SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: Commission File No.:
March 31, 1996 0-19516
SUNRISE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1632858
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
5500 Wayzata Boulevard, Suite 725
Golden Valley, Minnesota 55416
(Address of principal executive offices)
Registrant's telephone number, including area code:
(612) 593-1904
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
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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 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. [ ]
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The aggregate market value of the Common Stock held by nonaffiliates of the
Registrant as of June 21, 1996 was approximately $13,086,002 based upon the
closing sale price of the Registrant's Common Stock on such date.
Shares of $.01 par value Common Stock outstanding at June 21, 1996: 7,188,721
shares.
<PAGE>
This Amendment No. 1 to the Form 10-K for the year ended March 31, 1996 is being
filed to amend Part III as follows:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information relating to the executive officers of the Company is set
forth at the end of Part I of the Form 10-K previously filed. The names and ages
of current directors of the Company in addition to information regarding their
business experience for the past five years is set forth below. Directors are
elected to serve until the next Annual Meeting of Shareholders and until their
successors are duly elected and qualified.
Current Positions with the Company
Name and Age and Principal Occupations and Other Director
of Nominee Information for the Past Five Years Since
Peter J. King Mr. King has served as a Director of the 1995
68 Company since February 1995 pursuant
to the terms of the merger agreement
between the Company and ILC. Mr. King
has also served as a member of the
Company's Interim CEO Committee from July
1995 to July 1996, subject to the condition
that he would abstain from matters
presenting a conflict of interest with
his pending claims arising from the
merger with ILC. Mr. King also served
as Chairman of the Board from February
1995 to February 1996 when he resigned
as Chairman. Mr. King founded ILC in
1974 and served as its President until
ILC was merged into the Company. Mr. King
served as President of The King Management
Corporation since its formation in 1986.
Mr. King has over 20 years of experience
in the equipment leasing business. Peter
King is the father of William King, Vice
President - National Vendor Programs of
the Company, but is not related to Thomas
King, Interim Chairman of the Company's
Board.
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<PAGE>
Donald R. Brattain Donald R. Brattain has served as a 1989
55 Director of the Company since November
1989. From July 1995 to July 1996, Mr.
Brattain served as a member of the
Company's Interim CEO Committee, and,
from July 1991 to February 1995, he
served as the Company's Chairman of the
Board. Mr. Brattain has served as
President of Brattain & Associates, LLC,
an investment company, since 1981. He is
also a director of Everest Medical
Corporation, Barefoot Grass Lawn Service,
Inc., Harmony Brook, Inc., Koala Corporation
and Featherlite Mfg., Inc.
Thomas R. King Mr. King has served as Secretary of the 1991
56 Company since July 1991 and as a Director
of the Company since December 1991. Since
February 1996, Mr. King has also served as
the Company's Interim Chairman of the Board.
He has been an officer and shareholder of
Fredrikson & Byron, P.A., the Company's legal
counsel, for more than the past five years.
He is also a director of Datakey, Inc. and
Kelly Russell Studios, Inc. Mr. King is not
related to Peter King, a Director and member
of the Interim CEO Committee, or William King,
Vice President - National Vendor Programs.
Daniel A. Leclerc Mr. Leclerc has served as a Director of the 1992
55 Company since November 1992. He has been
President and Chief Executive Officer of
Crestwood Capital Corp., a financial services
firm, since January 1994. Mr. Leclerc was a
consultant to Norwest Equipment Finance, Inc.,
an equipment finance and leasing company,
from January 1993 to December 1993. From
October 1989 to December 1992, he was
President and Chief Executive Officer of
Norwest Equipment Finance. From January 1984
to October 1989, he was President and Chief
Executive Officer of Crestwood Capital Corp.
Mr. Leclerc is a past director of the Equipment
Leasing Association, a national trade
organization, and the author of many trade
journal articles on equipment leasing.
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<PAGE>
Thomas M. Strand Mr. Strand has served as a Director of the 1993
51 Company since January 1993. Since 1977, Mr.
Strand has been an officer of Dougherty
Dawkins, Inc., an investment banking firm,
serving as Vice Chairman since March 1995,
President from September 1989 to March 1995,
Chief Executive Officer from November 1993 to
March 1995 and Executive Vice President from
1977 to September 1989.
Andrew G. Sall Mr. Sall has served as a Director of the 1995
63 Company since February 1995. Mr. Sall served
as Executive Vice President of The Churchill
Companies, a company which provides asset
based lending and mortgage banking services,
from June 1990 to June 1993 when he retired.
Mr. Sall currently provides consulting services
to various companies.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
April 1, 1995 through March 31, 1996, all filing requirements applicable to its
officers, directors, and greater than ten-percent beneficial owners were
complied with, except that a Form 3 timely filed by Peter King inadvertently
omitted holdings, which holdings were reported late on an amended Form 3. In
addition, the Company is aware of three transactions which have not been
reported on either a Form 4 or 5 by Thomas Anderson, a former officer of the
Company.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to each person who
served in the capacity of the Company's Chief Executive Officer during fiscal
1996 and for each person who served as an executive officer during fiscal 1996
whose total salary and bonus earned during fiscal 1996 exceeded $100,000.
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<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------------------------------ ----------------------- ---------
Restricted
Stock Options/ LTIP
Name and Principal Fiscal Other Annual Awards(s) SARs Payouts All Other
Position Year Salary($) Bonus($)(1) Compensation($) ($) (#) ($) Compensation($)
- - -------------------- --------- ------------- -------------- ------------------- ------------ ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter J. King 1996 160,000(2) --- --- --- --- --- 12,500(2)
Interim CEO
Committee(2)
Donald R. Brattain 1996 ---(3) --- --- --- --- --- 10,000(3)
Interim CEO
Committee(3)
Craig H. Forsman 1996 55,000 --- --- --- --- --- 135,000(4)
Former Chief 1995 180,000 54,000 --- --- 40,000 --- 1,470
Executive Officer 1994 180,000 --- --- --- 20,000 --- 675
Barry J. Schwach 1996 126,000 62,600 --- --- 4,000(5) --- 1,499(6)
Executive Vice 1995 23,750 7,750 --- --- 15,000 --- ---
President of Finance
and Administration
and CFO
Dana C. Prescott 1996 126,000 12,600 --- --- 4,000(5) --- 1,123(6)
Senior Vice 1995 182,000 20,000 --- --- 10,000 --- 1,585
President - National 1994 140,000 --- --- --- --- --- 461
Sales Manager
William B. King 1996 112,998 12,600 --- --- 4,000(5) --- 999(6)
Vice President - 1995 18,750 6,249 --- --- 12,000 --- 820
National Vendor
Programs
</TABLE>
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(1) Reflects bonus earned during the fiscal year. In some instances all or a
portion of the bonus was paid during the next fiscal year.
(2) Mr. Peter King has served as a member of the Interim CEO Committee since
July 1995, for which he received no compensation; all compensation was paid
to him pursuant to his Consulting and Noncompetition Agreement described in
the section entitled Certain Relationships and Related Transactions below.
(3) Mr. Brattain has served as a member of the Interim CEO Committee since July
1995, for which he received no compensation; the compensation paid to Mr.
Brattain was pursuant to director compensation for non-employee directors
described in the section entitled Compensation of Directors below.
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<PAGE>
(4) Reflects severance payments paid to Mr. Forsman from July 1, 1995 to March
31, 1996 pursuant to a severance agreement.
(5) Option granted subsequent to March 31, 1996 fiscal year end as part of
discretionary bonus awarded with respect to fiscal 1996. The exercise price
is $2.625 per share, equal to the market value of the Company's common
stock on the date of grant.
(6) Represents total Company matching contributions to the Company's 401(k)
plan.
Option Grants During 1996 Fiscal Year
No options or stock appreciation rights were granted to any of the named
executive officers during fiscal year 1996.
Option Exercises During 1996 Fiscal Year and Fiscal Year-End Option Values
The following table provides information related to options and warrants
exercised by the named executive officers during fiscal 1996 and the number and
value of options held at fiscal year-end. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money Options at
Shares Underlying Unexercised March 31, 1996
Acquired on Value Options at March 31, 1996 Exercisable/
Name Exercise Realized Exercisable/Unexercisable Unexercisable(1)
<S> <C> <C> <C> <C>
Peter J. King -- -- 0 exercisable $0 exercisable
0 unexercisable $0 unexercisable
Donald R. Brattain -- -- 4,000 exercisable $0 exercisable
0 unexercisable $0 unexercisable
Craig H. Forsman -- -- 0 exercisable $0 exercisable
0 unexercisable $0 unexercisable
Barry J. Schwach -- -- 3,750 exercisable $0 exercisable
11,250 unexercisable $0 unexercisable
Dana C. Prescott -- -- 18,500 exercisable $0 exercisable
7,500 unexercisable $0 unexercisable
William B. King -- -- 3,000 exercisable $0 exercisable
9,000 unexercisable $0 unexercisable
</TABLE>
(1) Value is calculated on the basis of the difference between the option
exercise price and the closing sale price for the Company's Common Stock at
March 31, 1996 as quoted on the Nasdaq National Market, multiplied by the
number of shares of Common Stock underlying the option.
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<PAGE>
Employment and Severance Agreements or Arrangements
On July 1, 1995, the Company entered into a Severance Agreement and Release
(the "Agreement") with Craig H. Forsman, the Company's former President and
Chief Executive Officer, in connection with Mr. Forsman's resignation as an
officer, director and employee of the Company. Pursuant to the Agreement, Mr.
Forsman continued to receive, as severance, his base salary of $15,000 per month
for a period of twelve months. In addition, Mr. Forsman agreed that, during such
twelve-month period, he would not (i) compete with the Company, (ii) disclose
confidential information relating to the Company, (iii) solicit any of the
Company's employees to leave the Company, (iv) contact the Company's customers
or (v) cause the discontinuance of the Company's business.
In connection with the Company's February 1995 merger with ILC, the Company
assumed ILC's obligations under Employment Agreements with Barry Schwach and
William King. These agreements assure Mr. Schwach and Mr. King minimum
compensation of at least $115,000 and $95,000 per year, respectively. These
agreements also provide that if, prior to February 13, 1997, such officer's
employment is terminated without cause or his title or duties are adversely
changed without his consent, then such individual will be paid an amount equal
to his assured minimum compensation for the remaining period to February 13,
1997.
Compensation of Directors
Meeting Fees. The Company pays each director who is not an employee of the
Company (a "Non-Employee Director") an annual retainer of $2,500 plus $1,000 for
each Board of Directors meeting attended and $500 for each committee meeting
attended. Mr. Peter King, a Non-Employee Director, has agreed that he will not
receive such fees during the period of his consulting agreement as described in
the section entitled Certain Transactions below.
Stock Option Grants. The Company's 1991 Stock Option Plan provides for the
automatic grant of stock options to each Non-Employee Director to purchase the
following number of shares of the Company's Common Stock at exercise prices
equal to 100% of the current market price on the date of grant: (i) 10,000
shares upon such Non-Employee Director's initial election to the Board, which
option becomes exercisable to the extent of 20% immediately and 20% each year
thereafter so long as such person remains a director of the Company, and (ii)
2,000 shares upon such Non-Employee Director's annual re-election to the Board
of Directors, which option is immediately exercisable in full. Mr. Peter King, a
Non-Employee Director, has agreed that he will not receive options under the
formula stock option grants to Non-Employee Directors during the period of his
consulting agreement as described in the section entitled Certain Transactions
below.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table provides information as of July 19, 1996 concerning the
beneficial ownership of the Company's Common Stock by (i) persons known to the
Company to be the beneficial owners of more than 5% of the Company's outstanding
Common Stock as of July 19, 1996, (ii) each director and nominee for director of
the Company, (iii) the named executive officers in the Summary Compensation
Table and (iv) all directors and executive officers as a group.
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<PAGE>
Name (and Address of Number of shares Percent
5% Holders) or Identity of Group Beneficially Owned(1) of Class(2)
Peter J. King 433,999(3) 6.0%
2500 World Trade Center
30 E. Seventh Street
St. Paul, MN 55101
Donald R. Brattain 324,300(4) 4.5%
Thomas R. King 16,000(5) *
Daniel A. Leclerc 10,500(6) *
Thomas M. Strand 10,000(7) *
Andrew G. Sall 27,654(8) *
Barry J. Schwach 149,468(9) 2.1%
William B. King 3,000(10) *
Craig H. Forsman 221,650(11) 3.1%
Stephen D. Higgins 2,414,081(12) 33.6%
2500 World Trade Center
30 East 7th Street
St. Paul, MN 55101
Stephen D. Higgins, Trustee, 1,354,526 18.8%
William B. King Stock Trust
2500 World Trade Center
30 East 7th Street
St. Paul, MN 55101
Stephen D. Higgins, Trustee, 1,054,526 14.7%
Russell S. King Stock Trust
2500 World Trade Center
30 East 7th Street
St. Paul, MN 55101
All Executive Officers and 1,003,821(13) 13.8%
Directors as a Group
(11 persons)
*less than 1%
(1) Unless otherwise indicated, each person named or included in the group has
sole power to vote and sole power to direct the disposition of all shares
listed as beneficially owned by such person.
(2) Under the rules of the SEC, shares not actually outstanding are deemed to
be beneficially owned by an individual if such individual has the right to
acquire the shares within 60 days. Pursuant to such SEC rules, shares
deemed beneficially owned by virtue of an individual's right to acquire
them are also treated as outstanding when calculating the percent of the
class owned by such individual and when determining the percent owned by
any group in which the individual is included.
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<PAGE>
(3) Includes 2,000 shares held by The King Holding Corporation, of which Mr.
Peter King is a principal shareholder, officer and director sharing voting
and investment power over such shares.
(4) Includes 4,000 shares of Common Stock which may be acquired by Mr. Brattain
within 60 days after July 19, 1996 upon exercise of outstanding
nonqualified stock options.
(5) Includes 10,000 shares of Common Stock which may be acquired by Mr. Thomas
King within 60 days after July 19, 1996 upon exercise of outstanding
nonqualified stock options.
(6) Includes 10,000 shares of Common Stock which may be acquired by Mr. Leclerc
within 60 days after July 19, 1996 upon exercise of outstanding
nonqualified stock options.
(7) Includes 10,000 shares of Common Stock which may be acquired by Mr. Strand
within 60 days after July 19, 1996 upon exercise of outstanding
nonqualified stock options.
(8) Includes 22,625 shares which may be acquired by Mr. Sall within 60 days
after July 19, 1996 upon exercise of outstanding nonqualified stock
options.
(9) Includes 28,750 shares of Common Stock which may be acquired by Mr. Schwach
within 60 days after July 19, 1996 upon exercise of outstanding incentive
stock options.
(10) Includes 3,000 shares of Common Stock which may be acquired by Mr. William
King within 60 days after July 19, 1996 upon exercise of outstanding
incentive stock options. Does not include 1,354,526 shares held in a trust
for Mr. William King's benefit for which he has no voting or investment
power.
(11) Based upon information set forth in Mr. Forsman's Schedule 13G dated
January 24, 1996 for the year ended December 31, 1995.
(12) Includes 2,409,052 shares held by Mr. Higgins, as trustee under the William
B. King Stock Trust and Russell S. King Stock Trust, for the benefit of
William B. King, an officer of the Company, and Russell S. King,
respectively, both of whom are sons of Mr. Peter King. Mr. Higgins
disclaims beneficial ownership of these shares.
(13) Includes 106,515 shares of Common Stock which may be acquired within 60
days after July 19, 1996 upon the exercise of outstanding options and 2,000
shares held by a corporation. Does not include 1,354,526 shares held in a
trust for the benefit of an officer for which the officer has no voting or
investment power or 221,650 shares held by a former officer.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has adopted a policy of not entering into transactions in which
any officer, director, shareholder or affiliate of the Company has a material
financial interest unless the transaction has been approved by a majority of the
disinterested directors of the Company based upon a determination that the terms
of such transactions are no less favorable to the Company than those which could
be obtained from unaffiliated third parties. The Company has entered into the
following transactions in which directors had a material financial interest:
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<PAGE>
Harmony Brook--In fiscal 1992, the Company leased approximately $250,000 of
water dispensing equipment to Harmony Brook, Inc., a manufacturer of water
purification systems, of which Mr. Brattain is a shareholder, chairman and
director. In fiscal 1996, the Company received approximately $124,457 in
gross rentals under such lease, which terminated as of March 31, 1996.
In fiscal 1994, the Company entered into a $2,000,000 line of credit with
Harmony Brook. As of March 31, 1996, $1,629,914 was outstanding. The line
is used by Harmony Brook to fund the expansion of its business operations
and is collateralized by certain assets of Harmony Brook.
Gift Certificate Centers--As of March 31, 1996, the Company had a
direct-financing lease outstanding with Gift Certificate Centers, of which
Mr. Brattain is a principal shareholder. The net asset value at year-end
was $1,156,383.
The King Management Corporation--The Company has a note in the original
principal amount of $11,733,000 payable to The King Management Corporation,
a majority of the common stock of which is owned by Peter J. King. This
note is collateralized by certain rental equipment which is presently on
lease to various customers. The note was due in semi-monthly installments,
payable in full February 16, 1996, and bears interest at prime (9.0% at
March 31, 1995 and 8.25% at March 31, 1996). As of March 31, 1996, there
was a balance due of $4,126,937. The Company is negotiating an extension of
the note.
Dougherty Dawkins--In December 1995, the Company sold to Dougherty Dawkins,
Inc., an investment banking firm of which Thomas Strand is Vice Chairman,
certain asset-based loans having an aggregate net value of approximately
$3,600,000 for a price approximately equal to such aggregate net value.
On February 13, 1995, the Company entered into a Consulting and
Noncompetition Agreement with Peter J. King, whereby Mr. King would provide
consulting services to the Company for three years. Mr. King is to receive
annual fees of $167,500 for the first year, $107,500 for the second year and
$60,000 for the third year. In addition, the agreement provides for the payment
of $12,500 on each of the date of the agreement and the first anniversary date
of the agreement as consideration for Mr. King's agreement not to compete with
the Company for a two-year period.
On February 13, 1995, the Company entered into a Sublease Agreement with
The King Management Corporation, of which Mr. Peter King is a principal
shareholder, officer and director, for the sublease by the Company to The King
Management Corporation of approximately 40% of the Company's office space at the
St. Paul World Trade Center. Prior to the merger, this office was occupied by
both ILC and The King Management Corporation. The King Management Corporation
paid its pro rata share of all rent and other occupancy expenses of
approximately $95,600 through termination of the lease in March 1996.
On September 26, 1995, the Company entered into a Consulting Agreement with
Andrew G. Sall, a director of the Company, whereby Mr. Sall provided consulting
services to the Company for a sixteen- week period commencing July 15, 1995. As
consideration for his services, Mr. Sall received an option to purchase 18,625
shares of the Company's Common Stock at $3.00 per share.
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<PAGE>
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.
SUNRISE RESOURCES, INC.
Date: July 26, 1996 By: /s/ Errol F. Carlstrom
Errol F. Carlstrom, President &
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to Form 10-K for year ended March 31, 1996 has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signatures Title Date
/s/ Errol F. Carlstrom President and Chief Executive July 26, 1996
Errol F. Carlstrom Officer (principal executive officer)
* Director July 26, 1996
Peter J. King
* Director July 26, 1996
Donald R. Brattain
/s/ Barry J. Schwach Chief Financial Officer (principal July 26, 1996
Barry J. Schwach financial officer)
/s/ Paul R. Wotta Controller (principal accounting July 26, 1996
Paul R. Wotta officer)
* Interim Chairman of the Board, July 26, 1996
Thomas R. King Secretary and Director
* Director July 26, 1996
Daniel A. Leclerc
* Director July 26, 1996
Andrew G. Sall
* Director July 26, 1996
Thomas M. Strand
* /s/ Barry J. Schwach
Barry J. Schwach, Attorney-in-Fact
pursuant to Power of Attorney
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