Hersch receive $25,000 annually each, and John Lannan receives $15,000
annually, for serving on the Board of Directors and any committees thereof.
Each of Messrs. Friedman and Lannan were granted options to purchase 16,667
shares at an exercise price of $2.84 in June 1998, and Mr. Hersch was granted
options to purchase 16,667 shares at an exercise price of $1.875 in August
1997.
During the 1998 fiscal year, there were six meetings of the Board of
Directors, five meetings of the Compensation Committee and two meetings of the
Audit Committee of the Board of Directors. Each director attended all of the
meetings of the Board of Directors, the Compensation Committee and the Audit
Committee held during the period for which he was a director or for which he
had served as a committee member.
Other Significant Employees
The business experience, principal occupations and employment for at least
the past five years of certain other significant employees who have made or
are expected to make significant contributions to the business of the Company
are as follows:
D'Arcy Conrique, age 34, was appointed Senior Vice President, Operations of
Kushner-Locke International, Inc., the international theatrical distribution
subsidiary of the Company, in April 1997. Mr. Conrique joined Kushner-Locke
International, Inc. as Vice President in January 1995. Prior to joining
Kushner-Locke International, Inc., Mr. Conrique was Manager, Contracts
Administration at August Entertainment, Inc., a producer and distributor of
feature films, from 1994 to 1995. From 1986 through 1994 Mr. Conrique was
Managing Director at Koritain Entertainment, a producer and distributor of
feature films.
Chris Perry-Melish, age 31, was appointed President, Film and Television Sales
of Kushner-Locke International, Inc., the international theatrical
distribution subsidiary of the Company, in October 1998. In May 1998 Mr.
Perry-Melish was appointed Vice President, International Sales of
Kushner-Locke International. Mr. Perry-Melish joined Kushner-Locke
International, Inc. as Director, International Distribution in April 1997.
From 1996 to April 1997 Mr. Perry-Melish was Director, International
Distribution for Conquistador Entertainment, Inc., a distributor of feature
films. From 1992 through 1996 Mr. Perry-Melish was Manager of International
Distribution for Prism Entertainment, a producer and distributor of feature
films and television programs.
Richard Marks, age 50, was appointed Executive Vice President and General
Counsel of the Company in April 1997. Prior to that, he served as the
Company's Senior Vice President in charge of Legal and Business Affairs since
joining the Company in October 1993. From 1991 to October 1993, Mr. Marks
served as Senior Vice President in charge of Business and Legal Affairs for
Media Home Entertainment, an independent film producer and video distributor.
From 1983 to 1991 Mr. Marks held similar legal and business affairs positions
with Walt Disney Pictures, Paramount Pictures and Weintraub Entertainment
Group.
Frank Hildebrand, age 48, joined the Company in January 1998 as Executive
Vice President - Production. From 1992 through 1997 Mr. Hildebrand was an
independent producer and produced numerous films, among them two films for the
Company, Freeway and the special effects film Beowulf. From 1988 to 1991 he
was Executive Vice President at NOVA Entertainment, where he was responsible
for the production of all features and television, including the Disney film
Firebirds and Triumph of the Spirit, among others. From 1985 to 1987, Mr.
Hildebrand was a producer and executive with The Samuel Goldwyn Co., where he
produced the successful comedy Once Bitten.
Phillip Mittleman, age 28, joined the Company in 1993 as Director of
Development, Feature Films. In March 1994 Mr. Mittleman was appointed Vice
President, Feature Films. In 1995 Mr. Mittleman was appointed Executive Vice
President, Feature Films. Prior to 1993 Mr. Mittleman served as production
coordinator, script coordinator and writer's assistant on various Company
projects.
Andrew Steinberg, age 34, joined the Company as Executive Vice President-
Television in April 1997. Before joining the Company, Mr. Steinberg was a
Senior Packaging Agent at International Creative Management ("ICM") beginning
in April 1990, where he represented many producers, writers and authors. Mr.
Steinberg also worked with ICM's chairman, Jeff Berg, on building a corporate
consulting business. While at ICM, Mr. Steinberg worked closely with the
Company and packaged four television projects for the Company, including the
CBS made-for-television movie "Unlikely Angel" starring Dolly Parton.
Nicholas Matzorkis, age 36, is the Chief of Technology and a director of the
Company's subsidiary, 800-U.S. Search. Mr. Matzorkis co-founded
800-U.S Search in 1994 and served as its President from inception to September
1998. From 1992 to 1994, Mr. Matzorkis was founder and President of U.S. Bell
Long Distance, an aggregator and reseller of telecommunications services. In
addition, from 1992 through 1997 Mr. Matzorkis consulted with companies in the
entertainment industry on Web site development, and promoted a variety of
music and entertainment ventures.
Alan Mazursky, age 40, is serving as Chief Financial Officer of 800-U.S.
Search as part of his duties as a consultant to the Company. From 1996 to
1998 Mr. Mazursky was an independent financial consultant. From 1988 to 1996
Mr. Mazursky was Chief Financial Officer of Hard Rock Cafe America, the owner,
operator and franchisor of Hard Rock Cafe restaurants in the western United
States and certain international territories.
Robert Zakari, age 28, has served as Vice President-Legal and Business
Affairs of 800-U.S. Search since August 1996. Previously Mr. Zakari attended
New York Law School where he received a Juris Doctorate degree in 1996. Mr.
Zakari is a member of the California state bar.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires executive officers and directors,
and persons who beneficially own more than 10% of any class of the Company's
equity securities to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and beneficial owners of more than 10% of any class of the
Company's equity securities are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company
during or with respect to fiscal 1997, and certain written representations
from executive officers and directors, the Company believes that each such
person has complied with all Section 16(a) filing requirements applicable to
such executive officers, directors and greater than 10% beneficial owners,
except that Irwin Friedman inadvertently failed to file one report on a timely
basis, covering one small sale of securities in December 1998, and Bruce
Lilliston inadvertently failed to file one report on a timely basis, covering
one transaction reflecting the receipt by Mr. Lilliston of stock options
granted pursuant to the 1988 Stock Incentive Plan.
Item 11. Executive Compensation
Cash Compensation
The following table sets forth the cash compensation paid or accrued by the
Company during the fiscal year ended September 30, 1998 to the Chief Executive
Officer and each executive officer of the Company whose salary and bonus
exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<Captions>
Long-Term
Compensation
Awards
----------
Annual Securities All Other
Compensation(1) Underlying Compensation
Name and Fiscal Salary Bonus Options/SARs (1,4)
Principal Position Year ($) ($) (#) ($)
- - ------------------ ---- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Peter Locke (2)(3) 1998 425,000 -- -- 30,856
Co-Chairman, Co-Chief 1997 425,000 -- 166,666/0 36,293
Excecutive Officer 1996 425,000 -- -- 34,313
Donald Kushner (3) 1998 425,000 -- -- 27,989
Co-Chairman, Co-Chief 1997 425,000 -- 166,666/0 33,878
Executive Officer and 1996 425,000 -- -- 30,415
Secretary
Bruce Lilliston (5) 1998 400,000 80,049 8,333/0 --
President and Chief 1997 400,000 -- 41,667/0 --
Operating Officer
Robert Swan (5) 1998 172,558 -- -- --
Senior Vice President 1997 124,154 -- 25,000/0 --
and Chief Financial
Officer
</TABLE>
______________________
(1) Does not include perquisites including automobile allowances and $25,000
annual non-accountable expense allowances in the case of Messrs. Locke,
Kushner and Lilliston.
(2) Does not include payments by the Company's subsidiary, 800-U.S. Search,
prior to January 30, 1998, when the Company acquired such subsidiary.
(3) Does not include options to purchase shares of the common stock of
800-U.S. Search which were approved by the Company and Search, but
subsequently were terminated prior to full documentation pursuant to a waiver
of any rights to receive such options executed by Messrs. Kushner and Locke.
(4) Includes term life insurance premiums paid by the Company on behalf of the
Named Executive Officers in respect of a $3,500,000 policy and disability
insurance premiums paid by the Company on behalf of the Named Executive
Officers.
(5) Commenced employment in fiscal 1997.
Employment Agreements
Messrs. Kushner and Locke. In March 1994, Messrs. Kushner and Locke each
agreed to an amendment to his respective employment agreement with the Company
to (i) extend the term of the agreement to September 1998 and (ii) reduce the
maximum annual performance bonus that each may receive to 4% of pre-tax
earnings for the applicable period up to a maximum of $200,000 in fiscal 1994,
$220,000 in fiscal 1995, $250,000 in fiscal 1996, $270,000 in fiscal 1997 and
$290,000 in fiscal 1998. Under the then revised employment agreements, Messrs.
Kushner and Locke each were entitled to a base salary of $425,000 in fiscal
1996 through fiscal 1998, subject to potential increase upon review by the
Company's Board of Directors after fiscal 1995.
In order to induce Messrs. Kushner and Locke to enter into the March 1994
amended employment agreements, the Company granted to each, as of March 7,
1994, options to purchase 150,000 adjusted shares of Common Stock at an
adjusted exercise price per share equal to $5.04 (the last reported sale price
of the Common Stock on the date of the initial closing of the 8% Debentures).
The options vest over a five year period, with 20% vesting respectively on
each of the five annual anniversary dates following the date of the grant
(subject to possible acceleration following a "change-in-control" as defined
in the Company's 1988 Stock Incentive Plan (the "Plan")). Options to purchase
up to 120,000 shares of Common Stock have vested as to each officer as of
January 27, 1999.
As of October 1, 1997, Messrs. Kushner and Locke each agreed to a further
amendment to his respective employment agreement with the Company to extend
the term of the agreement to October 2002. Under the revised employment
agreements, Messrs. Kushner and Locke each continue to be entitled to an
annual base compensation of $425,000 in fiscal 1997, and are entitled to
$25,000 annual increases beginning with the second employment year
(commencing October 1998) under the amended agreement up to a maximum of
$525,000. In the event the Company achieves earnings before income taxes
prior to the profit bonuses in excess of $2,000,000, each of Messrs. Kushner
and Locke are entitled to certain profit bonuses at graduated rates ranging
from 5% of such annual earnings before income taxes (from the first dollar of
earnings before income taxes) up to $4,000,000 to increasing percentages up to
7.5% of annual earnings before income taxes in excess of $8,000,000, but not
to exceed two times annual base compensation.
In addition, the Company granted to each of Messrs. Kushner and Locke, as of
August 1, 1997, options to purchase 83,333 (post reverse split) shares of
Common Stock at an exercise price per share equal to $1.875 (the last reported
sale price of the Common Stock on the date prior to the award date, as
adjusted). These options (time vesting options) vest over a five year period,
with 20% vesting respectively on each of the five annual anniversary dates
following the date of the grant (subject to acceleration in the event of
termination of optionee's employment agreement by such optionee for "cause"
(as defined therein) or wrongfully by the Company or upon certain "Events" (as
defined under the Plan), including termination following a "change-in-control"
as defined in the Plan). The Company also granted to each of Messrs. Kushner
and Locke options to purchase an additional 83,333 (post reverse split) shares
of Common Stock at an exercise price per share equal to $1.875, vesting at the
rate of 20% per year, but exercisable only upon (i) the achievement of at
least 85% of certain annual earnings before income tax targets to be set by
the board of directors or (ii) the Company's Common Stock reaching certain
public trading prices ranging from $3.00 to $6.00 per share. Such performance
options are also subject to accelerated vesting and exercisability under the
circumstances described above for the time-vesting option tranche.
The Company also provides Messrs. Kushner and Locke with certain fringe
benefits, including $3,500,000 of term life insurance with a split dollar
ownership structure and disability insurance for each person. If the
employment agreement is terminated by employee for "cause" or wrongfully by
the Company, the Company is required to pay the present value of all unpaid
premiums on the split dollar policy for the ten (10) year period ending
February 2007. The Company also agreed to assign any key-man life insurance
policy to the employee after certain terminations of the employment agreement.
The agreements permit Messrs. Kushner and Locke to collect outside
compensation to which they may be entitled and to provide incidental and
limited services outside of their employment with the Company and to receive
compensation therefor, so long as such activities do not materially interfere
with the performance of their duties under the agreements. Each of Messrs.
Kushner and Locke also may require the Company to change its name to remove
his name within one year after the expiration or termination of his employment
agreement, except that the Company may continue to use such name for a period
of one year after such notice, or for such longer period of time as is
reasonably necessary to cause the Company not to default under any
indebtedness for borrowed money or other material agreement. In the event
Messrs. Kushner's or Locke's employment agreement is terminated following a
change of control, as such term is defined therein, such executive would be
entitled to a lump sum payment equal to all compensation and benefits provided
for in the agreement for the remainder of the term, discounted at the rate of
10% per annum.
Mr. Lilliston. On September 14, 1996, the Company entered into an employment
agreement with Bruce St. J. Lilliston pursuant to which the Company employed
Mr. Lilliston as the President and Chief Operating Officer of the Company
effective October 1, 1996 for a three year term. As part of the agreement,
Mr. Lilliston will be paid a base salary of $400,000 per year. In addition,
the Company loaned him $100,000 on September 3, 1996 and $200,000 in October
1996. The loan was made to assist Mr. Lilliston in the transition from his
private law practice to his duties as Chief Operating Officer of the Company.
The loan accrues simple interest at the rate of 8% per annum and will be repaid
over a five year period at certain specified dates ending October 1, 2001.
Mr. Lilliston has the right to receive bonuses equal to the amount of the
payments, including interest, due for such loan if Mr. Lilliston is still
employed by the Company (including the renewal of his employment agreement if
applicable) on certain dates (the "Employment Bonus"). Beginning October 1,
1997, so long as Mr. Lilliston is then employed by the Company (including the
renewal of his employment agreement if applicable), he shall be entitled to
receive a bonus of $100,000 the first time the adjusted "Average Closing
Price" (the average closing price of the common stock over a thirty calendar
day period) is $6.00 or more greater than the "First Day Price" (the average
closing price of the Common Stock, as adjusted, over the thirty calendar day
period immediately prior to October 1, 1996). Thereafter, if Mr. Lilliston is
still employed by the Company (including the renewal of his employment
agreement if applicable), he shall be entitled to receive an additional
$100,000 bonus the first time the Average Closing Price exceeds the First Day
Price by $12.00 or more, as adjusted, and each whole six-dollar amount through
and including $60.00, as adjusted, (each such bonus, a "Stock Bonus"). The
aggregate of such bonuses shall not exceed $1,000,000. The Stock Bonuses
shall be reduced by an amount equal to the Employment Bonus up to $150,000
plus interest payable thereon from September 3, 1996. As of September 30,
1998 Mr. Lilliston had received an Employment Bonus of $80,049 but no Stock
Bonus.
If the Company realizes pre-tax operating profits or earnings per share for
any fiscal year during Mr. Lilliston's employment greater than 100% of the
Company's largest pre-tax operating profit or earnings per share amount for
any of the preceding years of Mr. Lilliston's employment under his employment
agreement or in any of the five fiscal years immediately preceding the
commencement of such agreement, and if Mr. Lilliston is still employed by the
Company at the end of the applicable fiscal year, then Mr. Lilliston shall be
entitled to receive a bonus of $50,000 for each such event. No bonus was
earned or paid for fiscal 1998.
As part of the agreement, the Company agreed to grant Mr. Lilliston options
to purchase up to 41,667 adjusted shares of Common Stock, with 20,834 of such
options having been granted and vested upon the authorization by the
shareholders of the Company of additional shares of common stock in November
1996. Options to purchase an additional 8,333 shares of common stock and
12,500 shares of common stock were granted and vested on October 1, 1997 and
October 1, 1998, respectively, as Mr. Lilliston reached the performance
criteria established by the Board of Directors or a committee thereof. If Mr.
Lilliston's employment is extended for a second term pursuant to such
agreement (the "Second Term"), the Company has agreed to grant Mr. Lilliston
options to purchase up to an additional 83,334 shares of Common Stock, 41,667,
16,667, and 25,000 of such options to be granted upon commencement and one,
and two years, respectively, after the commencement of the Second Term with
one-half of each such grant to vest immediately upon grant and the remainder
thereof to vest upon Mr. Lilliston reaching certain performance criteria to be
established by the Board of Directors or a committee thereof. If Mr.
Lilliston's employment is extended beyond a Second Term, the Company has
agreed to grant Mr. Lilliston options to purchase up to an additional 41,667
shares of Common Stock as adjusted, with such options granted in full upon
such employment extension with one-half of such grant to vest immediately upon
grant and the remainder thereof to vest upon Mr. Lilliston reaching certain
performance criteria to be established by the Board of Directors or a
committee thereof. In the event the performance goals are not met, such
options vest at a fixed date in the future, contingent solely on future
employment. The exercise price for such options shall be equal to the closing
price of the Common Stock on the applicable date of grant. Finally, as part
of Mr. Lilliston's agreement, he is allowed to maintain not more than two
independent outside legal consultancy client relationships, subject to
approval by the Co-Chief Executive Officers, with earnings from such
consultancies limited to $150,000 per year.
Mr. Swan. Effective May 1, 1997 ("the Effective Date") the Company entered
into an employment agreement with Robert Swan pursuant to which the Company
employed Mr. Swan as the Chief Financial Officer of the Company for a three
year term. Mr. Swan was paid a base annual salary of $160,000 for the first
year, $175,000 for the current year and $200,000, for the subsequent year.
Mr. Swan has the right to receive a bonus equal to 10% of his base annual
salary to the extent that net earnings for each fiscal year are greater than
that of the immediately preceding fiscal year. The Company agreed to grant
Mr. Swan options to purchase up to 25,000 shares of Common Stock, with options
exercisable for 8,334 shares immediately vesting and for 8,333 shares vesting
on each of the first and second anniversaries of the agreement. The agreement
is subject to early termination by the Company in its discretion on the second
anniversary date of the Effective Date.
1998 Stock Incentive Plan
The 1998 Stock Incentive Plan adopted by the Board of Directors in October
1988 (the "Plan") authorizes the granting of stock incentive awards ("Awards")
to qualified officers, employees, directors, key employees and third parties
providing valuable services to the Company, e.g., independent contractors,
consultants and advisors to the Company. In November 1996, the shareholders of
the Company voted to increase the adjusted authorized number of shares
available under the Plan from 750,000 to 1,250,000. The Plan may be
administered by a committee appointed by the Board and consisting of two or
more members, each of whom must be Non-Employee Directors. A Non-Employee
Director is defined as a director who is not employed by the Company or its
subsidiaries, does not receive compensation from the Company or its
subsidiaries other than as a director, except for compensation in an amount
less than $60,000, and is generally disinterested. The Plan is currently
administered by the entire board of directors, who determine the number of
shares to be covered by an Award, the term and exercise price, if any, of the
Award and other terms and provisions of Awards.
The Plan is designed to help the Company attract and retain qualified persons
for positions of substantial responsibility and to provide certain key
employees and consultants with an additional incentive to contribute to the
success of the Company. As of January 27, 1999, options to purchase 944,692
shares of the Company's Common Stock were outstanding under the Plan. Under
the Plan options to purchase 296,556 shares had been exercised, options to
purchase 411,279 shares had expired or been canceled and options to purchase
8,752 shares remained available for grant under the Plan.
Awards can be Stock Options ("Options"), Stock Appreciation Rights ("SARs"),
Performance Share Awards ("PSAs") and Restricted Stock Awards ("RSAs"). The
number and kind of shares available under the Plan are subject to adjustment
in certain events. Shares relating to Options or SARs which are not exercised,
shares relating to RSAs which do not vest and shares relating to PSAs which
are not issued will again be available for issuance under the Plan.
An Option may be an incentive stock option ("ISO") or a nonqualified Option.
The exercise price for Options is to be determined by the Committee, but in
the case of an ISO is not to be less than fair market value on the date the
Option is granted (110% of fair market value in the case of an ISO granted to
any person who owns more than 10% of the Common Stock). The purchase price is
payable in any combination of cash, shares of Common Stock already owned by
the participant for at least six months or, if authorized by the Committee,
a promissory note secured by the Common Stock issuable upon exercise. In
addition, the award agreement may provide for "cashless" exercise and payment.
Subject to early termination or acceleration provisions, an Option is
exercisable, in whole or in part, from the date specified in the related award
agreement (which may be six months after the date of grant) until the
expiration date determined by the Committee (not to exceed 10 years from the
date of grant).
An SAR is the right to receive payment based on the appreciation in the fair
market value of Common Stock from the date of grant to the date of exercise.
In its discretion, the Committee may grant an SAR concurrently with the grant
of an Option. An SAR is only exercisable at such time, and to the extent, that
the related Option is exercisable. Upon exercise of an SAR, the holder
receives for each share with respect to which the SAR is exercised an amount
equal to the difference between the exercise price under the related Option
and the fair market value of a share of Common Stock on the date of exercise
of the SAR. The Committee in its discretion may pay the amount in cash, shares
of Common Stock, or a combination thereof.
An RSA is an award of a fixed number of shares of Common Stock subject to
restrictions. The Committee specifies the prices, if any, the recipient must
pay for such shares. Shares included in an RSA may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered until they have
vested. The recipient is entitled to dividend and voting rights pertaining to
such RSA shares even though they have not vested, so long as such shares have
not been forfeited.
A PSA is an award of a fixed number of shares of Common Stock, the issuance
of which is contingent upon the attainment of such performance objectives, and
the payment of such consideration, if any, as is specified by the Committee.
The Plan also provides for certain tax-offset bonuses and tax withholding
using shares of Common Stock instead of cash.
Upon the date a participant is no longer employed by the Company for any
reason, shares subject to the participant's RSAs which have not become vested
by that date or shares subject to the participant's PSAs which have not been
issued shall be forfeited in accordance with the terms of the related Award
agreements. Options which have become exercisable by the date of termination
of employment or of service on the Committee must be exercised within certain
specified periods of time from the date of termination, the period of time to
depend on the reason for termination. Options which have not yet become
exercisable on the date the participant terminates employment or service on
the Committee for a reason other than retirement, death or total disability
shall terminate on that date.
The Board of Directors may, at any time, terminate, amend or suspend the
Plan. In addition, the Committee may, with certain exceptions, amend any
provision of the Plan.
All employees, officers and directors of, and consultants to, the Company are
eligible to participate in the Plan. The Committee determines which persons
shall be granted options, the extent of such grants and, consistent with the
Plan, the terms and conditions thereof. As of December 31, 1998, approximately
60 employees of the Company, and three directors of the Company who are not
also employees of the Company, are eligible to receive option grants under the
Plan. Options granted under the Plan may be either ISOs or options which are
not intended to qualify as ISOs, except that ISOs may only be granted to
employees of the Company.
The aggregate fair market value (determined on the date of grant) of the
shares of Common Stock for which ISOs may be granted to any participant under
the Plan and any other plan by the Company or its affiliates which are
exercisable for the first time by such participant during any calendar year
may not exceed $100,000.
The options granted under the Plan become exercisable on such dates as the
Board determines in the terms of each individual option. Options are subject
to termination in the event of a disposition of all or substantially all of
the assets or capital stock of the Company by means of a sale, merger,
consolidation, reorganization, liquidation or otherwise; unless the Committee
arranges for a continuation of the Plan or for the optionee to receive
payment or new options covering shares of the corporation purchasing or
acquiring the assets or stock of the Company, in substitution of the options
granted under the Plan. The Committee in any event may, on such terms and
conditions as it deems appropriate, accelerate the exercisability of options
granted under the Plan. An ISO to a holder of more than 10% of the total
combined voting power of all classes of stock of the Company must expire no
later than five years from the date of grant. A nonqualified stock option must
expire no later than ten years from the date of the grant.
The options granted under the Plan are not transferable other than by will or
the laws of descent and distribution. Unexercised options generally lapse 3
months after termination of employment other than by reason of retirement,
disability or death (except in the case of ISOs) in which case it terminates
one year thereafter.
The Plan provides for anti-dilution adjustments which are applicable in the
event of a reorganization, merger, combination, recapitalization,
reclassification, stock dividend, stock split or reverse stock split; however,
no such adjustment need be made if it is determined that the adjustment may
result in the receipt of federally taxable income to optionees or the holders
of Common Stock or other classes of the Company's securities. Upon the
dissolution or liquidation of the Company, or upon a reorganization, merger or
consolidation of the Company as a result of which the Company is not the
surviving entity, the Plan shall terminate, and any outstanding awards shall
terminate and be forfeited unless assumed by the successor corporation.
The Plan currently provides that the Board may amend the Plan at any time
without obtaining shareholder approval to the fullest extent permitted by
applicable law or regulation, and, in the event the Board determines that
shareholder approval is required by applicable law or regulation, than such
amendments would be effective once approved by the Board and the holders of a
majority of the shares of Common Stock.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<Captions>
Individual Grants
- - --------------------------------------------------------
Percent of Potential
total realizeable value
Number of options/ assumed annual
securities SARs rates of stock price
underlying granted to Exercise appreciation for
Options/ employees or base option term
SARs in fiscal price Expiration --------------
Name granted(#) year ($/Sh) date 5%($) 10%($)
(a) (b) (c) (d) (e) (f) (g)
------------ -------- -------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Peter Locke - -% - - - -
Donald Kushner - -% - - - -
Bruce Lilliston 8,333 7.41% 3.875 10/1/07 20,307 51,463
Robert Swan - -% - - - -
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unerercised In-The-Money Options/
Options/SARs at FY- SARs at FY-End($)
Shares Acquired Value End(#) Exerciseable/ Exerciseable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
- - ------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Peter Locke -0- N/A 183,334/133,332 44,794/179,177
Donald Kushner -0- N/A 183,334/133,332 44,794/179,177
Bruce Lilliston -0- N/A 41,667/0 18,882/0
Robert Swan -0- N/A 16,667/8,333 22,397/11,198
</TABLE>
Compensation Committee Interlocks and Insider Participation
From October 1, 1997 through June 18, 1998 the Compensation Committee
consisted of Messrs. Hersch, Braun and Coppersmith. On June 18, 1998, at the
Company's annual shareholders meeting, Messrs. Braun and Coppersmith did not
stand for reelection and Messrs. Friedman and Lannan were elected to the Board
odf Directors. In a subsequent Board meeting on June 18, 1998, Messrs.
Friedman and Lannan were appointed to the Compensation Committee. The
Compensation Committee participated in deliberations and decisions regarding
executive compensation. However, the full Board of Directors of the Company
participated in deliberations and decisions regarding grants of new options
to certain directors and certain employees in connection with new employment
agreements and amendments and extensions of employment agreements with the
Company. Other than Messrs. Kushner and Locke, no member of the Board of
Directors was, during the fiscal year or formerly, an officer or employee of
the Company or any of its subsidiaries, however Stuart Hersch, a director, is
paid $7,500 per month pursuant to a consulting contract. During fiscal year
1998, Mr. Locke served as Co-Chairman of the Board, and Co-Chief Executive
Officer of the Company, and Mr. Kushner served as Co-Chairman of the Board,
Co-Chief Executive Officer, and Secretary of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth certain information as of January 27, 1999
concerning the beneficial ownership of Common Stock, by (i) each person who is
known to the Company to be a beneficial owner of more than 5% of the
outstanding Common Stock; (ii) each of the current Directors of the Company;
(iii) each of the Named Executive Officers; and (iv) all current Directors
and Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
Common Stock Percent of
Beneficial Owner Beneficially Owned Class (8)
- - ---------------- ------------------ ---------
<S> <C> <C>
Peter Locke 681,013 (1) 6.31%
11601 Wilshire Blvd., 21st Floor
Los Angeles, CA 90025
(310) 481-2000
Donald Kushner 681,158 (1)(2) 6.31%
11601 Wilshire Blvd., 21st Floor
Los Angeles, CA 90025
(310) 481-2000
Irwin Friedman 91,389 (3) *
375 Park Avenue, Suite 2608
New York, NY 10152
(212) 831-1611
Stuart Hersch 82,295 (4) *
11601 Wilshire Blvd., 21st Floor
Los Angeles, CA 90025
(310) 481-2000
John Lannan 18,888 (5) *
11601 Wilshire Blvd., 21st Floor
Los Angeles, CA 90025
(310) 481-2000
Bruce St. J. Lilliston 41,667 (6) *
11601 Wilshire Blvd., 21st Floor
Los Angeles, CA 90025
(310) 481-2000
Robert Swan 6,667 (6) *
11601 Wilshire Blvd., 21st Floor
Los Angeles, CA 90025
(310) 481-2000
Gruber & McBaine Capital Management, LLC 1,009,000 (7) 9.51%
50 Osgood Place
San Francisco, CA 94133
(415) 981-2101
All directors and executive officers
as a group (seven individuals) 1,603,077 14.31%
(1)(2)(3)(4)(5)(6)
</TABLE>
* Less than 1%
(1) Includes 183,334 shares subject to options which are currently exercisable
or exercisable within 60 days of the date hereof, and excludes 133,332 options
which are not currently exercisable or exercisable within 60 days of the date
hereof.
(2) Includes 33,333 shares owned by a corporation controlled by Mr. Kushner.
(3) Includes 88,890 shares subject to options and warrants currently
exerciseable, and excludes 27,777 shares subject to options and warrants which
are not currently exercisable or exercisable within 60 days.
(4) Includes 82,295 shares subject to options currently exercisable, and
excludes 5,555 shares subject to options which are not currently exercisable
or exercisable within 60 days.
(5) Includes 5,556 shares subject to options currently exercisable, and
excludes 11,111 shares subject to options which are not currently exercisable
or exercisable within 60 days.
(6) Represents shares subject to options currently exercisable.
(7) Based upon Form 3 and Form 13D filings by the investment advisor
dated December 30, 1998, as updated by the investment advisor to the Company
so as to represent holdings on January 27, 1999.
(8) As a percentage of the 10,608,141 shares outstanding on January 27, 1999
plus certain shares issuable upon conversion of convertible securities or
subject to options held by such person or persons.
Item 13. Certain Relationships and Related Transactions.
In fiscal 1993, the Company entered into a domestic home video distribution
agreement with WarnerVision for the feature film Deadly Exposure. Stuart
Hersch, a Director of the Company, was President of WarnerVision at that time.
The distribution agreement provides for payment by WarnerVision to the
Company of an advance in exchange for certain domestic home video rights,
subject to certain back-end participation rights of the Company, and payments
by the Company to WarnerVision of 30% of the Company's net revenues derived
from Canadian home video and broadcast television exploitation of Deadly
Exposure. Through September 30, 1998, no payments had been made by the Company
to WarnerVision pursuant to such agreement.
In fiscal 1994, the Company entered into certain joint ventures with
WarnerVision whereby WarnerVision and the Company share production costs and
expenses and any resulting revenues with respect to certain motion pictures.
The Company has also entered into domestic home video distribution agreements
with WarnerVision for the feature films Lady-in-Waiting and Last Gasp. These
agreements provide for the payment by WarnerVision to the Company of $510,000
and $530,000 in exchange for WarnerVision receiving participation rights with
the Company in the revenues derived from the exploitation of Lady-in-Waiting
and Last Gasp, respectively. The Company also agreed to license to
WarnerVision domestic distribution rights to Wes Craven Presents: Mind Ripper
for a recoupable minimum guaranty payment against revenues.
In fiscal 1994, the Company entered into a five picture joint venture with
WarnerVision similar to the Lady-in-Waiting and Last Gasp joint ventures.
Through September 30, 1998, the Company had received approximately $924,000
from WarnerVision towards the production costs and expenses of these films
pursuant to such joint ventures. The Company believes that the terms of the
forgoing transactions are no less favorable to the Company than those that
could have been obtained in transactions with unaffiliated third parties.
On September 14, 1996, the Company entered into an employment agreement with
Bruce St. J. Lilliston pursuant to which the Company agreed to hire Mr.
Lilliston as the President and Chief Operating Officer of the Company
effective October 1, 1996. As part of such agreement, Mr. Lilliston is
allowed to maintain not more than two independent outside legal consultancy
client relationships, subject to approval by the Chief Executive Officers.
Prior to his employment, Mr. Lilliston provided various legal services to the
Company through the Law Offices of Bruce St. J. Lilliston. During fiscal
1996, the Company paid Mr. Lilliston $180,000 for such legal services. In
addition, Mr. Lilliston had provided various legal services to certain of
Kushner-Locke International's distributing licensees as well as August
Entertainment. See Item II, Executive Compensation - Employment Agreement -
Mr. Lilliston for a further description of Mr. Lilliston's employment
arrangement with the Company.
During fiscal 1998 the Company paid to WarnerVision $1,543,000, a
previously accrued payment obligation, and settled certain disputes with
WarnerVision.
In April 1996, the Company entered into a month-to-month consulting agreement
with Stuart Hersch which provides for a monthly fee of $7,500 to be paid to
Mr. Hersch. Mr. Hersch assists the Company in analyzing potential strategic
acquisitions and provides the Company consulting services in connection with
the Company's infomercial operations.
In February 1998 the Company paid I. Friedman Equities, Inc. $24,000 pursuant
to Mr. Friedman's consulting agreement.
In August 1997, Mr. Locke acquired an option to purchase 45% of the
outstanding shares of common stock of 800-U.S.Search ("Search") from Robert L.
Rich pursuant to an option agreement (the "Rich Option"). In November 1997,
Mr. Locke exercised the Rich Option in exchange for Mr. Locke's entering into
an indemnification agreement whereby he agreed to personally indemnify Mr.
Rich against certain liabilities to which Mr. Rich may have been subject in
connection with Search (the "Indemnified Liabilities"). Mr. Locke
subsequently transferred the shares to Dayton Way V, Inc., a California
corporation and affiliate of the Company ("Dayton Way"), in exchange for
indemnification by Dayton Way from the Indemnified Liabilities. In October
1997, the Company purchased 35% of the outstanding shares of common stock of
Search from Nicholas Matzorkis in exchange for the Company's agreement to
indemnify Mr. Matzorkis against certain liabilities to which Mr. Matzorkis may
have been subject in connection with the Indemnified Liabilities. The
indemnification obligation included substantially the same liabilities as the
Indemnified Liabilities under the Rich Option. Subsequently, the Company
assigned its rights under this agreement to Dayton Way, and Dayton Way
acquired the shares, bringing its total ownership to 80% of the outstanding
common stock of Search. In connection with these transactions, Dayton Way
granted to the Company an option to purchase the 80% interest for $100 and the
Company's agreement to indemnify Dayton Way against the Indemnified
Liabilities. The Company exercised this option in January 1998.
From May 1997 to October 1997, Mr. Locke personally loaned Search $187,000,
bearing interest at 10% per annum, payable upon demand. This loan was
subsequently repaid in full. In addition, Search paid $35,000 in consulting
fees to Mr. Locke for services rendered from May 1997 through December 1997.
The Company believes that the terms of the foregoing transactions are no less
favorable to the Company than those that could have been obtained in
transactions with unaffiliated third parties.
Each of Messrs. Friedman and Lannan were granted options to purchase 16,667
shares of common stock of the Company at an exercise price of $2.84 in June
1998.
In July 1998, Messrs. Braun and Coppersmith, each of whom was director of the
Company until June 1998, each entered into a one year consulting agreement
with the Company providing for payments totalling $20,000. In addition, the
board of directors fully vested the options previously granted to Messrs.
Braun and Coppersmith.
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
The Company's Notes to Consolidated Financial Statements as previously
presented are amended as follows:
(3) Investments in Unconsolidated Entities, at Equity
Equity in earnings (losses) of unconsolidated entities and other investments
for the year ended September 30, 1998 which are included in operating revenues
were as follows:
<TABLE>
<CAPTION>
1998
------
<S> <C>
BLT Ventures $(98,000)
Cracker Company LLC (342,000)
TV First (148,000)
Grendel Productions LLC 136,000
Swing Ventures 207,000
Others (85,000)
--------
$(330,000)
========
(7) Stockholders' Equity
Warrants
In September 1997, in connection with a consulting agreement, the Company
issued warrants to Allen & Company, Incorporated to purchase up to 500,000
shares of common stock of the company at $2.0625 per share. Of this total,
warrants for 166,667 shares were immediately exerciseable, an additional
166,667 became exerciseable in september 1998, and the remaining 166,666
become exerciseable in September 1999, the latter event subject to Allen &
Company, Incorporated still being engaged as consultants by the Company. The
warrants expire in September 2004. Also in September 1997 the Company issued
warrants to a financial consultant to purchase up to 50,000 shares of common
stock at $2.0625 per share. The terms of that warrant are the same as that
pertaining to Allen & Company, Incorporated. The fair value of such warrants
are amortized over the term of the consulting agreement.
Options
At September 30, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $1.86 - $15.78 and 6.4
years, respectively. At September 30, 1998, options covering 33,752 shares of
common stock remained available for future grant under terms of the Company's
stock incentive plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
</TABLE>
<TABLE>
<S> <C>
Date: January 28, 1999
THE KUSHNER-LOCKE COMPANY
(Registrant)
By: /s/ PETER LOCKE
Peter Locke
Co-Chairman of the Board,
Co-Chief Executive Officer
By: /s/ DONALD KUSHNER
Donald Kushner
Co-Chairman of the Board,
Co-Chief Executive Officer and Secretary
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ PETER LOCKE
Peter Locke Co-Chairman of the Board January 28, 1999
and Co-Chief Executive
Officer; Director
/s/ DONALD KUSHNER
Donald Kushner Co-Chairman of the Board, January 28, 1999
Co-Chief Executive Officer
and Secretary; Director
/s/ BRUCE ST.J LILLISTON
Bruce St.J Lilliston President and Chief January 28, 1999
Operating Officer
/s/ ROBERT SWAN
Robert Swan Senior Vice President and January 28, 1999
Chief Financial Officer
/s/ ADELINA VILLAFLOR
Adelina Villaflor Controller (Chief January 28, 1999
Accounting Officer)
/s/ IRWIN FRIEDMAN
Irwin Friedman Director January 28, 1999
/s/ STUART HERSCH
Stuart Hersch Director January 28, 1999
John Lannan Director January __, 1999
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES AND AFFILIATES OF THE COMPANY
Entity (Note 1)
THE KUSHNER-LOCKE COMPANY
KL INTERNATIONAL, INC. (formerly known as AKL
Distributing, Inc., AKL Distribution, Inc. and
KL Distribution, Inc.)
KL PRODUCTIONS, INC. (formerly AKL Productions, Inc.
and Kushner/Locke Company, Inc.)
KUSHNER-LOCKE PRODUCTIONS, INC. (formerly Brave Little
Co. and Atlantic/Kushner-Locke Productions, Inc.)
POST AND PRODUCTION SERVICES, INC. (formerly Post
Production Services, Inc., KW Acquisitions
Corporation and KL Acquisition Corp.)
KL SYNDICATION, INC. (formerly D.I., Inc.)
TWILIGHT ENTERTAINMENT, INC. (formerly Gentox
Films, Inc.)
KLC FILMS, INC.
KL FEATURES, INC. (formerly KLC, Inc.)
KLF GUILD COMPANY (formerly KLF Guild Co., Inc.)
KLF DEVELOPMENT CO.
KLTV GUILD CO.
KLTV DEVELOPMENT CO.
KUSHNER-LOCKE INTERNATIONAL, INC. (formerly KLC Worldwide, Inc.)
KL INTERACTIVE MEDIA, INC.
DAYTON WAY PICTURES, INC.
DAYTON WAY PICTURES II, INC.
F.W. COLD CO., INC.
DAYTON WAY PICTURES IV, INC.
KLC/NEW CITY
MDP/KLC
KLC/M3D
VADO MOUNTAIN PRODUCTIONS
OUTPOSTS PRODUCTIONS
NEA PRODUCTIONS, INC.
KUSHNER-LOCKE INTERNATIONAL (U.K.) LIMITED
800-U.S.SEARCH
Note 1 - Each entity is domiciled in California, except Kushner-Locke
International (U.K.) Limited, which is domiciled in the United Kingdom.
[/TABLE]
