-----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, CJsmyPmL6+vqJLzRmDqbcjxFM3rIOb5yYTxHLAzKOKsoTlwm4ve0EyT7m1TQGQ29 Nt+6LFrMEoPO15iwBdaPfw== 0000950116-97-002122.txt : 19971117 0000950116-97-002122.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950116-97-002122 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAM CORP CENTRAL INDEX KEY: 0000925741 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-LEGAL SERVICES [8111] IRS NUMBER: 232753988 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21419 FILM NUMBER: 97721942 BUSINESS ADDRESS: STREET 1: 1010 NORTHERN BLVD STREET 2: STE 336 CITY: GREAT NECK STATE: NY ZIP: 11021 MAIL ADDRESS: STREET 1: 1010 NORTHERN BLVD., SUITE 336 CITY: GREAT NECK STATE: NY ZIP: 11021 10QSB 1 U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-QSB [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the three month period ended September 30, 1997 [ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-21419 NAM CORPORATION - -------------------------------------------------------------------------------- (Name of small business issuer as specified in its charter) Delaware 23-2753988 - ----------------------------------- -------------------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 1010 Northern Boulevard Great Neck, New York 11021 ---------------------------------------- (Address of Principal Executive Offices) (516) 829-4343 --------------------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of November 12, 1997, 3,334,978 shares of common stock of the issuer were outstanding. Transitional small business disclosure format (check one): Yes ___ No _X_ NAM CORPORATION INDEX PART I. FINANCIAL INFORMATION Page ---- ITEM 1. UNAUDITED FINANCIAL STATEMENTS Consolidated Balance Sheets at September 30, 1997 and June 30, 1997 3 Consolidated Statements of Operations for the three month periods ended September 30, 1997 and 1996 4 Consolidated Statements of Changes in Stockholders' Equity for the three month periods ended September 30, 1997 and 1996 5 Consolidated Statements of Cash Flows for the three month periods ended September 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 12 Item 6. Exhibits and Reports on Form 8-K 12 2 NAM Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, June 30, 1997 1997 ------------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 262,402 $ 175,486 Marketable securities 3,576,675 3,792,381 Accounts receivable (net of allowance for doubtful accounts of $80,000) 397,958 408,260 Other receivables 26,034 34,490 Prepaid expenses 54,713 54,682 ----------- ---------- Total current assets 4,317,782 4,465,299 FURNITURE AND EQUIPMENT - AT COST, less accumulated depreciation 223,720 201,113 ORGANIZATION COSTS (net of accumulated amortization of $24,033, and $21,885, respectively) 18,929 21,077 OTHER ASSETS 37,337 39,756 ----------- ---------- $ 4,597,768 $4,727,245 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 143,571 $ 158,846 Accrued liabilities 148,859 140,192 Accrued payroll and employee benefits 116,881 174,115 Deferred revenues 147,342 138,716 ----------- ---------- Total current liabilities 556,653 611,869 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock - $0.001 par value; 5,000,000 shares authorized; none issued - - Common stock - $0.001 par value; 15,000,000 shares authorized; 3,334,978 shares issued and outstanding 3,335 3,335 Paid-in capital 4,773,971 4,772,569 Accumulated deficit (928,167) (739,547) Unrealized gain on marketable securities 192,155 79,224 Unearned compensation (180) (205) ----------- ---------- Total stockholders' equity 4,041,114 4,115,376 ----------- ---------- $ 4,597,767 $4,727,245 =========== ==========
The accompanying notes are an integral part of these statements. 3 NAM Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended September 30, 1997 1996 ---- ---- Net revenues $ 863,725 $ 805,491 Operating costs and expenses Cost of services 224,469 197,082 Sales and marketing expenses 389,551 284,945 General and administrative expenses 481,398 307,299 ---------- --------- 1,095,418 789,326 ---------- --------- (Loss) income from operations (231,693) 16,165 Other income (expenses) Investment income 42,663 - Other income 410 1,148 Interest expense - (8,000) ---------- --------- 43,073 (6,852) ---------- --------- (Loss) income before provision for income taxes (188,620) 9,313 Provision for income taxes - - ---------- --------- NET (LOSS) INCOME $ (188,620) $ 9,313 ========== ========= Net (loss) income per common share $ (0.06) $ 0.00 ========== ========= Weighted average common stock and common stock equivalents 3,334,978 1,947,504 ========== =========
The accompanying notes are an integral part of these statements. 4 NAM Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Three months ended September 30, 1997 and 1996
Change in unrealized Unearned Additional gain on compensation- Total Common Stock paid-in Retained marketable stock bonus Stockholders' Shares Amount capital deficit securities plan Equity ------------------------------------------------------------------------------------- Balance at June 30, 1996 1,813,075 $ 1,813 $ 28,739 $(101,990) $ (308) $ (71,746) Net income 9,313 9,313 Earned portion of stock bonus plan 26 Shares issued pursuant to restricted stock award 61,903 62 (62) ===================================================================================== Balance at September 30, 1996 1,874,978 $ 1,875 $ 28,677 $ (92,677) $ (282) $ (62,433) ===================================================================================== Balance at June 30, 1997 3,334,978 $ 3,335 $4,772,569 $(739,547) $ 79,224 $ (205) $4,115,376 Net loss (188,620) (188,620) Change in unrealized gain on marketable securities 112,931 112,931 Compensation related to stock option plan 1,402 1,402 Earned portion of stock bonus plan 25 25 ===================================================================================== Balance at September 30, 1997 3,334,978 $ 3,335 $4,773,971 $(928,167) $ 192,155 $ (180) $4,041,114 =====================================================================================
The accompanying notes are an integral part of these statements. 5 NAM Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended September 30,
1997 1996 ---------- -------- Cash flows from operating activities Net (loss) income $(188,620) $ 9,313 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities Depreciation and amortization 15,187 20,698 Losses on sales of marketable securities 976 - Earned portion of stock bonus plan 25 26 Compensation related to stock option plan 1,402 - Changes in operating assets and liabilities Decrease in accounts receivable 10,302 57,507 Decrease in other receivables 8,456 27,681 (Increase) in prepaid expenses (31) (44,331) Decrease (increase) in other assets 2,419 (1,000) Increase (decrease) in accounts payable and accrued liabilities 8,655 (15,037) Decrease in accrued payroll and employee benefits (57,234) (25,748) Increase (decrease) in deferred revenues 8,626 (7,590) ---------- -------- Net cash (used in) provided by operating activities (189,837) 21,519 ---------- -------- Cash flows from investing activities Purchases of marketable securities (332,101) - Proceeds from sales of marketable securities 463,737 - Proceeds from maturities of marketable securities 200,000 - Decrease in payable for securities purchased (15,263) - Purchases of furniture and equipment (39,620) (2,990) ---------- -------- Net cash provided by (used in) investment activities 276,753 (2,990) ---------- -------- Cash flows from financing activities (Increase) in deferred offering costs - (54,811) ---------- -------- Net cash used in financing activities - (54,811) ---------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 86,916 (36,282) Cash and cash equivalents at beginning of period 175,486 31,474 ---------- -------- Cash and cash equivalents at end of period $ 262,402 $ (4,808) ========== ========
The accompanying notes are an integral part of these statements. 6 NAM CORPORATION and SUBSIDIARIES Notes to Consolidated Financial Statements Three months ended September 30, 1997 (Unaudited) 1. The consolidated balance sheet as of September 30, 1997 and the related consolidated statements of operations for the three month periods ended September 30, 1997 and 1996 have been prepared by NAM Corporation, including the accounts of its wholly-owned subsidiaries. In the opinion of management, all adjustments necessary to present fairly the financial position as of September 30, 1997 and for all periods presented, consisting of normal recurring adjustments, have been made. Results of operations for the three month period ended September 30, 1997 are not necessarily indicative of the operating results expected for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended June 30, 1997 included in the Company's Annual Report on Form 10-KSB. The accounting policies used in preparing these consolidated financial statements are the same as those described in the June 30, 1997 consolidated financial statements. 2. The Company entered into an employment agreement with its Chief Executive Officer retroactive to July 1, 1997 as the prior agreement expired on June 30, 1997. The new agreement expires June 30, 2002 and provides for an annual base salary of $225,000, an annual cost of living increase to reflect increases in the Urban Consumer Price Index and an annual bonus at the discretion of the Company's Board of Directors. The agreement also provides for life, medical and disability insurance, auto and business expense reimbursements. If this agreement is terminated as a result of a change in duties of the executive or due to a change in control, the officer will be entitled to a lump sum severance payment equal to three times his then current base salary. 3. Certain prior period amounts were reclassified to conform with the presentation shown in the Company's Form 10-KSB for the fiscal year ended June 30, 1997. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). The Company desires to avail itself of certain "safe harbor" provisions of the Act and therefore is including this special note to enable it to do so. Forward-looking statements contained herein involve risks and uncertainties. The Company's actual results and experience could differ materially from those anticipated in these forward-looking statements as a result of many factors, including changes in the markets and/or regions currently served by the Company and in those markets and/or regions that the Company may expand into; changes in the insurance industry; the Company's inability to retain current or new hearing officers; and changes in the public court system. General The Company provides alternative dispute resolution ("ADR") services to insurance companies, law firms, corporations and municipalities. To date, the Company has focused the majority of its marketing efforts on developing relationships, and expanding existing relationships, with insurance companies which the Company believes are some of the largest consumers of ADR services. The Company opened for business in March 1992 in New York and currently has offices in New York, Pennsylvania, Massachusetts, Tennessee, South Carolina and the Midwest. The Midwest region, with headquarters in Wisconsin, commenced operations in the third quarter of the 1997 fiscal year. The Company's objective is to become one of the leading providers of ADR services nationally. To accomplish this goal, the Company plans to open up new offices, which may include the acquisition of existing ADR companies. In addition, the Company intends to increase its marketing of its ADR services to litigants in other types of disputes, including complex commercial issues, construction, employment, matrimonial and worker's compensation cases. First Quarter Ended September 30, 1997 Compared to First Quarter Ended September 30, 1996 Revenues. Revenues increased 7% to $863,725 for the first quarter ended September 30, 1997 from $805,491 for the comparable prior period. Management attributes this growth in sales to an overall increase in the number of cases heard, which is partially attributable to the opening of the Midwest region in the third 8 quarter of the 1997 fiscal year. In particular, revenue generated by the Boston office increased by over 50% from the prior period. Offsetting such increases were declines in revenues from the Pennsylvania and South Carolina offices. Management believes that these offices will continue to experience a lower volume of cases heard during the 1998 fiscal year. The Company has restaffed the Pennsylvania office in an attempt to reverse this trend. In addition, the Company is pursuing exclusive agreements with the home offices of large corporations/insurance companies in order to obtain contracts on a national basis. Cost of Services. Cost of services increased 14% to $224,469 for the first quarter ended September 30, 1997 from $197,082 for the first quarter ended September 30, 1996. The higher volume of business serviced resulted in greater hearing officer fees. In addition, cost of services as a percentage of revenues increased to 26% in the first quarter of fiscal year 1998 from 24% in the first quarter of fiscal year 1997. The ratio of cost of services to revenues will fluctuate based on the number of hours per case, as well as the ability (or inability) of an office to take advantage of volume arrangements with hearing officers which usually lower the cost per case. Sales and Marketing. Sales and marketing costs increased 37% to $389,551 for the first quarter ended September 30, 1997 from $284,945 for the first quarter ended September 30, 1996. This expense category includes amounts directly related to the production of sales; that is, salaries and commissions for sales executives, sales managers and account executives and applicable payroll taxes and employee benefits; advertising; promotions and travel and entertainment. Sales and marketing costs as a percentage of revenues increased to 45% in the first quarter of fiscal year 1998 from 35% in the first quarter of fiscal year 1997. Most of this increase (approximately $91,000) relates to salary and related items. Firstly, higher sales commissions were incurred based on the higher volume of business. Secondly, primarily during the second half of fiscal year 1997, personnel were hired and upgraded to staff and support the Company's expansion plans. In particular, sales management was strengthened at the Company's headquarters in New York to better prepare the Company for higher revenue levels. Finally, the Midwest region, with personnel in Wisconsin and Illinois, opened during the third quarter of fiscal 1997. Additionally, advertising costs rose by approximately $12,000 to $20,900 for the three months ended September 30, 1997. Higher spending levels are planned for the remainder of the 1998 fiscal year as the Company moves forward with its advertising campaign intended to create an increased awareness of the Company through a variety of media. There can be no assurance that such expenditures will produce higher revenues. 9 General and Administrative. General and administrative costs increased 57% to $481,398 for the first quarter ended September 30, 1997 from $307,299 for the first quarter ended September 30, 1996. Furthermore, general and administrative costs as a percentage of revenues increased to 56% in the first quarter of fiscal year 1998 from 38% for the comparable prior period. This category includes salaries of executives, accounting, data processing and administration/clerical and related payroll taxes and employee benefits, as well as all other overhead costs. Of the total increase, salary-related costs increased by approximately $66,000 as the Company upgraded and expanded personnel, particularly at its headquarters in New York, primarily during the second half of fiscal year 1997. All corporate activities, including marketing, finance, data processing, billing and collections, purchasing and scheduling of hearings, are centralized in New York. Management believes that this structure enhances the control environment as well as produces a more streamlined and efficient approach as the Company grows. Higher costs with respect to professional fees, insurance, stock market fees and the printing of new brochures were incurred due to the expansion of the Company and its status as a publicly traded entity. Such costs increased by approximately $94,000 in total. Other Income (Expenses). Other income (expenses) changed from a net expense of ($6,852) for the first quarter ended September 30, 1996 to income of $43,073 for the first quarter ended September 30, 1997. In the current fiscal period, other income was composed primarily of investment income generated from available proceeds received from the Company's initial public offering in November 1996. In the prior fiscal period, other expenses was composed primarily of interest expense from a past private placement financing. This debt was satisfied in full as of November 20, 1996 with proceeds from the Company's initial public offering. Provision for Income Taxes. There was no provision for taxes during the three month periods ended September 30, 1997 and 1996 due to losses incurred during the periods and the existence of net operating loss carryforwards for Federal tax purposes. Net (Loss) Income. For the three months ended September 30, 1997, the Company had a net loss of ($188,620) as compared to net income of $9,313 for the three months ended September 30, 1996. As discussed above, this change was primarily due to higher expenditures incurred as an investment in the Company's infrastructure in anticipation of future growth. 10 Liquidity and Capital Resources At September 30, 1997, the Company had working capital surplus of $3,761,129 compared to $3,853,430 at June 30, 1997. Net cash used in operating activities was $189,837 for the three months ended September 30, 1997 versus cash provided by operating activities of $21,519 in the prior comparable period. The decline is attributable to the decrease in net income (loss) from income of $9,313 for the three months ended September 30, 1996 to a loss of ($188,620) for the three months ended September 30, 1997. Net cash provided by investing activities was $276,753 for the three months ended September 30, 1997 versus cash used in investing activities of $2,990 in the comparable prior period. Investing activity began in the second quarter of the 1997 fiscal year when the net proceeds from the Company's initial public offering were received. During the first quarter of the 1998 fiscal year, several investments in government securities matured or were sold with a portion of the proceeds reinvested in equity securities. Net cash used in financing activities was $54,811 for the three months ended September 30, 1996 versus no activity in the current year fiscal period. The prior period costs related to offering costs incurred in anticipation of the Company's initial public offering which was consummated in November 1996. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Not applicable. Item 2. Changes in Securities and Use of Proceeds. In November 1996, the Company raised additional capital through an initial public offering of its securities. Net proceeds after offering expenses approximated $4,700,000 of which $970,000 had been utilized through June 30, 1997 as disclosed in the Company's Form 10-KSB. During the three months ended September 30, 1997, the Company additionally expended approximately $120,000 for working capital and general corporate purposes. Item 3. Defaults upon Senior Securities. Not applicable. Item 4. Submission of matters to a Vote of Security Holders. None. Item 5. Other information. Not applicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit Number Description of Document ------- ----------------------- 10.2 Employment Agreement between Company and Roy Israel dated October 21, 1997 27 Financial Data Schedule (b) Reports on Form 8-K. None. SIGNATURES In accordance with 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. NAM CORPORATION Date: November 13, 1997 By: /s/ Roy Israel ----------------------------- Roy Israel, President and CEO Date: November 13, 1997 By: /s/ Patricia A. Giuliani-Rheaume -------------------------------- Patricia A. Giuliani-Rheaume, Vice President, Treasurer and CFO 12 EXHIBIT INDEX Exhibit Number Description of Document ------- ----------------------- 10.2 Employment Agreement between Company and Roy Israel dated October 21, 1997 27 Financial Data Schedule (b) Reports on Form 8-K. None. EX-10 2 EXHIBIT 10.2 EXHIBIT 10.2 EMPLOYMENT AGREEMENT This AGREEMENT (the "Agreement"), dated as of October 21, 1997, is made by and between ROY ISRAEL (the "Executive") and NAM CORPORATION, a Delaware corporation (the "Company"). WHEREAS, it is important to the Company that it have the benefit of the Executive's services, experience and loyalty, and Executive has indicated his willingness to provide his services on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties, subject to the terms and conditions set forth below, intending to be legally bound, hereto agree as follows: 1. Employment. (a) General. The Company hereby employs the Executive and the Executive agrees upon the terms and conditions herein set forth to serve as Chief Executive Officer and President of the Company. At all times during the Employment Term, as defined below, the Executive shall be the most senior executive officer of the Company. The Executive shall devote substantially all of his efforts to the Company, but during the term of this Agreement he is allowed to engage in other businesses which do not compete with the Company. (b) Duties. The duties of the Executive shall include primary responsibility for the administration, organizational structure, strategic direction and overall management of the Company and such other responsibilities as the Board of Directors of the Company may reasonably delegate to the Executive. All employees of the Company shall report to the Executive. 2. Term of Employment. The Company hereby employs the Executive and the Executive shall serve in the employ of the Company for a period retroactive to July 1, 1997 (the "Commencement Date") and extending through and including June 30, 2002 (such date and the last day of any extended term of employment pursuant to this Section 2 being referred to as the "Termination Date"), unless sooner terminated hereunder (the "Initial Term"). The term of this Agreement shall be automatically renewed for successive one (1) year periods (the "Renewal Term") unless terminated by either the Executive or the Company by the giving of written notice of termination at least ninety (90) days in advance of the then current Termination Date. (The Initial Term and the Renewal Term shall be collectively referred to herein as the "Employment Term"). At the end of the Initial Term, the Base Salary, as defined below, for the Renewal Term, and each Renewal Term thereafter, may be renegotiated by the Company and the Executive. 3. Compensation and Other Benefits. The Company shall pay and provide the following compensation and other benefits to the Executive during the Employment Term: (a) Base Salary. The Company shall pay to the Executive a minimum annual base salary of $225,000 (the "Base Salary") for the first year of the Initial Term. Effective on each anniversary of the Commencement Date during the Employment Term, the -2- Base Salary shall be increased to reflect increases in the Urban Consumer Price Index for all Urban Consumers for the New York metropolitan area (or any successor Consumer Price Index), based on data published by the Bureau of Labor Statistics of the United States Department of Labor for the period that corresponds with the preceding twelve month period. Such Base Salary shall be paid in accordance with Company policy. In addition, the Company shall pay all sums owed to the Executive from the Commencement Date until the date hereof which are due to the retroactive application of the Commencement Date. (b) Fringe Benefits. (i) The Executive shall be entitled to receive twenty (20) days paid vacation for each twelve (12) month period (the "Vacation Time") during the Employment Term. (ii) The Executive shall receive full health and dental insurance coverage for the Executive and his family for which the Company shall pay the premium. The Company shall pay Executive a gross-up payment necessary to cover any tax liability he incurs in connection with the payment of such health and dental insurance premiums by the Company. (iii) The Company shall lease an automobile, to be chosen by the Executive, for his use or the Company may reimburse the Executive for the lease of an automobile, at the Executive's option. The monthly lease payment by the Company for such automobile shall not exceed one thousand dollars ($1,000), provided, however, that if the monthly lease payment is greater than one thousand dollars ($1,000), the Executive acknowledges that the Company shall only pay one thousand dollars ($1,000) towards the monthly lease payment. In addition, the Company shall pay, or reimburse Executive promptly -3- after receiving supporting documentation relating thereto, all taxes and all expenses associated with the lease and use of such automobile. (iv) The Executive shall be entitled to participate in all employee benefit plans, programs and arrangements of the Company now or hereafter made available to senior executives of the Company on a basis which is no less favorable than is made available to any other senior executive of the Company. (v) During the Employment Term, the Company shall maintain key man life insurance on the life of the Executive for the benefit of the Company of at least one million dollars ($1,000,000). In addition, during the Employment Term, the Company shall provide life insurance to the Executive for the benefit of the Executive's estate in an amount to be determined solely by Executive. The premiums on all such policies shall not aggregate more than $15,000 for each policy year. The Company shall pay a tax gross-up payment to the Executive for taxes, if any, on such premiums. All rights of Executive with respect to any prior life insurance policies shall be governed by the prior employment agreement. (vi) During the Employment Term, the Company shall maintain a long-term disability policy for the Executive which shall provide for disability coverage of 60% of Base Salary. The Company will structure its payments for such policy so that the receipt of the benefit by the Executive shall not be taxable. In addition, if the Executive is taxed upon the reimbursement or payment by the Company of such premiums, then the Company shall pay a tax gross-up payment to compensate the Executive for such taxes, if any. -4- (c) Business Expenses. During the Employment Term, the Company shall promptly reimburse the Executive for all ordinary and necessary travel expenses, business expenses, and other disbursements incurred by him for or on behalf of the Company, in the performance of his duties hereunder. The Executive shall provide the Company with an accounting of his expenses, including written documentation when available, which accounting shall clearly reflect which expenses are reimbursable by the Company. (d) Bonus. The Executive may receive an annual bonus which may consist of cash, stock options or a combination thereof (the "Bonus") at the sole discretion of the Board of Directors or any Committee of the Board of Directors vested with the power to determine such bonuses (the "Committee"). The Bonus shall be payable to the Executive within thirty (30) days after completion of the Company's annual audit. 4. Location. Except when traveling, the Executive shall work in the Company's New York offices or in any other location selected by the Company with the Executive's prior written approval. 5. Termination of Employment. (a) During the Employment Term, the Executive may be terminated only "For Cause" as that term is defined below. (b) "For Cause" shall mean (i) wilful misconduct by the Executive in the performance of his duties hereunder; or (ii) the Executive is convicted of a felony. In no event shall the results of the Company's operations or business decisions made by the Executive -5- constitute For Cause. The Company shall immediately notify the Executive if it is intending to terminate this Agreement For Cause (the "Cause Notice"). (c) Any determination that For Cause exists shall only be made after the Executive shall have been given a reasonable opportunity to present his view of relevant facts and circumstances to the Board of Directors of the Company and the Company shall have made a reasonable independent and impartial investigation thereof. The Executive shall be given twenty (20) days from receipt of the Cause Notice in which to present to the Board of Directors his view of the relevant facts. (d) If this Agreement is terminated pursuant to Paragraph 5(a), then this Agreement shall terminate on the date set by the Board of Directors. (e) If at anytime during the Employment Term, the Executive's duties are changed ("Change-in-Duties"), without his consent, so that he is no longer the most senior executive officer of the Company, then such change shall be deemed a material breach of the Agreement by the Company. In such event, the Executive shall be entitled to terminate the Agreement and receive three times his Base Salary at the time of the Change-in-Duties. This payment shall be paid during the one-year period following the termination of the Agreement at the same intervals as the Base Salary had been paid prior to such date. In addition, the Company is obligated to maintain all other benefits under this Agreement for any period remaining under this Agreement or for a period of one (1) year from the Change-in-Duties, whichever is longer. 6. Permanent Disability. If during the Employment Term, the Executive shall -6- become Permanently Disabled (as defined below), the Company shall give thirty (30) day written notice of termination and this Agreement shall terminate on the last day of such period. "Permanently Disabled" shall mean the inability of the Executive to perform the services that the Executive is required to perform pursuant to this Agreement due to physical or mental disability which continues for one hundred eighty (180) consecutive days. Evidence of such disability shall be certified by a physician reasonably acceptable to both the Executive and the Company. The Executive shall be entitled to receive (i) any Base Salary owed through the date of termination, (ii) the Base Salary for a period of one (1) year following the date of termination, which shall be paid in accordance with paragraph 3(a), (iii) reimbursement for any business expenses incurred and unpaid prior to termination, (iv) all options granted to Executive during the Employment Term shall immediately vest, (v) all health, dental and life insurance benefits provided for under this Agreement shall be maintained for a period of one (1) year from the date of termination, (vi) all accrued but unpaid Bonus amounts shall be paid within five (5) days of the date of termination, and (vii) all disability benefits payable under the relevant policy. 7. Death of the Executive. If the Executive dies prior to the expiration of the Employment Term this Agreement shall terminate on the date of death and Executive's beneficiary, designee, or estate ("Beneficiary") shall be entitled to receive (i) any Base Salary owed though the date of death, (ii) all accrued but unpaid Bonus amounts shall be paid within five (5) days of the date of death, (iii) reimbursement for any business expenses incurred and unpaid prior to the Executive's death, (iv) all options granted to Executive shall immediately -7- vest, (v) all health and dental benefits provided for under this Agreement shall be maintained for Executive's family for a period of one (1) year following the date of death, and (vi) such death benefits payable under the insurance policy for the benefit of the Executive's estate. 8. Trade Secrets and Proprietary Information of the Company. (a) By virtue of his employment, Executive will have access to, will acquire and will become acquainted with various trade secrets and confidential and proprietary information relating to the businesses of the Company, including but not limited to: client, employee, supplier, hearing officer and distributor lists, contacts, addresses, information about employees, employee relations, hearing officers, clients and suppliers, employee handbooks, clients, price lists, costs and expenses, documents, budgets, proposals, financial information, inventions, patterns, processes, computer programs, specification, all records of the accounts of clients, hearing officers, prices, schedules, and other documentation, computer hardware and software, and any other records and books relating in any manner whatsoever to the clients and hearing officers of the Company, whether prepared by the Executive or otherwise, and whether situated inside or outside the offices of the Company which are used in the operation of the businesses of the Company. (b) The Executive shall hold in strictest confidence and shall not disclose or use any trade secret or confidential information of the Company, directly or indirectly, or use them in any way, either during the term of the Executive's employment hereunder or for one (1) year thereafter, except as required in the course of Executive's employment with the Company. Executive understands that the term "trade secret" or "confidential information" -8- means all information concerning the Company that is not in the public domain. In the event of a breach of this Agreement by the Company or termination without cause, this paragraph shall be deemed null and void. 9. Non-Compete. In consideration of the compensation to be received by Executive from the Company, Executive shall not: (a) during the period Executive is employed with the Company, engage in, or otherwise directly or indirectly be employed by, or act as a consultant or lender to, or be a director, officer, employee, owner, member or partner of, any business or organization that is or shall then be competing with the Company; and (b) for a period of one (1) year after the termination of this Agreement, directly or indirectly, (i) market or provide any competitive services to, or solicit any business from, any clients of the Company or (ii) solicit or contact any person who is employed or acts as hearing officer for the Company at the time that Executive ceases being employed by the Company for the purpose of employing or retaining such person as an employee, consultant or hearing officer; provided, however, that nothing in this section shall prohibit the Executive from employing or retaining such person where the Executive did not initiate the contact with such person. If any restriction contained in this section shall be deemed invalid, illegal, or unenforceable by reason of the extent, duration, or geographical scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, geographical scope or other provision hereof to the fullest extent allowed by law, and in its reduced form such restriction shall then be enforceable in the manner contemplated hereby. In the event of a breach of the Agreement by the Company or termination without cause, this paragraph shall be deemed null and void. -9- 10. Change-in-Control. If within two (2) years after a Change-in-Control of the Company, as defined below, (i) the Executive's employment is terminated by the Company, except For Cause, death or the Executive becoming Permanently Disabled; or (ii) this Agreement is terminated by the Executive because of a Change-in-Duties, then the Executive shall receive as severance compensation, three times the Base Salary at the then current amount. The amounts paid pursuant to this paragraph shall be in lieu of any other payments due under this Agreement. In addition, if any compensation is to be paid under this paragraph, the Company shall continue to maintain all benefits provided hereunder for one year. Such compensation shall be paid in a lump sum within five (5) days after the termination, "Change-in-Control" shall mean: (a) any "person" as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other than a current stockholder that, directly or indirectly, owns 5% or more of the Company's outstanding common stock or an affiliate of such 5% or greater stockholder, collectively, the "Controlling Shareholders") and other than the Company, any trustee, or other fiduciary holding securities under any employee benefit plan of the Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities; (b) during any 24-consecutive-month period, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director -10- whose election by the Board of Directors or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof unless the Executive has approved such change; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 70% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of, or the Company sells or disposes of, all or substantially all of the Company's assets. 10. Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by all the parties hereto. Failure to exercise any rights hereunder shall not constitute a waiver of such rights. -11- 11. Governing Law. All matters affecting or in connection with this Agreement, the employment of the Executive or the termination or resignation of the Executive, are to be governed by, interpreted and construed in accordance with the laws of the State of New York without giving effect to the state's conflict of law principles. 12. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to be delivered the same day if delivered by personal delivery, five (5) days from the date if mailed by certified mail, return receipt requested, or on the day delivered if sent by overnight carrier to addresses as follows: If to the Executive: Roy Israel 63 Shelter Lane Roslyn Heights, New York 11577 If to the Company: NAM Corporation 1010 Northern Boulevard Suite 336 Great Neck, New York 11021 Attn.: Board of Directors With a copy to Robert S. Matlin, Esq. (which shall not Camhy Karlinsky & Stein LLP constitute notice): 1740 Broadway, 16th FL. New York, NY 10019-4315 13. Severability. Each provision hereof is intended to be severable, and the invalidity of any portion of this Agreement shall not affect the validity or legality of the remainder hereof. -12- 14. Counterparts. This Agreement may be executed by the parties hereto in counterpart, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 15. Headings. The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 16. Successors and Assigns. This Agreement shall be binding upon any successor or assign of the Company. 17. Arbitration. The parties agree that in the event of any dispute or controversy arising out of or in connection with this Agreement or any alleged breach thereof (a "Dispute"), the parties shall submit the Dispute for arbitration in New York City before three (3) arbitrators; one arbitrator shall be chosen by the Executive, one arbitrator by the Company and the third by the two other arbitrators. If any party fails to choose its arbitrator within thirty (30) days after a request is made to designate an arbitrator, then that party waives its right to choose an arbitrator and the arbitration shall immediately go forward before the one arbitrator chosen by the non-breaching party. The decision of the arbitrators will be final and binding upon the parties, and the judgment of a court of competent jurisdiction may be entered thereon. Fees of the arbitrators and the cost of arbitration shall be borne as determined by the arbitrators. -13- IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the date first written above. NAM CORPORATION By: /s/ Patricia Giuliani-Rheaume -------------------------------------------- Name: Patricia Giuliani-Rheaume Title: Vice President and Chief Financial Officer /s/ ROY ISRAEL -------------------------------------------- ROY ISRAEL -14- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1997 SEP-30-1997 262 3,577 478 80 0 4,318 390 166 4,598 557 0 0 0 3 4,038 4,598 864 864 224 1,095 0 0 0 (187) 0 (187) 0 0 0 (187) (0.06) (0.06)
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