Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
9 Months Ended
Sep. 30, 2014
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
8. Commitments and Contingencies

 Employment Agreements

On the Closing Date, the Company entered into new employment agreements with James Kirsch, the Company's current Chairman and Chief Executive Officer, David Mecklenburger, the Company's current Chief Financial Officer and Secretary, Matthew Proman, Star Jones and Christopher Wesser (each such agreement, an “Employment Agreement,” and collectively, the “Employment Agreements”). Messrs. Kirsch, Mecklenburger, Proman and Wesser, and Ms. Jones, are collectively referred to as the “Executives.”

The Employment Agreement with Mr. Kirsch provides that he will receive an annual base salary of $275,000 and the Employment Agreement with Mr. Mecklenburger provides that he will receive an annual base salary of $200,000. Mr. Proman will serve as the Company's Executive Vice President and Chief Operating Officer and receive an annual base salary of $275,000. Ms. Jones will serve as the Company's President, Chief Development Officer, and National Spokesperson and receive an annual base salary of $300,000. Mr. Wesser will serve as the Company's Executive Vice President and General Counsel and receive an annual base salary of $250,000.

Each Employment Agreement provides the Executive with an initial term of three years that automatically renews for successive one year terms unless either party provides advance written notice of its intention to terminate the Employment Agreement. Mr. Kirsch's and Mr. Mecklenburger's base salaries will be automatically increased annually by the greater of 3% of their then current base salary or the annual percentage increase in the Consumer Price Index. If Mr. Kirsch's role changes such that he is no longer the Chief Executive Officer, his three year term will automatically be renewed and continue for another three years after the date of the change in role. Should such a change in role occur, his base salary cannot be reduced below his then current base salary immediately prior to the change in role

The Employment Agreements provide that each Executive will be eligible for an annual bonus and have his or her salary reviewed each year by the Board of Directors. In addition, the Executives will be reimbursed for all reasonable business expenses incurred in the ordinary course of business and taking into consideration each such Executive's unique responsibilities within the Company. The Employment Agreements also generally permit the Executives to participate in all benefits plans and programs offered by the Company.

Under the terms of the Employment Agreements, each Executive is subject to a non-competition, non-interference and non-raiding restrictive covenant during their employment and 18 months following Executive's last day of employment with the Company. In the event that an Executive's employment is terminated without “Cause” or the Executive resigns for “Good Reason” (as those terms are defined by the Employment Agreements), the post-employment restrictive covenant period may not extend past the severance period (as described below). The Employment Agreements also contain customary confidentiality, work product and return of Company property covenants.

The Employment Agreements provide each Executive with severance pay in the event that such Executive is terminated without “Cause” or resigns for “Good Reason.” Upon such a termination of employment, such Executive is entitled to continue to receive such Executive's monthly salary at his or her then current rate for the greater of six months or the number of remaining whole months in such Executive's term (whether the initial term or an extension). Finally, the Employment Agreements between the Company and each of Ms. Jones and Mr. Wesser also provide that such Executives will become immediately fully vested in any unvested shares of restricted stock granted in connection with the Merger upon their termination without “Cause” or their resignation for “Good Reason.”

Aggregate potential severance compensation amounted to approximately $3.9 million at September 30, 2014.

Lease Obligations - The Company leases office space, office furniture and equipment under operating lease agreements.
The Company leases an office for its headquarters in Illinois, an office space for its events business in Minnesota and three sales and administrative offices under non-cancelable lease arrangements that provide for payments on a graduated basis with various expiration dates.

Rent expense, amounting to $45,617 and $10,739 for the three months ended September 30, 2014 and 2013, respectively, and $91,193 and $54,985 for the nine months ended September 30, 2014 and 2013, respectively, is included in general and administrative expense in the condensed consolidated statements of comprehensive loss.

Future annual minimum payments due under the leases are summarized as follows:

Year ending December 31,
2014 (three months)
  $ 379,233  
    $ 6,577,680  

Legal Proceedings

NAPW, Inc., the Company's wholly-owned subsidiary and successor by merger to Old NAPW, is a defendant in the related cases of Constantino v. NAPW, Inc., No. 0000074/2013 (Sup. Ct., Nassau Co.), filed in the County Court for Nassau County, New York, and DeLisi, et al. v. NAPW, Inc., No. 2:13-CV-05322 (E.D.N.Y.), filed in federal court for the Eastern District of New York. These cases involve allegations made by four former employees of same sex sexual harassment by a female sales manager over a period of several years. Upon learning of these allegations, which came only after the employees involved were terminated for cause, Old NAPW engaged an independent investigator that conducted an investigation and returned a conclusion that the allegations were unfounded. Both cases are in the early stages of discovery. At this time, the Company does not have an estimate of the likelihood or the amount of any potential exposure. The outcome of these lawsuits is uncertain. The Company believes that the claims asserted in each suit are without merit and intends to defend itself vigorously against the claims.