-----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, D1ZGig8vPIbzscuADpWCpbHJGoAJ9Pir9IR29TAHi4pxP5tB92FdEjbqOTCoZSQa 977NGspnzT0MUKobrvJuJg== 0001005477-98-002983.txt : 19981030 0001005477-98-002983.hdr.sgml : 19981030 ACCESSION NUMBER: 0001005477-98-002983 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19981029 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLIMPIE INTERNATIONAL INC CENTRAL INDEX KEY: 0000895477 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 132908793 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-13945 FILM NUMBER: 98733127 BUSINESS ADDRESS: STREET 1: 1775 THE EXCHANGE STREET 2: SUITE 600 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709842707 MAIL ADDRESS: STREET 1: 1775 THE EXCHANGE STREET 2: SUITE 600 CITY: ATLANTA STATE: GA ZIP: 30339 10-K/A 1 AMENDMENT NO. 2 TO FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment No. 2 to the Annual Report on Form 10-K for the fiscal year ended June 30, 1998 (the"Report") to include Part III, Items 10, 11, 12 and 13 in the Report. BLIMPIE INTERNATIONAL, INC. (Exact name of small business issuer as specified in its charter) Commission File Number 0-21036 New Jersey 13-2908793 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 740 Broadway, New York, NY 10003 (Address and Zip Code of Principal Executive Offices) Issuer's Telephone Number: (212) 673-5900 1 Part III Item 10. Directors, Executive Officers The following table sets forth certain information concerning all directors and executive officers of the Company. All directors are elected at each Annual Meeting of Shareholders and serve until the immediately succeeding Annual Meeting and until their respective successors have been elected and qualified. Executive officers are elected by the Board of Directors to serve at the pleasure of the Board. Name Age Position Anthony P. Conza 58 Chairman of the Board, President and Chief Executive Officer David L. Siegel 54 Vice Chairman of the Board, Chief Operating Officer and General Counsel Patrick J. Pompeo 59 Director, Executive Vice President, Research and Development Charles G. Leaness 48 Director, Executive Vice President - Senior Corporate Counsel and Secretary Harry G. Chernoff 52 Director Alvin Katz 68 Director Joseph A. Conza 44 Senior Vice President, President - B I Concept Systems, Inc. Robert S. Sitkoff 45 Senior Vice President, President - Maui Tacos International, Inc. Joseph W. Morgan 36 Senior Vice President, President - Blimpie Subs & Salads Bruce A. Kolbinsky 37 Vice President - Franchise Development Arthur L. Mancino 49 Vice President - New Business Rebecca D. Killarney 41 Vice President - Marketing Brian D. Lane 36 Vice President, Chief Financial Officer Mr. Anthony P. Conza, together with two individuals who are not affiliated with the Company, originally created the Blimpie concept in 1964. He is one of the original founders of the Blimpie outlet chain, and is a co-founder of the Company. He has been Chairman of the Board of Directors, President and Chief Executive Officer of the Company since the Company commenced business operations in 1977. In 1992, "the Entrepreneur of the Year" for New York, an award sponsored by Ernst & Young, Merrill Lynch and Inc. Magazine, was presented to Mr. Conza. In the same year, he was also named Chain Operator of the Year by the New York State Restaurant Association. He is a member of the Board of the Jose Limon Dance Company, a member of the Board of Governors of The Boys & Girls Clubs of America and he serves on the Dean's Council at Harvard University's JFK School of Government. Mr. Conza is the brother of Joseph A. Conza, the brother-in-law of Patrick Pompeo and the father-in-law of Joseph Morgan. See "Certain Relationships and Related Transactions." Mr. Siegel, one of the co-founders of the Company, served as the Company's Executive Vice President and General Counsel and as a member of its Board of Directors since its formation in 1977. In September 1995, he was appointed as the Company's Vice Chairman of the Board, Chief Operating Officer and General Counsel. He also served as the Company's Treasurer from 1977 until January, 1991. He is also a practicing attorney in the City of New York. Mr. Siegel received a Bachelor of Arts degree in 2 1965 from Marietta College, a Juris Doctor Degree in 1968 from New York University School of Law and a Master of Laws Degree in 1970 from New York University School of Law. During the past five years, Mr. Siegel has also served as an officer of each of the Company's leasing subsidiaries. Mr. Pompeo has served as a director and Senior Vice President in charge of operations since the time of commencement of the Company's business operations in 1977. In September 1995, he became Executive Vice President of Research Development and Procurement. Mr. Pompeo was employed for 16 years as a floor supervisor by E.F. Hutton & Co., the former New York Stock Exchange member firm. Mr. Pompeo is also a principal shareholder, officer and director of Georgia Enterprises, Inc., the Company's Subfranchisor for the State of Georgia. Mr. Pompeo is the brother-in-law of Anthony Conza. See "Certain Relationships and Related Transactions." Mr. Leaness has been a member of the Company's Board of Directors since the Company commenced business operations, and served as the Company's Senior Vice President-Corporate Counsel for more than the past five years. In September,1995, he became an Executive Vice President. Mr. Leaness is also a principal shareholder, officer and director of Llewellyn Distributors, Inc., the Company's Subfranchisor for a part of New Jersey. Mr. Leaness received a Bachelor of Arts degree from Tulane University in 1972 and a Juris Doctor degree from New York Law School in 1982. Mr. Leaness is a practicing attorney in New York State. He currently serves as Director of the New York State Restaurant Association and is President of the New York City Chapter. Mr. Leaness received the 1997 Restaurateur of the Year award from the New York State Restaurant Association. Mr. Leaness also serves on the Board of Directors of the International Franchise Association (IFA) and the National Restaurant Association (NRA). See "Certain Relationships and Related Transactions." Mr. Katz was appointed to the Board of Directors of the Company on November 23, 1993. Mr. Katz has been a member since September 1993 of the Board of Directors of Nastech Pharmaceutical Company, Inc., a company engaged in the development of pharmaceuticals. Since 1981, he has served as an adjunct professor of business management at Florida Atlantic University. In 1991, Mr. Katz was appointed Chief Executive Officer of Odessa Engineering Corp., a company engaged in the manufacturing of pollution monitoring equipment. He held this position until that company was sold in September 1992. Mr. Katz also serves on the Board of Directors of Amtech Systems Inc. which is engaged in the manufacture of capital equipment in the chip manufacturing business; BCT International, Inc., a franchisor of thermo graphic printing plants; Mikron Instruments, Inc. a manufacturer of infrared temperature measuring instruments; and serves as Chairman of the Board of Ozo Diversified Automation, Inc., a manufacturer of driller and depaneling machines for circuit board manufacturers. Mr. Katz holds a B.S. in Business Administration degree from New York University and has done graduate work at C.U.N.Y.-Baruch School. Dr. Chernoff was appointed to the Board of Directors of the Company on November 23, 1993. For more than the past five years, Dr. Chernoff has been a principal of HMS Properties, Inc., a real estate investment, development and management firm. Dr. Chernoff has an active financial and operational consulting practice with major financial institutions, and food and hospitality firms as his clients. Dr. Chernoff received a Ph.D. in Operations Management from the New York University Leonard N. Stern School of Business in 1985, and has been a member of the faculty of New York University for 20 years. He also received a B.S. degree from New York University in 1968 and an M.S. degree from that institution in 1975. Mr. Joseph A. Conza held the position of Vice President - Construction and Design from February 1, 1991 through August 1995. In September 1995, he was appointed Senior Vice President - Equipment and Design Services. In November 1997, he was appointed President of B I Concept Systems, Inc., the Company's wholly-owned equipment and design subsidiary. From 1986 through his appointment as one of the Company's Vice Presidents, Mr. Conza was employed as President of Lone Star Blimpie, Inc. He has also served as President of International Southwest Blimpie, Inc. since 1990. Mr. Conza is also a principal shareholder, officer and director of International Southwest Blimpie, Inc., the Company's Subfranchisor for the Harris County (Houston), Texas market. Mr. Conza also owns 45% of Georgia 3 Enterprises, Inc., the Company's Subfranchisor for the State of Georgia. Mr. Conza is the brother of Anthony P. Conza. Mr. Sitkoff served as a Vice President, Treasurer and Chief Financial Officer of the Company from January 1991 through August 1995. In September 1995, he was appointed Senior Vice President, Treasurer and Chief Financial Officer. In September 1997, he was appointed President of Maui Tacos International, Inc. Between 1980 and 1985, he was self-employed as a distributor for Pepperidge Farms' Biscuit Division. Between 1986 and 1988, he was a principal shareholder and President of Blimpie of Central Florida, Inc., the Company's Subfranchisor for the Orlando, Florida market. From 1989 through 1990 he was employed as Controller of the Company. Mr. Sitkoff received a B.S. degree in Industrial Management from Georgia Institute of Technology in 1974. Mr. Morgan joined the Company in 1992 in the capacity as a corporate counsel. From 1994 through August 1995, he served as the Company's director of strategic planning. In September 1995, he was appointed as Vice President of Strategic Planning and in December 1996 he was appointed to Senior Vice President of Strategic Planning. In September 1997 he was appointed President of the Blimpie Subs & Salads division of the Company. During the three year period prior to joining the Company, Mr. Morgan attended the University of Miami School of Law, and received a J.D. degree from said institution in June 1992. Mr. Kolbinsky has been Vice President-Operations since July 1994. Since joining the Company in October, 1990, Mr. Kolbinsky has held the positions of National Training Director and National Director of Operations. After graduating from The University of North Carolina Chapel Hill in 1983 with a Bachelor of Arts in Business Administration, Mr. Kolbinsky became a supervisor for Domino's Pizza. Over the next six years he rose through the corporate ranks to the position of South Eastern Operations Director in 1988, a position he held until 1989. During 1989 and 1990, Mr. Kolbinsky operated several Subway( submarine sandwich franchise outlets. Mr. Mancino was elected Vice President of New Business in August 1995 after serving as Blimpie's Director of New Concepts since August 1993. In this capacity he oversees development of new business opportunities in the various new-concept areas such as petroleum, education, healthcare, and the like. Mr. Mancino joined Blimpie as a salesperson in April 1992. From April 1990 to March 1992, Mr. Mancino was the Director of Franchising for EBC Franchise Group, Inc. and from July 1988 to May 1990, Mr. Mancino was Vice President of Integrated Concepts Corporation, a Burger King Franchisee. Ms. Killarney was appointed Vice President of Marketing in December of 1995. Upon joining the Company in June of 1991 she served as Director of Marketing. Prior to joining Blimpie Ms. Killarney worked for Hardee's Food Systems, Inc. in a Field Marketing capacity. Ms. Killarney works with the Boys & Girls Clubs of America on their National Marketing Committee. Mr. Lane joined the Company in 1998 in the capacity of Vice President, Chief Financial Officer. After graduating from the University of Georgia in 1984 with a Bachelor of Business Administration in Accounting, Mr. Lane joined Ernst & Young LLP as a staff accountant. He progressed to the position of Audit Senior Manager before leaving the firm in 1995. Mr. Lane then joined Checkmate Electronics, Inc., an electronics manufacturer in Roswell, Georgia, as Director of Finance. He was promoted to Vice President of Finance before leaving the company to join Blimpie International, Inc. Item 11. Executive Compensation The following table sets forth compensation awarded to, earned by or paid to the Chief Executive Officer and the four highest-paid executive officers of the Company who served as such at June 30, 1998 and whose annual compensation and bonus was $100,000 or more (collectively, the "Named Executive Officers"). Information with respect to salary, bonus, other annual compensation, restricted stock and options is included for the fiscal years ended June 30, 1998, 1997 and 1996. The Company has not paid any compensation that would qualify as "All Other Compensation," nor has the Company made payments 4 to any named Executive Officer which may be categorized as "LTIP" payments in any of the three years in the period ended June 30, 1998.
Annual Compensation Fiscal Securities Year Underlying Name and Ended Other Annual Options/ Principal Position June 30 Salary($) Bonus ($) Compensation SARs(#) ------------------ ------- --------- --------- ------------- ------- Anthony P. Conza, CEO 1998 $217,375 $41,006 $1,172(1) -- 1997 214,326 117,450 3,093(1) 40,000(2) 1996 206,718 46,500 3,267(1) -- David L. Siegel, COO 1998 156,748 21,558 1,172(1) -- 1997 149,418 58,725 3,093(1) 40,000(2) 1996 148,839 23,250 3,267(1) -- Charles G. Leaness, Exec. V.P. 1998 124,028 14,521 4,397(1) -- 1997 114,654 39,233 10,982(1) 20,000(3) 1996 105,324 15,500 12,250(1) -- Patrick J. Pompeo, Exec. V.P. 1998 115,615 14,521 1,172(1) -- 1997 102,181 39,233 3,093(1) 20,000(3) 1996 87,245 15,500 3,267(1) -- Dennis G. Fuller, Sr. V.P.(4) 1998 44,654 14,401 93,070(1,5) -- 1997 42,793 19,616 155,716(1,5) 20,000(3) 1996 42,134 7,800 170,486(1,5) -- Joseph W. Morgan, Sr. V.P. 1998 114,654 10,451 6,033(1,6) -- 1997 92,413 14,166 10,827(1,6) 25,000(7) 1996 65,708 5,400 9,656(1,6) --
- ------------------------- (1) Represents commissions paid with respect to franchise, subfranchise and/or master license sales consummated. (2) In April 1997, each of Messrs. A. Conza and Siegel received a five year option under the Plan to purchase 40,000 shares of Common Stock vesting at the rate of 8,000 shares per year. (3) In April 1997, each of Messrs. Leaness, Pompeo and Fuller received a five year option under the Plan to purchase 20,000 shares of Common Stock vesting at the rate of 4,000 shares per year. (4) Mr. Fuller's employment by the Company ended on May 8, 1998. (5) Includes the fair market value on the date of issuance of awards of common stock to Mr. Fuller. On July 1, 1993, Mr. Fuller was granted a stock bonus of 7,500 shares of Common Stock (as adjusted to account for a three for two stock split implemented in March 1994) to be vested and issued at a rate of 1,500 shares per year beginning July 1, 1993 and ending July 1, 1997. The amount included in Other Annual Compensation was $8,250 in 1998, $22,125 in 1997 and $11,160 in 1996. (6) Includes the fair market value on the date of issuance of awards of common stock to Mr. Morgan. On December 24, 1993, Mr. Morgan was granted a stock bonus of 3,750 shares of Common Stock (as adjusted to account for a three for two stock split implemented in March 1994) to be vested and 5 issued at a rate of 1,500 shares per year beginning December 24, 1993 and ending December 24, 1997. The amount included in Other Annual Compensation was $2,766 in 1998, $7,734 in 1997 and $8,484 in 1996. (7) In April 1997, Mr. Morgan received a five year option under the Plan to purchase 25,000 shares of Common Stock vesting at the rate of 5,000 shares per year. Options/SAR Grants In Last Fiscal Year There were no options awarded to the Named Executive Officers during the fiscal year ended June 30, 1998. Fiscal Year End Option Values The following table sets forth the number of unexercised options held by the Named Executive Officers during the fiscal year ended June 30, 1998. No options were exercised during such period. Value of Number of Unexercised Unexercised In-the-Money Options/SARs Options/SARs at FY-End(#) at FY-End($) Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise(#) Realized($) Unexercisable Unexercisable ---- -------------- ----------- ------------- ------------- Anthony P. Conza -- -- 16,000/24,000 $ -- / -- David L. Siegel -- -- 16,000/24,000 -- / -- Charles G. Leaness -- -- 8,000/12,000 -- / -- Patrick J. Pompeo -- -- 8,000/12,000 -- / -- Dennis G. Fuller -- -- -- / -- -- / -- Joseph W. Morgan -- -- 20,750/43,000 -- / -- Omnibus Stock Incentive Plan The Company has adopted the Omnibus Stock Incentive Plan (the "Plan") to permit the grant of awards to employees of the Company (including officers and directors who are employees of the Company or a subsidiary of the Company) of restricted shares of the Company's Common Stock, performance shares of the Company's Common Stock, stock appreciation rights relative to the Company's Common Stock and both incentive stock options and non-qualified options to purchase shares of the Company's Common Stock. A maximum of 950,000 shares maybe issued under the Plan. Through June 30, 1998, the Company granted to certain employees, pursuant to its incentive plan: (a) options to acquire a total of 380,400 shares of Common Stock, net of amounts canceled or exercised; and (b) stock grants of 95,800 shares of Common Stock. The options are exercisable at the fair market value on the date of grant, with prices ranging from $3.25 to $14.75 per share. The options and stock grants provide for vesting at the rate of 20% per annum and expire five years after the date of the grant. As of June 30, 1998, 7,850 options had been exercised, 212,600 options had been vested and not exercised, and 83,100 shares of stock had been issued under the stock grant program. The aggregate value of the shares issuable pursuant to vested options under the Plan was $438,594 based on the closing price of the Common Stock on October 15, 1998 of $2.063 per share. The Plan was adopted in order that the participants in the Plan will have financial incentives to contribute to the Company's growth and profitability, and to enhance the ability of the Company to attract and retain in its employ individuals of outstanding ability. 6 Warrants Issued To Non-Employee Directors On November 24, 1993, the Company issued to each of Harry Chernoff and Alvin Katz, two non-employee directors of the Company, warrants to purchase up to 7,500 shares of the Company's Common Stock at the purchase price of $6.00 per share at any time prior to November 24, 1998. On September 1, 1995, the Company issued to each of Messrs. Chernoff and Katz warrants to purchase up to 4,000 shares of the Company's Common Stock at the purchase price of $8.875 per share at any time prior to September 1, 2000. On September 11, 1998, the Company issued to Messrs. Chernoff and Katz Plan options entitling each of them to purchase up to 17,000 shares of the Company's Common Stock at the purchase price of $2.56 per share at any time prior to September 11, 2003. Such options entitle each of Messrs. Chernoff and Katz to purchase 9,000 shares of Common Stock at any time during the term thereof. The 8,000 share remainder purchasable under such options shall vest at the rate of 2,000 shares per annum during the four year period commencing on September 11, 1999. Directors' Compensation The Board has adopted a compensation policy to help the Company to attract and maintain the services of qualified outside directors. Such compensation consists of (a) payment of a directors fee of $9,000 per annum and $500 per meeting; (b) issuance of five year warrants or options to purchase 5,000 shares of the Company's Common Stock at an exercise price equal to the average of the highest and lowest sales prices of such stock on the date of his or her appointment or election to the Board; (c) issuance of additional warrants or options, at the discretion of the Board, periodically during the tenure of an outside director; and (d) reimbursement of the reasonable travel and lodging expenses incurred by each outside director in attending Board meetings which are not held within a 75 mile radius of his or her residence or principal place of business. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth the holdings of the Common Stock of the Company as of October 12, 1998 by (1) each person or entity known to the Company to be the beneficial owner of more than five percent (5%) of the outstanding shares of Common Stock of the Company; (2) each director and executive officer; and (3) all directors and executive officers as a group. All of the holders of the Company's Common Stock are entitled to one vote per share. Except as otherwise noted, the address of each of the persons listed below is 740 Broadway, New York, New York 10003. Number Attributable to Number of Shares Options or Warrants Name and Address of Beneficially Exercisable Within 60 Percent Beneficial Owner Owned(1)(2) Days of June 30, 1998 Owned(3) - ------------------- ----------- --------------------- -------- Anthony P. Conza 2,953,985(4) 21,000 30.6% David L. Siegel 1,518,830 21,000 15.8% Charles G. Leaness 444,908 13,000 4.6% Patrick J. Pompeo 411,637(5) 13,000 4.3% Alvin L. Katz 11,500(6) 11,500 * Dr. Harry G. Chernoff 13,768(7) 11,500 * Dennis G. Fuller 800 0 * Joseph W. Morgan 155,050(8) 20,750 1.6% All Directors and Executive Officers as a Group (15 Persons) 5,632,191 163,750 58.4% - ------------------ * Represents less than 1%. 7 (1) Includes shares actually and beneficially owned. (2) Includes all shares which may be acquired within 60 days after June 30, 1998 by the exercise of stock options under the Company's stock option plan or under warrants issued to outside directors. (3) Based on 9,640,976 shares of the Company's Common Stock, consisting of 9,577,226 shares outstanding on October 12, 1998, increased by 163,750 shares under options which the holders thereof have the right to acquire within 60 days from June 30, 1998, and decreased by 100,000 shares held in treasury stock. (4) Does not include (a) 37,050 shares owned by Mr. Conza's daughter, (b) 8,550 shares owned by Mr. Morgan (Mr. Conza's son-in-law), (c) 125,000 shares owned jointly by Mr. Conza's daughter and Mr. Morgan over which Mr. Morgan has sole voting power, (d) 4,150 shares owned by Mr. Conza's parents, (e) 40,913 shares owned by Joseph Conza, the brother of Mr. Conza, (f) 44,000 shares held by Mr. Conza's daughter as Trustee for the Anthony P. Conza Charitable Remainder Trust, and (g) 1,400 shares owned by Mr. Conza's wife, as to all of which Mr. Conza disclaims beneficial ownership. (5) Does not include 6,300 shares held by Mr. Pompeo's sister and brother-in-law, as to which Mr. Pompeo disclaims beneficial ownership. (6) The address of Mr. Katz is 301 N. Birch Road, Ft. Lauderdale, Florida 33304. (7) The address of Mr. Chernoff is 286 Spring Street, Suite 401, New York, New York 10013. (8) Does not include (a) 37,050 shares held by Mr. Morgan's wife (Mr. A. Conza's daughter), (b) 4,800 shares held by Mr. Morgan's children, (c) 700 shares held by Mr. Morgan's wife as custodian for his son under the Transfers to Minors Act, and (d) 44,000 shares held by Mr. Morgan's wife as Trustee for the Anthony P. Conza Charitable Remainder Trust, as to all of which Mr. Morgan disclaims beneficial ownership. Item 13. Certain Relationships and Related Transactions During the fiscal years ended June 30, 1998, 1997 and 1996, the Company paid $990,000, $984,000 and $894,000, respectively, to Georgia Enterprises, Inc., a corporation partially owned by Patrick Pompeo, an Executive Vice President and Director of the Company, and Joseph Conza, a Senior Vice President of the Company and President of B I Concept Systems, Inc., in payment of said corporation's share of the fees that it earned as the Subfranchisor for the Georgia market. During the same three fiscal years, the Company paid $254,000, $289,000 and $339,000, respectively, to Llewellyn Distributors, Inc. ('Llewellyn'), a corporation partially owned by Charles G. Leaness, a Director and Executive Vice President of the Company, in payment of said corporation's share of the fees that it earned as the Subfranchisor for the northern New Jersey market. The Company also paid $143,000, $150,000 and $165,000, respectively, to International Southwest Blimpie, Inc. ('Southwest'), a corporation principally owned and controlled by Joseph Conza, in payment of said corporation's share of the fees that it earned as the Subfranchisor for the Houston, Texas market. Each of the aforementioned transactions was effected pursuant to written agreements between the Company and the parties thereto. Such agreements are substantially identical to the standard form of Subfranchise agreement that the Company enters into with unaffiliated Subfranchisors. In the opinion of the Company's management, each such agreement is on terms as favorable to the Company as would be available from an unrelated third party. During the fiscal years ended June 30, 1998, 1997 and 1996, the Company received $4,000, $168,000 and $245,000 respectively, in management fees from Georgia Enterprises, Inc. Such fees were received pursuant to a written agreement which provides that, in consideration of the Company's provision of operational and administrative support functions to Georgia Enterprises, Inc., the Company shall be reimbursed with respect to the expenses incurred by the Company in connection therewith 8 pursuant to a payment scale set forth in the agreement. The agreement also provides that in the event the costs of such support services shall rise, then the fees paid pursuant to the agreement shall rise accordingly. In the opinion of the Company's management, the agreement is on terms as favorable to the Company as would be available from an unrelated third party. During the years ended June 30, 1998, 1997 and 1996, the Company paid $11,030, $8,243 and $7,182, respectively, to Joseph Conza as compensation for the use of his apartment in New York City by employees of the Company's Atlanta and Houston offices during business trips. In the Company's estimation, this practice reduced the Company's lodging expense inasmuch as the per diem amounts paid to Mr. Conza were below the market rates for hotel accommodations which the Company would have been required to pay in order to house such employees during such trips to New York. During the fiscal years ended June 30, 1998, 1997 and 1996, the Company received $119,000, $101,000 and $85,000, respectively, in management fees from Llewellyn. Such fees were paid pursuant to a written agreement which provides that the Company shall be reimbursed by Llewellyn for costs incurred by the Company in providing operational support services to Llewellyn. The agreement also provides that in the event the costs of such support services shall rise, then the fees paid pursuant to the agreement shall rise accordingly. In the opinion of the Company's management, the agreement is on terms as favorable to the Company as would be available from an unrelated third party. During the fiscal years ended June 30, 1998, 1997 and 1996, the Company received $8,000, $49,000 and $61,000, respectively, in management fees from Southwest. The management fees were paid pursuant to a written agreement which provides that the Company shall be reimbursed by Southwest for costs incurred by the Company in providing operational support services to Southwest. The agreement also provides that in the event the costs of such support services shall rise, then the fees paid pursuant to the agreement shall rise accordingly. In the opinion of the Company's management, the agreement is on terms as favorable to the Company as would be available from an unrelated third party. In April 1994, Mr. Leaness borrowed the sum of $20,000 from the Company, and collateralized the payment thereof with the same 120,000 shares of Common Stock which he pledged in connection with a $60,000 option exercise and loan transaction consummated in December 1991. Said $20,000 loan is payable upon demand and bears interest at the rate of 5% per annum. In March 1995, Joseph Conza borrowed the principal amount of $55,500 from the Company. Said indebtedness is payable in constant bi-monthly payments of principal and interest computed at the rate of 8% per annum on the basis of a 20 year amortization schedule, and the unpaid balance of principal and accrued but unpaid interest shall become due and payable on April 16, 2000, provided, however, that, Mr. Conza may extend the term of the loan through April 15, 2015 as long as no default exists with regard to said loan when it originally matures. Mr. Conza pledged 10,000 unregistered shares of the Company's Common Stock as collateral security for the payment of all sums due under said loan. As of the end of the fiscal year, Mr. Conza was current with respect to his payment obligations and the outstanding principal balance had been reduced to $51,325. In 1995, the Company acquired the rights possessed by Anthony P. Conza and David L. Siegel regarding the licensing of the Blimpie Trademarks and the Blimpie Marketing System for all non-U.S. territories, pursuant to a 99 year license Agreement. Said agreement provided for payment of certain income-based fees to Messrs. Conza and Siegel, and further provided for cancellation by Messrs. Conza and Siegel if the Company fails to pay them a minimum annual fee aggregating $350,000 during the first five years of the term, and a minimum aggregate fee of $150,000 per year (subject to an annual cost of living adjustment) during the balance of such term. The payments made to Messrs. Conza and Siegel under this agreement were $137,029 and $230,713 during the fiscal years ended June 30, 1997 and 1996, respectively. In February 1997, the Company acquired, pursuant to a written agreement which it executed with Messrs. Anthony P. Conza and David L. Siegel, ownership of the undivided 60% interest in the international rights to the Blimpie trademarks and Blimpie marketing system owned by such individuals. In accordance with such agreement, the Company paid these individuals $4.5 million ($3 9 million to Mr. Conza and $1.5 million to Mr. Siegel), and it must pay certain income-based fees to them which take effect after international revenues exceed $5 million. SIGNATURE In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. BLIMPIE INTERNATIONAL, INC. Dated: October 29, 1998 By: /s/ Brian Lane ---------------------------------- Brian Lane, Vice President and Chief Financial Officer (Principal Accounting Officer) 10 -----END PRIVACY-ENHANCED MESSAGE-----