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Kushner Locke Co – ‘10-K/A’ for 9/30/00

On: Monday, 1/29/01, at 5:11pm ET · For: 9/30/00 · Accession #: 950148-1-114 · File #: 1-10661

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/29/01  Kushner Locke Co                  10-K/A      9/30/00    1:51K                                    Bowne of Century City/FA

Amendment to Annual Report — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K/A      Amendment to Annual Report                            19     86K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Certain Relationships and Related Transactions Directors and Executive Officers of Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management
1	1st Page - Filing Submission
2	Item 10. Directors and Executive Officers of Registrant
5	Item 11. Executive Compensation
15	Item 12. Security Ownership of Certain Beneficial Owners and Management
17	Item 13. Certain Relationships and Related Transactions

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================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000

COMMISSION FILE NO. 0-17295

THE KUSHNER-LOCKE COMPANY
(Exact name of registrant as specified in its charter)

CALIFORNIA 95-4079057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

11601 Wilshire Blvd., 21st Floor, Los Angeles, California 90025
(Address of principal executive offices) (Zip Code)

(310) 481-2000
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Not Applicable

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
13-3/4% Convertible Subordinated Debentures, Series B due 2000

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 or any amendment to this
Form 10-K. [ ]

The aggregate market value based on the closing price of the Registrant's Common
Stock held by nonaffiliates of the Registrant was approximately $3,029,000 as of
January 26, 2001.

There were 13,847,210 shares of outstanding Common Stock of the Registrant as of
January 26, 2001.

Total number of pages: 19

The undersigned registrant hereby amends its Annual Report on Form-K for the
fiscal year ended September 30, 2000 by replacing the following Items in their
entirety:

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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Executive Officers and

DirectorsDirectors of the Company are elected annually by the shareholders to
serve for a term of one year or until their successors are duly elected and
qualified. Officers are elected by the Board of Directors and serve at the
Board's pleasure. Set forth below is certain information concerning each person
who was an executive officer or director of the Company as of September 30,
2000.

[Enlarge/Download Table]

Director
Name Age Since Position
---- --- ----- --------

Peter Locke 57 1983 Co-Chairman and Co-Chief Executive Officer; Director
Donald Kushner 55 1983 Co-Chairman, Co-Chief Executive Officer and Secretary; Director
Irwin Friedman+ 66 1998 Director
Stuart Hersch+ 49 1989 Director
John Lannan+ 54 1998 Director
Bruce St. J. Lilliston 48 - Chief Operating Officer and President
Brett Robinson 31 - Senior Vice President and Chief Financial Officer

----------------------
+ Member of Audit Committee and Compensation Committee

Background of Executive Officers and Directors

The business experience, principal occupations and employment of each of the
directors and executive officers of the Company, for at least the past five
years, are as follows:

Peter Locke co-founded the Company with Donald Kushner in 1983 and currently
serves as Co-Chairman and Co-Chief Executive Officer of the Company. Mr. Locke
has served as executive producer on substantially all of the Company's
productions since its inception. Prior to 1983, Mr. Locke produced several
prime-time television programs, including two years of the Stockard Channing
Show and the NBC television mini-series

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The Star Maker, starring Rock Hudson. Mr. Locke also produced two
made-for-television movies telecast on CBS and the films The Hills Have Eyes
Parts I and II. Mr. Locke is a member of the board of directors of US
SEARCH.com.

Donald Kushner co-founded the Company with Peter Locke in 1983 and currently
serves as Co-Chairman, Co-Chief Executive Officer and Secretary. Mr. Kushner has
served as executive producer on substantially all of the Company's productions
since its inception. Mr. Kushner was the producer of Tron, a 1982 Walt Disney
theatrical film starring Jeff Bridges, which was nominated for two Academy
Awards.

Irwin Friedman has served as a director of the Company since 1998. Mr. Friedman
is President of I. Friedman Equities, Inc., a corporate financial services firm,
which he founded more than twenty years ago. Since 1991 Mr. Friedman has
rendered financial consulting services to the Company through I. Friedman
Equities, Inc. Mr. Friedman was responsible for introducing the Company to
various investment banking firms, and has advised and assisted the Company with
various corporate financing and other transactions. Mr. Friedman is a director
of Recoton Corporation, a consumer electronics company.

Stuart Hersch has served as a director of the Company since 1989. Since 1996,
Mr. Hersch has been a consultant to several entertainment companies. In 1996,
Mr. Hersch became a consultant to the Company. Mr. Hersch assists the Company in
analyzing potential strategic acquisitions and provides the Company consulting
services in connection with the Company's infomercial operations. From 1990 to
1996, Mr. Hersch was President of the WarnerVision Entertainment division of
Atlantic Records, a subsidiary of Time-Warner, Inc. From 1988 to 1989, Mr.
Hersch was Chairman of Hersch Diener & Company, an independent consulting firm.
From 1983 to 1987, Mr. Hersch was the Chief Operating and Chief Financial
Officer of King World Productions, Inc.

John Lannan has served as a director of the Company since 1998. Mr. Lannan is
the President of Brentwood Partners, Inc., a mortgage banking company. From 1995
to 1998 Mr. Lannan was Vice President of Westco Real Estate Finance Corp., a
mortgage banking company. Previously he was Vice-Chairman of Hollingsworth &
Lord, a mortgage banking company. Mr. Lannan is a director of Centennial Bank
and of Orange County Bancorp, treasurer of the Lannan Foundation, a
not-for-profit organization, and is a member of the California Bar.

Bruce St.J Lilliston became President and Chief Operating Officer of the Company
in October, 1996. Prior to joining the Company, Mr. Lilliston practiced
entertainment law for 19 years. He represented the Company in various
transactions for the two years preceding his appointment as Company President
and Chief Operating Officer. Mr. Lilliston served as an arbitrator for the
American Film Marketing Association, and also served a special master for the
Los Angeles Superior Court. He graduated from the University of Chicago Law
School in 1977, where he was an associate editor of the University of Chicago
Law Review. He received his bachelor of arts degree with honors

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from Brown University in 1974. Mr. Lilliston was a partner in the law firm of
Paul, Hastings, Janofsky & Walker from 1989 to 1991, where he was managing
partner of that firm's entertainment finance and transactions practice. Mr.
Lilliston resigned from his positions with the Company in January, 2001.

Brett Robinson joined the Company in June, 2000 as Senior Vice President and
Chief Financial Officer. Previously, Mr. Robinson worked for eight years at dick
clark productions, inc. in various capacities, most recently as the Controller,
a position he held from November, 1997 until his departure. Mr. Robinson also
worked for two years for NAPICO, a real estate syndication firm in Beverly
Hills. He received his bachelor of science degree from California State
University, Sacramento in May, 1990. Mr. Robinson is a licensed CPA in the State
of Maryland.

Directors who are also executive officers of the Company do not receive any
additional compensation for serving as members of the Board of Directors or any
committee thereof. Peter Locke and Donald Kushner receive no compensation for
serving as a member of the Board of Directors. Irwin Friedman and Stuart Hersch
receive $25,000 annually each, and John Lannan receives $15,000 annually, for
serving on the Board of Directors and any committees thereof. Each of Messrs.
Friedman, Hersch and Lannan were granted options to purchase 13,333 shares at an
exercise price of $7.19 in February 1999 and options to purchase 13,333 shares
each at an exercise price of $4.8125 in September 1999. Each of Messrs. Friedman
and Lannan were granted options to purchase 16,667 shares at an exercise price
of $2.84 in June 1998, and Mr. Hersch was granted options to purchase 16,667
shares at an exercise price of $1.875 in August 1997. In 1990 Mr. Hersch was
granted options to acquire 71,185 adjusted shares of common stock at an adjusted
price of $9.33 per share. In September 1999 Mr. Hersch was granted options to
purchase 40,000 shares at an exercise price of $4.8125 per share.

During the 2000 fiscal year, there were 10 meetings of the Board of Directors,
two meetings of the Compensation Committee and six meetings of the Audit
Committee of the Board of Directors, including joint meetings. Each director
attended all of the meetings of the Board of Directors, the Compensation
Committee and the Audit Committee held during the period for which he was a
director or for which he had served as a committee member.

OTHER SIGNIFICANT EMPLOYEES

The business experience, principal occupations and employment for at least the
past five years of certain other significant employees who have made or are
expected to make significant contributions to the business of the Company are as
follows:

Rob Aft, age 36, was appointed President of International Distribution of the
Company in December 1999. From November 1994 to November 1999, Mr. Aft was
Senior Vice President for Worldwide Distribution at Behaviour Worldwide. From
August 1991 to November 1994, Mr. Aft was Vice President International Sales for
Trimark Holdings. Mr. Aft is a member of the board of directors of the American
Film Marketing Association.

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Richard Marks, age 52, was appointed Executive Vice President and General
Counsel of the Company in April 1997. Prior to that, he served as the Company's
Senior Vice President in charge of Legal and Business Affairs since joining the
Company in October 1993. From 1991 to October 1993, Mr. Marks served as Senior
Vice President in charge of Business and Legal Affairs for Media Home
Entertainment, an independent film producer and video distributor. From 1983 to
1991 Mr. Marks held similar legal and business affairs positions with Walt
Disney Pictures, Paramount Pictures and Weintraub Entertainment Group.

Adam Moos, age 40, joined the Company in October 1999 as Executive Vice
President-Production. From 1994 to October 1999, Mr. Moos was Vice
President-Production at Film Finances, Inc., a production guarantor.

Steven Rosen, age 40, joined the Company in June 1994 as Production Controller.
In June 1995 Mr. Rosen was appointed Director - Production Finance. In June 1997
Mr. Rosen was appointed Vice President - Production Finance. In January 1999 Mr.
Rosen was appointed Executive Vice President, Operations and Finance. Prior to
June 1994 Mr. Rosen served as Controller of The Finnigan Pinchuk Company.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires executive officers and directors, and
persons who beneficially own more than 10% of any class of the Company's equity
securities to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and beneficial owners of more than 10% of any class of the
Company's equity securities are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.

Based solely on a review of the copies of such forms furnished to the Company
during or with respect to fiscal 2000, and certain written representations from
executive officers and directors, the Company believes that each such person has
complied with all Section 16(a) filing requirements applicable to such executive
officers, directors and greater than 10% beneficial owners.

ITEM 11. EXECUTIVE COMPENSATION

Cash Compensation

The following table sets forth the cash compensation paid or accrued by the
Company during the fiscal year ended September 30, 2000 to the Chief Executive
Officer and each executive officer of the Company whose salary and bonus
exceeded $100,000 (the "Named Executive Officers").

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[Enlarge/Download Table]

Long-Term
Compensation Awards
Annual -------------------------------
Compensation (1) Securities All Other
---------------------- Restricted Underlying Compensation
Fiscal Salary Bonus Stock Options/SAR (1 )(4)
Name and Principal Position Year ($) ($) Awards ($) (#) ($)
----------------------------------------------------------------------------------------------------------------------------------

Peter Locke (2) (3) 2000 475,000 -- -- 200,000/0(6) --
Co-Chairman, Co-Chief 1999 457,596 679,904 243,750(5) 100,000/0 4,216
Executive Officer 1998 425,000 -- -- -- 30,856

Donald Kushner (3) 2000 475,000 -- -- 200,000/0(6) --
Co-Chairman, Co-Chief 1999 457,596 679,904 243,750(5) 100,000/0 4,216
Executive Officer and 1998 425,000 -- -- -- 27,989
Secretary

Bruce Lilliston 2000 400,000 -- -- 41,667/0 --
President and Chief 1999 400,000 118,811 -- 12,500/0 --
Operating Officer 1998 400,000 74,132 -- 8,333/0 --

Robert Swan 2000 155,351 -- -- 2,500/0(7) --
Senior Vice President and 1999 186,153 20,000 -- -- --
Chief Financial Officer 1998 172,558 -- -- -- --

----------------------

(1) In accordance with the rules of the Commission, the compensation described
in this table does not include medical, group life insurance or other
benefits received by the named executive officers that are available
generally to all of our salaried employees and perquisites and other
personal benefits received by the named executive officers that do not
exceed the lesser of $50,000 or 10% of the officer's salary and bonus
disclosed in this table. Does not include perquisites including automobile
allowances and $25,000 annual non-accountable expense allowances in the
case of Messrs. Locke, Kushner and Lilliston.

(2) Does not include payments by the Company's subsidiary, US SEARCH.com, prior
to January 30, 1998, when the Company acquired such subsidiary.

(3) Does not include options to purchase shares of the common stock of US
SEARCH.com which were approved by the Company and Search, but subsequently
were terminated prior to full documentation pursuant to a waiver of any
rights to receive such options executed by Messrs. Kushner and Locke.

(4) Consists of term life insurance premiums paid by the Company on behalf of
the Named Executive Officers in respect of a $3,500,000 policy and
disability insurance premiums paid by the Company on behalf of the Named
Executive Officers.

(5) Consists of 50,000 shares for which the restrictions lapsed in June 1999.

(6) Represents the award of restricted shares of common stock by the Company,
with the restrictions to be lifted starting one year after the grant date.
As such, the realized value is not able to be determined as of January 29,
2001.

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(7) Represents a performance stock award by the Company for which registration
of such shares was not completed as of January 29, 2001. As such, the
realized value is not able to be determined as of January 29, 2001.

EMPLOYMENT AGREEMENTS

Messrs. Kushner and Locke. In March, 1994 the Company amended employment
agreements with each of Messrs. Kushner and Locke to extend the term of the
agreement to September 1998 and reduce the maximum annual performance bonus that
each may receive to 4% of pre-tax earnings up to a maximum of $270,000 in fiscal
1997 and $290,000 in fiscal 1998. Under the revised agreements, Messrs. Kushner
and Locke each received a base salary of $425,000 in fiscal 1997 and fiscal
1998. In addition, the Company granted to each, in March, 1994, options to
purchase 150,000 adjusted shares of common stock at an adjusted exercise price
per share of $5.04. The options are fully vested.

In October, 1997 the Company extended the term of Messrs. Kushner and Locke's
agreements to October, 2002. Messrs. Kushner and Locke each continued to receive
annual base compensation of $425,000 in fiscal 1998, and receive $25,000 annual
increases beginning in fiscal 1999 under the amended agreement up to a maximum
of $525,000. If Company achieves earnings before income taxes prior to the
profit bonuses in excess of $2,000,000, each of Messrs. Kushner and Locke are
entitled to profit bonuses at graduated rates ranging from 5% of such annual
earnings before income taxes up to $4,000,000, with increasing percentages up to
7.5% of annual earnings before income taxes in excess of $8,000,000. The total
profit bonus is not to exceed two times annual base compensation.

In August, 1997 the Company granted to each of Messrs. Kushner and Locke options
to purchase 83,333 adjusted shares of Common Stock at an exercise price per
share of $1.875. These options (time vesting options) vest over a five year
period, with 20% vesting respectively on each of the five annual anniversary
dates following the date of the grant (subject to acceleration in the event of
termination of optionee's employment agreement by such optionee for "cause" (as
defined therein) or wrongfully by the Company or upon certain "Events" (as
defined under the agreement), including termination following a
"change-in-control" as defined in the agreement). The Company also granted to
each of Messrs. Kushner and Locke options to purchase an additional 83,333 (post
reverse split) shares of Common Stock at an exercise price per share equal to
$1.875, vesting at the rate of 20% per year, but exercisable only upon (i) the
achievement of at least 85% of certain annual earnings before income tax targets
to be set by the board of directors or (ii) the Company's Common Stock reaching
certain public trading prices ranging from $3.00 to $6.00 per share. Such
performance options are also subject to accelerated vesting and exercisability
under the circumstances described above for the time-vesting option tranche. As
of September 30, 1999 50,000

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time vesting options and 83,333 performance options had vested for each of
Messrs. Kushner and Locke.

In March, 1999 the Company further amended the employment contracts of Messrs.
Kushner and Locke to extend the term of the agreements to March, 2004. Under the
revised employment agreements, each of Messrs. Kushner and Locke were granted a
$25,000 increase in annual base compensation for each year of employment, and
will be entitled to an annual base compensation of $550,000 in fiscal 2003 and
$575,000 in fiscal 2004. Messrs. Kushner and Locke have foregone the scheduled
October, 2000 salary increase and, effective January, 2001 have reduced their
salaries to $450,000. Messrs. Kushner and Locke were also granted 50,000 shares
of restricted Common Stock, and one-half of each of their remaining unvested
stock options were determined to be immediately vested. In June, 1999 the
restrictions on the shares of common stock lapsed and unrestricted shares were
issued to each of them.

In September, 1999 the Board of Directors granted to each of Messrs. Kushner and
Locke special bonuses of $500,000 and fully vested options to acquire 100,000
shares of common stock at $4.6875 per share. The awards were granted as a result
of the successful completion of the US SEARCH.com initial public offering.

In April, 2000, the Board of Directors granted to each of Messrs. Kushner and
Locke a restricted stock award of 200,000 shares each. The shares vest one-third
per year over a three year period beginning in February, 2001.

The Company also provides Messrs. Kushner and Locke with certain fringe
benefits, including $3,500,000 of term life insurance with a split dollar
ownership structure and disability insurance for each person. If the employment
agreement is terminated by the employee for "cause" or wrongfully by the
Company, the Company is required to pay the present value of all unpaid premiums
on the split dollar policy for the ten (10) year period ending February 2007.
The Company also agreed to assign any key-man life insurance policy to the
employee after certain terminations of the employment agreement. The agreements
permit Messrs. Kushner and Locke to collect outside compensation and to provide
limited services outside of their employment with the Company and to receive
compensation therefor, so long as such activities do not materially interfere
with the performance of their duties under the agreements. Each of Messrs.
Kushner and Locke also may require the Company to change its name to remove his
name within one year after the expiration or termination of his employment
agreement, except that the Company may continue to use such name for a period of
one year after such notice, or for such longer period of time as is reasonably
necessary to cause the Company not to default under any indebtedness for
borrowed money or other material agreement. In the event Messrs. Kushner's or
Locke's employment agreement is terminated following a change of control, as
such term is defined therein, such executive would be entitled to a lump sum
payment equal to all compensation and benefits provided for in the agreement for
the remainder of the term, discounted at the rate of 10% per annum.

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Mr. Lilliston. In September, 1996 the Company entered into an employment
agreement with Bruce St. J. Lilliston pursuant to which the Company employed Mr.
Lilliston as the President and Chief Operating Officer of the Company effective
October, 1996 for a three-year term. As part of the agreement, Mr. Lilliston was
paid a base salary of $400,000 per year. In addition, the Company loaned him
$100,000 in September 1996 and $200,000 in October, 1996. The loans were made to
assist Mr. Lilliston in the transition from his private law practice to his
duties as Chief Operating Officer of the Company. The loans accrued simple
interest at the rate of 8% per annum and were to be repaid over a five-year
period at certain specified dates ending in October, 2001. In January, 2000 Mr.
Lilliston's received an additional $100,000 loan bearing interest at 8%. Mr.
Lilliston received bonuses equal to the amount of the payments, including
interest, due for such loan if Mr. Lilliston is still employed by the Company
(including the renewal of his employment agreement if applicable) on certain
dates (the "Employment Bonus"). Through September 30, 2000 Mr. Lilliston had
received $150,000 of such Employment Bonuses and thus the balance owing had been
reduced to $250,000. As a result of Mr. Lilliston's resignation, the balance of
the loans became due and payable immediately, however, the Company was notified
in November, 2000 that Mr. Lilliston filed for bankruptcy and therefore the
Company does not expect full repayment of the loans. The Company anticipates,
however, that Mr. Lilliston will perform consulting services in exchange for
forgiveness of a portion of the outstanding loans.

Beginning in October 1997, so long as Mr. Lilliston remained employed by the
Company, he was entitled to a bonus of $100,000 the first time the adjusted
"Average Closing Price" (the average closing price of the common stock over a
thirty calendar day period) is $6.00 or more greater than the "First Day Price"
(the average closing price of the Common Stock, as adjusted, over the thirty
calendar day period immediately prior to October 1, 1996). Thereafter, if Mr.
Lilliston was still employed by the Company (including the renewal of his
employment agreement if applicable), he would be entitled to receive an
additional $100,000 bonus the first time the Average Closing Price exceeds the
First Day Price by $12.00 or more, as adjusted, and each whole six-dollar amount
through and including $60.00, as adjusted, (each such bonus, a "Stock Bonus").
The aggregate of such bonuses was not to exceed $1,000,000. The Stock Bonuses
were reduceable by an amount equal to the Employment Bonus up to $150,000 plus
interest payable thereon from September 1996. Through September 30, 2000 Mr.
Lilliston had received a $100,000 Stock Bonus, subject to the aforementioned
initial offset which reduced said bonus to zero.

If the Company realized pre-tax operating profits or earnings per share for any
fiscal year during Mr. Lilliston's employment greater than 100% of the Company's
largest pre-tax operating profit or earnings per share amount for any of the
preceding years of Mr. Lilliston's employment under his employment agreement or
in any of the five fiscal years immediately preceding the commencement of such
agreement, and if Mr. Lilliston was still employed by the Company at the end of
the applicable fiscal year, then Mr. Lilliston was entitled to receive a bonus
of $50,000 for each such event. No bonus was earned or paid for fiscal 1998. For
fiscal 1999 Mr. Lilliston earned both an operating

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profit and earnings per share bonus, both of which were subject to the offset
mentioned above, resulting in a net bonus payable of $18,811. No such bonuses
were awarded for fiscal 2000.

As part of the agreement, the Company granted Mr. Lilliston options to purchase
up to 41,667 adjusted shares of Common Stock, with 20,834 of such options having
been granted and vested in November 1996. Options to purchase an additional
8,333 shares of common stock and 12,500 shares of common stock were granted and
vested in October 1997 and October 1998, respectively, as Mr. Lilliston reached
the performance criteria established by the Board of Directors or a committee
thereof. Additionally, as part of Mr. Lilliston's agreement, he was allowed to
maintain not more than two independent outside legal consultancy client
relationships, subject to approval by the Co-Chief Executive Officers, with
earnings from such consultancies limited to $150,000 per year.

Effective September 30, 1999 Mr. Lilliston's employment was extended for three
months under the existing terms of employment. In January, 2000 Mr. Lilliston's
employment was continued on an at-will basis under the same terms and continued
as such until the date of his resignation in January, 2001.

Mr. Swan. In May, 1997 the Company entered into an employment agreement with
Robert Swan pursuant to which the Company employed Mr. Swan as the Chief
Financial Officer of the Company for a three-year term. Mr. Swan was paid a base
annual salary of $160,000 for the first year, $175,000 for the second year and
$200,000 for the current year. Mr. Swan was to receive a bonus equal to 10% of
his base annual salary if net earnings for a fiscal year are greater than that
of the immediately preceding fiscal year. The Company granted Mr. Swan options
to purchase up to 25,000 shares of Common Stock, all of which have vested. In
fiscal 2000, Mr. Swan received no such bonus. In May, 2000 Mr. Swan resigned
from his positions and was succeeded by Brett Robinson.

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OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning stock options that the
Company granted to the named executive officers. The Company has never issued
stock appreciation rights.

[Enlarge/Download Table]

Individual Grants
---------------------------------
Percent of Potential realizable value
Number of total options at assumed annual rates of
securities granted to Exercise stock price appreciation for
underlying employees in or base option term (5)
Options granted fiscal year price Expiration ----------------------------
Name (#) (1) (2) ($/Sh) Date(4) 5% ($) 10% ($)
----------------------------------------------------------------------------------------------------------------------------

(a) (b) (c) (d) (e) (f) (g)
Peter Locke (6) 200,000(6) 37.27% $0 N/A N/A N/A
Donald Kushner (6) 200,000(6) 37.27% $0 N/A N/A N/A
Bruce Lilliston (6) 41,667 7.76% $5.00(3) 9/30/09 $131,021 $332,032
Brett Robinson (7) 10,000(7) 1.86% $2.03 5/22/10 $ 12,754 $ 32,340

------------------

(1) Represents options the Company granted under its 1988 Stock Incentive Plan.

(2) Based on an aggregate 536,667 shares of Common Stock subject to options
granted to employees during the last fiscal year.

(3) The Company granted options at an exercise price equal to the closing price
of the Common Stock on the NNM on the last trading day before the grant.

(4) The term of each option grant is generally ten years from the date of
grant. The options may terminate before their expiration dates if the
option holder's status as an employee is terminated or upon the option
holder's death or disability.

(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Commission and do not represent either
historical appreciation or the Company's estimate or projection of its
future Common Stock prices.

(6) Options immediately vested upon grant. The underlying shares vest one-third
per year over a three-year period.

(7) Options were granted May 23, 2000 and vest one year after date of grant.

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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

The following table sets forth information concerning options that the named
executive officers exercised during the last fiscal year and the number of
shares subject to both exerciseable and unexerciseable stock options as of
September 30, 2000. The table also reports values for "in-the-money" options
that represent the positive spread between the exercise prices of outstanding
options and the fair market value of the Common Stock as of September 30, 2000.
The Company has never issued stock appreciation rights.

[Enlarge/Download Table]

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY-End SARs at FY-End ($)
Shares Acquired Value (#) Exercisable/ Exercisable/Unexerci-sable
Name on Exercise (#) Realized ($) Unexercisable (1)
----------------------------------------------------------------------------------------------------------------------------------

Peter Locke 200,000 -- (2) 383,333/33,333 $0/$0

Donald Kushner 200,000 -- (2) 383,333/33,333 $0/$0

Bruce Lilliston -- $ 0 20,834/20,833 $0/$0

Robert Swan 2,500 -- (3) 0/0 $0/$0

----------------
(1) Calculated by determining the difference between the exercise price and the
sale price of the Common Stock on the NNM on September 30, 2000.

(2) Exercises were related to the award of restricted shares of common stock,
with the restrictions to be lifted starting one year after the grant date.
As such, the realized value is not able to be determined as of January 29,
2001.

(3) Exercise was related to performance stock award for which registration of
such shares was not completed as of January 29, 2001. As such, the realized
value is not able to be determined as of January 29, 2001.

1988 STOCK INCENTIVE PLAN

The 1988 Stock Incentive Plan (the "Plan") authorizes the granting of varying
forms of stock incentive awards ("Awards") to qualified officers, employees,
directors, key employees and third parties providing valuable services to the
Company, e.g., independent contractors, consultants and advisors to the Company.
In April 1999, the shareholders of the Company voted to increase the adjusted
authorized number of shares available under the Plan from 1,250,000 to
1,820,000. In March 2000 the stockholders approved an additional increase in the
number of shares of Common Stock reserved for issuance from 1,820,000 to
2,500,000. The Plan may be administered by a committee appointed by the Board
consisting of two or more members, each of whom must be Non-Employee Directors.
A Non-Employee Director is defined as a director who is not employed by the
Company or its subsidiaries, does not receive compensation from the Company or
its subsidiaries other than as a director, except for compensation in an amount
less than $60,000, and is generally disinterested. The Plan is currently
administered by the entire board of directors, who determine the number of
shares to be covered by an Award, the term and exercise price, if any, of the
Award and other terms and provisions of Awards.

The Plan is designed to help the Company attract and retain qualified persons
for positions of substantial responsibility and to provide certain key employees
and consultants with an additional incentive to contribute to the success of the
Company. As of September 30, 2000, options to purchase 1,222,108 shares of the
Company's Common Stock were outstanding under the Plan. Through that date
options to purchase 973,531 shares had been exercised, options to purchase
570,800 shares had expired or been canceled and options to purchase 304,361
shares remained available for grant under the Plan.

Awards can be Stock Options ("Options"), Stock Appreciation Rights ("SARs"),
Performance Share Awards ("PSAs") and Restricted Stock Awards ("RSAs"). The

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number and kind of shares available under the Plan are subject to adjustment in
certain events. Shares relating to Options or SARs that are not exercised,
shares relating to RSAs that do not vest and shares relating to PSAs that are
not issued will again be available for issuance under the Plan.

An Option may be an incentive stock option ("ISO") within the meaning of the
internal Revenue Code or a nonqualified option. The exercise price for Options
is to be determined by the Committee, but in the case of an ISO is not to be
less than fair market value on the date the Option is granted (110% of fair
market value in the case of an ISO granted to any person who owns more than 10%
of the Common Stock). The purchase price is payable in any combination of cash,
shares of Common Stock already owned by the participant for at least six months
or, if authorized by the Committee, a promissory note secured by the Common
Stock issuable upon exercise. In addition, the award agreement may provide for
"cashless" exercise and payment. Subject to early termination or acceleration
provisions, an Option is exercisable, in whole or in part, from the date
specified in the related award agreement until the expiration date determined by
the Committee (not to exceed 10 years from the date of grant).

The options granted under the Plan become exercisable on such dates as the Board
determines in the terms of each individual option. Options are subject to
termination in the event of a disposition of all or substantially all of the
assets or capital stock of the Company by means of a sale, merger,
consolidation, reorganization, liquidation or otherwise; unless the Committee
arranges for a continuation of the Plan or for the optionee to receive payment
or new options covering shares of the corporation purchasing or acquiring the
assets or stock of the Company, in substitution of the options granted under the
Plan. The Committee in any event may, on such terms and conditions as it deems
appropriate, accelerate the exercisability of options granted under the Plan. An
ISO to a holder of more than 10% of the total combined voting power of all
classes of stock of the Company must expire no later than five years from the
date of grant. A nonqualified stock option must expire no later than ten years
from the date of the grant.

The options granted under the Plan are not transferable other than by will or
the laws of descent and distribution. Unexercised options generally lapse 3
months after termination of employment other than by reason of retirement,
disability or death (except in the case of ISOs) in which case it terminates one
year thereafter.

An SAR is the right to receive payment based on the appreciation in the fair
market value of Common Stock from the date of grant to the date of exercise. In
its discretion, the Committee may grant an SAR concurrently with the grant of an
Option. An SAR is only exercisable at such time, and to the extent, that the
related Option is exercisable. Upon exercise of an SAR, the holder receives for
each share with respect to which the SAR is exercised an amount equal to the
difference between the exercise price under the related Option and the fair
market value of a share of Common Stock on the date of exercise of the SAR. The
Committee in its discretion may pay the amount in cash, shares of Common Stock,
or a combination thereof.

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An RSA is an award of a fixed number of shares of Common Stock subject to
restrictions. The Committee specifies the prices, if any, the recipient must pay
for such shares. Shares included in an RSA may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered until they have
vested. The recipient is entitled to dividend and voting rights pertaining to
such RSA shares even though they have not vested, so long as such shares have
not been forfeited.

A PSA is an award of a fixed number of shares of Common Stock, the issuance of
which is contingent upon the attainment of such performance objectives, and the
payment of such consideration, if any, as is specified by the Committee.

The Plan also provides for certain tax-offset bonuses and tax withholding using
shares of Common Stock instead of cash.

When a participant is no longer employed by the Company for any reason, shares
subject to the participant's RSAs which have not become vested by that date or
shares subject to the participant's PSAs which have not been issued are
forfeited in accordance with the terms of the related Award agreements. Options
which have become exercisable by the date of termination of employment or of
service on the Committee must be exercised within certain specified periods of
time from the date of termination, dependent upon on the reason for termination.
Options which have not yet become exercisable on the date the participant
terminates employment or service for a reason other than retirement, death or
total disability terminate on that date.

All employees, officers and directors of, and consultants to, the Company are
eligible to participate in the Plan. The Committee determines which persons
shall be granted options, the extent of such grants and, consistent with the
Plan, the terms and conditions thereof. As of December 18, 2000, approximately
55 employees of the Company, and three directors of the Company who are not also
employees of the Company, are eligible to receive option grants under the Plan.

The Plan provides for anti-dilution adjustments in the event of a
reorganization, merger, combination, recapitalization, reclassification, stock
dividend, stock split or reverse stock split; however, no such adjustment need
be made if it is determined that the adjustment may result in the receipt of
federally taxable income to optionees or the holders of Common Stock or other
classes of the Company's securities. Upon the dissolution or liquidation of the
Company, or upon a reorganization, merger or consolidation of the Company as a
result of which the Company is not the surviving entity, the Plan will
terminate, and any outstanding awards will terminate and be forfeited unless
assumed by the successor corporation.

The Board of Directors may, at any time, terminate, amend or suspend the Plan.
In addition, the Committee may, with certain exceptions, amend any provision of
the Plan. The Plan currently provides that the Board may amend the Plan at any
time without obtaining shareholder approval to the fullest extent permitted by
applicable law or

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regulation. In the event the Board determines that shareholder approval is
required by applicable law or regulation, then such amendments would be
effective once approved by the Board and the holders of a majority of the shares
of Common Stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee participated in deliberations and decisions regarding
executive compensation. However, the full Board of Directors of the Company
participated in deliberations and decisions regarding grants of new options to
certain directors and certain employees in connection with new employment
agreements and amendments and extensions of employment agreements with the
Company. Other than Messrs. Kushner and Locke, no member of the Board of
Directors was, during the fiscal year or formerly, an officer or employee of the
Company or any of its subsidiaries, however, for the fiscal year ended September
30, 2000, Mr. Hersch earned $59,400 and I. Friedman Equities, Inc. (of which Mr.
Friedman is President) earned $96,000 pursuant to consulting contracts. During
fiscal year 2000, Mr. Locke served as Co-Chairman of the Board, and Co-Chief
Executive Officer of the Company, and Mr. Kushner served as Co-Chairman of the
Board, Co-Chief Executive Officer, and Secretary of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

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BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS

The following table sets forth certain information as of January 26, 2001
concerning the beneficial ownership of Common Stock, by (i) each person who is
known to the Company to be a beneficial owner of more than 5% of the outstanding
Common Stock; (ii) each of the current Directors of the Company; (iii) each of
the Named Executive Officers; and (iv) all current Directors and Executive
Officers of the Company as a group. The address and telephone number for those
directors and executive officers not otherwise noted is 11601 Wilshire
Boulevard, 21st Floor, Los Angeles, California 90025, (310) 481-2000.

[Enlarge/Download Table]

Percent
Common Stock of
Beneficial Owner Beneficially Owned Class (7)
---------------- ------------------ ----------

Peter Locke....................................................... 710,679(1) 4.76%
Donald Kushner.................................................... 664,823(1)(2) 4.45%
Irwin Friedman.................................................... 127,777(3) *
Stuart Hersch..................................................... 154,518(3) 1.03%
John Lannan....................................................... 51,110(3) *
Bruce St. J. Lilliston............................................ 20,834(4) *
Brett Robinson.................................................... 0(5) *
Gruber & McBaine Capital Management, LLC.......................... 2,387,800(6) 15.99%
Jon D. Gruber..................................................... 2,701,200(6) 18.09%
J. Patterson McBaine.............................................. 2,740,500(6) 18.35%
Thomas O. Lloyd-Butler............................................ 2,387,800(6) 15.99%
Eric B. Swergold.................................................. 2,387,800(6) 15.99%
Lagunitas Partners, LP............................................ 1,045,550(6) 7.00%
All directors and executive officers as a group
(seven individuals).............................................. 1,729,741 11.58%
(1)(2)(3)(4)(5)(6)

---------------------
* Less than 1%

(1) Includes 383,333 shares subject to options that are currently exercisable
or exercisable within 60 days of the date hereof, and excludes 33,333
options that are not currently exercisable or exercisable within 60 days of
the date hereof.

(2) Includes 33,333 shares owned by a corporation controlled by Mr. Kushner.

(3) Represents shares subject to options currently exercisable. Included in Mr.
Friedman's total are 5,000 shares held pursuant to an exercise of options.

(4) Excludes 20,833 shares subject to options that are not currently
exercisable or exercisable within 60 days.

(5) Excludes 10,000 shares subject to options that are not currently
exercisable or exercisable within 60 days.

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(6) As of January 26, 2001, Gruber & McBaine Capital Management, LLC, John D.
Gruber, J. Patterson McBaine, Thomas O. Lloyd-Butler and Eric B. Swergold
jointly shared voting and dispositive powers for 2,387,800 shares. Mr.
Gruber reported sole voting and dispositive powers for 313,400 shares. Mr.
McBaine reported sole voting and dispositive powers for 352,700 shares. The
address of Gruber & McBaine Capital Management, LLC is 50 Osgood Place,
Penthouse, San Francisco, CA 94133

(7) As a percentage of the 13,847,210 shares outstanding on January 26, 2001
plus certain shares issuable upon conversion of convertible securities or
subject to options held by such person or persons.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Stuart Hersch, a Director of the Company, was previously President of
WarnerVision. During fiscal 1998 the Company paid to WarnerVision $1,543,000, a
previously accrued payment obligation, and settled certain disputes with
WarnerVision.

In September, 1996 the Company entered into an employment agreement with Bruce
St. J. Lilliston pursuant to which the Company agreed to hire Mr. Lilliston as
the President and Chief Operating Officer of the Company effective October,
1996. As part of such agreement, Mr. Lilliston was allowed to maintain not more
than two independent outside legal consultancy client relationships, subject to
approval by the Chief Executive Officers. Mr. Lilliston had provided various
legal services to certain of Kushner-Locke International's distributing
licensees as well as August Entertainment. See Item II, Executive Compensation -
Employment Agreement - Mr. Lilliston for a further description of Mr.
Lilliston's employment arrangement with the Company. In April, 1999 Mr.
Lilliston exercised all options granted to him by the Company and obtained
41,667 shares of common stock for $128,000.

Since April, 1996 Stuart Hersch has consulted with the Company pursuant to a
month-to-month consulting agreement that provides for a monthly fee of $4,950
(since April, 1999; $7,500 per month previously) to be paid to Mr. Hersch. For
the fiscal year ended September 30, 2000, Mr. Hersch earned $59,400 from such
consulting agreement. Mr. Hersch assists the Company in analyzing potential
strategic acquisitions.

For the fiscal year ended September 30, 2000, Mr. Friedman earned $96,000 from a
consulting agreement that provided for a monthly fee of $8,000. In July, 1999 as
a result of the Company's redemption of its Class C Warrants, I. Friedman
Equities was paid a fee of $62,000 pursuant to a 1996 agreement. The Company
understands that I. Friedman Equities is controlled by Irwin Friedman, a Company
director.

From May, 1997 to October, 1997, Mr. Locke personally advanced US SEARCH.com
$397,000, bearing interest at 10% per annum, payable upon demand. These advances
were subsequently repaid in full. In addition, US SEARCH.com paid approximately

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$40,000 in consulting fees and interest to Mr. Locke for services rendered
through December, 1997.

In February, 1999 the Board granted to each of Messrs. Kushner and Locke 50,000
restricted shares of common stock. In June, 1999 the Board removed such
restrictions and the Company issued unrestricted shares to each individual. In
April, 2000 the Board granted to each of Messrs. Kushner and Locke 200,000
restricted shares of common stock, and granted 25,000 shares of restricted
common stock to Mr. Rosen.

Messrs. Friedman, Hersch, and Lannan were each granted options to purchase
13,333 shares of Company common stock at an exercise price of $7.19 per share in
February, 1999. In September, 1999 the options granted in February, 1999 were
cancelled and replaced with options for the same number of shares at exercise
prices of $4.8125 per share. Also in September, 1999 the exercise price of
options for 71,185 shares of common stock that were granted to Mr. Hersch in
1990 were reduced to $4.8125 per share. Also in September, 1999 the Board of
Directors approved the granting to each of Messrs. Kushner and Locke special
bonuses of $500,000 and options for 100,000 shares of common stock at exercise
prices of $4.6875 per share.

In April, 2000 Messrs. Kushner and Locke purchased notes from the Company in the
aggregate principal amount of $200,000 each as part of a $1,500,000 private
placement pursuant to Regulation D of the Securities and Exchange Act of 1934.
The notes bore interest at the rate of 10% per annum payable at maturity. At the
scheduled six-month maturity the holders were entitled to receive, at their
election, either a cash payment equal to 15% of the principal amount of the
notes purchased or a warrant for a number of shares of common stock equal to
their loan principal amount divided by $10. The warrant would be exercisable at
110% of the Company's common stock market value at the loan closing date for a
three-year term from the date of issuance. The notes became due in October, 2000
and were repaid at that time.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

THE KUSHNER-LOCKE COMPANY
(Registrant)

Dated: January 29, 2001 /s/ DONALD KUSHNER
Donald Kushner
Co-Chairman of the Board,
Co-Chief Executive Officer and Secretary

Dated: January 29, 2001 /s/ BRETT ROBINSON
Brett Robinson
Senior Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
the capacities and on the dated indicated.

THE KUSHNER-LOCKE COMPANY
(Registrant)

Dated: January 29, 2001 /s/ PETER LOCKE
Peter Locke
Co-Chairman of the Board and
Co-Chief Executive Officer

Dated: January 29, 2001 /s/ DONALD KUSHNER
Donald Kushner
Co-Chairman of the Board,
Co-Chief Executive Officer and Secretary

Dated: January 29, 2001 /s/ BRETT ROBINSON
Brett Robinson
Senior Vice President and
Chief Financial Officer

Dated: January 29, 2001 /s/ IRWIN FRIEDMAN
Irwin Friedman
Director

Dated: January 29, 2001 /s/ STUART HERSCH
Stuart Hersch
Director

Dated: January 29, 2001 /s/ JOHN LANNAN
John Lannan
Director

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K/A’ Filing	Date	First	Last	Other Filings

Filed on:	1/29/01	6	19
	1/26/01	1	17
	12/18/00	14
For Period End:	9/30/00	1	17	10-K
	5/23/00	11
	9/30/99	10		10-K, 10-K/A, DEF 14A
	1/30/98	6
	10/1/96	9
				List all Filings

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Kushner Locke Co – ‘10-K/A’ for 9/30/00

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