-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RcszUciREEi6EEpYf2OsNnQFfrnxdHZudqPl+C10JRHdsB3av+AQMwLuJycHclVq 50Af6+1PcTKaIwt+6OAZ8Q== 0000950152-04-003127.txt : 20040423 0000950152-04-003127.hdr.sgml : 20040423 20040423123535 ACCESSION NUMBER: 0000950152-04-003127 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031228 FILED AS OF DATE: 20040423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYLVAN INC CENTRAL INDEX KEY: 0000861291 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 251603408 STATE OF INCORPORATION: NV FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18339 FILM NUMBER: 04750149 BUSINESS ADDRESS: STREET 1: 333 MAIN STREET STREET 2: P.O. BOX 249 CITY: SAXONBURG STATE: PA ZIP: 16056-0249 BUSINESS PHONE: 724-352-75 MAIL ADDRESS: STREET 1: 333 MAIN STREET STREET 2: P.O. BOX 249 CITY: SAXONBURG STATE: PA ZIP: 16056-0249 FORMER COMPANY: FORMER CONFORMED NAME: SYLVAN FOODS HOLDINGS INC DATE OF NAME CHANGE: 19930328 10-K/A 1 j0719301e10vkza.txt SYLVAN INC. 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 28, 2003 Commission File No. 0-18339 SYLVAN INC. (Exact name of registrant as specified in its charter) NEVADA 25-1603408 ------ ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 333 MAIN STREET, P.O. BOX 249, SAXONBURG, PA 16056-0249 -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (724) 352-7520 Securities registered pursuant Name of each exchange to Section 12(b) of the Act: on which registered: Title of each class Not applicable ------------------- None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.001 PER SHARE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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/A or any amendment to this Form 10-K/A. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X ---- ---- The aggregate market value of voting stock held by non-affiliates of the registrant at June 29, 2003 (the last day of the registrant's second fiscal quarter of 2003) was approximately $35,189,000. As of that date, the last sale price of the registrant's common stock was $10.58 per share. Solely for purposes of this calculation, shares beneficially owned by directors and executive officers have been excluded. Indicated below is the number of shares outstanding of each of the registrant's classes of common stock as of April 15, 2004. Class Outstanding ----- ----------- COMMON STOCK, PAR VALUE $.001 PER SHARE 5,155,131 DOCUMENTS INCORPORATED BY REFERENCE: None EXPLANATION Set forth in this Form 10-K/A Amendment No. 1 are amendments relating to Items 10, 11, 12, 13 and 14 of Part III of the Annual Report of Sylvan Inc. on Form 10-K for the fiscal year ended December 28, 2003. These items were not included in the original report because it was anticipated that the information would be provided in Sylvan's Proxy Statement to Shareholders to be filed within 120 days after the end of the registrant's 2003 fiscal year. However, the proxy statement will be filed and distributed later than initially planned. Sylvan recently announced entering into a definitive agreement with Snyder Associated Companies, Inc. and SAC Holding Company that will result in a merger of Sylvan and a Snyder affiliate if approved by shareholders at a special meeting expected to be held in the second quarter of 2004. Sylvan currently expects that shareholders will receive a proxy statement with respect to the proposed merger and the special meeting to approve it in the second quarter of 2004. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT IDENTIFICATION OF DIRECTORS The following is a list of the names and ages of the directors of Sylvan as of the date of this report. Also set forth is the principal occupation and the inception date of service of each director. There is no arrangement or understanding between any director and any other person pursuant to which he or she was selected, and no family relationship exists between the company's directors and officers.
PRINCIPAL OCCUPATION OR NAME AND AGE PRESENT POSITION WITH SYLVAN EMPLOYMENT, IF DIFFERENT DIRECTOR SINCE - ------------ ---------------------------- ------------------------ -------------- William L. Bennett (54) Director Partner, Monitor Group July 1994 Monir K. Elzalaki (48) President of Sylvan December 1998 America, Inc. Jeanine C. Heller (55) Director Equity Analyst/Portfolio Advisor April 2003 Virgil H. Jurgensmeyer (74) Director Chairman of J-M Farms, Inc. June 1992 and J-M Foods, Inc. Nelson Obus (57) Director President of Wynnefield June 2000 Capital, Inc. Dennis C. Zensen (65) Chairman, President April 1989 and Chief Executive Officer
William L. Bennett has served, since February 2000, as a partner of Monitor Group, an international consulting firm headquartered in Cambridge, Massachusetts. He also served, from August 1994 until March 2004, as vice chairman and as a director of PlanVista Corporation, a leading provider of managed healthcare services. PlanVista was acquired by ProxyMed, Inc. (Nasdaq: PILL) in March 2004 and Mr. Bennett was elected to ProxyMed's board of directors shortly thereafter. ProxyMed is an electronic healthcare transaction processing services company. He has also served as a director of D2Hawkeye, Inc., a nonpublic healthcare information company, since 2002. Monir K. Elzalaki has served as president of the company's Sylvan America, Inc. spawn subsidiary in Pennsylvania since March 1992, president of the company's Nevada spawn subsidiary since December 1992, and as a director of the company's Sylvan Australia Pty Limited subsidiary since June 1994. Jeanine C. Heller is an independent investor relations consultant, advising publicly held companies since 1990. She also provides equity analysis and portfolio advice to investors through Smith, Moore & Co. Ms. Heller holds the Chartered Financial Analyst designation. Ms. Heller served as senior vice president of Stifel, Nicolaus & Co., an investment and brokerage subsidiary of Stifel Financial Group, from May 1987 through April 1990. Prior to that, she served as vice president of Josephthal & Co., a securities firm based in New York. She has also served as a member of the board of trustees of St. Mary-of-the-Woods College in Indiana. 2 Virgil H. Jurgensmeyer has served as chairman of the board of J-M Farms, Inc. (a grower and marketer of fresh mushrooms) since April 1979 and as chairman of the board of J-M Foods, Inc. (a producer and marketer of fresh-cut salads) since January 1991. Mr. Jurgensmeyer is owner and chairman of Mid-West Custom Mixing Co. (a mixer of rubber compounds), Miami Industrial Supply and Manufacturing Co. (a manufacturer of mushroom production equipment) and Miken Computer Co. (a retailer of personal computer hardware, software and services). Nelson Obus has served as president of Wynnefield Capital, Inc. since November 1992 and as the managing member of Wynnefield Capital Management, LLC since January 1997. Wynnefield Capital Management manages two partnerships and Wynnefield Capital, Inc. manages one partnership, all three of which invest in small-cap value U.S. public equities. Dennis C. Zensen was elected chairman of Sylvan's board in July 1990 and has served as director, president and chief executive officer of Sylvan since April 1989. IDENTIFICATION OF EXECUTIVE OFFICERS A description of Sylvan's executive officers is included in Part I of its Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 26, 2004. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 requires the company's directors, executive officers and persons who own more than ten percent of a registered class of the company's equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the company. Directors, executive officers and greater-than-ten-percent shareholders are required by Commission regulations to furnish the company with copies of all Section 16(a) forms that they file. Sylvan believes that all filing requirements applicable to its directors and executive officers were complied with during 2003. In making these disclosures, the company has relied solely on the written and oral representations of its directors and executive officers and copies of the reports that they filed with the Commission. 3 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- NUMBER OF SHARES OTHER ANNUAL UNDERLYING STOCK ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS GRANTED COMPENSATION - --------------------------- ---- ------ ----- ------------ --------------- ------------ Dennis C. Zensen 2003 $500,000 $ 155,000 $103,078 (b) -- $181,031 (f) President and Chief 2002 500,000 150,000 125,619 (b) -- 181,668 Executive Officer 2001 500,000 240,000 119,192 (b) -- 174,219 Monir K. Elzalaki 2003 $300,000 $ 45,000 $ 11,940 (b) -- $ 22,134 (f) President 2002 300,000 65,000 19,418 (b) -- 29,157 Sylvan America, Inc. 2001 289,583 65,000 11,837 (b) -- 18,048 Michael A. Walton (a) 2003 $277,450 $ 53,700 -- -- $ 21,641 (f) Managing Director 2002 277,450 -- 29,000 (c) -- 21,641 Sylvan Europe 2001 268,500 80,550 -- -- 20,943 Gary D. Walker 2003 $200,000 $ 20,000 $ 30,346 (d) -- $ 22,533 (f) President 2002 200,000 30,000 10,081 (b) -- 15,630 Sylvan Bioproducts, Inc. 2001 185,000 30,000 28,910 (e) -- 15,521 Donald A. Smith 2003 $228,500 $ 50,000 -- -- $ 1,317 (f) Chief Financial Officer 2002 207,500 30,000 10,252 (b) -- 15,874 2001 183,750 30,000 11,445 (b) -- 17,351
- -------------- (a) Mr. Walton, a citizen and resident of the United Kingdom, is paid in British pounds. For the purposes of this report, his compensation for each of the three years was converted into U.S. dollars using a December 31, 2003 exchange rate of pound sterling equal to $1.79. (b) Reflects reimbursements for income taxes incurred as a result of contributions made by the company on behalf of the executive officer to its Nonqualified Target Benefit Annuity Purchase Program. (c) Constitutes the difference between the exercise and market prices of stock options that Mr. Walton exercised during the year. (d) Reflects Mr. Walker's recognition of the $17,204 difference between the exercise and market prices of stock options that he exercised during the year and of a $13,142 reimbursement for income taxes incurred as a result of contributions made by the company on his behalf to its Nonqualified Target Benefit Annuity Purchase Program. (e) Reflects Mr. Walker's recognition of the $18,750 difference between the exercise and market prices of stock options that he exercised during the year and of a $10,160 reimbursement for income taxes incurred as a result of contributions made by the company on his behalf to its Nonqualified Target Benefit Annuity Purchase Program. (f) Amounts reported for 2003 consist of the following:
Zensen Elzalaki Walton Walker Smith ------ -------- ------ ------ ----- o Nonqualified target benefit annuity purchase premiums............ $179,714 $20,817 -- $21,216 $ -- o 401(k) plan company matching contributions............... 1,179 1,179 -- 1,179 1,179 o Term life insurance premiums......... 138 138 -- 138 138 o UK pension benefit plan contribution......................... -- -- $21,641 -- --
4 AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
NO. OF SHARES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS SHARES AT 12/28/03 AT 12/28/03 (b) ACQUIRED VALUE -------------------------- ------------------------- NAME ON EXERCISE REALIZED (a) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ------------ ----------- ------------- ----------- ------------- Dennis C. Zensen -- -- 45,000 -- $156,375 -- Monir K. Elzalaki -- -- 63,334 -- 89,643 -- Michael A. Walton -- -- 75,000 -- 82,250 -- Gary D. Walker 10,000 17,204 60,000 -- 89,500 -- Donald A. Smith -- -- 43,668 -- 104,873 --
- ------------- (a) Reflects value before income taxes payable as a result of exercise. (b) The closing market price of Sylvan's common stock as of December 28, 2003 was $12.10 per share. DEFINED BENEFIT PLAN DISCLOSURE Sylvan has a defined benefit pension plan covering eligible salaried employees of its Sylvan America, Inc. and Sylvan Foods, Inc. subsidiaries, and former salaried employees of its closed Moonlight Mushrooms, Inc. subsidiary. The pension plan is funded solely by employer contributions, but the company ceased accruing benefits for the plan as of January 3, 1993. Annual pension benefits under the plan are determined by multiplying 1.25% times the employee's average salary as reported on such employee's Form W-2 over the five highest earnings years of service prior to January 3, 1993, times the employee's number of years of service prior to January 3, 1993. Pension benefits are not subject to deductions for Social Security benefits. Mr. Elzalaki and Mr. Walker are the only persons named in the Summary Compensation Table who have an accrued benefit under the plan. Mr. Elzalaki has two years of credited service as of January 3, 1993, and an accrued benefit of approximately $324 per month at age 65. Mr. Walker has six months of credited service and an accrued benefit of approximately $95 per month at age 65. COMPENSATION OF DIRECTORS Sylvan compensates each nonemployee director with an annual retainer of $10,000 and a payment of $2,000 for each board meeting attended and for each committee meeting attended. The directors as a group were paid $198,000 in total during 2003. Directors are also reimbursed for travel and other necessary business expenses incurred for attending meetings. In addition, under the terms of the 1993 Stock Option Plan for Nonemployee Directors and to the extent that shares are available, each nonemployee director is automatically granted nonincentive options to purchase 10,000 shares of common stock on the first business day following the annual meeting at which such individual first becomes a Sylvan director. In addition, he or she is automatically granted nonincentive options to purchase 1,000 shares of common stock on the first business day following the day of each subsequent annual meeting of shareholders. The exercise price per share of the common stock underlying each option granted is the closing price of the common stock on the date of grant as reported on The Nasdaq Stock Market. Directors who are employees of the company or its subsidiaries are eligible to participate in the company's 1990 Stock Option Plan. 5 EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS Messrs. Elzalaki, Smith, Walker and Zensen Sylvan entered into employment continuation agreements with these executive officers in September 2002. The agreements are intended to provide for continuity of management if there is a change of control of Sylvan. They become effective whenever a "change of control" occurs. A "change of control" is defined in the agreements as: o when any "person," as defined in the Securities Exchange Act of 1934, acquires 51% or more of Sylvan's securities (with certain exceptions); o the completion of a tender offer to acquire 51% or more of the voting power of Sylvan's stock (with certain exceptions); o when 39% of Sylvan's directors are replaced without the approval of a majority of the existing directors or directors previously approved by the then existing directors; o any merger or business combination of Sylvan and another company, unless the outstanding voting securities of Sylvan prior to the transaction continue to represent at least a majority of the voting securities of the new company; or o any other transaction that Sylvan's board determines is a change of control with respect to the officers. A "potential change of control" is defined as when: o any person acquires or announces an intention to acquire 51% or more of Sylvan's voting securities, except any offer that, if completed, would not constitute a change of control; o Sylvan enters into an agreement that would constitute a change of control; or o a solicitation of proxies for the election of directors is commenced by anyone other than Sylvan that, if successful, would effect a change of control. Under the agreements, an executive is entitled to receive severance payments in either of the following situations: o Sylvan terminates the executive following a change of control or a potential change of control, other than for death, disability or for "cause" (as defined in the agreements); or o the executive terminates his or her employment for "good reason" (as defined in the agreements) following a change of control or a potential change of control. If Messrs. Elzalaki, Smith or Walker becomes entitled to receive a severance payment, each will receive two times his then base salary paid over a two-year period. If Mr. Zensen becomes entitled to receive a severance payment, he will receive $1 million in a lump-sum payment. In addition, Mr. Zensen will be retained to serve as a consultant for two years commencing on his termination date. His fee for such services will be $480,000, payable in equal monthly installments over the two-year period. If any payments made to an executive officer under the severance agreements are subject to the excise tax that the Internal Revenue Code imposes on excess parachute payments, Sylvan will pay the amounts due under the severance agreement and will "gross up" the executive officer's compensation for the excise tax, and for any federal, state and local income taxes applicable to the excise tax, and for tax penalties and interest. Each executive officer will also be entitled to receive a lump-sum payment if he continues his employment with Sylvan during the period of time that begins on the date that a potential change of control occurs and ends on the date that a change of control occurs. Messrs. Elzalaki, Smith and Walker will receive $50,000 and Mr. Zensen will receive $100,000. Each executive officer will also receive the payment if his employment is terminated without cause (as defined in the agreements) before the change of control occurs or if he terminates his employment for good reason (as defined in the agreement) before the change of control occurs. Sylvan will also continue to cover each executive under the company's welfare benefit plans for healthcare, life and accidental death and dismemberment insurance, and disability insurance for one year following the date of a covered termination. These benefits will be discontinued if the executive receives similar benefits from another employer. In addition, Sylvan will pay the executive's reasonable legal fees and expenses if he must hire a lawyer to enforce the agreement. As part of the agreements, the executives agree not to disclose or to use for their own purposes confidential and proprietary Sylvan information and, for a period of two years following termination of employment, they agree not to compete with Sylvan or induce employees to leave Sylvan or to otherwise interfere with Sylvan's business. 6 Mr. Walton In April 1988, Mr. Walton entered into a Managers Service Agreement with White Queen Limited, a British company that Sylvan acquired in 1992. The agreement states that Mr. Walton is to serve as White Queen's general manager, be paid a salary of 24,000 pounds sterling per year and be provided with the use of an automobile. Mr. Walton's salary is to be reviewed each year with changes to be effective each January 1. He is to receive annual increases of no less than the proportional increase in the Retail Price Index published by England's Department of Employment, or on the basis of increases in other published inflation measures, in the event that the Retail Price Index is no longer available. The agreement also provides for Mr. Walton's participation in the company's fringe benefit programs, including its supplemental private medical benefits program. In addition, termination of Mr. Walton's employment must be with a minimum of three years notice, unless it is due to his mental incapacity, declaration of bankruptcy, conviction of a serious criminal offense, persistent and willful neglect or disregard of duties, refusal to carry out reasonable and proper instructions of the board of directors of the company, the commission of any action that is manifestly prejudicial to the company, or a material breach of the employment agreement. Waiver of Certain Change of Control Rights As previously announced, Sylvan entered into a definitive agreement with Snyder Associated Companies, Inc. of Kittanning, Pennsylvania, which will result in a merger between Sylvan and a Snyder affiliate. It is anticipated that Messrs. Zensen, Elzalaki, Smith and Walker will waive the change of control and potential change of control triggers that are in their agreements with respect to the proposed merger. However, the agreements will remain in place for five years after the merger so that, if a different change of control occurs during the five-year period following the closing of the merger, these managers (to the extent their employment with the surviving corporation or its applicable subsidiary has not previously terminated) will be entitled to the benefits of those agreements and their change of control provisions. STOCK OPTION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Stock Option and Compensation Committee is composed of Messrs. Jurgensmeyer and Bennett, neither of whom is an executive officer of the company. During 2003, no executive officer of the company served on a compensation committee (or other board committee performing equivalent functions) or the board of directors of any entity related to any member of Sylvan's board of directors. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
(c) (a) NUMBER OF SECURITIES NUMBER OF SECURITIES (b) REMAINING AVAILABLE FOR TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EXERCISE OF OUTSTANDING EXERCISE PRICE OF COMPENSATION PLANS OPTIONS, WARRANTS OUTSTANDING OPTIONS, (EXCLUDING SECURITIES PLAN CATEGORY AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a)) ------------- -------------------- -------------------- ------------------------ Equity Compensation Plans Approved by Security Holders 757,469 $11.35 134,919 (1) Equity Compensation Plans Not Approved by Security Holders (2) -- -- -- Total 757,469 $11.35 134,919
- ------------- (1) Consists of 122,919 shares available under the 1990 Stock Option Plan and 12,000 shares available under the 1993 Stock Option Plan for Nonemployee Directors as of December 28, 2003. Included in the total are options that became available due to the forfeiture or expiration of grants. (2) All of Sylvan's equity plans were approved by shareholders. 7 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The only persons or firms known to the company that may be deemed to beneficially own five percent or more of Sylvan's common stock as of the dates in the footnotes are the following:
AMOUNT AND NATURE PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNERSHIP(a) COMMON STOCK(f) ---------------- ------------------------- --------------- Wynnefield Capital Management, LLC.................. 1,069,886(b) 20.8% 450 Seventh Avenue New York, NY 10123 Dennis C. Zensen.................................... 739,128(c) 14.2% 333 Main Street Saxonburg, PA 16056 SAC Holding Co...................................... 537,771(d) 10.4% P.O. Box 1022 One Glade Park East Kittanning, PA 16201 Dimensional Fund Advisors Inc....................... 378,672(e) 7.3% 1299 Ocean Avenue Santa Monica, CA 90401
- ------------- (a) Under regulations of the Securities and Exchange Commission, a person who directly or indirectly has or shares voting or investment power with respect to a security is considered a beneficial owner of the security. Voting power is the power to vote or direct the voting of shares; investment power is the power to dispose of or direct the disposition of shares. (b) Based on information reported by Wynnefield Partners Small Cap Value, L.P. on a Schedule 13D filed with the Securities and Exchange Commission on November 19, 2003, as amended through April 5, 2004. (c) Jointly owned by Mr. Zensen with his wife and includes 45,000 shares that are subject to options, all of which are exercisable. Mr. Zensen, SAC Holding Co. and two other individuals or entities are members of a group formed for the purpose of acquiring, holding, voting or disposing of securities of Sylvan as more fully described in the statement on Schedule 13D/A (Amendment No. 1) filed with the Securities and Exchange Commission on December 24, 2003, as amended further through April 5, 2004. As a result of his membership in this group, Mr. Zensen may be deemed, for purposes of Section 13(d) of the Securities Exchange Act of 1934, to beneficially own the 537,771 shares of stock beneficially owned by SAC. Mr. Zensen disclaims beneficial ownership of any shares in which he does not have a pecuniary interest. (d) Based on information reported by SAC Holding Co. on a Schedule 13D filed with the Securities and Exchange Commission on November 21, 2003, as amended through April 5, 2004. SAC, Mr. Zensen and two other individuals or entities are members of a group formed for the purpose of acquiring, holding, voting or disposing of securities of Sylvan as more fully described in the statement on Amendment No. 1 to such Schedule 13D filed with the Securities and Exchange Commission on December 24, 2003 and Amendment No. 2 to such Schedule 13D filed with the Securities and Exchange Commission on February 18, 2004. As a result of its membership in this group, SAC may be deemed, for purposes of Section 13(d) of the Securities Exchange Act of 1934, to beneficially own the 739,128 shares of stock beneficially owned by Mr. Zensen, which includes 45,000 shares that are subject to exercisable options. SAC disclaims beneficial ownership of any shares in which it does not have a pecuniary interest. (e) According to an amendment to its Schedule 13G dated February 6, 2004, Dimensional Fund Advisors Inc., an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the "Funds." In its role as investment advisor or manager, Dimensional possesses voting and/or investment power over Sylvan's securities that are owned by the Funds. All securities reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. 8 (f) Based on 5,155,131 shares of the company's common stock issued and outstanding on December 28, 2003, except in the case of Mr. Zensen, in whose case 45,000 shares that are subject to exercisable options are included in the number of shares outstanding in determining Mr. Zensen's ownership percentage. SECURITY OWNERSHIP OF MANAGEMENT The table below sets forth the following information as of April 15, 2004. Unless otherwise described in the footnotes, each named person has sole voting and investment power as to all shares listed opposite his name.
SHARES OF BENEFICIALLY OWNED COMMON STOCK ----------------------------------------- DIRECT OTHER RIGHT TO PERCENT OF NAME OWNERSHIP OWNERSHIP ACQUIRE (e) OUTSTANDING (f) ---- --------- --------- ----------- --------------- Dennis C. Zensen 694,128(a) - 45,000 14.3% William L. Bennett 6,000 2,880(b) 17,000 * Monir K. Elzalaki 11,061 - 63,334 * Jeanine C. Heller - 1,000(c) - * Virgil H. Jurgensmeyer 31,000 - 9,000 * Nelson Obus - 1,069,886(d) 12,000 21.0% Donald A. Smith - - 43,668 * Gary D. Walker 4,130 - 60,000 * Michael A. Walton 5,000 - 75,000 * All of the above and all other executive 755,419 1,073,766 356,668 42.4% officers as a group (g)
- ----------- * Less than 5% (a) Owned in joint tenancy by Mr. Zensen with his wife. (b) Includes 2,000 shares held in Mr. Bennett's 401(k) account and 880 shares held by trusts for the benefit of Mr. Bennett's children, with respect to which he disclaims beneficial ownership. (c) Held in Ms. Heller's IRA. (d) Mr. Obus is president of Wynnefield Capital, Inc. and a managing member of Wynnefield Capital Management, LLC. Both companies have indirect beneficial ownership in securities held in the name of Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P.I. and Wynnefield Small Cap Value Offshore Fund, Ltd., which, combined, own all of the indicated shares. (e) Consists of shares that are subject to exercisable options. (f) Based on 5,155,131 shares of Sylvan's common stock issued and outstanding on April 15, 2004. (g) Ten persons, including those named. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2003, various mushroom business interests of Mr. Jurgensmeyer, a member of the company's board, purchased spawn and compost supplements at fair market value totaling $766,000. 9 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table lists the fees paid or accrued by Sylvan for services provided by Ernst and Young LLP during the indicated years.
2003 2002 ---- ---- Audit fees (a) $226,250 $175,838 Audit-related fees - - Tax fees (b) 13,154 - All other fees - - -------- -------- Total $239,404 $175,838
(a) Reflects fees related to the audit of Sylvan's financial statements, review of quarterly financial statements and audit services provided in connection with other regulatory filings. (b) Reflects fees related to federal, state and international tax consultations. Sylvan's audit committee is responsible for the appointment, compensation and oversight of the work of the independent auditor. As part of this responsibility, the audit committee is required to pre-approve the audit and non-audit services performed by the independent auditor to assure that the provision of such services does not impair the auditor's independence. All audit and other fees are subject to the specific pre-approval of the audit committee and all services rendered by Ernst & Young LLP during fiscal year 2003 were pre-approved by the audit committee. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K 31 Rule 13a-14(a) Certification of Dennis C. Zensen 31 Rule 13a-14(a) Certification of Donald A. Smith 32 Section 1350 Certification of Dennis C. Zensen 32 Section 1350 Certification of Donald A. Smith SIGNATURES Pursuant to the requirements 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. SYLVAN INC. April 23, 2004 By: /s/ FRED Y. BENNITT -------------------------------- Fred Y. Bennitt Secretary/Treasurer 10 EX-31 3 j0719301exv31.txt EXHIBIT 31 EXHIBIT 31 CERTIFICATION I, Dennis C. Zensen, Chairman of the Board, President and Chief Executive Officer, certify that: 1. I have reviewed this amended annual report on Form 10-K/A of Sylvan Inc.; 2. Based on my knowledge, this amended annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this amended annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this amended annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this amended annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report, based on such evaluations; and c) Disclosed in this amended annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. April 23, 2004 /s/ DENNIS C. ZENSEN ------------------------- Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) EXHIBIT 31 CERTIFICATION I, Donald A. Smith, Chief Financial Officer, certify that: 1. I have reviewed this amended annual report on Form 10-K/A of Sylvan Inc.; 2. Based on my knowledge, this amended annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this amended annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this amended annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this amended annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report, based on such evaluations; and c) Disclosed in this amended annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. April 23, 2004 /s/ DONALD A. SMITH ---------------------------- Chief Financial Officer (Principal Financial Officer) EX-32 4 j0719301exv32.txt EXHIBIT 32 EXHIBIT 32 STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350 AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Sylvan Inc. hereby certifies that the company's amended annual report on Form 10-K/A for the year ended December 28, 2003 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the company. Dated: April 23, 2004 /s/ DENNIS C. ZENSEN --------------------- ------------------------------ Dennis C. Zensen Chairman, President and Chief Executive Officer EXHIBIT 32 STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350 AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Sylvan Inc. hereby certifies that the company's amended annual report on Form 10-K/A for the year ended December 28, 2003 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the company. Dated: April 23, 2004 /s/ DONALD A. SMITH --------------------- ------------------------------ Donald A. Smith Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----